Nuclear Weapons: NNSA Needs to Determine Critical Skills and Competencies for Its Strategic Materials Programs

NNSA is responsible for ensuring a sustainable supply of strategic materials critical to the nation's nuclear security missions, as well as the capability to process these materials. NNSA estimates that strategic materials management activities will cost about $7.7 billion over the next 5 years.

The House Report accompanying H.R. 4909, a bill for the National Defense Authorization Act for Fiscal Year 2017, included a provision for GAO to review NNSA's management of its strategic materials programs. This report examines (1) the extent to which NNSA has, for these programs, defined requirements, including program manager roles and responsibilities, and (2) the progress of NNSA's implementation of those program requirements.

GAO reviewed NNSA program management policies and documents related to its strategic materials program manager positions and interviewed NNSA officials and program managers.

The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) manages strategic materials programs for uranium, plutonium, tritium, and lithium—materials that are critical to national security. NNSA has set program requirements that each of the programs must follow and has established the roles and responsibilities of the program managers. NNSA has defined these requirements in two documents:

Program Execution Instruction (2016). Outlines requirements for program management documents, such as a program plan, cost and schedule estimates, and an integrated master schedule that includes the entire scope of work for successful execution.

Program Management Policy (2017). Outlines the program managers' authority and requirements for managing the strategic materials programs, such as managing risk, and requires each program to develop documents, such as a mission strategy and technology development plan.

NNSA officials reported that the agency is making progress implementing the requirements outlined for each of the strategic materials programs, although some of the programs are farther along than others. For example:

The uranium and domestic uranium enrichment programs established in 2014 are the furthest along and have developed the documents needed to meet strategic program requirements.

The plutonium program has met some of the requirements, such as developing a program plan, work breakdown structure, and decision analysis, but does not yet have an integrated master schedule.

The tritium program met the requirements during the course of GAO's review.

The lithium program, which is the newest, has made the least amount of progress and to date has developed only a mission strategy, a mission requirements matrix, and a technology development plan.

According to NNSA officials, shortage of staff assigned to the strategic materials programs has been the primary reason hampering progress in implementing the program requirements. For example, a lithium program manager has not yet been assigned, and all the other programs have identified the need for additional staff beyond the one or two staff currently assigned to each. According to officials, competing agency priorities and perceived staffing limits are the primary impediments to assigning more staff to these programs. However, GAO also found that NNSA has not determined the critical skills and competencies needed for these programs. GAO's prior work has identified certain activities or practices that can help an agency strategically manage its human capital. These activities include determining the critical skills and competencies that will be needed to achieve the program's mission and developing strategies to address gaps in the number, deployment, and alignment of staff needed. By determining the critical skills and competencies needed for the strategic materials programs and using this determination to develop strategies to address any gaps in the number, deployment, and alignment of program staff, NNSA may have the information it needs to better justify increased staffing levels for the programs.

GAO recommends that NNSA determine the critical skills and competencies that will be needed for the strategic materials programs and use this determination to develop strategies for addressing any gaps related to the number, deployment, and alignment of program staff. NNSA agreed with GAO's recommendation.

Certain materials—such as uranium, plutonium, tritium, and lithium—are  critical to the nuclear security missions of the Department of Energy  (DOE). These missions include ensuring a safe, secure, and reliable  nuclear deterrent; achieving designated reductions in the nuclear  weapons stockpile; and supporting the nation’s nuclear nonproliferation  efforts. Managing these missions is the responsibility of the National  Nuclear Security Administration (NNSA), a separately organized agency  within DOE. To carry out this responsibility, NNSA must ensure a  sustainable supply of these materials, which NNSA calls strategic  materials. For example, NNSA is seeking to establish a new capability to  enrich uranium—a capability that it lost with the 2013 closure of the aging  Gaseous Diffusion Plant in Paducah, Kentucky—to sustain the production  of tritium.

NNSA has established programs for ensuring the supply of each of these  four strategic materials, as well as a separate strategic materials program  specifically to develop the new domestic uranium enrichment capability.  NNSA’s Office of Defense Programs, responsible for implementing  NNSA’s stockpile mission, in 2014 and 2015 named federal program  managers to oversee the uranium, domestic uranium enrichment,  plutonium, and tritium programs and has designated a lead point of  contact for the lithium program. As we reported in November 2016,  program managers play key roles in the federal government, including  overseeing contracts to help agencies get what they need at the right time  and at a reasonable price.

The strategic materials program managers and lithium lead point of  contact are responsible for complex programs that may take decades and  cost billions of dollars to execute and that often include the design and  construction of major projects (i.e., those with an estimated cost of $750  million or greater). Such projects include the Uranium Processing Facility  (UPF), which is under construction in Tennessee to replace and  modernize a portion of NNSA’s enriched uranium capabilities, and a  variety of activities to replace the capabilities of the Chemistry and  Metallurgy Research Facility—built in the 1950s—in New Mexico for  conducting plutonium analysis. NNSA estimated that it would cost about  $1.4 billion in fiscal year 2018 to carry out its annual activities associated  with its strategic materials programs.

The House Armed Services Committee report accompanying H.R. 4909,  a bill for the National Defense Authorization Act for Fiscal Year 2017,  included a provision for us to review NNSA’s management of its strategic  materials programs. This report examines (1) the extent to which NNSA  has, for its strategic materials programs, defined program requirements,  including program manager roles and responsibilities; and (2) the  progress of NNSA’s implementation of those program requirements.

To examine the extent to which NNSA has defined program requirements  for its strategic materials programs, we reviewed NNSA directives on  program management, including its 2016 Program Execution Instruction.  To review NNSA’s definition of strategic materials program manager roles  and responsibilities, we reviewed the NNSA memorandums that created  and described strategic materials program manager positions, where  applicable, as well as NNSA’s 2017 Program Management Policy for  Weapons and Strategic Materials Programs. To examine NNSA’s  progress toward implementing program requirements for its strategic  materials programs, we obtained and reviewed all of the documents that  NNSA programs had completed as of June 2017 in response to  requirements contained in NNSA’s 2017 Program Management Policy for  Weapons and Strategic Materials Programs. In addition, we obtained and  reviewed documents for a nonprobability sample of 22 of the 65 total  requirements that strategic materials programs must implement based on  NNSA’s 2016 Program Execution Instruction. This sample included key  documents such as program plans and the work breakdown structures for  all of the strategic materials programs. The results of our review of this  sample of requirements are not generalizable but represent illustrative  examples of NNSA’s progress. NNSA also identified a number of  documents that were still being developed in response to both sets of  requirements. We interviewed all four of NNSA’s appointed strategic  materials managers and the lithium lead point of contact, as well as other  NNSA officials to better understand the steps NNSA had taken as of  September 2017 to implement these requirements. We also reviewed  NNSA’s budget requests for fiscal years 2016, 2017, and 2018 and other  relevant agency documents, such as strategies and implementation plans  for the strategic materials programs.

We conducted this performance audit from June 2016 to November 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

NNSA’s strategic materials programs include a broad range of activities.  The programs often include (1) building unique new facilities, (2)  modifying and repairing existing facilities and equipment, and (3)  developing and deploying new technologies for processing and producing  strategic nuclear materials. The programs may involve multiple NNSA  and DOE sites and multiple facilities at a given site. For example, since  the days of the Manhattan Project, a large portion of the nation’s uranium  mission has been executed at the Y-12 National Security Complex in Oak  Ridge, Tennessee, with uranium production and associated operations  housed in several nuclear facilities within the complex. These facilities are  in some cases more than 60 years old. NNSA’s uranium program is  coordinating efforts to build the UPF, invest in the infrastructure of  existing facilities to extend their lives, and develop and deploy several  new technologies that are expected to increase the efficiency and  effectiveness of uranium processing. Collectively, these uranium program  activities may take more than 2 decades to implement and cost several  billion dollars.

