GAO Releases Most Recent Report on The Recovery Act: Energy Cleanup Projects

Across the United States, as of September 30, 2012, the Department of the Treasury has paid out $259 billion in Recovery Act funds for use in states and localities. Of that amount, $25.6 billion has been paid out since the beginning of fiscal year 2012 (October 1, 2011). The Recovery Act provided $6 billion to the Department of Energy’s (DOE) Office of Environmental Management (EM), which it is using to expand and accelerate cleanup activities in 17 sites around the country. The latest GAO report on the uses of Recovery Act funds focuses on funding for Department of Energy (DOE) cleanup projects. See full report GAO-13-23.

The majority of the federal outlays—53.7 percent—has been provided through the increased Medicaid Federal Medical Assistance Percentage (FMAP) and the State Fiscal Stabilization Fund (SFSF) administered by the Department of Education.

Office of Environmental Management Recovery Act-Funded Jobs Peaked at about 11,000 FTE Employees Late in Fiscal Year 2010

According to EM data, as of April 30, 2012, 78 of the 112 Recovery Act-funded cleanup projects were complete, and 72 of the 78 projects met DOE’s performance standard of completing project work scope without exceeding the cost target by more than 10 percent. According to EM officials, the completed Recovery Act projects have helped accelerate the cleanup at the sites. GAO, however, found several inconsistencies in how EM set and documented projects’ scope, cost, and schedule targets. Without clear scope, cost, or schedule targets in performance baselines, it becomes difficult to assess project performance. For example, in some cases, EM set scope targets differently in different documents and claimed project success even if key performance parameters were not achieved. Current guidance on setting performance baselines is more comprehensive for capital asset projects, such as building or demolishing facilities or constructing remediation systems, than for projects known as operation activity projects, such as operating a groundwater treatment plant. In addition, capital asset projects costing under $10 million are classified as operation activity projects.

EM Has Completed Most Projects, but Inconsistent Data Make Assessing Project Performance Difficult

According to EM data, as of April 30, 2012, 78 of the 112 Recovery Act-funded cleanup projects were complete, and 72 of the 78 projects met DOE’s performance standard of completing project work scope without exceeding the cost target by more than 10 percent. According to EM officials, the completed Recovery Act projects have helped accelerate the cleanup at the sites. GAO, however, found several inconsistencies in how EM set and documented projects’ scope, cost, and schedule targets. Without clear scope, cost, or schedule targets in performance baselines, it becomes difficult to assess project performance. For example, in some cases, EM set scope targets differently in different documents and claimed project success even if key performance parameters were not achieved. Current guidance on setting performance baselines is more comprehensive for capital asset projects, such as building or demolishing facilities or constructing remediation systems, than for projects known as operation activity projects, such as operating a groundwater treatment plant. In addition, capital asset projects costing under $10 million are classified as operation activity projects.

Project Management Problems Occurred on EM Recovery Act Projects, and EM Is Taking Steps to Identify Lessons Learned

Some of EM’s long-standing project management problems occurred during its implementation of several Recovery Act projects, primarily insufficient early planning before setting performance baselines. For example, a project to remove wastes from a landfill at one site exceeded its $111 million cost target by $20 million because, after beginning the project, officials determined that the site would need to be excavated to a depth of almost double that planned. In addition, EM’s new initiative to reclassify projects as either capital asset or operation activity projects raised concerns about how projects were reclassified. EM does not have a clear policy that sets out under what conditions and how EM should break a capital asset project into smaller, discrete operation activity projects. Project classification is important, however, because some requirements apply only to capital asset projects. EM’s guidance for projects classified as operation activity projects under this initiative states that certain approval and reporting requirements will not be applied, and others will be applied as appropriate. Some DOE and other officials expressed concern that projects could be broken into smaller projects to avoid the requirements. For example, a $30 million project, partially funded with Recovery Act funds, was divided into 18 smaller projects, each below the $10 million threshold. The cost for one of these smaller projects eventually doubled—from $8 million to $16 million—but was not reclassified as a capital asset project. EM has been gathering information on lessons learned from Recovery Act projects, some of which could be applied as corrective measures to other EM cleanup work.