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(Ebook) Progress in Improving Project Management at The Department of Energy by National Research Council ISBN 9780309082808, 9780309510288, 0309082803, 0309510287 Digital Version 2025

The document discusses the progress made in improving project management at the Department of Energy, as assessed by the National Research Council. It highlights key areas such as senior management involvement, risk management, and project oversight, providing recommendations for further enhancement. The report is a comprehensive evaluation of the DOE's project management practices and policies, aimed at optimizing efficiency and effectiveness in handling large-scale projects.

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12 views145 pages

(Ebook) Progress in Improving Project Management at The Department of Energy by National Research Council ISBN 9780309082808, 9780309510288, 0309082803, 0309510287 Digital Version 2025

The document discusses the progress made in improving project management at the Department of Energy, as assessed by the National Research Council. It highlights key areas such as senior management involvement, risk management, and project oversight, providing recommendations for further enhancement. The report is a comprehensive evaluation of the DOE's project management practices and policies, aimed at optimizing efficiency and effectiveness in handling large-scale projects.

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© © All Rights Reserved
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Progress in Improving
Project Management at the
Department of Energy
2001 Assessment

Committee for Oversight and Assessment of


U.S. Department of Energy Project Management

Board on Infrastructure and the Constructed Environment

Division on Engineering and Physical Sciences

National Research Council

NATIONAL ACADEMY PRESS


Washington, D.C.
NATIONAL ACADEMY PRESS • 2101 Constitution Avenue, N.W. • Washington, DC 20418

NOTICE: The project that is the subject of this report was approved by the
Governing Board of the National Research Council, whose members are drawn
from the councils of the National Academy of Sciences, the National Academy of
Engineering, and the Institute of Medicine. The members of the committee re-
sponsible for the report were chosen for their special competences and with
regard for appropriate balance.

This study was funded by the U.S. Department of Energy, Contract Number DE-
AM01-99PO8006. All opinions, findings, conclusions, and recommendations
expressed herein are those of the authors and do not necessarily reflect the views
of the Department of Energy.

International Standard Book Number 0-309-08280-3

Additional copies of this report are available for sale from National Academy
Press, 2101 Constitution Avenue, N.W., Lockbox 285, Washington, DC 20055;
(800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); also
available online at <http://www.nap.edu>.

Copyright 2001 by the National Academy of Sciences. All rights reserved.


Printed in the United States of America
National Academy of Sciences
National Academy of Engineering
Institute of Medicine
National Research Council

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of


distinguished scholars engaged in scientific and engineering research, dedicated to the
furtherance of science and technology and to their use for the general welfare. Upon the
authority of the charter granted to it by the Congress in 1863, the Academy has a mandate
that requires it to advise the federal government on scientific and technical matters. Dr.
Bruce M. Alberts is president of the National Academy of Sciences.

The National Academy of Engineering was established in 1964, under the charter of the
National Academy of Sciences, as a parallel organization of outstanding engineers. It is
autonomous in its administration and in the selection of its members, sharing with the
National Academy of Sciences the responsibility for advising the federal government.
The National Academy of Engineering also sponsors engineering programs aimed at
meeting national needs, encourages education and research, and recognizes the superior
achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of
Engineering.

The Institute of Medicine was established in 1970 by the National Academy of Sciences
to secure the services of eminent members of appropriate professions in the examination
of policy matters pertaining to the health of the public. The Institute acts under the
responsibility given to the National Academy of Sciences by its congressional charter to
be an adviser to the federal government and, upon its own initiative, to identify issues of
medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of
Medicine.

The National Research Council was organized by the National Academy of Sciences in
1916 to associate the broad community of science and technology with the Academy’s
purposes of furthering knowledge and advising the federal government. Functioning in
accordance with general policies determined by the Academy, the Council has become the
principal operating agency of both the National Academy of Sciences and the National
Academy of Engineering in providing services to the government, the public, and the
scientific and engineering communities. The Council is administered jointly by both
Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are
chairman and vice chairman, respectively, of the National Research Council.
COMMITTEE FOR OVERSIGHT AND ASSESSMENT OF
U.S. DEPARTMENT OF ENERGY PROJECT MANAGEMENT
KENNETH F. REINSCHMIDT, Chair, Texas A&M University, College
Station
DON JEFFREY BOSTOCK, Lockheed Martin Energy Systems (retired), Oak
Ridge, Tennessee
DONALD A. BRAND, Pacific Gas and Electric company (retired), Novato,
California
ALLAN V. BURMAN, Jefferson Solutions, Washington, D.C.
LLOYD A. DUSCHA, U.S. Army Corps of Engineers (retired), Reston,
Virginia
G. BRIAN ESTES, consulting engineer, Williamsburg, Virginia
DAVID N. FORD, Texas A&M University, College Station
G. EDWARD GIBSON, University of Texas, Austin
PAUL H. GILBERT, Parsons, Brinckerhoff, Quade, and Douglas, Seattle,
Washington
THEODORE C. KENNEDY, BE&K, Inc., Birmingham, Alabama
MICHAEL A. PRICE, Project Management Institute, Newtown Square,
Pennsylvania

