National Nuclear Security Administration: Additional Actions Needed to Collect Common Financial Data
Fast Facts
The National Nuclear Security Administration uses contracts to manage its labs, production facilities, and test sites.
Contractors track and report costs in their own ways—using lists of components like labor or material at a certain level of detail. One contractor may break down the components differently from another contractor—even for work on the same program. This makes it hard for NNSA to compare and manage contract costs.
NNSA is required to implement a common financial reporting system for its contractors. The effort has started, but we identified problems with the approach. We made 7 recommendations to address the problems we found.
The Department of Energy
Highlights
What GAO Found
The National Nuclear Security Administration (NNSA)—a semiautonomous agency within the Department of Energy (DOE)—and Consolidated Nuclear Security, LLC (CNS)—the management and operating (M&O) contractor for the Y-12 National Security Complex (Y-12) in Tennessee and the Pantex Plant (Pantex) in Texas—implemented a consolidated business system for the two sites. CNS, NNSA, and DOE generally followed DOE guidance as well as leading project management and information technology investment practices for three areas of project management that may be useful in identifying problems that can arise after a system is implemented. Specifically, they (1) developed required plans and documents to support critical decisions on information technology projects, (2) generally followed leading practices for risk management, and (3) initiated a review by the investment review board during the system's operations and maintenance phase.
With regard to NNSA's broader effort to implement common financial reporting across its eight sites, GAO found that NNSA's progress on seven key implementation steps has varied (see table). For example, NNSA is not pursuing an important step to implement a common work breakdown structure—a method of dividing a project into successive levels of detail—as required by the National Defense Authorization Act for Fiscal Year 2017 (the act). All of NNSA's program offices had not accepted a common work breakdown structure, in part because program office leaders do not agree one is needed. According to GAO leading practices, not doing so causes difficulty in comparing costs across programs and contractors, which is the purpose of common financial reporting. Without pursuing this approach, the effort may not result in reliable, enterprise-wide financial data that meets the needs of Congress and improves NNSA's ability to report the total costs of its programs.
NNSA Progress toward Implementing Common Financial Reporting, as of December 2018
|
Steps |
Progress |
|
Identify an approach and develop a tool |
Completed |
|
Develop a policy |
Not yet completed |
|
Establish common cost elements and definitions |
Completed |
|
Identify and report costs for programs of record and base capabilities |
Not yet completed |
|
Implement a common work breakdown structure |
Not pursuing |
|
Collect financial data from M&O contractors |
Not yet completed |
|
Publish and analyze data |
Not yet completed |
Source: GAO analysis of NNSA documents and interviews with NNSA officials.| GAO-19-101
In addition, NNSA generally has not followed six project management leading practices, including one that emphasizes the importance of collecting and documenting stakeholder requirements to define project scope. NNSA officials said the act included the basic requirements and project scope, and therefore stakeholders only needed to provide input on how to meet requirements in the act rather than identify their own; this input was not documented. However, the act did not provide specific or detailed requirements. Without collecting and documenting stakeholder requirements, NNSA will not have assurances that data will meet stakeholder needs, which could limit the effectiveness of the effort.
Why GAO Did This Study
GAO has identified challenges in determining and comparing costs across NNSA's eight sites. Congress needs this information to carry out its oversight responsibilities and make budgetary decisions. The National Defense Authorization Act for Fiscal Year 2017 required NNSA to implement a common financial reporting system across all sites. Separately, in 2013, NNSA awarded a single M&O contract for the Y-12 and Pantex sites, which included a requirement to consolidate the two sites' business systems.
An explanatory statement accompanying the act included a provision for GAO to review the agency's progress. This report examines (1) the status of the effort to consolidate the business systems at Y-12 and Pantex and the extent to which CNS and NNSA followed guidance and leading practices, and (2) the steps NNSA has taken in implementing common financial reporting across all eight sites and the extent to which this effort follows leading practices. GAO reviewed documentation for both efforts and compared it with leading practices, and interviewed NNSA officials and M&O contractors.
