Suzanne Rudzinski
USDOE

Merle Sykes
USEPA

Peter Dahling
Project Performance Corp.

This paper discusses the facility and infrastructure management responses of the Department of Energy (DOE) to changing mission and budget priorities in the post-Cold War environment. Specifically, it presents analysis and discussion that suggest alternative management and budgeting strategies to address the Department's current infrastructure management challenges. By 2006, the ten largest DOE Operations Offices (the "Field Offices") project that 800-1,500 facilities will be declared excess to their missions, in addition to the estimated 10,300 that are currently excess. Over 40 percent of the facilities that will become excess (and 60 percent of the total square footage) is estimated to require cleanup because of either hazardous or radiological contamination. The 800-1,500 facilities are managed by three different programs within the Department (Defense Programs, Energy Research, and Nuclear Energy). The Environmental Management program manages the 10,300 currently excess facilities. Analysis of different budgeting strategies suggests that investing in the disposition of future excess facilities and conducting more centralized prioritization of excess facility projects can substantially reduce long-term costs. In addition, current data show that DOE spends 30 percent of its annual budget on facility and infrastructure maintenance at its largest sites. A planning process that integrates mission analysis with resource allocation would enable the Department to reduce costs by allocating its infrastructure more efficiently across missions, programs, and sites.

In January 1997, Secretary of Energy Hazel O'Leary asked for an independent examination of unresolved issues in the scope, management, and funding of the Department's cleanup plans for facilities expected to be declared "excess" to its missions by 2006. This paper presents results of internal DOE analysis (i.e., the Special Project on Excess Facilities and Department Infrastructure) and expands beyond the former Secretary's request to suggest alternatives to current DOE infrastructure management strategies and policies. The paper is divided into three major sections:

DOE's mission changed abruptly with the end of the Cold War. The Department's activities shifted from large-scale nuclear weapons development to smaller-scale nuclear research, basic scientific research, and nuclear materials stockpile stewardship and management. In fact, much of the nuclear weapons complex completely ceased operations. Many of the buildings originally designed and constructed to support these efforts no longer have any ongoing or planned mission. Twenty-five percent of these facilities were built before 1960, and 50 percent were built before 1974. Many are now obsolete and increasingly expensive to maintain in a safe condition. Despite the dramatic changes in its mission and resource needs, the configuration of DOE's industrial complex is basically unchanged from the Cold War. The Department currently maintains approximately 22,500 facilities; nearly half of these have been declared excess to DOE missions. These facilities range in nature and size from administrative buildings and support structures to large industrial and production facilities with varying levels and types of contamination. This facility and infrastructure profile incurs large maintenance costs and does not reflect recent downward funding trends and shifting mission priorities.

In 1989, DOE established the Environmental Management (EM) program to address the Department's environmental cleanup responsibilities, including facilities with radiological or hazardous contamination. DOE Order 4330.5, Surplus Facility Transfer (November 4, 1994) provides a framework and procedures for the transfer of excess contaminated facilities from their program owners to EM for final disposition. The Department's current policy on facilities and infrastructure (as defined by EM's charter and DOE Order 4330.5) maintains that all active facilities are the responsibility of their program owners (e.g., Defense Programs (DP), Energy Research (ER), or Nuclear Energy (NE)). Program owner responsibilities include funding operating activities, as well as conducting and funding surveillance and maintenance (S&M) activities (e.g., security, building safety inspections, or routine maintenance). However, once a facility is declared excess by the owning program, it enters a transfer process where contaminated facilities (including contaminated ancillary facilities) become the responsibility of the Office of Environmental Management (EM) and uncontaminated excess facilities become the responsibility of the site landlord program. When facilities are transferred, any associated budget for conducting S&M on the facilities is also transferred to the new program.

Some shortfalls in implementation of current policies have resulted in an uneven and unpredicted distribution of the facility and infrastructure management burden. Consequently, the EM program manages the majority of the Department"s facilities, including thousands of uncontaminated facilities at four of its largest sites (Hanford, Idaho National Engineering and Environmental Lab (INEEL), Rocky Flats Environmental Technology Site (RFETS), and Savannah River) where EM is the landlord. (See Table I for a distribution of DOE facility management responsibilities).

When the Department created EM to address environmental cleanup, it never contemplated management and disposition of uncontaminated facilities as part of EM's primary mission. Given current downward trends in weapons production and nuclear energy research missions, it is likely that the number of facilities declared excess will increase. In the absence of different policies, it is also likely that pressure on EM to assume responsibility for these facilities, contaminated and uncontaminated, will increase.