Staff
RICHARD G. LITTLE, Director, Board on Infrastructure and the Constructed
Environment
MICHAEL D. COHN, Project Officer
KIMBERLY GOLDBERG, Financial Associate
NICOLE E. LONGSHORE, Project Assistant

iv
BOARD ON INFRASTRUCTURE AND THE
CONSTRUCTED ENVIRONMENT
RICHARD WRIGHT, Chair, National Institute of Standards and Technology
(retired), Gaithersburg, Maryland
MASOUD AMIN, Electric Power Research Institute, Palo Alto, California
GREGORY BAECHER, University of Maryland, College Park
JONATHAN BARNETT, urban planner, Washington, D.C.
MAX BOND, Davis, Brody, Bond, LLP, New York, New York
MARY COMERIO, University of California, Berkeley
PAUL H. GILBERT, Parsons, Brinckerhoff, Quade, and Douglas, Seattle,
Washington
YACOV HAIMES, University of Virginia, Charlottesville
HENRY HATCH, U.S. Army Corps of Engineers (retired), Oakton, Virginia
JEREMY ISENBERG, Weidlinger Associates, New York, New York
SUE McNEIL, University of Illinois, Chicago
DOUGLAS SARNO, The Perspectives Group, Inc., Alexandria, Virginia
WILL SECRE, Masterbuilders, Inc., Cleveland, Ohio
DAVID SKIVEN, General Motors Corporation, Detroit, Michigan
DEAN STEPHAN, Charles Pankow Builders (retired), Laguna Beach,
California
ERIC TEICHOLZ, Graphic Systems, Inc., Cambridge, Massachusetts
ZOFIA ZAGER, County of Fairfax, Fairfax, Virginia
CRAIG ZIMRING, Georgia Institute of Technology, Atlanta

Staff
RICHARD G. LITTLE, Director, Board on Infrastructure and the Constructed
Environment
LYNDA STANLEY, Executive Director, Federal Facilities Council
MICHAEL D. COHN, Project Officer
KIMBERLY GOLDBERG, Administrative Associate
NICOLE E. LONGSHORE, Project Assistant
JASON DREISBACH, Research Assistant

v
Acknowledgment of Reviewers

This report has been reviewed in draft form by individuals chosen for their
diverse perspectives and technical expertise, in accordance with procedures ap-
proved by the NRC’s Report Review Committee. The purpose of this indepen-
dent review is to provide candid and critical comments that will assist the institu-
tion in making its published report as sound as possible and to ensure that the
report meets institutional standards for objectivity, evidence, and responsiveness
to the study charge. The review comments and draft manuscript remain confiden-
tial to protect the integrity of the deliberative process. We wish to thank the
following individuals for their review of this report:

Philip R. Clark, Nuclear Corporation (retired),


Fletcher H. (Bud) Griffis, Polytechnic University,
Henry J. Hatch, U.S. Army Corps of Engineers (retired),
Elvin R. Heiberg III, Heiberg Associates, Inc.,
Bradley C. Moore, Ohio State University, and
Richard N. Zare, Stanford University.

