James A. Turi
Jane M. Talarico
Phillip E. Hill
U.S. Department of Energy
ABSTRACT
DOE Waste Management's Re-Engineering Project is working to change the Department's paradigm for waste management. The focus of this change is the waste generators. In a re-engineered world, waste generators will have to pay for the treatment, storage and disposal waste management services they consume and will be able to choose their waste management service provider.
How waste management services are provided will also change. Sites will have to compete with each other and private industry for waste generator business. The mission programs will have the option of taking over, from the Office of Environmental Management, the operation of the waste management services at their landlord sites for newly generated waste.
These changes recognize that centrally-planned, command-and-control economies are inherently costly, and not as responsive to their customers as "free market" economies. Re-engineering is about introducing "free market" forces, i.e., competition and "enlightened self-interest" into the DOE community to reduce the amount of waste generated, and to drive down the cost of waste management services. This paper discusses the Re-Engineering Project's evolution, achievements, and future direction.
BACKGROUND
The Department of Energy's Environmental Management (EM) Program was created in 1989 to consolidate the management and funding for the Department's mission programs' waste management activities. In the past seven years, the program has tackled the complex and diverse problems associated with the treatment, storage, disposal, and cleanup of the Department's cold war legacy of nuclear and hazardouswaste.
While the process of compliant operations is an ongoing one, the Department has developed a culture that is now sensitive and attuned to achieving and maintaining compliance. Achieving compliance at the Department's facilities and in its operations was not without a price--the nearly tripling of the Department's EM budget over seven years. Some of this increase was due to the unavoidable cost of taking a non-compliant waste management enterprise and making it compliant, as quickly as possible. This accelerated effort resulted in the duplication of some facilities, services, and infrastructure at many sites to achieve the schedules specified in the 150 compliance agreements the Department has negotiated with 22 States.
CHANGING THE WASTE MANAGEMENT PARADIGM
Now that the Department has developed the infrastructure and the culture necessary to ensure compliant operations, it is essential for the waste management program to continue its evolution and take the next step: to reduce the cost of compliant waste management for DOE mission programs.
This issue has been the subject of several reviews by DOE and non-DOE organizations. A July 1995 report by a DOE chartered Red Team on waste minimization and management programs at three DOE national laboratories recommended that:
"DOE-Laboratory waste minimization and management programs be fundamentally re-engineered with the objective of concurrently reducing waste volumes and total program cost while improving generator service.... To accomplish this, the tension between mission-program customers and waste management support service, which normally drives cost-effective, quality services, must be recreated."
To create a tension between mission program customers and the waste management support service the report proposed the laboratory waste management programs be restructured so that generators would fund waste unit costs. The report also recommended that unit costs be competitively established, and that a single contractor "base program" be established to manage the wastes at all three, and possibly other, laboratories.
In a December 1995 report evaluating DOE's Environmental Management Program, the National Academy of Sciences' recommended waste generators pay for the costs of handling the waste they generate. The NAS stated: "Having the various programs of the Department 'pay' Environmental Management for the services would provide an incentive for the programmatic groups to minimize waste and use appropriate technology."
The NAS believes this approach is essential to instituting, within the Department, a life-cycle approach in which environmental consideration is given to all processes and products with a goal of eliminating or drastically reducing waste streams at every stage of the activity.
Options for Moving Forward
The DOE Waste Management Alternatives Working Group, a staff-level effort with participation from four DOE Operations Offices whose primary customers are Energy Research, Defense programs, and Nuclear Energy, developed options for transitioning the current Waste Management system from a stand-alone program into a site service organization. The objectives of the proposed transition being to: increase waste generator accountability and waste minimization; reduce waste generation; and reduce costs. To achieve these objectives the Group proposed to reconfigure responsibilities for waste management activities and costs.
The essential feature of this reconfiguration is the separation of waste management into two main components: a Waste Management Service Center and an Investment/Legacy Waste Portion. The Service Center is responsible for treatment, storage, and disposal (TSD) of waste generated from R&D and production. The Center parallels the structure of waste management in the commercial sector. The Legacy Portion includes the storage and work-off of old waste, waste facility improvements and construction, and DOE program management activities. This new structure will permit DOE to focus on cost reduction by making it easier to benchmark costs and practices between site's Waste Service Centers. Also, it will heighten awareness of programmatic costs by both generators, who will be billed for these costs based on their waste volumes, and by the service Centers which operate the TSD facilities.