Congressional budget allocations for EM, which had been rising since 1990, began to level off in 1995. EM management expressed concern that it could not support the program's facility cleanup mission if its excess facility management responsibilities continued to increase in the face of declining budgets. Consequently, EM proposed in its draft accelerated cleanup plan (Accelerating Cleanup: Focus on 2006, June, 1997), that it would not accept responsibility for any additional excess facilities beyond those already in the EM program. This proposal raised the possibility of shifting the responsibility for facility cleanup to other DOE programs and prompted Secretary Hazel O'Leary to ask for an internal DOE assessment of the scope and cost of the excess facility management problem expected by 2006 and an external assessment (by NAPA) of organizational alternatives for allocating funding and management responsibility for future excess properties.

The following section presents results from the internal DOE analysis including the number and type of facilities, their projected costs, and programmatic budget impacts. In addition, it suggests some budgeting strategies to reduce long-term excess facility management costs.

The Department lacks several important sources of information needed to answer questions about the number, nature and cost of facilities (e.g., a uniform cost information system). In addition, FIMS data are not consistently provided across the Department. Consequently, we sent surveys to contacts at the ten largest DOE Operations Offices (collectively, the Field Offices) requesting them to identify facilities to be declared excess over the next ten years and the annual cost to conduct required S&M activities on those facilities.

After reviewing the Field Office it was apparent that the lack of a common definition of excess and a means of forcing facilities meeting certain criteria to be declared excess resulted in potentially inconsistent responses from the Field. These sources of inconsistency combined with review of previous reports and excess facility projections lead us to believe that Field Office projections could be understated. For analytical purposes, we developed a range to estimate the numbers and costs of excess facilities. The Field Office projections served as the lower bound. We developed the upper bound by using previous studies to increase the projected numbers of excess facilities at three sites: the Y-12 Plant, Oak Ridge National Laboratory (ORNL), and the Nevada Test Site.^** Throughout this section, discussions of the range of costs or facilities refer to the range between these upper and lower bounds.

Finally, we used the facility data from FIMS to estimate disposition costs for the range of projected excess facilities using three modeling methodologies:

The Field Offices project that almost 800 facilities at 14 sites would become excess over the next ten years (the lower bound estimate). The upper bound estimate is almost 1,500 facilities, including 700 additional facilities at Y-12, ORNL, and the Nevada Test Site. In both estimates, the vast majority of these excess facilities are located at four sites: Nevada Test Site, Pantex Plant, Los Alamos National Laboratory, and Oak Ridge Reservation (ORNL and Y-12 Plant). Similarly, DP manages the majority of facilities in both estimates (over 80 percent) with ER and NE managing the remaining facilities. Slightly under half of the facilities are contaminated in both estimates, but an uneven size distribution results in 65-80 percent of the total facility square footage being contaminated. In both estimates, over 80 percent of the facilities and 70 percent of the facility square footage were characterized as having hazardous contamination with the remainder having radiological or mixed contamination.

Costs for excess facility management are driven by the management strategy. We estimated and analyzed costs for two general strategies: (1) conducting only minimal S&M activities on excess facilities, and (2) conducting disposition activities including stabilization, deactivation, and decommissioning. The S&M activities required for a given facility are determined by its characteristics (e.g., contaminated/uncontaminated, large/small, high-security/low-security) and include maintaining fences and access barriers, on-site surveillance, environmental monitoring, repairs, and other routine maintenance. Absent disposition activities, S&M costs remain constant in the short-term and then increase in the long-term as the facility deteriorates with age. However, required S&M activities (and their costs) decrease significantly throughout the disposition process as materials are stabilized and removed, equipment is deactivated and decontaminated, and the facility structure is decommissioned. This relationship, presented in Figure 1, is the basis for developing budgeting strategies that reduce long-term costs.

Figure 2 presents cost profiles for both the upper and lower bound estimates for two management strategies: (1) S&M activities only (i.e., no investment in disposition), and (2) 20 percent investment in disposition. Investment in disposition activities including stabilization, deactivation, and decommissioning, results in some incremental cost in the near term, but significantly decreases the total costs. For example, up to 2006 annual costs only for S&M activities averaged $45-200 million compared to $80-270 million if there is a 20 percent investment in disposition. However, investment in disposition results in $600 million-$4.1 billion in total cost savings over the period 1997-2025.