Although the reviewers listed above have provided many constructive com-
ments and suggestions, they were not asked to endorse the conclusions or recom-
mendations, nor did they see the final draft of the report before its release. The
review of this report was overseen by Charles B. Duke (NAE), Xerox Research
and Technology. Appointed by the National Research Council, he was respon-
sible for making certain that an independent examination of this report was
carried out in accordance with institutional procedures and that all review com-
ments were carefully considered. Responsibility for the final content of this re-
port rests entirely with the authoring committee and the institution.

vii
Contents

EXECUTIVE SUMMARY 1

1 INTRODUCTION 11
Background, 11
Scope of Work, 12
Organization of the Report, 13
References, 14

2 OVERARCHING ISSUES 15
Introduction, 15
Involvement of Senior Management, 16
Strategic Planning, 17
Owner’s Role, 18
Process Improvement, 19
Organizational Structure and Responsibility, 19
References, 21

3 FRONT-END PLANNING 22
Introduction, 22
Assessment of Front-End Planning in DOE, 24
Management Review, 29
Front-End Planning Metrics, 30

ix
x CONTENTS

Human Resources for Front-End Planning, 30


References, 32

4 RISK MANAGEMENT 33
Introduction, 33
Risk Identification, 34
Risk Analysis and Evaluation, 35
Risk Response, 41
Allocation of Risk and Contracting, 44
Active Risk Management, 45
Ongoing Project Risks, 46
Development of Risk Management Excellence, 47
Program Risks Across Multiple Projects, 48
References, 49

5 PROJECT REPORTING AND OVERSIGHT 50


Introduction, 50
Analysis of Earned Value Management System Data, 51
Project Oversight, 52
Contingency Utilization Index, 53
Benchmarking, 53
Measuring Improvement in Project Management, 54
Other Metrics, 54
Findings and Recommendations, 55
References, 56

6 INDEPENDENT REVIEWS 57
Introduction, 57
Documentation of Review Procedures, 58
Review Team Qualifications, 59
Review Requirements, 59
Review Evaluation, 60
Project Review Management System, 61
Findings and Recommendations, 61
References, 63

7 ACQUISITION AND CONTRACTING 64


Introduction, 64
Performance-Based Contracting, 65
Performance-Based Contracting in Policy and Procedure Documents, 67
Risk, Performance-Based Contracting, and Contract Tailoring, 70
CONTENTS xi

Findings and Recommendations, 72


References, 73

8 DOCUMENTATION OF PROJECT MANAGEMENT POLICIES 74


AND PROCEDURES
Introduction, 74
DOE Policy P413.1 and Order O413.3, 75
Draft Program and Project Management Manual and Draft
Project Management Practices, 76
Issues in Need of Additional Documentation, 77
ISO 9000 Certification, 78
Findings and Recommendations, 79
References, 80

9 PROJECT MANAGER TRAINING AND DEVELOPMENT 81


Introduction, 81
Project Management Career Development Program, 82
Interim Training Efforts, 83
Alternative Learning Concepts, 83
Other Concerns, 84
Findings and Recommendations, 85
References, 85

APPENDIXES
A Biographies of Committee Members, 89
B Committee Fact Finding and Briefing Activities Through August 2001
and Project Data Request in March 2001, 96
C Phase II Report Findings and Recommendations, 101
D Letter Report of January 2000, 108
E Statistical Process Control with EVMS Data, 120
F Acronyms and Abbreviations, 126
Executive Summary

The Department of Energy (DOE) is engaged in numerous multimillion- and


even multibillion-dollar projects that are one of a kind or first of a kind and
require cutting-edge technology. The projects represent the diverse nature of
DOE’s missions, which encompass energy systems, nuclear weapons steward-
ship, environmental restoration, and basic research. Few other government or
private organizations are challenged by projects of a similar magnitude, diversity,
and complexity. To complete these complex projects on schedule, on budget, and
in scope, the DOE needs highly developed project management capabilities.
This report is an assessment of the status of project management in the
Department of Energy as of mid-2001 and the progress DOE has made in this
area since the National Research Council (NRC) report Improving Project Man-
agement in the Department of Energy (Phase II report) was published in June
1999 (NRC, 1999). The Phase II report findings and recommendations are repro-
duced as Appendix C. The findings presented in this report reiterate and expand
on those given in the committee’s January 2001 interim letter report, Improved
Project Management in the Department of Energy (NRC, 2001), reproduced here
as Appendix D.
The Phase II report estimated that DOE projects costed taxpayers 50 percent
more than comparable projects would cost if performed by the private sector or
other government agencies, in large part because DOE did not use industry-
standard best practices for project management. The Phase II report recom-
mended, inter alia, that DOE develop policies, procedures, models, tools, tech-
niques, and standards; train staff in their use; and require their use on DOE
projects. It recommended further that DOE should develop and deploy a compre-