NNSA’s 2017 future-years nuclear security program estimate projected  that NNSA would need about $1.4 billion in fiscal year 2018 to carry out  its annual activities associated with the management of these strategic  materials programs (see table 1). NNSA documents indicate that the  agency expects to spend about $7.7 billion over the next 5 years on  activities related to managing its strategic materials. This spending, which  would represent about 12 percent of the approximately $63 billion NNSA  expects to spend on all weapons activities over this same time period,  includes: $4.8 billion for costs related to construction of facilities and other  capital equipment purchases that will be used to support the strategic  materials mission; and $2.9 billion for program costs related to general activities such as  reducing risk and ensuring sufficient supply, as well as the  consolidation, disposition, tracking, and accounting of nuclear  materials.

Program managers are an important part of the federal government’s  workforce. They interact with the managers of individual projects to  provide support and guidance on those projects but also must take a  broad view of the overall objectives of programs and an agency’s  organizational culture. According to leading practices outlined by the  Project Management Institute, organizations develop program plans,  capture and understand stakeholder needs, and establish processes for  maintaining program management oversight, among other activities.  Recognizing the importance of improving program management, in  December 2016 the President signed the ‘‘Program Management  Improvement Accountability Act” that required the Office of Management  and Budget to, among other things, adopt and oversee implementation of  government-wide standards, policies, and guidelines for program and  project management for executive agencies and assess the quality and  effectiveness of program management for these agencies. We have  previously reported on DOE’s and NNSA’s program management  challenges.

In March 2009, we found that NNSA and the Department of Defense  (DOD) established unrealistic schedules, did not establish consistent  cost baselines, and did not effectively manage technical risks in some  of their nuclear weapon life extension programs. These problems  resulted in delays, additional expenditures, difficulties tracking the  cost of the programs, and difficulties in meeting all of NNSA’s and  DOD’s technical objectives. We recommended that NNSA develop  and use consistent budget assumptions and criteria for the baseline to  track costs over time, among other actions. NNSA agreed with our  recommendations and made changes to its cost estimating  procedures.

In November 2014, we found that the lack of requirements for  programs meant that DOE could not ensure that it was developing  fully credible cost estimates for programs. We recommended that  DOE revise its program management directives to require that  programs develop life-cycle cost estimates in accordance with our 12  cost-estimating best practice steps. DOE agreed with our  recommendation but has not yet incorporated the best practice steps  into its program management directives.

In February 2016, we found that the B61-12 life extension program,  the most complex such program NNSA has undertaken to date, faces  ongoing management challenges in some areas, including staff  shortfalls and an earned value management system that has yet to be  tested. We did not make any recommendations but reiterated  previous recommendations such as those already mentioned.

In November 2016, we found that DOE and NNSA had not  established organization-wide policies or practices addressing leading  practices related to program management, and we recommended that  DOE do so. DOE did not agree or disagree with this  recommendation. NNSA, however, in late 2016 instituted a training  program for program management.

NNSA’s stockpile stewardship program has established strategic  materials as one of the major elements to sustain the nation’s nuclear  weapons stockpile. According to NNSA budget documents, the strategic  materials programs help ensure the sustainment of nuclear material  processing capabilities and fund the stabilization, consolidation,  disposition, tracking, and accounting of nuclear materials. Strategic  materials are generally not available, or are available only in limited  quantities, from commercial suppliers because of their specific properties  and use in nuclear weapons or for other national security purposes.  NNSA named strategic material program managers in 2014 and 2015 to  integrate, oversee, plan, and execute material strategies for uranium  (including domestic uranium enrichment), plutonium, and tritium.

In addition to the general program management challenges highlighted  above, we have also reported previously on challenges facing NNSA’s  strategic materials programs:  In July 2015, we found that NNSA had identified various challenges in  its lithium production strategy that may impact its ability to meet  demand for lithium in the future. These challenges included  insufficient supply of lithium material and constraints facing NNSA’s  efforts to replace the aging lithium production facility. We  recommended that NNSA objectively consider all alternatives, without  preference for a particular solution, as it proceeds with its analysis of  alternatives process. NNSA neither agreed nor disagreed with our  recommendation but did undertake a formal analysis of alternatives in  2017, according to NNSA officials.

In August 2016, we found that NNSA had not documented important  requirements for its plutonium program at Los Alamos National  Laboratory in New Mexico. We recommended that, among other  things, NNSA should update its program requirements. NNSA outlined  actions taken and planned to address this recommendation.

NNSA Has Defined Strategic Materials Program Requirements, Including Roles and Responsibilities for Program Managers

NNSA’s Office of Defense Programs has set program requirements for  the strategic materials programs and has established the roles and  responsibilities of the programs’ managers. NNSA defined these program  requirements in two documents issued in 2016 and 2017. Collectively  these documents set documentation requirements as well as established  the roles and responsibilities of the strategic materials program  managers. According to NNSA officials, these requirements apply to each  of the programs, including the lithium program. These requirements are  outlined below.

Program Execution Instruction (2016) – In January 2016, NNSA  approved a Program Execution Instruction that defines requirements  for carrying out NNSA defense programs, such as the strategic  materials programs. This instruction outlines a series of  requirements that vary based on the categorization—and therefore  the rigor—of management applied to a program. Of the four  categories outlined in the instruction—Standard Management,  Enhanced Management A, Enhanced Management B, and Capital  Acquisition Management—NNSA has generally designated the  strategic materials programs as “Enhanced Management B,” the most  rigorous designation applicable to this type of program, according to  NNSA officials. The “Enhanced Management B” programs are  required to have the following elements documented: a program plan,  a work breakdown structure that details the work elements necessary  to organize the total work scope with cost estimates, a decision  analysis, an integrated master schedule that includes the entire scope  of work required for the program’s successful execution, a  performance management approach, and a lessons learned/best  practices review. According to the instruction, if the scope, cost, and  schedule of a program are more complex, moving to a more rigorous  program management category is often required. According to the  instruction, when enhanced complexity and risk are associated with a  program, among other things, “Enhanced Management B” is the  appropriate designation. The instruction also allows for programs to  “tailor,” or modify, the application of certain requirements depending  on risk and other factors.

Program Management Policy for Weapons and Strategic  Materials Programs (2017) – NNSA issued a program management  policy in January 2017 that defines general roles and responsibilities  for all four strategic materials program managers. This policy  broadly outlines the managers’ authority and responsibilities for  managing the strategic materials; these responsibilities include  developing program documentation and managing risk. According to  NNSA officials we interviewed, the policy is based on NNSA’s  experience in implementing the uranium program in 2014. The policy  requires each of the strategic materials programs to develop a  number of guidance documents, including a mission strategy, mission  requirements, and a technology development plan. For each program,  the policy also requires the formation of a strategic materials mission  working group that is comprised of the key stakeholders involved in  the program.

NNSA Officials Reported Progress in Meeting Strategic Materials Program Requirements but Challenges from Staffing Shortages

NNSA officials told us that they are making progress in implementing the  program requirements outlined for each of the strategic materials  programs, although some are further along than others. However, these  officials said that relatively few staff had been assigned to these  programs, which has challenged implementation efforts.

Progress Reported in Implementing Program Requirements

For its two strategic materials programs established in 2014—uranium  and domestic uranium enrichment—NNSA officials told us that they are  generally meeting the strategic materials program management  requirements outlined in the Program Execution Instruction and the  Program Management Policy for Weapons and Strategic Materials.  NNSA officials identified documents for each program, including mission  strategy, mission requirements, program plan, and work breakdown  structure. For the other programs, according to agency officials, NNSA is  still working to meet these requirements, though the tritium program met  all requirements during the course of this review. More specifically,  according to agency officials:

The plutonium sustainment program has met some of the Program  Execution Instruction requirements to date, including having in place a  program plan, work breakdown structure, and decision analysis, but  not an integrated master schedule (although one is being developed,  according to agency officials). The plutonium program also has a  mission strategy in place, as called for by the Program Management  Policy for Weapons and Strategic Materials, but has not yet met the  other strategic materials program management requirements.  According to agency officials, those requirements are being  developed.