The Group examined four Options for "re-engineering" waste management functions to increase waste generator accountability. The Options ranged from keeping all functions under EM, to charge-back for waste, to full return of waste management to the mission programs. It became clear, however, that "one size does not fit all" and that the extent to which re-engineering would be initially implemented might vary from site to site because of differences in site mission programs and the status of current legacy waste activities.
MOBILIZING THE JOINT VENTURE
In June 1996, Headquarters established a Re-Engineering Waste Management Project Task Force under the direction of the Headquarters Office of Waste Management and held a workshop later in the month. The purpose of the workshop was to discuss the objectives, principles and overall schedule for Re-Engineering implementation with the Field Offices and mission program representatives.
The workshop had two goals. The first was to have the Field Offices identify Pilot Projects to test alternative strategies for transitioning the funding and management responsibility for newly generated waste from EM to the waste generators or site landlord. The second was to charter four working groups to develop solutions to the major institutional issues that were obstacles to implementing Re-Engineering.
The working groups were staffed by DOE mission program and Field Office personnel and contractors. The Pilot Project Working Group coordinated the Pilot Projects offered by the sites and established the data needs and reporting requirements. The Data Dictionary Working Group was to develop a uniform code-of-account definitions to allow comparison of the cost effectiveness of the strategies being tested. The Financial Management Working Group focused on the financial, procedural and legislative matters associated with implementation. The Program Management Working Group focused on the development of an implementation memorandum of understanding and corporate coordination and integration issues, including the DOE Radioactive Waste Management Order.
There was general agreement among the workshop's attendees that generators should pay for TSD costs; that EM needs to examine and lower its "fixed costs;" and that EM funding transfers to the mission programs must equal TSD costs. However there were some concerns, the most important being a mistrust of EM's intentions, i.e., the mission programs would get the waste along with insufficient funds and personnel. There was also a concern that enthusiasm for Re-Engineering was not uniformly shared by the other non-EM secretarial program offices. A wide range of Pilot Projects were offered by the Field Offices representing all mission programs, waste types (except high-level waste), diverse laboratories and contractors, and re-engineering options.
Late in July, Assistant Secretary Al Alm and his deputy, Richard Guimond,briefed the heads of Nuclear Energy, Energy Research, and Defense Programs on Re-Engineering's objectives and schedule. In addition to Pilot Projects that were scheduled for FY 1997, they were asked to identify candidate waste streams for which funding, and perhaps management responsibility, could be transferred to the mission programs in the FY 1998 budget submittal to Congress.
In late September, another workshop was held to assess the progress of the working groups, discuss the FY 1998 budget transfers and receive a report on each site's Pilot Projects. There was a great deal of progress to discuss. The sites had begun to examine their internal processes for improvements; the initiation of Pilot Projects of many sites was imminent; quantitative and qualitative metrics had been identified; FY 1998 budget transfers were being proposed for a number of sites; and roles and responsibilities in a re-engineered world were being discussed. However, there were outstanding issues, the most significant of these being: obtaining a visible expression of senior DOE Management support for Re-Engineering; and receiving the approval of the Office of Management and Budget and the Congress to make the budget transfers. Immediately after the workshop, the heads of EM, Defense Programs, Energy Research and Nuclear Energy jointly signed an internal memorandum endorsing the Re-Engineering Pilot Projects.
As of late October, fourteen Pilot Projects had been proposed and are being conducted by the Field during 1997. There are six Option 2 projects; the generator pays the waste TSD costs and EM manages the waste. There are eight Option 3 projects; the generator pays the TSD costs and manages the TSD infrastructure.
WASTE GENERATORS DIALOGUE GROUP
One issue discussed at the September workshop was the establishment of a Waste Generators Dialogue Group. The purpose of the group is to provide Headquarters with unfettered information on waste generator experiences and recommendations. It is believed this group will be a rich source of anecdotal information on the Pilot Projects, and would be the most timely source of information on the progress of the projects. Also, the sharing of experiences among waste generators is likely to help accelerate and smooth the re-engineering transition.
Some Field Office representatives and contractors were concerned that Headquarters might use the information provided by the Group for performance evaluation. Concern was also expressed that waste generator reports might be taken out of context and reflect unfairly on the status of the Pilot Projects.
In early October, Headquarters formally requested the Field Offices to identify representatives to participate in the Waste Generator Dialogue Group. The request included examples of the types of questions the representatives will be asked to answer at the meetings. The selected representatives are to be drawn directly from those involved with the planning and implementation of projects which generate waste. The Group will meet about every three months during the term of the FY 1997 Pilot Projects.