1
2 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT DOE

hensive project management system with clear definition of the specific roles and
responsibilities of all parties associated with a project.
As noted in the interim letter report, the department has taken a number of
positive steps since the Phase II report. On June 25, 1999, subsequent to the
release of that report, the deputy secretary, as the DOE chief operating officer,
issued a memorandum announcing a project management reform initiative. This
memorandum directed a number of actions to be taken to improve project man-
agement capability. These included the formation of the Office of Engineering
and Construction Management (OECM) in the office of the chief financial officer
(CFO) and the formation and strengthening of project management support offices
(PMSOs) in the three major program secretarial offices (PSOs). On January 3,
2000, the deputy secretary issued an interim instruction to serve as policy guid-
ance on critical decisions by acquisition executives (AEs) and the Energy Sys-
tems Acquisition Advisory Board (ESAAB) and on the conduct of corporate-
level performance reviews. On June 10, 2000, DOE issued Policy P413.1, which
addresses project management accountability, the establishment of project man-
agement organizations, project management tools, and training of personnel.
DOE Order O413.3 was issued October 13, 2000, to implement the DOE policy
document. O413.3 covered department policies on project management; pro-
vision for project engineering and design (PED) funding for preconstruction
planning; reestablishment of the ESAABs; and other matters related to the man-
agement and oversight of DOE projects. Finally, the Program and Project Man-
agement (PPM) manual and a companion volume, Project Management Prac-
tices (PMP), were released in draft form in October 2000.
The body of this report addresses certain specific areas that the committee
believes needed greater definition and follow-up since the Phase II report. Not all
the findings and recommendations in the Phase II report are repeated in the body
of this report, although the committee continues to endorse them, so this report
should be used in conjunction with the Phase II report.

OVERARCHING ISSUES
The new secretary of energy, the deputy secretary, and the CFO were briefed
on the recommendations of the Phase II report (NRC, 1999) and the 2001 letter
report (NRC, 2001). All of these executives expressed their intention to gain
control over DOE projects and to change the prevalent project management cul-
ture within DOE and its contractors through active management attention and
oversight. Although DOE senior management has expressed the intent to achieve
early results, it is too soon to see any effects from these management changes, as
the new deputy secretary was confirmed only in June 2001. Accordingly, any
policies and practices put in place by the new management team at DOE lie
outside the scope of the present report, and their assessment must be deferred to
EXECUTIVE SUMMARY 3

a later time. Nevertheless, the committee is optimistic that if these stated inten-
tions are carried through, there can be positive change at DOE.
The committee believes the efforts of the deputy secretary, the CFO, OECM,
and the PMSOs have unquestionably raised awareness of the importance of good
project management within the department. Briefings by DOE officials indicate
that new steps are being undertaken at all levels of the department. This is en-
couraging, and if the efforts continue, they can form the foundation of a coherent
project management approach for the department. By and large, these initiatives
are considered by the committee to be steps toward improving project perfor-
mance. However, change has been inordinately slow, and the committee has
found no evidence that DOE project management practice and performance in the
field have actually improved.
The committee believes that the PMSOs in the Environmental Management
(EM), National Nuclear Security Agency (NNSA), and Office of Science (SC)
PSOs are having a positive influence on project management in their programs.
The committee recognizes the need for tailoring project management programs to
the different PSO mission requirements. However, some PSOs are improving
faster than others, and progress could be accelerated by stronger central oversight
and support using OECM as a unifying organization to assist the PMSOs and the
PSO projects and to validate the results.
Department-wide, recognition of project management deficiencies and of the
effectiveness of initiatives for improvement has been inconsistent. The PMSO in
NNSA has been particularly active since formation of the agency. Excessive
administrative impediments and time required to get the OECM up and running,
along with the inadequate resources assigned to it, are symptoms of cultural
resistance to change and the lack of a sense of urgency. The committee is aware
that not all of the recommendations in the Phase II report could have been accom-
plished in the 2 years since it was released, but it does believe that much more
progress could have been made. The committee recommends that OECM should
be budgeted, staffed, and empowered to become the center of excellence in
project management and the central manager for oversight and approval of all
capital projects in DOE.
DOE continues to rely heavily on contractors, not only for the management
of projects, which is to be expected, but also for project justification and defini-
tion of scope. DOE does not directly manage projects, unless the contractor is
simply working on a time and materials basis, as do some management and
operations (M&O) contractors. Although many projects are managed success-
fully, especially those identified as outstanding examples in the OECM October
2000 project management workshop awards, DOE is not in control of many of its
projects and in some cases has virtually abdicated its role of owner in project
oversight and management of contracts and contractors. As stated in the Phase II
report, DOE needs to become proficient in the role of owner; and DOE project
4 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT DOE

