UPF's cost may soar above $11B
By Frank Munger
From the Knoxville News Sentinel
May 21, 2013
the past couple of years, the government has stood behind a cost range
of $4.2 billion to $6.5 billion for the Uranium Processing Facility, but
that range may not be able to contain the giant project's growing costs
as the schedule gets pushed into the future and funding gets stretched
Todd Jacobson of Nuclear Weapons & Materials Monitor
this week reported that, based on a Government Accountability Office
briefing prepared for congressional committees, the cost of UPF could go
beyond the $6.5 billion estimated cap and perhaps go well beyond it.
to information in the GAO's 27-page briefing package, the "space/fit"
problem that forced the UPF team to re-do the building's design to
accommodate more equipment is a big part of the cost escalation. The GAO
cited NNSA documents that say the space problem will add $540 million
to the project's cost, delay the start of construction and delay the
start of facility operations by 13 months.
A bigger impact on the
overall cost, however, appears to be the possibility of the project
getting significantly lengthened due to funding constraints.
NNSA declined to comment on the GAO analysis or discuss any updates on
the estimated cost range for the Uranium Processing Facility.
GAO briefing notes that UPF cost estimates made in 2010-2011 timeframe
were based on annual appropriations not subject to budget constraints.
The NNSA, which placed the cost range at $4.2 billion to $6.5 billion in
that time frame, also planned on potentially changing the year-to-year
funding to meet the needs as the UPF moved from design to site
prepration to construction to operations.
In the same period, the
Army Corps of Engineers challenged the NNSA's estimated cost range for
UPF and came up with a range that went up to to $7.5 billion. The Corps
also did not foresee budgetary constraints, with the idea of the biggest
funding load coming with $900 per million per year for UPF in four
consecutive fiscal years.
Now, however, with schedules getting lengthened and some work getting deferred, the overall costs are reportedly climbing.
less-optimum funding profiles, with limited appropriations (between
$200 million and $500 million annually), the overall cost of UPF could
go up to $11.6 billion and stretch the project out until FY 2035 -- the
GAO analysis of Corps of Engineers data suggests.
The GAO said the current cost range (up to $6.5 billion) for UPF does not include significant portions of the original scope.
briefing report said the NNSA in October 2012 updated its point
estimate -- the closest estimate to actual cost of UPF -- from $5.2
billion to $5.8 billion. The NNSA reportedly said it did not update the
cost range, which includes contingency for unknowns, at that time
because it's scheduled to get a complete review when the cost baseline
is established for the Critical Decision-2 process (which the contractor
plans to submit in September 2013).
The GAO concluded by saying it is "unclear" if the project's current cost range of $4.2B to $6.5B remains valid because:
-- NNSA's current "point estimate" is $6B as design cost for certain processing equipment has increased.
The space/fit issue ate up about 45 percent of the NNSA's contingency
for the project and the NNSA had not accounted for such a risk.
Several identified project risks, "including all risks related to
construction activities," are still out there and could require funding
to overcome in the future.
"It is possible that additional funds
will be needed to ensure there is sufficient contingency to complete the
UPF within a cost range that meets NNSA's 85 percent confidence level,"
the GAO briefing states. "As part of the CD-2 process, NNSA plans to
establish a firm cost baseline by June 2014."
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