The tritium sustainment program has recently met the Program  Execution Instruction requirements as well, including having a  program plan, work breakdown structure, integrated master schedule,  and performance management approach in place. Additionally, the  program recently updated documentation to meet the Program  Management Policy requirements including revising its Strategic  Material Mission Working Group in 2017, according to agency  officials.

The lithium program is early in its development, and no program  manager has been appointed yet, pending senior NNSA leadership  decisions. NNSA has a lithium mission strategy, a mission  requirements matrix, and a technology development plan in place, as  required by the Program Management Policy for Weapons and  Strategic Materials, but the rest of the strategic materials program  management requirements are still in the process of being developed,  according to agency officials. NNSA officials said that even though the  lithium program is not subject to the same requirements, they intend  for it to meet all of the same requirements as the other strategic  materials programs.

Officials from the Office of Defense Programs, including the strategic  materials program managers themselves, said that a shortage of staff has  presented a challenge in terms of implementing the requirements of the  strategic materials programs and meeting their missions. According to  NNSA officials, all of the strategic materials programs have been  assigned relatively few federal staff to implement the programs. The  officials also said that while they plan to have all five strategic materials  programs fully meet the requirements and operate as cohesive programs,  the lack of staff has hampered their efforts to do so. For example, the  plutonium manager said more staff were needed to successfully  implement the program, and the lithium lead point of contact said that at  least two full-time staff members would be required to accomplish the  work needed to make the lithium program meet program requirements.  Specifically, according to agency officials as of October 2017, in addition  to contractor support:  the uranium program had the program manager and two federal  staff assigned;  the domestic uranium enrichment program had the program  manager and one federal staff assigned;  the plutonium program had the program manager and one federal  staff member;  the tritium program had the program manager and no dedicated  staff, relying instead on staff in other programs such as a federal  program manager from a different program who acts as staff for this  program; and  the lithium program had the lead point of contact and no dedicated  staff, although a contracted senior technical advisor provides some  support.

NNSA officials cited competing agency priorities and current perceived  staffing limits as the primary impediments to assigning more staff to these  programs. First, according to agency officials, the relative newness of the  strategic materials programs and competing agency priorities to  modernize the nuclear weapons infrastructure and modernize and extend  the lives of current nuclear weapons have meant that federal staff are in  high demand across the agency. This concern is consistent with issues  we have identified in our past work as well. For example, in April 2017,  we noted NNSA’s ambitious, costly, decades-long effort to modernize the  nation’s nuclear security enterprise. In addition to ongoing and planned  infrastructure modernization, some of which is associated with the  strategic materials programs, this modernization includes four ongoing  expensive weapons refurbishments and efforts to improve the agency’s  research, development, testing, and evaluation capabilities by, for  example, continuing efforts in advanced modeling, simulation, and  computing. Similarly, we found in September 2016 that the competing  agency priorities for infrastructure modernization and weapons  refurbishments had negatively affected another NNSA program: the  Enhanced Surveillance Program.

Second, NNSA officials said that they have limited flexibility when it  comes to increasing federal staff levels. Specifically, in each year that the  total number of federal employees at NNSA exceeds 1,690, the  Administrator is required by law to submit to the congressional defense  committees a report justifying such excess. In the NNSA Administrator’s  testimony before the Senate Appropriations Subcommittee on Energy and  Water Development in June 2017, he stated that since 2010, NNSA’s  program funding had increased 28 percent, while its federal staffing levels  had decreased by 17 percent. He said that initial results from a yet-to-be- completed study by the Office of Personnel Management in support of the  Reform of Government Initiative indicate the need for a 20 percent  increase in federal staff at NNSA.

We have also previously reported that staffing shortages have affected  NNSA’s efforts to improve management capability. For example, we  reported in October 2014 that NNSA determined that inadequate levels of  federal staff had contributed to management problems with the UPF  project. As a result, NNSA increased staffing levels for the UPF project  office from 9 full-time equivalents in 2012 to more than 50 as of January  2014. According to NNSA officials, the additional staff enabled NNSA to  conduct more robust oversight of the contractor’s design efforts than was  previously possible. Similarly, in 2016, we found that the B61-12 life  extension program, the most costly and complex such program  undertaken to date, successfully requested that NNSA enlarge its  program office staff from 3 to 8 full-time equivalent staff to provide more  management capability. However, we found that even with this increase  in federal staff, some NNSA and DOD officials said that they believe that  NNSA needs two to three times more personnel in the federal program  manager’s office to ensure sufficient federal management and oversight.

One area that we noted in this review is that with regard to the strategic  materials programs, NNSA has not conducted a workforce needs  assessment. Strategic materials program officials acknowledged that they  had neither specifically assessed the number or skills of staff needed to  manage the strategic materials programs, nor did they have current plans  to do such an assessment. Our prior work on strategic human capital  management has identified certain activities or practices that can help an  agency strategically manage its human capital. These activities include  determining the critical skills and competencies that will be needed to  achieve the programs’ missions and developing strategies to address  gaps in the number, deployment, and alignment of staff needed. NNSA  officials said that individual offices have attempted over time to assess  resource and skill needs but that these efforts have been hampered by,  among other things, a lack of staff. By determining the critical skills and  competencies needed to achieve each strategic material program’s  mission and using this determination to develop strategies to address any  gaps in the number, deployment, and alignment of staff needed, NNSA  may find it has better information to justify increased staffing levels for its  strategic materials programs.

Since 2014, NNSA has taken steps to establish programs to maintain and  modernize the nation’s nuclear weapons stockpile, including appointing  federal program managers for four of the five strategic materials  programs, as well as steps to establish and organize the programs  according to internal program management requirements. This is a  significant step given the importance, cost, and complexity of these  strategic materials programs. However, NNSA has made varying  progress implementing these strategic materials programs, in part  because these programs may not have been allotted staff and  management capacity commensurate with their cost and scope of work.

Although strategic materials program officials acknowledged staffing  limitations, they have not determined the critical skills and competencies  that will be needed to meet program requirements and, ultimately,  achieve the programs’ missions. By determining the critical skills and  competencies needed to achieve each strategic materials programs’  missions and using that determination to develop strategies to address  any gaps in the number, deployment, and alignment of staff needed,  NNSA may find it has more information to justify increased staffing levels  for its strategic materials programs.

The NNSA Administrator should determine the critical skills and  competencies that will be needed for the strategic materials programs  and use this determination to develop strategies for addressing  challenges, if any, related to the number, deployment, and alignment of  program staff (Recommendation 1).

We provided a draft of this report to DOE and NNSA for their review and  comment. NNSA provided written comments, which are reproduced in full  in appendix II, as well as technical comments, which we incorporated in  our report as appropriate. In its comments, NNSA agreed with our  recommendation and stated that the recommendation is consistent with  the programs’ current evolution. NNSA further stated that it recognizes  the need to define the range of skills and competencies necessary to  execute the programs' critical missions and that it plans to identify the  complete set of core competencies needed for these programs by  December 31, 2018.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Administrator of the National  Nuclear Security Administration, and other interested parties. In addition,  the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.

