Background
This report is the second in a series of reports that discuss the acquisition of the Chemical Demilitarization Program (the Demilitarization Program). The first report discussed the need for the Army to revise its acquisition program baseline agreement and to obtain a documented threat assessment for the Demilitarization Program. In May 2001, the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) designated the Demilitarization Program as a major Defense acquisition program and assigned the Army as the Executive Agent. The Office of the Secretary of Defense approved a life-cycle cost estimate of $24 billion for the Demilitarization Program in September 2001. Through December 2002, the Army awarded contracts totaling $5.8 billion for the construction, systemization, operations, and closure of seven chemical agent disposal facilities and planned two additional disposal facilities.
Results:
The Program Manager for the Demilitarization Program (the Program Manager) had made substantial progress in developing and operating chemical agent disposal facilities; however, program acquisition managers need to improve the program’s baseline performance by making better use of acquisition management policy and guidance in the areas of cost estimating, earned value management, preventive maintenance, failure reviews, and spare parts planning. Specifically:
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The Under Secretary of Defense (AT&L) needs to conduct program cost reviews to enable him to have up-to-date cost information needed to revise program cost baselines and funding requirements and for the Program Manager to more accurately report the estimated liability for disposal of chemical agents in DoD financial statements (finding A).
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The facility project managers at Tooele, Utah; Anniston, Alabama; and Umatilla, Oregon need to correct cost and schedule information that is incomplete or inaccurate in contractor cost performance reports to enable them to effectively monitor and manage contract execution and the Program Manager to provide complete and accurate cost and schedule information in status reports to the Under Secretary of Defense (AT&L) (finding B). The project manager at the Tooele Chemical Agent Disposal Facility needs to ensure that the contractor performs timely preventive maintenance to decrease equipment failures, avoid potential fines, eliminate safety hazards, and reduce facility operating costs (finding C).
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The Program Manager needs to ensure that facility project managers conduct effective operational failure reviews to prevent schedule delays, reduce program costs, and avoid potentially life-threatening injuries to workers from exposure to nerve agent vapor (finding D).
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The Program Manager needs to identify initial and replenishment spares early in facility development, assign national stock numbers to replenishment spares needed at multiple facilities, and establish an obsolescence program to identify replenishment spares to help resolve difficulties that facility project managers encounter when replenishing common spares (finding E).
In May 2002, the Office of the Director, Accounting Policy, Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer requested that the audit review the methodologies that the Program Manager used for computing the chemical stockpile inventory and life-cycle cost estimate for the Demilitarization Program. In response to that request, we determined that the methodologies used to develop the lifecycle estimate and compute the stockpile inventory were adequate. Appendixes E and F provide the details on the cost estimating and inventory methodologies. See Appendix A for the details of the review of the management controls relating to the above findings. The Findings section of the report provides detailed recommendations.