Recommendations
GAO is making seven recommendations, including that NNSA should implement a common work breakdown structure and should follow leading practices to collect and document requirements to define project scope. NNSA generally agreed with six recommendations and neither agreed nor disagreed with one. GAO maintains that the recommendations are valid.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| National Nuclear Security Administration |
Priority Rec.
The NNSA Administrator should implement a common work breakdown structure across NNSA program offices in the nuclear security enterprise, standardized at a high level to allow for program office customization but also to allow for the collection of total program costs. (Recommendation 1) |
In May 2020, NNSA decided to implement a common work breakdown structure across NNSA program offices in the nuclear security enterprise. In fiscal year 2020, NNSA determined that financial data could be collected using a common work breakdown structure across NNSA program offices while continuing to collect data using the programmatic structures that some offices used for project management. In May 2020, NNSA issued guidance directing the management and operating (M&O) contractors to provide financial data to NNSA using the common work breakdown structure beginning in fiscal year 2021.
|
| National Nuclear Security Administration | The Program Director for Financial Integration should collect and document requirements to define project scope and meet project objectives. These requirements should be updated periodically throughout the life of the project. (Recommendation 2) |
As of April 2024, NNSA has not yet documented requirements that define specific or detailed requirements for successful implementation of common financial reporting, such as the types of information that program managers need.
|
| National Nuclear Security Administration | The Program Director for Financial Integration should develop a detailed project schedule. The detailed schedule should be documented as part of the annual report to Congress required in the National Defense Authorization Act for Fiscal Year 2017. (Recommendation 3) |
NNSA established a detailed project schedule for implementing its common financial reporting effort and has continued to update the schedule as of June 2021. NNSA provides information annually to Congress on the status of its efforts to implement common financial reporting including completed and ongoing activities.
|
| National Nuclear Security Administration | The Program Director for Financial Integration should develop a project budget that includes information on the human resources needed to implement common financial reporting. (Recommendation 4) |
As of December 2019, NNSA developed a project budget that includes information on the human resources needed to implement common financial reporting. Specifically, with regard to human resources, the project budget includes federal employee salaries and contractor support staff. The project budget also includes estimated costs to implement a common work breakdown structure including system upgrades. An NNSA official said the agency plans to update its project budget routinely to include additional costs in the future.
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| National Nuclear Security Administration | The Program Director for Financial Integration should develop a method to collect and report information on the costs associated with implementing common financial reporting. (Recommendation 5) |
As of December 2019, NNSA developed a method to collect and report information on the costs associated with implementing common financial reporting that includes M&O contractors' costs, federal employee salaries, federal contractor costs, and an estimated cost for implementing a common work breakdown structure. NNSA reported information on the costs associated with implementing common financial reporting.
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| National Nuclear Security Administration | The Program Director for Financial Integration should develop a formal process to identify risks, document those risks, and plan how to minimize risk exposure. (Recommendation 6) |
NNSA developed a risk management plan for common financial reporting which established a framework for identifying and managing risks and, in July 2021, updated its project plan to track identified risks. NNSA routinely discusses how to mitigate these risks and identify any additional risks to the effort that should be tracked.
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| National Nuclear Security Administration | The Program Director for Financial Integration should develop an approach to effectively engage with all project stakeholders that incorporates their expectations into project decisions. (Recommendation 7) |
In April 2023, NNSA submitted an update to its Financial Integration Policy Directive that documents the process for effectively engaging with stakeholders, which includes semiannual or quarterly meetings with federal staff and M&O contractors to address changes to financial integration, among other issues. However, according to NNSA officials, NNSA will not release updates to any of its policies that include contractor requirements-which includes this one-until NNSA completes implementation of its Enhanced Mission Delivery Initiative. NNSA officials do not anticipate concerns about the changes to the policy directive and continue to meet with project stakeholders regularly. We believe NNSA's actions satisfy the intent of the recommendation and are closing it as implemented. We encourage NNSA to finalize the draft directive and will continue to monitor efforts in this area.
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