Appendix I: Strategic Nuclear Materials Managed by the National Nuclear Security Administration (NNSA)

Appendix I: Strategic Nuclear Materials  Managed by the National Nuclear Security  Administration (NNSA)

NNSA has established programs for ensuring the supply of each of the  following strategic materials as well as the capability to process them:

Uranium – National security needs for uranium are met using a large  existing inventory of previously enriched uranium. Although NNSA  has estimated that stocks are sufficient for projected needs, existing  uranium needs to be purified, machined, and recovered from existing  operations. The Y-12 National Security Complex in Oak Ridge,  Tennessee, is the NNSA site for conducting enriched uranium  activities, producing uranium-related components for nuclear  warheads and bombs, and processing feedstock for nuclear fuel for  the U.S. Navy. In 2004, NNSA decided to construct a new Uranium  Processing Facility (UPF) that consolidated the functions of four  separate uranium facilities into a single building. In 2014, NNSA, on  the advice of a peer review team, decided to pursue a uranium  program that includes a smaller UPF and, among other program  elements, modifications to existing uranium buildings and capabilities  to include several new uranium processing technologies. Construction  on the UPF continues at the Y-12 site, and NNSA continues to  request funds for that project. Fiscal year 2018 funds are to be used  for construction of some related subprojects. According to NNSA  officials, the UPF is expected to be complete by 2025 and cost no  more than $6.5 billion. NNSA estimates that additional investments  needed to upgrade existing uranium facilities will cost about $20  million per year for the next 20 years.

Domestic Uranium Enrichment – To produce tritium, the Tennessee  Valley Authority (TVA) must use unobligated uranium in certain  nuclear reactors, under an interagency agreement between  Department of Energy (DOE) and TVA. The United States has not  had a sustained uranium enrichment capability since the 2013 closure  of the Paducah Gaseous Diffusion Plant, which was originally  constructed in 1952. In 2014, NNSA created the domestic uranium  enrichment program manager position with responsibility to sustain  the agency’s supply of low-enriched uranium for tritium production.

We currently have ongoing work reviewing the program’s plan to  ensure supply through 2060. NNSA estimated that over the next 5  years alone, these activities will likely cost more than $400 million.

Plutonium – A set of aging facilities at Los Alamos National  Laboratory provides the backbone of NNSA’s plutonium work, such as  certifying the safety of existing nuclear weapons’ plutonium pits and  producing new pits to extend the life of nuclear weapons in the  stockpile. NNSA conducts plutonium analysis in the Chemistry and  Metallurgy Research facility, which was built in the 1950s, but NNSA  plans to cease programmatic operations in this facility by 2019  because of its aging infrastructure and because it sits on a seismic  fault line. NNSA produces pits and conducts pit surveillance in the 38- year-old high-hazard, high-security Plutonium Facility 4 at Los  Alamos. Other important plutonium activities, such as NNSA’s  plutonium disposition efforts and the processing of plutonium used to  provide heat sources for space missions, are not included in the  plutonium manager’s portfolio because other program offices are  responsible for these activities, according to NNSA officials. Officials  said that these program offices coordinate capability and facility needs  with the plutonium program manager.

In August 2014, DOE cancelled plans to construct the nuclear facility  that was part of the overall Chemistry and Metallurgy Research  Replacement (CMRR), which was approved in 2005 to replace the  aging Chemistry and Metallurgy Research facility. In its place, DOE  approved the implementation of the first part of NNSA’s new  plutonium strategy: the revised CMRR project, which includes a  subproject to remove contaminated equipment no longer in use in  Plutonium Facility 4, install new plutonium analysis equipment, and  modify an existing building to handle higher quantities of plutonium.  NNSA estimated that the CMRR project would cost from $2.4 billion to  $2.9 billion and be completed by 2024. In addition, in November 2015,  DOE approved the mission need for the implementation of the second  part of the strategy: building modular nuclear facilities to add high- hazard, high-security laboratory space at Los Alamos (the Plutonium  Modular Approach) to meet plutonium pit production requirements.  NNSA estimated that the Plutonium Modular Approach could cost  from $1.3 billion to $3.0 billion and be completed by the end of 2027.

Tritium – NNSA has relied on tritium produced many years ago;  recycling and recovery of existing tritium is currently the source of  most of the tritium in the stockpile, according to NNSA officials.  However, tritium decays relatively rapidly, and in 2015 NNSA  identified a need to produce additional tritium. To produce tritium,  lithium target rods—called tritium-producing burnable absorber rods— are irradiated in TVA’s reactors. The irradiated rods are transported to  DOE’s Tritium Extraction Facility at the Savannah River Site in South  Carolina, where they are processed in a specialized facility to extract  and then prepare the tritium for nuclear warheads. NNSA requested  $9.8 million in design funds in fiscal year 2018 for construction of a  new tritium production capability. In its fiscal year 2018 budget  request, NNSA estimated that this facility would cost about $425  million and be approved for operations in 2027.

Lithium – Lithium is a key component of nuclear weapons and is  essential for their refurbishment. NNSA has a sufficient supply of  enriched lithium-6 (the isotope used in refurbishments and for tritium  production), but that lithium is stored in another form and must  undergo complex processing before it can be used for these  purposes. NNSA halted certain aspects of its lithium processing  operation—conducted at its Y-12 site in Oak Ridge, Tennessee—in  May 2013 due to the condition of the site’s 72-year-old lithium  production facility. Currently, NNSA is relying on a less complex but  also less efficient process that results in a loss of approximately 50  percent of material. In 2013, NNSA developed a lithium production  strategy that proposed a new lithium production facility, which the  agency estimated would cost more than $500 million. NNSA plans to  request $30.4 million in fiscal year 2019 for construction of this facility.  This strategy includes sustaining current infrastructure and deploying  new technologies to sustain lithium production.

Appendix II: Comments from the National Nuclear Security Administration

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the contact above, Jonathan Gill (Assistant Director), Alisa  Beyninson, Antoinette Capaccio, Jeff Larson, Cynthia Norris, and Kiki  Theodoropoulos made key contributions to this report.

Modernizing the Nuclear Security Enterprise: A Complete Scope of Work  Is Needed to Develop Timely Cost and Schedule Information for the  Uranium Program. GAO-17-577. Washington, D.C.: September 8, 2017.

Program Management: DOE Needs to Develop a Comprehensive Policy  and Training Program. GAO-17-51. Washington, D.C.: November 21,  2016.

DOE Project Management: NNSA Needs to Clarify Requirements for Its  Plutonium Analysis Project at Los Alamos. GAO-16-585. Washington,  D.C.: August 9, 2016.

Modernizing the Nuclear Security Enterprise: NNSA’s Budget Estimates  Increased but May Not Align with All Anticipated Costs. GAO-16-290.  Washington, D.C.: March 4, 2016.

Modernizing the Nuclear Security Enterprise: NNSA Increased Its Budget  Estimates, but Estimates for Key Stockpile and Infrastructure Programs  Need Improvement. GAO-15-499. Washington, D.C.: August 6, 2015.

DOE Project Management: NNSA Should Ensure Equal Consideration of  Alternatives for Lithium Production. GAO-15-525. Washington, D.C.: July  13, 2015.

DOE and NNSA Project Management: Analysis of Alternatives Could Be  Improved by Incorporating Best Practices. GAO-15-37. Washington, D.C.:  December 11, 2014.

Project and Program Management: DOE Needs to Revise Requirements  and Guidance for Cost Estimating and Related Reviews. GAO-15-29.  Washington, D.C.: November 25, 2014.

Nuclear Weapons: Some Actions Have Been Taken to Address  Challenges with the Uranium Processing Facility Design. GAO-15-126.  Washington, D.C.: October 10, 2014.

Nuclear Weapons: Technology Development Efforts for the Uranium  Processing Facility. GAO-14-295. Washington, D.C.: April 18, 2014.

Plutonium Disposition Program: DOE Needs to Analyze the Root Causes  of Cost Increases and Develop Better Cost Estimates. GAO-14-231.  Washington, D.C.: February 13, 2014.

Nuclear Weapons: Information on Safety Concerns with the Uranium  Processing Facility. GAO-14-79R. Washington, D.C.: October 25, 2013.

Nuclear Weapons: Factors Leading to Cost Increases with the Uranium  Processing Facility. GAO-13-686R. Washington, D.C.: July 12, 2013.

