Bruce Held: NNSA sticking to its plan on UPF, at least for now

December 13, 2013
By Frank Munger

NNSA acting chief Bruce Held had only good things to say about the Defense Department’s CAPE (Cost Assessment and Program Evaluation) group, noting they price out F35s and have lots of resources. But he said the National Nuclear Security Administration is not ready to shift its course on the Uranium Processing Facility because of the recent CAPE study — at least not yet.

“We’re not going to spin around and, you know, just (switch plans) because CAPE says it’s going to cost $19 billion,” Held said in an interview last week while in Knoxville for a Defense Nuclear Facilities Safety Board hearing.

The CAPE study has not been released publicly, but it’s been getting a lot of attention in recent weeks after reports circulated that the study showed the UPF could cost far more than previous estimates — including the official cost range of $4.2 billion to $6.5 billion. The CAPE group reportedly found the project at Y-12 could easily cost in the range of $10-12 billion, with a possible price tag of $19 billion if funding scenarios and other things don’t work out as hoped.

Asked if he’d read the CAPE report, Held said, “I have indeed.” He said the CAPE group used a different way of evaluating costs.

“You have two ways of doing this,” Held said. “You can start with the design and cost the design. Or you can start with what your budget is and get the maximum, fill as much of the mission within that budget.

“The approach that we started — and we started that approach in kind of a budgetary good period — was why don’t we figure out what we really need and then figure out what that costs and do it that way. The budgetary times have changed, pretty much.”

CAPE used the other approach, Held said. “What they’re actually doing is starting from a budget projection and saying what can we get, the maximum amount. Now those two things will cross. Eventually you make a decision and have to have something that gives you both, and those two things will intersect in the push-and-shove and hustle-and-bustle of the budgetary stuff in Washington, D.C.”

Held said the National Nuclear Security Administration has been working closely with Senate appropriators — Sens. Dianne Feinstein, D-Calif., and Lamar Alexander, R-Tenn. — on the UPF strategy.

“We have a commitment (to the senators),” he said. “This is what we’re doing. We’re going to keep them advised of it. We had been meeting with them every month. Now we meet with them every quarter because they’re comfortable with what we’re doing. They’re comfortable with (NNSA Associate Administrator Bob) Raines.”

While acknowledging the CAPE capabilities, Held said they don’t have the knowledge that will come with virtually completing (90 percent) the UPF design.

“They are looking at various other comparable things,” he said. “You know what? I’m not sure there is another comparable thing to UPF. You can do the best you can. But, fundamentally, they’re looking, OK, this is roughly how much money we’ve got and is this roughly going to fit into and it doesn’t look like it is.”

During the DNFSB hearing and, later, during the interview, Held acknowledged that the NNSA may have to change its game plan at some point.

“If we get to a position, were we said, OK, this is what our design was and this is what it’s going to cost, and if that is too expensive for the U.S. government to do, well, then we’re going to have to figure out something else to do. Because we have to get out of (70-year-old) 9212, and we have to get out of 9215 and Beta-2E.

“This is unique. We don’t build these things very often, and they last a long time,” Held said. “So we’ll have to see where that goes, and that is part of the governmental decision process.”

The NNSA official, who holds an M.S. in Monetary Theory from the London School of Economics, said there has been some confusion about how one arrives at a project’s price tag.

“The other thing that people don’t understand or don’t seem to understand is it’s sort of like buying a house or buying a car,” Held said. “The total cost of that house will depend on whether you pay cash or whether you pay it off in five years or pay if off in 30 years. Especially if you’re not discounting it, and all those numbers are not discounted back to current present values. Those are the total cost projected over a whole period of time.

“But, let me tell you, if you have this exact same design and everything is going fine and . . . if you, say, we’re stretching this project out because of our flow of funding — if you say we’re stretching it out three years — that’ll cost you a couple of billion dollars. With all the contractors doing everything right, no mistakes, just the shifting of the timeline will cost money every time you do that.”

Held said he has asked the UPF project team to track those kinds of costs. “As cost projections go up — or if they go up — please disaggregate the cost increase to how much of this is due to stretching out the scope and reduced budget, how much is due to poor planning on our part.”

If there’s a hit to take, such as on the design re-do, that’s fair, Held said. “But if it’s simply a question that the cost is going up because we’re stretching this out over a longer period of time, then that’s not our hit.”

There is no plan to release that cost anytime soon. “Because all that does is lead to trouble,” Held said. “We’re not going to actually give you a cost until we actually have some confidence in what the cost will be.”

He said he has asked his engineers not to give “false precision” in their projections, such as the costs through 2038 (when the schedule calls for the transfer of operations from Building 9215 and Beta-2E into UPF).

“No human being knows what the cost of commodities are going to be,” he said. “Between now and 2038 we’re going to have six presidential elections, 13 congressional elections. Nobody’s going to know. There’s no way any human being knows what the point estimate of something in 2038 is going to be.”

Held said the NNSA staff is in discussions with the CAPE staff on almost a daily basis, and eventually the two approaches will come together.

“But we’re approaching a time, with 9212 in particular, (where) we can’t push this to the right anymore,” he said. “We’ve got to do something. We’re not ringing an alarm bell that there’s going to be a safety disaster or something. But the building is 70 years old for godsakes so we’ve got to do something.”

The decision on how to proceed with UPF will include a lot of technical information, Held said. “But it won’t be a technical decision. It will be kind of a leadership, gut-feel decision. ‘Enough. We can’t do this anymore.’ At some point, we’re going to have to say we have to get out of this facility by this time.”