DOE M 413.3-1, Project Management for the Acquisition of Capital Assets

”- The Deputy Secretary of Energy Washington, DC 20585 March 3 1 . 2003 MEMORANDUM FOR ROBERT G. CARD UNDER SECRETARY, ENERGY, SCIENCE A N D E ” M E N T LINTON BROOKS ACTING ADMINISTRATOR, NATIONAL NUCLEAR SECURITY ADMINISTRATION JAMES T. CAMPBELL ACTING DIRECTOR, OFFICE OF MANAGEMENT, BUDGET AND EVALUATION/CFO FROM: SUBJJXT: ACTION: KYLE E. MCSLARROW fie Project Management and the Project Management Manual You are hereby directed to implement the attached manual titled “Project Management for the Acquisition of Capital Assets”. While the manual is available for immediate use and adoption, it will become mandatory on October 1,2003. Within 180 days of this date, all field elements shall have prepared an implementation plan for the manual and within 120 days of this date all major field elements should have been briefed on the manual by the PSOs, or their delegies, in concert with the OECM. BACKGROUND: This manual should be viewed in the context of our broader efforts to improve management at DOE consistent with the President’s management agenda. While this manual only applies to “capital asset projects” at this time, offices are encouraged to use the management principles contained in this manual, in a broad context across their program activities. A primary role that DOE plays within the federal government that distinguishes us fiom many other agencies, is the delivery of large, complex projects. As shown in the table below, this role and requirement is common for nearly all of our line organizations. The effective and predictable delivery of large projects must be, and perceived to be, a core organizational competency for DOE and its employees to grow and prosper. CANCELE D POLICYG 2003-004184 While DOE has successfblly delivered the vast majority of its projects, we must increase our success rate and our management of those projects where complications occur. Companies in the business of project management, such as the engineering and construction industry and the aerospace and defense industries, tell us that achieving project management success is a very difficult and never ending challenge for them. We should not expect to spend any less effort on this than the best of our private sector peers. Further, what makes DOE’S projects among the most exciting in the world is that they are frequently one of a kind using complex systems and technologies in a first time application. Obviously, this requires even more planning and expectations management at the inception of a project and skillful management of its delivery. Management Principles Role of this Manual. The purpose of this manual is to improve the implementation of DOE Order 413.3. It was not intended to impose new requirements that are not already Department policy or are contained in the Order. However, the manual does contain changes and clarifications to existing requirements. I have directed OMBE to publish revisions to DOE 0 413.3, Program and Project Management for the Acquisition of Capital Assets, to make it consistent with the manual. Pending the update of DOE 0 413.3, the manual takes precedence where there is a conflict between the processes, procedures and approval levels contained in the manual and those in the Order and other project management policy statements, including the Deputy Secretary memorandum concerning Project Acquisition Plans and Critical Decisions, dated November 15,2001 and the Director, OEce of Management, Budget and Evaluation (OMBE) memorandum concerning Mission Need Justification and Project Acquisition Plans dated February 14,2002.

Furthermore, because this manual does not impart additional requirements, projects with approved Critical Decisions before the implementation date of this manual, are not required to revise documentation supporting those Critical Decisions based upon the requirements identified in this manual. This manual, in and of itself, is but a building block on our way to improved project and general management. It will not be complete without adequate organizational and training implementation, attention to other key management issues such as safkty, and many other features of our management systems. CANCELE D Because we are planning on using project management fundamentals as a key part of our broader management agenda, DOE managers are encouraged to comment on ways to improve the manual. While the requirements of the order and manual remain in effect, it is anticipated that these improvements may warrant a revision by the end of this year. It is recognized that senior management needs to be involved in guiding the field through the manual and explaining its concepts and principals. It is for this reason that PSOs are being instructed to complete implementation training at the field sites within 120 days of the manual’s issue date. The Federal Pro-iect Director. Among the most significant new concepts in the attached manual is the retitling of the chief line federal official from “Project Manager” to “Project Director”. This is more than a name change: it reflects the principles of line management and accountability that must go hand in hand with good management. For the overwhelming majority of DOE projects, there are fbndamentally different roles between the federal Project Director and the contractor Project Manager. Please review the roles and responsibilities in the manual carefi~lly. To paraphrase the roles and responsibilities, the federal Project Director should view themselves as investors, strategists, developers and contract (rather than contractor) managers. Ifthey fmd themselves involved in the day-to-day management of the project, it would be an indication that they have either stepped out of their role or there has been a major acquisition failure on the project. The contractor Project Manager is responsible for the day to day management of the project and delivering the means, methods and resources to meet the contract end point requirements and the intermediate requirements that the project director determined where value added and necessary to achieve project success. Federal project directors will be required to have training and certification in accordance with deparlmental standards. We are targeting 1 1 1 implementation of this requirement (where all project directors must be certified) over the next two years. This will be described in the project management career development program that we expect to release within the next few months. Tailorina. The manual recognizes that varying emphasis is appropriate to match the scale, risk and complexity of the projects. Thus, while we expect the same principles to be adhered to with all projects, the level of effort spent on them will be vastly different between a small routine administrative building and say a pit production facility. Additionally, it is recognized that some projects, which have high risk and a low initial opportunity cost, make methodical upffont planning a clear desirable strategy.