Nuclear Weapons: National Nuclear Security Administration’s Plans for Its  Uranium Processing Facility Should Better Reflect Funding Estimates and  Technology Readiness. GAO-11-103. Washington, D.C.: November 19,  2010.

The National Nuclear Security Administration manages programs related to securing and processing uranium, plutonium, tritium, and lithium—materials critical to national security. NNSA will spend an estimated $7.7 billion to manage these programs over the next 5 years.

NNSA has set program requirements (such as developing cost and schedule estimates) for these programs but hasn't fully met them, due primarily to staff shortages. We recommended that NNSA determine the critical staff skills it will need for these programs, and use that information to address staffing shortages.


Defense Contracting: DOD Should Clarify Criteria for Using Lowest Price Technically Acceptable Process

When awarding a contract competitively, DOD may use the LPTA process, under which the lowest price is the determining factor when selecting an offer. Section 813, as amended, contained a provision for GAO to submit four annual reports on DOD's use of the LPTA process for contracts exceeding $5 million as well as how contracting officials considered eight specific criteria. GAO issued its first report in response to this provision in November 2017.

This second report, among other things, assesses the extent to which (1) DOD used the LPTA process in fiscal year 2017 and (2) contracting officials considered Section 813 criteria when using the LPTA process.

GAO selected a generalizable sample of 172 DOD contracts and orders valued at $5 million and above that were competitively awarded in fiscal year 2017. GAO verified that 46 of these contracts and orders used the LPTA process by reviewing solicitations. GAO selected 14 contracts and orders from the 46 based on the most frequently purchased products and services, reviewed documents, and interviewed officials to determine if the Section 813 criteria were considered.

GAO estimates that about 26 percent of the Department of Defense's (DOD) contracts and orders valued $5 million and above in fiscal year 2017 were competitively awarded using the lowest price technically acceptable (LPTA) process. DOD used the LPTA process to buy such things as equipment, fuel, information technology services and construction services.

Section 813 of the National Defense Authorization Act for Fiscal Year 2017, as amended, mandated that DOD revise its regulations to require that eight criteria be considered when using the LPTA process. As of September 2018, DOD had not yet done so. Accordingly, a DOD acquisition policy official stated that contracting officers are not yet required to consider these criteria. Nevertheless, GAO found that contracting officials generally considered five of the eight criteria for the 14 contracts and orders GAO reviewed (see table).

Source: GAO analysis of Section 813, DOD source selection guidance, contract file documents and interviews with contracting officials. | GAO-19-54

A DOD official stated that the updated regulations will reflect these eight criteria, including that justifications be documented. However, the official could not comment on whether the revisions will clarify how DOD contracting officials should implement the two other criteria that were generally not considered. Some contracting officials GAO interviewed were confused about how to apply these two criteria. Four of the 14 contracting officials stated that they did not understand how to apply the criterion regarding whether purchased goods are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Additionally, 8 of the 14 contracting officials stated the criterion regarding an assessment of life-cycle costs was not applicable to their acquisitions. Absent clarification on how to consider these two criteria, DOD increases the risk that its contracting officials will not consistently implement the requirements in Section 813, as amended.

GAO recommends that DOD address, as regulations are updated, how contracting officials should apply two Section 813 criteria that were generally not considered. DOD concurred with the recommendations and plans to revise its regulations and issue additional guidance by the end of fiscal year 2019.

The Department of Defense (DOD) obligated about $320 billion through  contracts for goods and services in fiscal year 2017. When awarding a  contract competitively, DOD has a number of source selection processes  it can use to evaluate firms’ proposals. One process DOD can use is a  best value, lowest price technically acceptable (LPTA) process. In the  LPTA process, DOD awards the contract to the firm presenting the lowest  priced proposal that is technically acceptable, and no tradeoffs are  permitted. Alternatively, DOD can use a best value tradeoff process, in  which it can vary the relative importance of cost or price to other factors  such as a firm’s technical capability or past performance. In these cases,  DOD may award a contract to a firm offering other than the lowest-priced  proposal if it determines that a higher-priced proposal provides a  worthwhile benefit to the department.

Section 813 of the National Defense Authorization Act for Fiscal Year  2017, as amended, required DOD to revise the Defense Federal  Acquisition Regulation Supplement (DFARS) to allow the use of the LPTA  process only when eight criteria are met. For example, one criterion is  that contracting officials must determine that no, or little, value would be  gained from a proposal exceeding the solicitation’s minimum technical  requirements. The specific criteria are discussed in the background  section of this report.

Section 813 also included a provision that we report no later than  December 1, 2017, and annually thereafter for 3 years on the number of  instances where DOD used the LPTA process for contracts exceeding $5  million, as well as an explanation of how contracting officials considered  the criteria identified in Section 813. In November 2017, we issued our  first report as required by Section 813. This second report (1) determines  the extent to which DOD used the LPTA process in competitively  awarded contracts and orders valued at $5 million and above in fiscal  year 2017; (2) identifies the reasons why contracting officials used the  LPTA process for selected contracts and orders; and (3) for those same  selected contracts and orders, assesses the extent to which contracting  officials considered the eight criteria listed in Section 813.

DOD does not maintain centralized data on which source selection  procedure is used to award contracts and orders. Consequently, to  determine the extent to which DOD used the LPTA process in  competitively awarded contracts and orders valued at $5 million and  above in fiscal year 2017, we used data from the Federal Procurement  Data System-Next Generation (FPDS-NG) to identify the population of  DOD contracts that were reported as competitively awarded contracts  and valued at $5 million and above in fiscal year 2017. This resulted in  the identification of approximately 3,000 contracts. We focused our review  on the Army, Navy, Air Force, and Defense Logistics Agency (DLA)  because they accounted for 96 percent—or almost 2,900—of the DOD  contracts competitively awarded during this time. In addition to contracts,  we used data from FPDS-NG to identify a population of approximately  1,800 DOD task and delivery orders with an estimated value of $5 million  and above that were reported in FPDS-NG as competed under multiple  award, indefinite delivery indefinitely quantity (IDIQ) contracts during this  time. We again focused our analysis on the Army, Navy, Air Force and  DLA which accounted for 81 percent—or about 1,400—of these orders.

Using these data, we randomly selected a generalizable sample of 94  contracts and 91 orders from the respective populations of contracts and  orders above. For each contract and order in our sample, we requested  that DOD identify the source selection method used. We independently  verified DOD’s responses by reviewing solicitations. We removed five  contracts and eight orders from our sample. Of the five contracts, we  removed three contracts from our sample because they were incorrectly  classified in FPDS-NG as having been competed when they were not;  one contract because it was terminated after award due to a bid protest;  and one contract because it was classified. Similarly, of the eight orders,  we removed seven from our sample because they were incorrectly  classified in FPDS-NG as being competitively awarded when they were  not and one because it was incorrectly identified as having a value over  $5 million. After removing these contracts and orders, our generalizable  sample consisted of 89 contracts and 83 orders. By tracing relevant  FPDS-NG data to the contracts and orders we reviewed, we determined  these data were sufficiently reliable for us to project the number of  contracts and orders valued over $5 million that the Army, Navy, Air  Force, and DLA competitively awarded in fiscal year 2017 using the LPTA  process.

To identify the reasons why contracting officials chose to use the LPTA  process and to assess whether those officials considered the eight criteria  in Section 813, we selected from our sample six contracts and eight  orders that used the LPTA process. We selected these 14 contracts and  orders to include a mix of the most frequently purchased products and  services. Of these 14 contracts and orders, four orders were for services  for which Section 813 directs DOD to avoid using the LPTA source  selection process, to the maximum extent practicable. For all of these  selected contracts and orders, we obtained and analyzed relevant  contract file documents including the acquisition plan, solicitation, and  source selection decision document, and we interviewed contracting  officials. Findings from our review of these 14 contracts and orders  cannot be generalized to all contracts and orders that used the LPTA  process. We also reviewed applicable sections of the Federal Acquisition  Regulation (FAR), the DFARS, and DOD’s March 2016 Source Selection  Procedures to identify existing criteria regarding the appropriate use of  the LPTA process.