AN OUTSIDE POINT OF VIEW
When the Re-Engineering Project Task Force was established in June 1996, the Los Alamos National Laboratory Red Team was requested to evaluate DOE and contractor waste TSD program structure and practices at selected national laboratories and plant sites. The Red Team was asked to identify opportunities for, and barriers to, commercial-like practices at the contractor level and at the DOE oversight level. The review was to include a comparison of DOE and contractor practices with commercial-like practices and metrics.
In response to this request, the Red Team assembled a review team including consultants to the nuclear power industry and DOE waste management, and waste management experts from Shell Oil Co. and IBM. The Team gathered data at the Idaho National Engineering Laboratory, Argonne National Laboratory, Los Alamos National Laboratory, Sandia National Laboratory (New Mexico and California), and Pantex; and met with DOE Field Office representative at Albuquerque, Idaho, Chicago, and with Waste Management Headquarters representatives.
For each facility, the Red Team developed an estimate of the fixed and variable TSD costs for each waste type, and waste type unit costs. Burden rate estimates were developed for each facility and presented in the context of comparable commercial burden rates. These data will be helpful to EM Headquarters in developing an independent estimate of costs to be transferred back to the mission programs.
The Team's most significant findings are:
"DOE EM-30 is paying for an extraordinarily expensive management process -- it costs more than the actual waste TSD. The Field/sites can tell you a lot about this process but have difficulty telling you much about TSD capacity and waste quantities.
The TSD "dirty hands" fraction of this waste operations dollar is in the range of commercial costs. [DOE] management process is far from commercial-like. It's built on distrust and an expectation of failure not performance.
- The management chain is 8 to 11 layers deep"
"Achieving commercial-like management cost requires continued evolution of the DOE HQ and Field [DOE and Contractor] management process to one which:
- is performance driven and based on actual data, and
- requires four to five less management layers and consequent staff."
The report's implications are significant. It is unlikely any additional significant savings are to be found in trying to reduce the "dirty hands" TSD cost, rather the savings are to be found by reducing the cost of programmanagement. The commercial program's management costs are ten percent of the "dirty hands" TSD cost, whereas DOE's cost is two to five times greater. This large difference is underscored by the Team's finding that a commercial organizational structure has roughly two-thirds fewer management layers than DOE and its combined contractor and subcontractor organizations.
The Team's proposed path forward for achieving commercial-like efficiencies assumes that generators pay the TSD costs for their waste. Making the generator responsible and accountable is the first step in achieving a commercial-like cost structure within DOE, and for reducing the cost of waste management, but it is not the only step.
REACTIONS OF CONGRESSIONAL STAFF
At our first meeting in October 1996, the re-engineering proposal met with resistance and skepticism by Congressional staff.
There was concern that funds for waste management will become "invisible" and Congress will be unable to track progress and ensure accountability. In creating EM, waste management issues and funding were made visible so that Congress could more readily perform oversight and exercise its authority. If waste management funds are spread among the mission programs, the issues and funding may become invisible.
There was also concern that re-engineering's basic premise, i.e., making generators accountable, cannot work in the government setting. Although good data exists to show that commercial low-level waste disposal volume is strongly related to disposal cost, no such data exists for DOE programs. The staff was concerned that this data may not apply to governmental programs, and are concerned that if generators have discretion for spending on waste disposal there may be a return to the days of noncompliance.
Lastly, the staff was concerned that the return of waste management funds to mission programs will give the unjustified appearance of program growth, particularly for the non-defense mission programs.
In a follow-up meeting in December 1996 to respond to staff's concerns, we developed an approach to ensure the waste management costs would remain visible. We will prepare a DOE budget crosswalk and crosscut analysis for internal use and provide these to Congress and OMB. This budget crosscut will not only maintain the visibility of waste management costs, it will also identify mission program growth that results from the transfer of waste management responsibility to the mission programs.
We presented several case studies of positive "charge-back" experience at DOE and EPA. The Pacific Northwest National Laboratory has used a "space charge-back" to alter line managers' perspective on the use of lab facilities. This has resulted in 61 of 200 building units being emptied. During FY 1996, the Savannah River Site used total life cycle analysis for environmental restoration and decontamination and decommissioning projects; cost/benefit analysis of existing processes for chemical substitution; and generator self assessment protocols, for a total of 180 initiatives resulting in an annual waste avoidance of 250,000 cubic feet - equivalent to $18 million cost savings.
