Briefing to EFCOG Infrastructure Management Working Group Annual Meeting PRESENTED BY JOHN BERNIER For: Thad Konopnicki

1. Improving Construction Project Management and Performance • Briefing to EFCOG Infrastructure Management • Working Group Annual Meeting PRESENTED BY JOHN BERNIER For: Thad Konopnicki Director Office of Project Management & Systems Support October 17, 2006

2. Agenda • Background • Summer 2006 “Findings” • Root Causes for Project Failures • Thad’s Message • Recommendations from NWC Sites • Conclusions • What to Do Next?

3. BackgroundSummer 2006 “Findings” • Project management “enjoys” significant political interest (it’s where the money comes from) • Within DOE/NNSA there is unequivocal direct support from the Secretary, Deputy Secretary, and Under Secretary/Administrator Brooks for excellence in project management performance • Project management landscape is ever-changing (i.e., Orders, Standards, Measuring, Training, and Federal–Contractor Partnership) with all changes directed at measurably improved project management • Stark conclusion – the foregoing is not bringing about dramatic improvements as measured by any standard

4. BackgroundRoot Causes for Project Failures • Preconstruction Planning is Inadequate • Unfounded optimism in most planning and risk scenarios • Inadequate Cost Estimating • Inadequate risk planning, assessment, and mitigation strategies – poor follow through • Inadequate Construction Project Experience by the Contractor’s Project Management Line Managers • Lack of Ownership, Executive Involvement, & Leadership – until something goes wrong! • Subcontractor performance (monitoring, corrective actions, etc.) • Little evidence of the competent use of the Independent Project Team as provided for in OMB Circular A-11, current Capital Programming Guide, and DOE Order 413.3

5. Thad’s Message • Contract formulation and contract execution remain as top concerns • Lack of experience dominates the performance and execution of NNSA Line Items • M&O reliance on existing staff to manage projects that exceed available expertise • Project Managers shy from the “onerousness” of accountability • Too frequently, safety basics are absent from construction sites • M&Os are pricing themselves out of the construction market • NNSA/M&O must pilot new approaches that will accelerate improvement

6. Recommendations from the NWC • Quantify the cost benefits of having the M&Os contract and manage construction projects. • Circa mid-1980s, DOE performed this role. Change was enacted because M&Os convinced Feds that they could save money • Develop a framework for assessing local business conditions and forecasts into project baselines • Develop a DOE requirement for such an assessment to be included in all CD-2 decision packages • Develop methodology to mitigate risk of “baseline-busting” bids solicited 12-18 months after approval of the baseline • Develop methods for addressing material cost escalation for construction projects

7. Recommendations from the NWC(cont’d) • Ensure effective oversight of construction subcontractors • Develop comprehensive and effective dissemination of lessons learned, especially safety issues (read electrical gaffes repeated) • Perform analysis of post-DOE O 413.3 projects (CD-2 after 2001). Determine if this rigor is resulting in better baselines. Please Answer: • Compare original baseline to final baseline of projects reaching CD-4 approval and 5 years before the order. Were there any improvements? • What is the average number of Baseline Change Proposals (BCPs) for projects during pre and post-Order?

8. Recommendations from the NWC(cont’d) • Explore feasibility of funding low-risk Line Items with TPC<$50M in one fiscal year once mission need is approved(Corollary: TPC<$100M in two years) • Cost Estimating for Construction and Construction Management • Hire cost estimating consultants (using delivery order contract) • Delivery order contracts for construction management, engineering & architectural design services that can be administered locally by Site Offices and paid for by HQ or NNSA Service Center funding • Determine the wisdom of turning over some projects to an independent A/E that reports to NNSA Feds – Laboratory becomes technical consultant to A/E

9. Recommendations from the NWC(cont’d) • “In a nutshell, the key to this work (PM activities) is: • ensuring that you understand the roles and responsibilities of the owner’s team, the construction manager’s team, and the contractor’s team; • Obtain the best staff you can to manage the work; and • Lastly, it is the owner who sets the pace, expectations and is ultimately responsible for the success or failure of the work – so don’t confuse this issue and attempt to place this responsibility on a contractor.” • Answer the following objectively: EFCOG has been around for at least a decade in DOE • What has EFCOG done for DOE Project management lately? • Can you quantify your added value? • Would EFCOG accept tasks contract style? SOW, start/end date?

10. Conclusions • Stepping back from the last 4 slides, HQs finds that: • Agreement is widespread among federal and M&O rank and file that Project Management is in need of dramatic improvement • The Federal/M&O Contractor partnership has yet to make a commitment to excellence • And as you can see, there are lots of disparate recommendations • Complex 2030 portends growth in LI modernization and large facility disposition projects • What to do next ?

11. What to Do Next? • We need new approaches: • Pricing ourselves out of market • Onerous oversight & requirements (which aren’t solving the problem • Alternative contracting strategies and approaches with emphasis on dramatic improvement • Feds need to accept the owner’s role and responsibilities • Feds need to be more demanding customers • DOE Direct Contracts • Complex-wide construction contracts • Performance plans that obtain M&O Leadership’s attention regarding LIs

12. What to Do Next? • Solve the problem of “We’re getting Less for more”: • Higher material costs • Unreasonably high construction bids (pricing) • “Project support costs” are exceeding direct construction costs • Overhead and G&A rates as applied to construction projects are unreasonable • Cost controls not always well managed • Establish dedicated HQ/EFCOG Partnership dedicated to solving the problem • We propose Mike Hickman – NA-54 • EFCOG proposes – (To be filled in today by you!)