We conducted this performance audit from January 2018 through  November 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.

FAR Part 15 describes the use of several competitive source selection  processes to meet agency needs, which include the LPTA process and  tradeoff process on a best value continuum (see fig. 1).

The FAR states that when using the LPTA process, tradeoffs are not  permitted. DOD may elect to use the LPTA process where the  requirement is clearly defined and the risk of unsuccessful contract  performance is minimal. In such cases, DOD can determine that cost or  price should play a dominant role in the source selection. When using the  LPTA process, DOD specifies its minimum requirements in the  solicitation. Firms submit their proposals and DOD determines which of  the proposals meet those requirements. No tradeoffs between cost or  price and non-cost factors (for example, technical capabilities or past  performance) are permitted. Non-cost factors are rated on an acceptable  or unacceptable basis. The award is made based on the lowest priced,  technically acceptable proposal submitted to the government. With either  the LPTA or the tradeoff process, contracting officials may establish a  competitive range and conduct discussions with offerors before selecting  an offer for award.

By contrast, DOD may elect to use the tradeoff process in acquisitions  where the requirement is less definitive, more development work is  required, or the acquisition has a greater performance risk. In these  instances, non-cost factors may play a dominant role in the source  selection process. Tradeoffs between price and non-cost factors allow  DOD to accept other than the lowest priced proposal. The FAR requires  DOD to state in the solicitation whether all evaluation factors other than  cost or price, when combined, are significantly more important than,  approximately equal to, or significantly less important than cost or price.

Contracting officials have broad discretion in the selection of the  evaluation criteria that will be used in an acquisition. A written acquisition  plan generally should include a description of the acquisition’s source  selection process and the relationship of the evaluation factors to the  acquisition objectives, but the FAR does not explicitly require contracting  officials to document the reasons why the specific source selection  procedures or evaluation factors were chosen.

DOD’s March 2016 Source Selection Procedures offer additional  guidance regarding the use of the LPTA source selection process. The  procedures are mandatory for acquisitions conducted as part of a major  system acquisition program and all competitively negotiated FAR part 15  acquisitions with an estimated value over $10 million. The March 2016  guide states that the LPTA source selection process may be used in  situations where there would not be any value on a product or service  exceeding the required technical or performance requirements. The guide  also states that such situations may include acquisitions  for well-defined, commercial, or non-complex products or services; where risk of unsuccessful contract performance is minimal; and where DOD has determined there would be no need or value to pay  more for higher performance.

Section 813, as amended, requires that DOD revise the DFARS to  require that the LPTA process only be used in situations when the  following eight criteria are met.  1.  DOD can clearly describe the minimum requirements in terms of  performance objectives, measures, and standards that will be used to  determine acceptability of offers.  2.  DOD would realize no, or little, value from a proposal exceeding the  solicitation’s minimum technical requirements.  3.  The proposed technical approaches can be evaluated with little or no  subjectivity as to the desirability of one versus the other.  4.  There is a high degree of certainty that a review of technical proposals  other than that of the lowest-price offeror would not identity factors  that could provide other benefits to the government.  5.  The contracting officer has included a justification for the use of the  LPTA process in the contract file.  6.  The lowest price reflects full life-cycle costs, including for operations  and support.  7.  DOD would realize little or no additional innovation or future  technological advantage by using a different methodology.  8.  For the acquisition of goods, the goods being purchased are  predominantly expendable in nature, nontechnical, or have a short life  expectancy or shelf life.

Section 813 required DOD to revise the DFARS within 120 days of  enactment of the National Defense Authorization Act for Fiscal Year  2017. The NDAA was enacted December 23, 2016, but, as of November  2018, the DFARS had not been revised. A Defense Pricing and  Contracting (DPC) official stated the revisions are in process but were  delayed due to a number of reasons, including the need for the revisions  to reflect  two additional criteria that were added to Section 813 (shown as  criteria (7) and (8) in the list above) through subsequent provisions in  Section 822 of the National Defense Authorization Act for Fiscal Year  2018, and  compliance with Executive Order 13771, which calls for the reduction  and control of regulatory costs.

The DPC official stated that until the DFARS is updated, DOD contracting  officials are not required to consider the Section 813 criteria.

Use of the LPTA Process for Task and Delivery Orders

The FAR describes a wide selection of contract types that may be used in  acquisitions. One of those types is an IDIQ contract, which provides for  an indefinite quantity, within stated limits, of supplies or services during a  fixed period of time. The FAR implements a statutory preference for  multiple-award IDIQ contracts, which are awarded to two or more  contractors under a single solicitation. These contracts allow agencies to  establish a group of prequalified contractors to compete for future orders  under streamlined ordering process once agencies determine their  specific needs. These contracts can be awarded using a source selection  process that is on the best value continuum, such as LPTA or tradeoff.

When a concrete need arises, a contracting officer will issue a task order  for services or delivery order for products. DOD frequently issues orders  under IDIQ contracts to address its needs. DOD obligated approximately  $133 billion—40 percent of its total fiscal year 2017 contract obligations— through such orders. With certain exceptions, the FAR requires that when  a contracting officer places an order under a multiple-award IDIQ  contract, the contracting officer must provide all of the IDIQ contract  holders a “fair opportunity” to be considered for the order. Generally, a  contracting officer placing an order exceeding the simplified acquisition  threshold must provide a “fair notice” that includes the basis upon which  the selection will be made to all contractors offering the required products  or services under the multiple-award contract.

We have previously found that DOD has awarded IDIQ contracts using  the tradeoff process but then issued orders off of those IDIQ contracts  using either the LPTA process or a tradeoff process. In other words,  DOD employs both the LPTA and tradeoff processes for competitive  orders issued against the same IDIQ contract, depending upon the  requirement.

Past GAO Reports on DOD Source Selection Process

Since 2010, we have issued three reports on DOD’s use of source  selection processes. In October 2010, we found that, for 60 of the 88  contracts we reviewed, DOD used a tradeoff process and weighted non- cost factors as more important than price. In these cases, DOD was  willing to pay more when a firm demonstrated it understood complex  technical issues more thoroughly, could provide a needed product or  service to meet deadlines, or had a proven track record in successfully  delivering products or services of a similar nature. In addition, we  determined that when making tradeoff decisions, DOD selected a lower  priced proposal nearly as often as it selected a higher technically rated,  but more costly, proposal. In so doing, DOD chose not to pay more than  $800 million in proposed costs by selecting a lower priced offer over a  higher technically rated offer in 18 of the contracts we reviewed. The  majority of solicitations where non-cost factors were equal to or less  important than cost were for less complex requirements. We also found  that DOD faced several challenges when using the best value tradeoff  process, including difficulties in developing meaningful evaluation factors,  the additional time investment needed to conduct best value tradeoff  procurements, and a greater level of business judgment required of acquisition staff when  compared to other acquisition approaches.

To help DOD effectively employ the best value tradeoff process, we  recommended that DOD develop training elements such as case studies  that focus on reaching tradeoff decisions. DOD concurred and  implemented the recommendation in August 2012.

In 2014, we found that DOD had increased its use of the LPTA process  for new contracts with obligations over $25 million, using the LPTA source  selection process to award an estimated 36 percent of new fiscal year  2013 contracts compared to 26 percent in fiscal year 2009. We found that  contracting officials’ decisions on which source selection process would  be used was generally rooted in knowledge about the requirements and  contractors. For contracts with obligations over $25 million, DOD used  the LPTA source selection process primarily to acquire commercial  products such as fuel, and we identified relatively few uses of the LPTA  process to acquire higher dollar services. For contracts with obligations  over $1 million and under $25 million, DOD used the LPTA process an  estimated 45 percent of the time for a mix of products and services,  including fuel, aircraft parts, computer equipment, construction-related  services, engineering support services, and ship maintenance and  repairs. We did not make recommendations to DOD in this report.