This is as contrasted to others like some EM projects that may have huge ongoing standby costs. In those cases, taking more planning risk for the sake of schedule acceleration may produce a much lower overall cost for the government. CANCELE D Controlling costs is an essential element in performance baseline stability. However, for projects such as environmental restoration and remediation, we may be unsatisfied with the initial cost and schedule and are expecting continuous improvement in reducing the baseline. In this case, baseline stability is not necessarily a good indicator of success. This may also be true of long-term projects where we are expecting rapid technological advancements during the life of the project. Compatibility with Contractor Systems. DOE endeavors to hire the very best project management contractors and, therefore, we should try to avoid creating unnecessary entry barriers to the best who may not yet be working for us. Consequently, it is intended to allow the contractor to use their standard system where they can be accommodated while meeting the intent of the manual and other DOE requirements. For example, while we expect our contractors to use earned value reporting that meets recognized national standards, it is also expected that there will be acceptable variations within the broader national standard among our antractor community. Maintaining the status quo in our project performance is not acceptable. While this manual is a step in the right direction, its publication should not be viewed as an end point, but rather a key element in our overall effort to continually improve the way the Department plans and executes our projects. CANCELE D DISTRIBUTION: INITIATED BY: DOE M 413.3-1 Approved: 3-28-03 This directive was reviewed and certified as current and necessary by Susan J. Grant, Director, Office of Management, Budget and Evaluation/Chief Financial Officer, 6-23-05. PROJECT MANAGEMENT FOR THE ACQUISITION OF CAPITAL ASSETS U.S. DEPARTMENT OF ENERGY Office of Management, Budget and Evaluation All Departmental Elements Office of Engineering and Construction Management CANCELE D DOE M 413.3-1 i (and ii) 3-28-03 PROJECT MANAGEMENT FOR THE ACQUISITION OF CAPITAL ASSETS 1. PURPOSE. The purpose of this Manual is to provide requirements and guidance to Department of Energy (DOE) employees, including National Nuclear Security Administration (NNSA) employees on the planning and acquisition of capital assets. The Manual establishes the framework and context for implementing DOE P 413.1, Program and Project Management for the Planning, Programming, Budgeting, and Acquisition of Capital Assets; DOE O 413.3, Program and Project Management for the Acquisition of Capital Assets and Office of Management and Budget Circulars: A-11, Part 7, Planning, Budgeting, and Acquisition of Capital Assets; A-109, Major Systems Acquisitions; A-123, Management Accountability and Control; A-127, Financial Management Systems; and A-130, Management of Federal Information Resources. 2. APPLICABILITY. The requirements identified in this Manual are mandatory for all capital asset acquisitions, including NNSA projects, having an expected fabrication, implementation, or construction cost greater than $5 million. This Manual applies to Federal Program Managers, Project Directors and Acquisition Executives as they propose, plan, manage, and oversee projects for DOE. While all requirements are to be addressed, the approach to meeting the requirements should be tailored consistent with the complexity, visibility, cost, safety, and risk of the project. All program and projects shall comply with all applicable laws, regulations, Executive orders, and DOE directives.

