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Hanford Waste Treatment and Immobilization Plant Project:
After-Action Fact-Finding Review

LMI, at the behest of the Department of Energy, identified the main causes of the $2.6 billion cost overrun and 4-year schedule delay in the construction of the Hanford Waste Treatment and Immobilization Plant Project—a major national priority to clean up longstanding nuclear waste materials and the second largest public works project in the United States.  We found that the increases in estimated costs and project schedule delays result primarily from a faulty initial estimate and the optimistic treatment of uncertainty and risk. A flawed acquisition strategy and a defective management approach exacerbated the cost misestimation.

The Department of Energy is responsible for the management, treatment, and appropriate disposal of approximately 53 million gallons of highly toxic, high-level radioactive waste stored in 177 underground tanks located at the DOE’s Hanford site, near Richland, WA. This nuclear waste is the result of more than 40 years of reactor operations and plutonium production for national defense.  Most of the storage containers have dramatically exceeded their design life, and actual leakage is becoming a serious consequence. The cleanup of this legacy waste is now a national priority.

In December 2000, DOE awarded a contract to design, construct, and commission the Waste Treatment and Immobilization Plant at the Hanford site. At contract award, the government fair cost estimate for total project cost was $4.35 billion, with a commissioning date in mid-2011.

Since contract award, cost and schedule estimates for the project have greatly increased significantly. In April 2003, when engineering design was about 30 percent complete, the contractor revised its estimate for the total project cost to $5.78 billion, with no revision to the commissioning date. Those estimates became the baseline cost and schedule values for subsequent project management and performance evaluation. However, 2 years later, the total project cost estimate was revised to $8.35 billion, with a 4-year schedule delay to a mid-2015 commissioning date.

To better understand the causes of the projected cost increase and schedule delay, DOE asked LMI to perform an after-action fact-finding review of the Waste Treatment Plant project. We found that the increases in estimated costs and the schedule delays for the project result primarily from a faulty initial estimate and the optimistic treatment of uncertainty and risk for the following: design of novel technology for a large, complex nuclear-chemical plant; quantity, procurement, and availability of physical capital; availability and productivity of qualified labor; and regulatory compliance. These four factors account for approximately $2 billion in cost growth.