In 2017, we reviewed contracts that DOD awarded using the LPTA  process for service categories for which Section 813 established the  LPTA process is to be avoided to the maximum extent practicable, such  as those for information technology, knowledge based services,  cybersecurity, and other professional support services. We found that  the Army, Navy, and Air Force rarely used the LPTA source selection  process for information technology and selected support services  contracts valued at $10 million or more that were awarded in the first half  of fiscal year 2017. Our analysis found that the three military departments  awarded 781 new contracts valued at $10 million or more during this time  frame. Of these 781 contracts, 133 contracts were awarded for  information technology and support services. However, only 9 of the 133  contracts used the LPTA source selection process. In addition, we found  that contracting officials’ reasons for using the LPTA process were  generally consistent with the criteria listed in Section 813. We did not  make recommendations to DOD in this report.

About One-Quarter of Fiscal Year 2017 DOD Contracts and Orders Valued $5 Million and Above Used the LPTA Process

Based upon the results of our generalizable sample, we estimate that  about 26 percent of contracts and orders competitively awarded by the  Army, Navy, Air Force, and DLA valued at $5 million and above in fiscal  year 2017 used the LPTA process. Table 1 shows the number and  percentage of contracts and orders in our sample that we estimate to  have used the LPTA process.

We reviewed the 46 contracts and orders for which the Army, Navy, Air  Force and DLA used the LPTA process and found that 20 were for  products and 26 for services. Within this sample, the Army, Navy, Air  Force, and DLA bought a variety of products and services (see figure 2).

Contracting Officials Used the LPTA Process for Reasons Consistent with Current Requirements

Contracting officials associated with the 14 contracts and orders we  selected used the LPTA process, in part, because they determined there  was no tradeoff available or determined that DOD would not derive any  benefit from paying a premium for offers that exceeded the minimum  capabilities. As previously mentioned, DOD’s March 2016 Source  Selection Procedures currently states that the LPTA process may be  used when there would not be additional value to a product or service  exceeding the required technical or performance requirements.  Therefore, these determinations are consistent with the DOD’s current  guidance. The following examples illustrate contracting officials’ rationale  for using the LPTA process.

A DLA contracting official awarded a contract for natural gas with a  ceiling value of approximately $14.8 million over a 2-year ordering  period. The contracting official stated that no tradeoffs were available  because the requirement was specifically for natural gas that would  be used in government owned facilities across multiple states and an  alternative fuel source was not required. Therefore, offerors were  evaluated, from a technical acceptability perspective, on whether they  were able to deliver the amount of natural gas required by the  specified time frames.

Similarly, the Marine Corps purchased over 15,400 general-purpose  laptops with an estimated value of approximately $14.1 million. To  meet a DOD initiative of upgrading general use laptops to Windows  10, Marine Corps officials determined that a commercially available  laptop would meet their requirements. Marine Corps contracting  officials stated that through their market research they noted there  were laptops with additional capabilities available; however, they  determined it was not beneficial to pay for higher capabilities.

Overall, for the 14 contracts and orders we reviewed, contracting officials  identified several reasons for using the LPTA process (see table 2). In  many cases, contracting officials cited more than one reason.

The following examples illustrate reasons contracting officials identified  for the use of the LPTA process.

The Air Force awarded a foreign military sales IDIQ contract, with a  maximum ordering value of $65 million, to provide planned  maintenance and supply support services for F-16 aircraft owned by  Taiwan. The contract had a one-month mobilization period, a 5-year  base ordering period, and two 1-year option ordering periods.  According to Air Force officials, the contract’s requirements were well- defined because the standard tasks and processes, such as engine  maintenance, corrosion prevention, and aircraft washing, are strictly  defined by an Air Force instruction. Contracting officials determined  there was a low risk of contractor failure because (1) the pool of  qualified firms interested in performing this type of contract is limited,  and (2) the incumbent workforce had to be offered the chance to  continue working under any new contract, regardless of the  management company that won the award.

The Navy issued an order under a multiple-award IDIQ contract, with  a value of $6.1 million, to renovate office space in two buildings at a  naval air station. The Navy determined that the risk of contractor  failure on this order was low because the contractor was pre-qualified  as part of the initial contract award. Additionally, contracting officials  stated the requirement was well-defined, as the contractor was  required to renovate the space according to the plans provided by the  Navy.

The Navy awarded a multiple award IDIQ contract with an estimated  maximum value of $502.6 million, over a one-year base period and  four 1-year options, for repair and maintenance of non-nuclear surface  ships harbored in San Diego. Navy officials considered the  requirements non-complex due to the nature of the work to be  performed. In this case, the tasks included welding, marine pipefitting,  sheet metal forming, and electrical/electronic repairs, among others,  which were to adhere to established standards that would be specified  in the orders. The contracting officials stated that for more complex  repairs they would use a different contract.

DLA awarded a contract with an estimated value of $5.7 million, over  a 2-year ordering period, for a commercial jet fuel system icing  inhibitor to be delivered to Middle Eastern destinations, such as Qatar.  Given that the additive was a commercial product, DLA determined  that awarding the contract to the offeror that could deliver the required  quantity within specific time frames at the lowest price was in the  government’s best interests.

Of the 14 contracts and orders we reviewed, 4 orders were for services  that Section 813 identified as those that DOD should, to the maximum  extent practicable, avoid using the LPTA process. These four orders were  for cybersecurity services, information technology services, and  knowledge-based professional services. DOD contracting officials’  rationale for using the LPTA process for these four orders were also  consistent with guidance in DOD’s March 2016 Source Selection  Procedures, as illustrated below:

The Air Force issued an order with an estimated value of $11.6  million, with a 1-year base period and four 1-year options, for  healthcare information technology system support services at several  European military installations. These services included help desk  support and network administration services, such as maintenance,  administration, and troubleshooting services for the local computer  servers. Air Force contracting officials stated the requirements were  well-defined, as the services have been provided by a contractor for a  long time and were well understood. Further, the officials stated they  confirmed that the requiring office was not willing to pay for additional  services beyond the minimum requirements. Contracting officials also  determined there was a low risk of contractor failure because they  were placing an order under a multiple-award IDIQ contract and all  contract holders were pre-qualified to perform the work.

The Air Force issued an order with a reported value of $21.6 million,  with a 1-year base period and four 1-year options, for information  technology services, which included cybersecurity services, network  management administration, requirements analysis, and  communications planning at a European military installation. Air Force  contracting officials stated the requirements for this contract were  well-understood, as the Air Force had been contracting for these  services for more than 15 years. Further, contracting officials stated  the contractor was required to use an existing government software  program to identify any information technology threats. Finally,  contracting officials determined there was a low risk of contractor  failure because they were issuing an order under a multiple-award  IDIQ contract for which all contract holders were pre-qualified to  perform the work.

The Army issued an order with an estimated value of $10.7 million,  with a 1-year base period and two 1-year options, for professional  support services at the United States Army Sergeants Major Academy  at Biggs Army Airfield, El Paso, Texas. Under this order, the  contractor was to provide instructors to teach a pre-existing curriculum  to Sergeants Major and Master Sergeants in strategic operations,  preparing them to take positions throughout the DOD. The order  provided that the instructors should be former Army sergeants and  hold a Master’s degree, with a preference for a Master’s degree in  adult education. In addition, the instructors had to have or had to  obtain specific Army contractor instruction certifications. Therefore,  the contracting official stated there was no benefit in having  instructors that exceeded these recommended qualifications.