As discussed in Section 1 of this paper, the Department needs to consider not only the magnitude, but also the distribution of projected costs across DOE programs. DP facilities account for the majority of costs for the upper and lower bound estimates (60 and 80 percent respectively) applying a 20 percent investment in disposition activities. Together, NE and ER facilities account for the remaining 40 percent of lower bound costs and 20 percent of upper bound costs. DP accounts for a greater proportion of upper bound costs because almost 90 percent of the additional facilities in the upper bound estimate belong to DP.

To efficiently manage excess facility costs, DOE needs to answer questions of how and when it will pay, and who within the Department will pay. This paper does not directly address the question of who will pay, but focuses on how the Department can reduce costs in the long term (For discussion of programmatic responsibility issues, see National Academy of Public Administration, June 1997). In conducting the cost analysis, we identified two budgeting strategies with high cost-reduction potential:

The basic relationship between S&M costs and facility disposition costs provides an opportunity for reducing long-term costs. As presented above, investing 20 percent above the minimum annual required S&M costs in the upper bound estimate reduced total costs for 1997-2025 from $8 billion to $3.9 billion. Analysis of additional investment rates between 0 and 20 percent on the upper bound estimate showed smaller but significant savings in total cost (e.g., only a 5 percent investment reduced total costs for the same facilities from $8 billion to $5.1 billion). These results suggest that investment in facility disposition is not an "all-or-nothing" strategy, but can be tailored to meet the constraints of a particular budget environment. The Department can reduce long-term costs to varying degrees based on a range of investment possibilities.

In addition to disposition investments, we evaluated the cost-reduction potential of different project prioritization strategies. Our initial cost estimates reflect the current DOE budget policy that allows individual sites to prioritize projects (based on a range of criteria) within their own site. An alternate prioritization strategy that targets cost-reduction would evaluate the potential for mortgage reduction savings for all facility disposition projects across all Department sites. This strategy reflects the concept that site-specific prioritization will not maximize the Department's mortgage-reduction cost savings. However, to implement this strategy, DOE would have to reallocate funds between sites from year to year based on the location of the highest priority projects. Figure 3 presents the results of our prioritization analysis on excess facility costs. When the upper bound estimate of facilities was prioritized across all sites, rather than within individual sites, and addressed with a single "pool" of budget dollars, the result was $1.6 billion in savings and a 13-year reduction in schedule.

It would be difficult to implement this strategy within the current DOE and Congressional budgeting process. One approach would be to establish a site-neutral pool of facility disposition funds, in addition to current EM funding for facility disposition, that could be allocated annually by Headquarters to those projects with the highest potential for mortgage reduction. If these funds are never "ear-marked" for a particular site, it may be easier to get funding to the appropriate sites.

Implementation of current DOE policies and management strategies has caused the Department to maintain a large infrastructure and to unevenly distribute the responsibility for managing that infrastructure. This section suggests a new management framework that would enable the Department to explicitly evaluate the infrastructure required to support its continuing missions.

In the last decade, the end of the Cold War and the decrease in national support of nuclear power have highlighted changing national priorities. Congressional budget appropriations for DOE's nuclear weapons production and nuclear energy research have declined as well. A literature review of public sector downsizing and "cutback management" experience presents several important lessons for DOE in this current climate of uncertain and declining missions. First, successful public sector downsizing begins with a return to the fundamentals of performance: mission, capacity, and results. Second, as organizations begin to downsize, they will experience denial and resistance to change. To move past these obstacles requires, among other things, strong senior management leadership and guidance in planning with a long-term perspective (NAPA, 1995). Third, management in a time of decreasing budgets inverts all of the relationships and strategies associated with budgeting in an era of plenty. The research suggests that, in general, the hard decisions associated with cutting budgets (a process analogous to resizing infrastructure and dispositioning excess facilities in this case) are made most successfully by a centralized decision-making body (Behn, 1985).

