I. Description of Investment

The Department of Energy builds facilities for programs in its four main mission areas -- national security, science and technology, energy resources, and environmental quality. Many of DOE's facilities are large, technically complex, state-of-the-art research or industrial facilities, which may take ten years or more to design and build. Examples include particle accelerators for physics research such as the Fermi Main Injector and the Superconducting Super Collider (SSC), nuclear reactors for civilian and defense programs, facilities to treat and dispose of radioactive waste, lasers as big as football fields, factories to produce parts for and assemble nuclear weapons, and large experimental facilities to investigate fusion energy and central station electricity generation using solar energy or fossil fuels.

Since 1994, DOE's budget for design and construction of new facilities has averaged $1 billion per year. That is down from an average of $2.5 billion per year through most of the 1980s and early 1990s, when many more new facilities were being built to support DOE's science, defense and energy programs.

II. Decision making Process

DOE typically builds new facilities to provide unique new capabilities to the nation, e.g. new capabilities for scientific research. Traditional investment analyses that judge investment in new technologies for their ability to reduce the organization's operating costs are not generally relevant. Rather, DOE's decision making process largely involves identification of those new projects that can best support its missions and garner the political support necessary to obtain funding.

A defining feature of DOE's process of budgeting and planning for construction of new facilities has been incremental funding. Until recently, each year DOE has requested and Congress has appropriated only enough funds to cover designated spending on each construction project for the upcoming year.⁽¹⁾

One benefit of incremental funding is that it helps smooth out lumpiness or spikes in the Department's budget that might result if DOE had to request full funding for large projects in a single year. On a department wide basis, spending on construction projects has varied by less than $300 million (2 percent of the total DOE budget) over the past five years. A large spike in funding would be needed to change from incremental funding to full up front funding of DOE's construction projects. Congress has been unwilling to provide DOE the large amounts of Budget Authority needed to make that change.

A drawback of incremental funding is that large projects may be initiated with relatively small budget requests in the first year or two. This practice reduces the attention paid by the Administration and the Congress to projects until they are already underway.

DOE's annual strategic planning and budgeting process focuses almost exclusively on the upcoming year. The Department does a good job in adjusting annual budget requests to balance priorities among the Departments various missions and programs. There is, however, little central control or coordination of individual programs longer term spending plans.

The combination of incremental funding and limited outyear planning creates an incentive for program managers to begin projects with low initial-year funds in the hope that future budget increases will allow them to continue. Such "betting on the come" was a common practice in DOE until recently. In many cases, the expected increase in funding did not materialize and projects were either canceled after significant spending had already occurred or had their construction schedules stretched out with resulting cost overruns.

III. DOE's Performance on Major System Acquisitions

In November 1996, the General Accounting Office (GAO) reported that of 80 projects which DOE had designated as major systems acquisitions from 1980 through 1996, 31 projects were terminated prior to completion and most of those that were finished had significant cost overruns.⁽²⁾

The complete list of DOE major projects canceled between 1980 and 1996 from GAO Report RCED-97-17 is Attachment A.

Projects Canceled After Significant Spending Had Occurred

     Since 1983, construction of at least four major Department of Energy facilities has been halted after significant spending had occurred (see table below). All four were controversial projects which never had widespread support. They were funded in the early years, because enthusiastic supporters were able to gain approval of the relatively small amounts of funding without thorough review of the full cost implications by the entire Congress. In almost every case, the opposition grew each year as the funding requests grew. In addition, annual debates and votes on the projects provided multiple opportunities for committed opponents to marshal support. There are several reasons why each was ultimately canceled, including problems with new technologies, charges of poor management, poor project design, cost overruns, and that the original purpose for which the projects were intended was no longer relevant. Ultimately, however, the major reason for cancellation in each case was that the majority of the Congress did not think that completion of the project was justified in light of the cost. Requests for full funding would have prompted more through debates at the outset which may have kept the projects from being started in the first place or garnered broader commitment and support from the Congress.
 
 

• The Superconducting Super Collider would have been the world's largest and most powerful high-energy physics accelerator facility.
• The New Production Reactor was a proposed nuclear reactor intended to supplement or replace existing reactors used to produce plutonium and tritium for nuclear weapons.
• The Gas Centrifuge Enrichment Plant was intended to supplement or replace existing facilities used to increase the percentage of the useful isotope of uranium (U-235) in nuclear powerplant fuel.
• The Clinch River Breeder Reactor was a 300 megawatt reactor intended to demonstrate the feasibility of a new type of nuclear powerplant -- the liquid metal breeder reactor -- for production of electricity.

2. U.S. General Accounting Office. Department of Energy: Opportunity to Improve Management of Major Systems Acquisitions. GAO/RCED-97-17, November 1996.
 

Attachment A:
 

                     ^\b These amounts represent the project's "Total Estimated Cost," which
                     includes costs such as land, engineering, design, and construction.  Other
                     costs, such as research and development, conceptual design, startup, and
                     initial training, are not available.

                     ^\c The Monitored Retrievable Storage Project was terminated; however,
                     portions of the project were continued and have now been combined with
                     other activities into the Civilian Radioactive Waste Management Strategic
                     System.

                     ^\d The termination activities for the Superconducting Super Collider are
                     not yet complete.  The cost at termination for this project is based on data
                     through fiscal year 1996.
 

President and First Lady | Vice President and Mrs. Gore
Record of Progress | The Briefing Room
Gateway to Government | Contacting the White House | White House for Kids
White House History | White House Tours | Help
Privacy Statement

Help

Site Map

Graphic Version

T H E   W H I T E   H O U S E