managers should become knowledgeable owner’s representatives. The commit-


tee has seen little evidence that DOE is aware of the distinction between the
owner’s and contractor’s role, let alone acting upon it.
Two of the overarching issues that particularly concern the committee are the
lack of strategic planning and the lack of a system for process improvement. The
first step toward process definition has been taken in O413.3, but much remains
to be done. A consistent, documented process and procedures for efficient project
planning, justification, and execution are essential. Treatment of each project on
a unique, ad hoc basis continues and should be seen as unacceptable. The com-
mittee believes that each PSO should develop its own strategic plan and that
project justification as required for approval of mission need (CD-0) should be
based on an assessment of the congruity of project descriptions with these strate-
gic plans. The committee recommends that DOE initiate a program for improving
the project management process, following an established statistical process con-
trol procedure such as the well-known six-sigma process.

FRONT-END PLANNING
The committee has received no evidence that new projects are getting off to
a better start than before the Phase II report was issued. The establishment of
PED funding and the development of the performance baseline at 25 to 30 per-
cent design completion are positive steps, but the committee’s review of new
projects authorized in FY2000 and FY2001 uncovered little documentation of
mission need, strategic requirements, scope justification, risk assessment, and the
other early steps that are necessary for project success. Industry studies consis-
tently correlate project performance with the quality of front-end planning (CII,
2000). The committee reiterates the Phase II finding that improvement in project
performance will require improvement in the front-end planning process, and that
any improvement in front-end planning will require positive, aggressive action
by all responsible parties. It should be noted that all the projects reviewed by or
presented to the committee were initiated prior to the activation of the OECM, the
establishment of the PMSOs, and the issuance of O413.3. Therefore, this nega-
tive assessment does not mean that these initiatives are ineffective. What it does
indicate, based on the evidence provided to the committee, is that the DOE
process has not noticeably improved since the 1999 Phase II report and probably
will not improve until the reforms have been implemented and have become
effective.
The committee recommends that OECM assure that all program offices have
a documented front-end planning process that meets the intent of O413.3, and
that the information be used as input for Energy Systems Acquisition Advisory
Boards (ESAABs) and ESAAB-equivalent readiness reviews. The outcomes of
these reviews should be documented and used to assess project performance and
EXECUTIVE SUMMARY 5

progress in improving project planning. Without immediate improvement in the


planning knowledge and skills of personnel and more management emphasis on
improving the planning process, projects will continue to have inadequate front-
end planning. To overcome the lack of internal skilled project planners and the
delays in training, and to bridge the gap until a training program takes effect, the
committee recommends that DOE should engage a cadre of experienced project
planners with a wide variety of planning capabilities and prior experience in the
different project types, including high-risk projects. These individuals should be
a part of the initial integrated project teams and should assist the project origina-
tors (as internal consultants) in getting front-end planning done correctly, even
before CD-0.

RISK MANAGEMENT
Risk management is probably the most difficult aspect of project manage-
ment, and for many DOE projects it is also the most critical. Discussions with
DOE project managers have revealed that DOE has not yet established effective
risk-management methodologies or systems, and managers lack the tools and
training to adequately address risk management for projects with high levels of
uncertainty. The acquisition risk management (ARM) pilot program by the DOE
Contract Reform Office is beginning to address many risk management issues
and has defined three iterative phases of risk management for DOE projects:

1. Risk identification,
2. Risk analysis and evaluation, and
3. Risk response.

The committee believes that all three phases of risk management are critical
to effective project management at DOE. The committee also believes that DOE
should undertake a department-wide assessment of risks for ongoing projects and
adopt procedures for program-wide management of contingencies and manage-
ment reserves.
The committee has found that there is no consistent system for evaluating the
relative risks of projects with respect to scope, cost, or duration, which means that
the deputy secretary, the CFO, and the PSO managers have no objective basis for
knowing which projects are riskier (and therefore require more management
attention) than others. Probability analysis has been used and misused as a tool
for risk analysis. However, the failure to accurately identify the root causes of
risk, including technical, environmental, and human factors, and the potential for
common mode failure has led to underestimating risks on many DOE projects.
The committee recommends that DOE should identify or develop personnel with
the ability to perform qualitative and quantitative risk assessments and assign
6 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT DOE