In particular, DOE's decentralized approach toward facility and infrastructure management has precluded the Department from evaluating changing post-Cold War missions and efficiently reallocating its infrastructure to support those missions. DOE currently manages a complex infrastructure comprised of contaminated and uncontaminated facilities (some active and some inactive), as well as some of the more permanent residuals of non-facility cleanup such as buried waste and capped soil areas. This infrastructure consists of both assets and liabilities, including some liabilities which cannot be shifted and will require long-term stewardship for generations. To effectively manage this diverse portfolio, the Department should develop a more cohesive planning process that explicitly integrates facilities (infrastructure) management, excess materials management, long-term stewardship responsibilities, and ongoing defense and research missions (See Figure 4 below). Implementing this kind of process will require cross-Operations Office, cross-site, and cross-program analysis to allocate the most efficient mix and distribution of facilities and infrastructure to support the Department's continuing missions. To conduct more of this type of analysis, the Department needs to improve its centralized data collection and analysis capabilities. In addition, it needs to allocate the appropriate analysis, policy-making, and resource allocation power to a senior-level, headquarters official or group to bring DOE missions, resources, and infrastructure into a more efficient balance.

The new process includes both primary and secondary missions as essential elements of an integrated planning effort. To match up its capabilities and its missions in a more transparent process, the Department should support a centralized mission analysis and resource allocation function. The Department cannot efficiently support future defense, research, and environmental management missions without more explicit consideration of secondary mission responsibilities. In addition, the Department must consider the constraints and opportunities posed by external influences. New and revised environmental regulations as well as associated stakeholder concerns will continue to pose constraints on DOE's development of new and disposition of old infrastructure. In contrast, the development of new technologies for environmental management or energy research and commercial interest in the reuse of DOE facilities will provide opportunities for the Department in resizing its infrastructure. The end result should be a more cohesive Departmental strategy for the management of its missions and resources in the short and long-term.

A more integrated infrastructure planning process could identify opportunities for cost-savings at the Department level. For example, active and excess facilities and the infrastructure required to support DOE operations consumes a significant portion of the Department's annual budget. Analysis of 1996 data from DOE's Functional Cost Reporting System at six Operations Offices shows that the Department spends about 30 percent of its annual budget on facility or infrastructure-related support activities. These activities include maintenance, utilities, safeguards and security, facilities management and engineering, and logistics support. In addition, analysis of DOE support costs estimates that the majority of these infrastructure costs (60 percent) are fixed at the site level (U.S. DOE, 1996 Indirect/Environmental Restoration data calls). Unless individual sites and programs undertake radical efforts to reduce their infrastructure costs, the best way to reduce these costs across the Department is to consolidate activities at fewer sites.

*Facility numbers taken from DOE's corporate facility database, the Facilities Information Management System (FIMS). When this analysis was conducted, facility management responsibility data were not consistently provided in FIMS. Table I uses the managing program identified in the Surplus Facility Inventory and Assessment (SFIA) (1994) (updated to include recent transfers to EM of RFETS, Mound Plant, Savannah River Site, and Energy Technology Engineering Center (ETEC) applied to the FIMS facility data. Contamination data were estimated using Field Office responses to a recent survey conducted by DOE's Office of the Chief Financial Officer (CR) in support of its FY 1996 consolidated financial statement.

**The Surplus Facilities Inventory and Assessment (SFIA) Report from 1993 projects 1,400 non-EM excess facilities adjusted for facilities transferred to EM since 1993. In addition, the Final Programmatic Environmental Impact Statement for Stockpile Stewardship and Management (September, 1996) projects that the footprint of Y-12 Plant may be reduced by up to 80 percent by 2003, yet the Field Office excess projections amounted to only 11% of the area of Y-12.

1. Behn, Robert, "Cutback Budgeting," Journal of Policy Analysis and Management, Vol. 4, No. 2, (Winter 1985), pp. 155-177.
2. National Academy of Public Administration, June 1997. Allocating Management and Funding Responsibilities for Excess Properties at DOE. Washington, DC.
3. National Academy of Public Administration, 1995. Effective Downsizing: A Compendium of Lessons Learned for Government Organizations. Washington, DC.
4. U.S. Department of Energy, June 1997. Accelerating Cleanup: Focus on 2006 Discussion Draft (DOE/EM-0327). Office of Environmental Management, Washington, DC.
5. U.S. Department of Energy, June 1997. Facilities Information Management System.
6. U.S. Department of Energy, 1996. Functional Cost Reporting System.
7. U.S. Department of Energy, 1995. Indirect/Environmental Restoration Data Calls supporting the 1996 Baseline Environmental Management Report (DOE/EM-0290).
8. U.S. Department of Energy, 1994. Surplus Facilities Inventory and Assessment Report.

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