The Navy issued an order with a value of approximately $10 million  and a period of performance of approximately four years and five  months for installation of furniture/equipment onboard the USS  George Washington aircraft carrier. Tasks included removing  furniture, installing new, furniture in the same place, and painting,  among others, to maintain ship habitability. Contracting officials  determined there was no value in performing a tradeoff because the  tasks were for routine work and all of the IDIQ contract holders  previously were found to have the technical capability to perform the  work.

DOD Contracting Officials Considered Most of the Section 813 Criteria before Using the LPTA Process, but Were Confused by Some Aspects

Contracting officials stated that they generally considered five of the eight  criteria in Section 813 when awarding the 14 contracts and orders we  reviewed. This was done, in part, because according to contracting  officials, those criteria are inherently considered by contracting officials  when determining which source selection process should be used.  Further, based on our analysis, these five criteria are generally reflected  in DOD’s March 2016 Source Selection Procedures. Table 3 illustrates  whether contracting officials considered the Section 813 criteria when  they decided to use the LPTA process for the 14 contracts and orders we  reviewed. As previously discussed, DOD has not yet updated regulations  to put the Section 813 criteria into effect. A DPC official stated that until  DOD regulations are updated, DOD contracting officials are not required  to consider the Section 813 criteria.

Most of the contract files we reviewed did not include a written justification  for the use of the LPTA process. A DPC official stated when the DFARS  is updated to implement Section 813, DOD intends to include a  requirement for contracting officials to prepare a written justification for  the use of the LPTA process.

Some contracting officials were uncertain how to address the other two  criteria that were generally not considered. For example, 4 of the 14  contracts and orders that we reviewed were for products. As stated  above, one of the Section 813 criteria will require contracting officers who  are purchasing goods to determine that the goods are predominantly  expendable in nature, nontechnical, or have a short life expectancy or  shelf life. Two of the four contracting officials for the products we  reviewed stated they made this determination for these purchases.  However, the other two stated that they would not have known how to  consider this criterion for their procurements. Specifically, a Marine Corps  contracting official who purchased general use computers stated it was  unclear if a computer that will be replaced every 5 years would be  considered to have a short shelf life. Additionally, an Air Force contracting  official who purchased Blackberry licenses stated that it was unclear if  this criterion would apply to such licenses, and if it did, whether a 1-year  license would be considered a short-shelf life. As a result, this contracting  official stated he would not know how to consider this criterion in similar  acquisitions.

Additionally, 12 of the 14 contracting officials we interviewed raised a  number of questions about how to consider full life-cycle costs, including  operations and support, which is another criterion under Section 813. In  this regard,

Eight contracting officials did not think life-cycle costs applied to their  acquisitions and therefore they did not understand what costs they  would have considered. For example, an Army contracting official who  purchased construction quality assurance and oversight services  stated the concept of life-cycle costs generally applies to products, not  services. Similarly, a DLA official who contracted for a de-icing agent  stated that this particular product does not have life-cycle costs  associated with it.

Three contracting officials raised questions regarding who would be in  the best position to determine life-cycle costs. For instance, an Air  Force contracting official stated life-cycle costs are determined by the  requiring office, not by the contracting office, so it was not clear what  role the contracting office would have in evaluating life-cycle costs.

One contracting official who awarded an IDIQ contract stated this  criterion would not apply to such an award because specific  requirements would be determined when issuing orders under the  IDIQ contract. Therefore, the contracting officer believed that any life- cycle costs should be considered when issuing subsequent orders.

In the two remaining cases, one contracting official stated he was not  confused by this criterion, but did not consider life-cycle costs when  awarding the contract to provide instructors at the Army Sergeants Major  Academy. In another case, the contracting official stated life-cycle costs  for a $14.8 million contract for natural gas had been considered, but the  official determined there were no life-cycle costs associated with the use  of natural gas in this instance.

As previously discussed, DOD has not yet revised the DFARS to include  the criteria specified in Section 813, nor has DOD’s March 2016 source  selection procedures been updated to address consideration of the new  criteria. A DPC official stated that the DFARS is in the process of being  updated and will reflect Section 813. For example, the official stated that  the updated regulation will require written justifications for using the LPTA  process. This official, however, could not comment on whether the  revisions will provide clarification, beyond what was written in Section  813, on how to apply the two criteria that DOD contracting officials  generally found confusing. Without further clarification, such confusion is  likely to continue. As a result, contracting officials will be at risk of not  consistently applying the criteria in Section 813.

Our work also found differing opinions on whether the criteria in Section  813 would apply to the issuance of competitive orders under multiple- award IDIQ contracts. Our prior work has found that such orders  represent a significant portion of DOD’s annual contract obligations. For  example, 7 of the 14 contracting officials generally stated the criteria in  Section 813 could apply at the order level depending on the nature of the  requirement. They stated that requirements are determined when issuing  orders and, as a result, it is possible that methods including the LPTA  process or a tradeoff process could be used when issuing orders.  Conversely, the remaining 7 contracting officials stated the criteria should  not apply to the issuance of orders, in part, because these criteria would  generally have been considered at the time the IDIQ contract was  awarded. Military department policy officials we interviewed generally  believed that the criteria in Section 813 should not be applicable to  orders. When we raised this issue, a DPC official stated that DOD plans  to address whether the Section 813 criteria are applicable to orders when  DOD revises the DFARS.

As DOD prepares to revise the DFARS to implement the eight criteria in  Section 813, as amended, it has an opportunity to address the issues we  identified. DOD stated its intent to require a written justification for using  LPTA and to address whether the Section 813 criteria are applicable to  the issuance of task and delivery orders. It is equally important that, in  revising the regulation, DOD also clarify how contracting officers are to  determine if a good is expendable in nature, nontechnical or have a short  life expectancy or shelf life, and how they are to consider if the lowest  price reflects full life-cycle costs, including for operations and support for  services as well as products. Absent additional direction, contracting  officials across DOD may not understand how to consistently apply these  criteria when using the LPTA process.

We are making the following two recommendations to DOD:  The Secretary of Defense should ensure that the Director, Defense  Pricing and Contracting , addresses how contracting officials using the  LPTA process should apply the Section 813 criterion regarding  procurement for goods that are predominantly expendable in nature,  nontechnical, or have a short life expectancy or shelf life as revisions to  the DFARS are considered. (Recommendation 1)

The Secretary of Defense should ensure that the Director, Defense  Pricing and Contracting addresses how contracting officials using the  LPTA process should apply the Section 813 criterion regarding full life- cycle costs, including for operations and support as revisions to the  DFARS are considered. (Recommendation 2)

We provided a draft of this report to DOD for review and comment. In its  written comments, reproduced in Appendix I, DOD concurred with both of  our recommendations. DOD stated that, in addition to its ongoing efforts  to update its regulations, a new DFARS Procedures, Guidance and  Information case was opened on October 25, 2018 to provide contracting  officers with supplemental internal guidance on applying the new criteria  for using LPTA. DOD anticipates that the revised regulations and the  internal guidance will be published in the fourth quarter of fiscal year  2019.

DOD also provided technical comments, which were incorporated as  appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Director, Defense Pricing  and Contracting. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II.

Appendix I: Comments from the Department of Defense

Appendix II: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Justin Jaynes (Assistant  Director), Victoria Klepacz (Analyst in Charge), Jennifer Baker, Matthew  Crosby, Lorraine Ettaro, Stephanie Gustafson, Julia Kennon, Roxanna  Sun, Jay Still, Alyssa Weir, and Khristi Wilkins made key contributions to  this report.

One way to award a competitive federal contract is to choose based on cost, when the cheapest option will suffice. But how does DOD decide when that's the case?

While there are some general criteria for using this process, DOD's regulations don't provide specific criteria for making determinations. That will change when DOD updates its regulations as directed by a 2016 law.

We found that some contracting officers were confused about how to apply 2 of the 8 criteria in the law, including how to assess the full cost to DOD over the life of the good or service being bought.

We recommended providing more guidance on the criteria.