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Audit Report: DOE/IG-0911

May 22, 2014

Cost and Schedule of the Mixed Oxide Fuel Fabrication Facility at the Savannah River Site

In September 2000, the United States and Russia signed a Plutonium Management and Disposition Agreement for the disposal of surplus weapons-grade plutonium. This agreement called for each country to dispose of at least 34 metric tons of plutonium by converting it into mixed oxide fuel that can be used in commercial nuclear power reactors. To carry out this program, the Department of Energy (Department) decided to construct the Mixed Oxide Fuel Fabrication Facility (MOX Facility) at the Savannah River Site near Aiken, South Carolina.  Shaw AREVA MOX Services, LLC (MOX Services), the current Facility contractor, has been working on the design of the facility since 1999.

The National Nuclear Security Administration (NNSA) and MOX Services have been largely unsuccessful in controlling the cost and schedule for the MOX Facility. A March 2012 construction project review conducted by NNSA concluded that the MOX Facility had a very low probability of being completed according to the approved baseline. NNSA directed MOX Services to develop a baseline change proposal with updated project completion, cost and schedule projections. Under the revised baseline, it was estimated that total project costs would grow to about $7.7 billion and that completion would slip to November 2019. This represents cost growth of about $2.9 billion and project schedule slippage of over 3 years.

The anticipated cost and time required to complete the MOX Facility were significantly underestimated due to a number of factors. This included, most prominently, the Department’s 2007 approval of a project baseline that was developed from an immature design, understating the level of effort to install various construction commodity items, and high personnel turnover rates. Prior to approval, the Department’s own independent review of the project baseline found that the design review of the MOX Facility was incomplete. We also noted that additional work scope added at NNSA’s direction caused some of the cost growth in the baseline change proposal developed by MOX Services. Despite project expenditures of about $4 billion and a proposal to place the MOX Facility construction project into cold standby status in fiscal year 2015, we remain concerned with the project management issues observed during the audit.

Topic: Management and Administration