Although Congressional staff remain skeptical, they nevertheless have agreed to allow a limited set of budget transfers for FY 1998 so that we can collect data and evaluate charge-back implementation strategies. We will keep the staff informed as we gain experience with the budget transfers and receive data from the Pilot Projects.
REACTIONS OF OFFICE OF MANAGEMENT AND BUDGET (OMB)
Assistant Secretary Alm and the Re-Engineering Project Director met with OMB to discuss a set of waste management budget transfers to the mission programs totaling $16 million for FY 1998. OMB directed that budget transfers be presented in the Budget Request as a "pilot effort intended to assess the merits of returning financial and managerial responsibility for waste management to the mission program" rather than as an irreversible first step.
Mr. Alm agreed to a set of principles that would ensure that the Secretary's commitments to stakeholders are honored. In FY 1998, EM will cover unavoidable funding shortfalls due to underestimates in waste generation. Regulatory accountability will remain with the mission program that currently holds the regulatory permit. The FY 1998 budget transfers will be assumed during the formulation of the FY 1999 Field Budget Request; however, there will be no additional budget transfers pending an assessment of the re-engineering program.
OMB will join with the Re-Engineering Project staff in appraising progress an assessing the performance of the Pilot Projects and budget transfers as the data become available. OMB will be invited to attend meetings of the Waste Generators Dialogue Group.
THE FIELD'S PERSPECTIVE
The overall objective of the re-engineering activity is to reduce the volume of waste and the waste management life cycle costs. However, it is difficult to achieve this objective when waste management is viewed as a separate independent activity and someone else's job. The waste minimization and management functions, as currently performed at most sites, are not integrated into the operating, production or research and development activities. This lack of integration has resulted in the waste management group not being actively involved up-front by the mission programs in the review of revised and/or new processes and initiatives.
Programmatic accountability for waste generation is non-existent or minimal since there are no strong incentives for the generators to understand their waste streams and how these streams can have an impact on the overall DOE and waste management costs (treatment, storage and disposal) and viability of a facility to continue operations. The current approach does not sufficiently provide for waste generators to be involved and accountable for the type and volume of waste being generated, including any costs associated with permit modifications. EM is currently responsible for the costs associated with the treatment, storage, and disposal of the waste regardless of the volume being generated, including any costs associated with permit modifications. In addition, EM continues to accept newly generated waste for storage if there are no treatment or disposal options available. The current way DOE manages waste makes it difficult to reduce the volumes and costs associated with waste management activities. The current approach creates difficulties in projecting waste volumes, ensuring that treatment capabilities exist for all waste streams, and formulating budget requests to treat and dispose of the waste.
To change this paradigm, the mission programs must have more accountability for newly generated waste. By either implementing a "charge-back" system or transferring the waste management responsibility to the site landlord will enhance the waste generators' awareness and accountability for waste costs. The waste generators would operate under strong cost incentives toward minimizing the amount of waste being generated since the generators would have a financial stake in the storage, treatment and, ultimately, disposal of waste. The DOE, Operations Offices, the site contractors, and HQ Program Offices must decide which approach, whether a charge-back or transfer of the waste management program, is best for their respective facilities based on size of facilities, number and complexities of the waste streams, number of waste generators/mission programs, and willingness of the landlord and mission programs to accept management and funding responsibility for the site's waste management program. By initiating the re-engineering pilot projects, DOE will be able to implement a waste management program that is competitive, cost-effective and efficient.
THE NEXT STEPS
In late October 1996, the Pollution Prevention Executive Board reviewed the status of the Re-Engineering Project. The Board indicated its support for the Pilot Projects and for the $9.3 million in proposed FY 1998 budget transfers. However, the Board directed the program mission offices to revisit the amount of the budget transfers with an eye to increasing the amount, particularly those proposed for Defense Programs and Energy Research. At Under Secretary Grumbly's insistence, the amount of budget transfers was increased to $16 million for FY 1998.
Assistant Secretary Alm has requested each Field Office to develop, for each of its major contractors business units, a draft implementation plan for the Red Team Report's recommendations. These proposals are to be presented at the March 1997, Waste Management Steering Committee meeting. These proposals will be the basis for developing a Department-wide implementation plan(s) for the Red Team Report and Re-Engineering.
Under Secretary Grumbly and the past Secretary of Energy have indicated their strong desire to move forward with budget transfers and the re-engineering of DOE waste management, and have indicated their willingness to endure the potential chaos that could accompany such a major change in the program. We expect the next Secretary of Energy, Mr. Peña, to continue the policy of his predecessor.