them to work with personnel with in-depth understanding of a given project to


undertake risk management. Independent assessors or reviewers who are not
project proponents should separately evaluate internal project risk assessments
for reasonableness of assumptions, estimates, and results. Risk mitigation and
management plans should be prepared to deal with any significant risks identi-
fied, especially risks due to common modes or root causes.
The committee recommends that DOE should develop more expertise and
improved tools for risk management. Nontraditional and innovative approaches,
tools, and methods should be investigated for adaptation to DOE project condi-
tions and use in DOE risk management, including those cited in this report and in
the Phase II report (NRC, 1999, Appendix B), such as systems analysis, event
trees, causal loop diagrams, system dynamics, stochastic simulation, and other
approaches that have been tested and shown to be valuable on similar projects or
in addressing similar challenges.

PROJECT REPORTING AND OVERSIGHT


Effective oversight of project performance is dependent on systematic and
realistic reporting of project performance data. Each PSO has its own active
project reporting systems, and OECM has completed a specification and beta
testing for a department-wide project analysis and reporting system (PARS). The
committee believes that PARS should be designed so that it supports the data
analysis needed by project managers to evaluate their projects’ performance as
well as the oversight needs of the PSOs, OECM, the CFO, and the deputy secre-
tary. The database should also provide the information needed for process im-
provement through statistical process control and benchmarking future projects.
An effective earned value management system (EVMS) is needed as the
source of data for PARS and data analysis for project management and project
oversight. To create an effective department-wide earned value management and
reporting system, a consistent accrual accounting system is needed for all projects.
The committee believes that DOE management needs to be able to detect
potentially adverse trends in project progress and distinguish them from mere
random fluctuations in progress reporting. EVMS provides data that can be used
to gain some very valuable insights into the health of a project and can predict the
probable outcome. EVMS data can also allow useful insights into the conduct of
the work, particularly when it is reported and analyzed to evaluate period-to-
period trends. The committee recommends that DOE utilize EVMS data to calcu-
late the incremental and cumulative cost performance index, schedule perfor-
mance index, and contingency utilization index for each reporting period and that
it produce process control charts to analyze and improve project performance.
EXECUTIVE SUMMARY 7

INDEPENDENT REVIEWS
The committee finds that DOE has made substantial progress in the imple-
mentation of reviews and resultant corrective action plans and in the formaliza-
tion and institutionalization of the review process. It continues to recommend the
use of formalized assessments of management, scope, cost, and schedule at
appropriate stages—from determining need for the project to determining readi-
ness for construction—as well as regular performance reviews.
The committee examined the internal review processes documented by the
three PMSOs and noted some inconsistency in general approach and the degree
of recent process improvement. It strongly endorses a department-wide manual to
achieve consistency in process, nomenclature, and reporting. Department-wide
procedures would allow the lessons learned in reviews to gain broader recogni-
tion and would facilitate the ability of reviewers to participate in reviews in
multiple organizations. Any differences or distinct features pertinent to a particu-
lar program could be identified and articulated in the text or in appendixes.
The committee is concerned that mandatory review for projects between
$5 million and $20 million total project cost may be consuming too many
resources and diverting too much management attention relative to the value it
adds. The committee understands that although O413.3 refers to the $5 million
level, OECM intends to waive the requirement if it believes a review would not
be cost effective.

ACQUISITION AND CONTRACTING


The committee has reaffirmed the integral role that acquisition planning and
acquisition and contracting techniques play in successful project management, as
noted in both of its previous reports (NRC 1998, 1999). This role is particularly
critical in the DOE environment, where some 90 percent of the department’s
budget is expended by contract (GAO, 2001). The committee stresses the impor-
tance of developing and employing contracting methods, such as performance-
based contracting (PBC), that ensure accountability, adequately address risk, and
focus the government and the contractor on achieving the outcomes sought.
Successful PBC is based on defining existing conditions, specific require-
ments, and the desired results or outcomes, along with objective, meaningful, and
measurable performance and quality standards. In addition, incentives are used to
focus contractor efforts and to reward success. In a successful performance-based
contract, expectations should be made clear, with agency and contractor teams
working together in a business partnership to achieve well-defined and measur-
able results.
The integrated project team (IPT) concept included in DOE Order O413.3 is
an essential element in implementing a performance-based approach. The com-
mittee strongly supports the use of IPTs and suggests a PBC methodology for
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