Estimate for First Phase of New LANL Pu Strategy Set at $2 Billion

Todd Jacobson
NS&D Monitor
8/29/2014

The first phase of Los Alamos National Laboratory’s new strategy to upgrade its plutonium facilities will cost about
$2 billion, according to a new cost estimate approved last week by Deputy Energy Secretary Dan Poneman as
part of a Critical Decision-1 approval of the project. Poneman signed off on the CD-1 package Aug. 22, allowing
the revamped project to proceed in the wake of a decision to defer work on the larger Chemistry and Metallurgy
Research Replacement-Nuclear Facility (CMRR-NF). Congressional authorizers and appropriators earlier this
month signed off on an approximately $90 million reprogramming request to free up money to begin work on the
project. The NNSA did not respond to a request for comment.

The project includes the installation of new equipment in the lab’s existing Radiological Laboratory/Utility/Office
Building (RLUOB) and Plutonium Facility (PF-4), as well as efforts to reconfigure space in PF-4. It does not include
construction of new “modules” for plutonium work, which are expected to cost approximately another $2 billion and
are expected to need separate authorization in DOE’s Critical Decision process.

NS&D Monitor obtained the CD-1 authorization memo drafted by Ingrid Kolb, the director of DOE’s Office of
Management, and signed by Poneman, as well as the project’s Preliminary Project Execution Plan (PPEP). Both
documents outline the plans for moving forward with the project, noting that long lead procurement is slated to
begin in January of 2015 after a National Environmental Policy Act Supplement Analysis is completed. The PPEP
suggests the project will be completed by 2024.

Underestimation of Costs Blamed for Demise of CMRR-NF

In the memo, “significant underestimation” of costs for CMRR-NF is suggested as the culprit for the project’s
cancellation. When CD-1 was first approved for the project in 2005, the cost range was $745 to $975 million, but
that grew to a range of $3.7 and $5.9 billion before the project was deferred. “Several factors contributed to the
significant cost growth in the estimate to complete the design and construction of the Nuclear Facility,” the memo
says. “Chief among those were the reliance on overly optimistic and less rigorous cost estimates when CD-1 was
approved in 2005, and an inability to properly define and control incremental changes to the project’s
requirements, commonly referred to as scope creep, as design progressed.”

The cost estimate for the new project includes a range of $505 to $675 million for the installation of new equipment
in the lab’s existing Radiological Laboratory/Utility/Office Building, and $995 to $1.4 billion for reconfiguring space
and installing equipment in the lab’s Plutonium Facility. The total estimate of $2.9 billion also includes $856 million
in already spent funds: $199 million on construction of RLUOB, $197 million on installation of equipment at
RLUOB, and $460 million already spent on designing CMRR-NF.

Analysis: Lifecycle Costs of First Two Phases Significantly Cheaper

According to the PPEP, the lifecycle costs for the two phases are considerably less than the estimated lifecycle
costs for CMRR-NF. The document indicates that operating CMRR-NF for 50 years would cost $6.6 billion, while it
will only cost an increase of $1.25 billion above current costs to run RLUOB and PF-4. The document does not
analyze what building modules for pit production would cost or what the lifecycle costs of such a facility would be.

NWC Committed to Modular Approach in July

The Nuclear Weapons Council formally committed to the new strategy, including building modules, in July,
triggering Congressional approval of $90 million in funds that had been stuck in limbo as lawmakers pushed for a
promise on the modular approach. Nuclear Weapons Council Chairman Frank Kendall and National Nuclear
Security Administration chief Frank Klotz pledged to complete the modular structures by 2027 in a July 25 letter to
Congressional leaders.

The Fiscal Year 2013 and FY 2014 National Defense Authorization Acts prevented the NNSA from spending
money on an alternate plutonium strategy without the commitment. “We request your support to use the remaining
CMRR funding to begin the first two steps of the plutonium strategy as subprojects within the CMRR project,”
Kendall and Klotz wrote. “Your continued support is appreciated, and we look forward to updating Congress on
our progress.” With the letter in place, the House Armed Services Committee is expected to give its approval to
free up the remaining money.

Pre-Conceptual Design on Modular Structures to Begin in FY 2015

Kendall and Klotz also said the NNSA’s modular approach would “meet the requirements for maintaining the
nuclear weapons stockpile over a 30-year period” and “meet the requirements for implementation of a responsive
infrastructure, including meeting plutonium pit production requirements.” They said the NNSA will begin work on
the modular structures in FY 2015 with pre-conceptual design activities in preparation for Critical Decision-0. The
officials said the strategy is “dependent on timely receipt of congressional appropriations and authorizations as
well as the release of funds previously requested for reprogramming” from the CMRR-NF project.

The NNSA requested $35.7 million in FY 2015 to outfit its Radiological Laboratory Utility Office Building with
equipment that can shoulder some of the load planned for the CMRR-NF facility, and another $3.8 million to begin
studying the new modular approach. While Congressional authorizers and appropriators have supported the
request, they’ve done so skeptically, most notably with Senate appropriators directing in report language that
NNSA thoroughly vet alternatives for modernizing Los Alamos’s plutonium capabilities before moving forward with
the modular approach.

Earlier this year, Los Alamos Director Charlie McMillan said the lab needs about $90 million in Fiscal Year 2014,
$38 million in FY 2015, and then a steady funding profile of about $85 million a year through 2019 for the
plutonium strategy. Lab officials have said the money is essential to getting out of the current Chemistry and
Metallurgy Research facility by 2019.