3. REFERENCES. DOE P 413.1, Program and Project Management for the Planning, Programming, Budgeting, and Acquisition of Capital Assets, and DOE O 413.3, Program and Project Management for the Acquisition of Capital Assets. 4. CONTACT. Questions concerning this Manual should be addressed to the Office of Engineering and Construction Management at 202-586-1784. BY ORDER OF THE SECRETARY OF ENERGY: KYLE E. McSLARROW Deputy Secretary CANCELE D DOE M 413.3-1 iii 3-28-03 TABLE OF CONTENTS FOREWORD............................................................................................................................... vii SECTION I: REQUIREMENTS 1. ACQUISITION MANAGEMENT SYSTEM OVERVIEW.......................................... 1-1 1.1 Introduction and Key Terms ............................................................................ 1-1 1.2 Acquisition Management System ..................................................................... 1-1 1.3 Program and Project Relationship................................................................... 1-3 1.4 Planning, Programming, Budgeting, and Evaluation Process....................... 1-5 2. REQUIREMENTS ............................................................................................................ 2-1 2.1 Introduction and Key Terms ............................................................................ 2-1 2.2 Requirements and Authorities.......................................................................... 2-1 2.3 Risk Management .............................................................................................. 2-6 2.4 Change Control .................................................................................................. 2-7 2.5 Performance Baseline Deviations ..................................................................... 2-7 2.6 Tailoring.............................................................................................................. 2-8 2.7 Other Requirements .......................................................................................... 2-9 3. ROLES AND RESPONSIBILITIES................................................................................ 3-1 3.1 Introduction and Key Terms ............................................................................ 3-1 3.2 Key Roles and Responsibilities ......................................................................... 3-2 3.3 Federal Project Directors and Contractor Project Managers....................... 3-7 3.4 Integrated Project Teams.................................................................................. 3-7 3.5 Energy Systems Acquisition Advisory Board................................................ 3-10 SECTION II: GUIDANCE 4. INITIATION PHASE........................................................................................................ 4-1 4.1 Introduction........................................................................................................ 4-1 4.2 Strategic Planning.............................................................................................. 4-1 4.3 Present Performance Assessment..................................................................... 4-1 4.4 Performance Requirements Analysis............................................................... 4-1 4.5 Alternatives To Capital Assets.......................................................................... 4-2 4.6 Mission Need Statement .................................................................................... 4-2 4.7 Tailoring.............................................................................................................. 4-5

CANCELE D iv DOE M 413.3-1 3-28-03 CONTENTS (continued) 5. DEFINITION PHASE....................................................................................................... 5-1 5.1 Introduction and Key Terms ............................................................................ 5-1 5.2 Conceptual Design ............................................................................................. 5-1 5.3 Risk Analysis ...................................................................................................... 5-9 5.4 Acquisition Strategy........................................................................................... 5-9 5.5 Estimating Costs............................................................................................... 5-14 5.6 Project Execution Plan .................................................................................... 5-15 6. EXECUTION PHASE....................................................................................................... 6-1 6.1 Introduction and Key Terms ............................................................................ 6-1 6.2 Preliminary Design ............................................................................................ 6-1 6.3 Critical Decision-2, Approve Acquisition Performance Baseline.................. 6-2 6.4 Final Design ........................................................................................................ 6-2 6.5 Scheduling and Controlling .............................................................................. 6-3 6.6 Configuration Management.............................................................................. 6-5 6.7 Critical Decision-3, Approve Start of Construction ....................................... 6-6 6.8 Execution or Implementation ........................................................................... 6-7 7. TRANSITION/CLOSEOUT PHASE .............................................................................. 7-1 7.1 Introduction........................................................................................................ 7-1 7.2 Transition and Turnover................................................................................... 7-1 7.3 Checkout, Testing, and Commissioning .......................................................... 7-2 7.4 Knowledge Transfer .......................................................................................... 7-3 7.5 Documentation ................................................................................................... 7-3 7.6 Lessons Learned................................................................................................. 7-3 7.7 Logistics .............................................................................................................. 7-4 7.8 Readiness Reviews ............................................................................................. 7-4 7.9 Critical Decision-4, Approve Start of Operations or Project Closeout......... 7-4 7.10 Project Closeout ................................................................................................. 7-5

8. PROJECT BUDGET DEVELOPMENT ........................................................................ 8-1 8.1 Introduction and Key Terms ............................................................................ 8-1 8.2 Planning, Programming, Budgeting, and Evaluation .................................... 8-1 8.3 Constructing a Defensible Budget Request ..................................................... 8-1 8.4 Appropriations ................................................................................................... 8-4 8.5 Application of Inflation to the Financial Forecast .......................................... 8-5 8.6 Project Engineering and Design Funds............................................................ 8-6 8.7 Key Documents................................................................................................... 8-6 CANCELE D DOE M 413.3-1 v 3-28-03 CONTENTS (continued) 9. PROJECT REVIEWS....................................................................................................... 9-1 9.1 Introduction........................................................................................................ 9-1 9.2 Project (Program) Management Reviews........................................................ 9-2 9.3 Independent Reviews ......................................................................................... 9-2 9.4 Specific Types of Project Reviews .................................................................... 9-3 9.5 Technical Review ............................................................................................. 9-11 9.6 Operational Readiness Review ....................................................................... 9-11 10. PERFORMANCE BASELINE..................................................................................... 10-1 10.1 Introduction and Key Terms .......................................................................... 10-1 10.2 Key Parameters................................................................................................ 10-1 10.3 Performance Baseline Preparation ................................................................ 10-4 10.4 Performance Baseline Deviation..................................................................... 10-5 11. CHANGE CONTROL................................................................................................... 11-1 11.1 Introduction and Key Terms .......................................................................... 11-1 11.2 Controlling Changes ........................................................................................ 11-1 12. EARNED VALUE MANAGEMENT .......................................................................... 12-1 12.1 Introduction...................................................................................................... 12-1 12.2 Management Needs.......................................................................................... 12-1 12.3 Management Systems ...................................................................................... 12-1 12.4 Industry Standard............................................................................................ 12-2 12.5 System Design and Development.................................................................... 12-2 12.6 Earned Value Management Implementation ................................................ 12-3 12.7 Criteria Concept............................................................................................... 12-5 12.8 Performance Measurement Baseline.............................................................. 12-8

13. INTEGRATED SAFETY, ENVIRONMENTAL, QUALITY ASSURANCE, AND SAFEGUARDS AND SECURITY......................................................................13-1 13.1 Safety................................................................................................................. 13-1 13.2 Environment..................................................................................................... 13-9 13.3 Quality Assurance.......................................................................................... 13-12 13.4 Source Documents.......................................................................................... 13-17 13.5 Safeguards and Security................................................................................ 13-17 14. RISK MANAGEMENT ................................................................................................ 14-1 14.1 Introduction...................................................................................................... 14-1 14.2 Characteristics of Effective Risk Management............................................. 14-2 14.3 Risk Management Process .............................................................................. 14-4 14.4 Risk Identification, Assessment and Mitigation............................................ 14-6 14.5 Risk Management Plan.................................................................................. 14-13 CANCELE D vi DOE M 413.3-1 3-28-03 CONTENTS (continued) 15. CONTRACTING AND CONTRACT MANAGEMENT .......................................... 15-1 15.1 Introduction and Key Terms .......................................................................... 15-1 15.2 Fundamental Principles................................................................................... 15-2 15.3 U.S. Government Contracts ............................................................................ 15-3 15.4 Acquisition Planning........................................................................................ 15-3 15.5 Solicitation Planning........................................................................................ 15-4 15.6 Evaluation and Selection ................................................................................. 15-7 15.7 Contract Management and Administration .................................................. 15-7 15.8 Contract Closeout ............................................................................................ 15-9 15.9 Performance-Based Contracting .................................................................... 15-9 15.10 Lessons Learned............................................................................................. 15-12 16. SPECIAL CONSIDERATIONS................................................................................... 16-1 16.1 Introduction...................................................................................................... 16-1 16.2 Design Build...................................................................................................... 16-1 APPENDIX A. ACRONYMS AND GLOSSARY.............................................................. A-1 LIST OF FIGURES

Figure 1-1 DOE Acquisition Management Process ........................................................... 1-2 Figure 8-1 Acquisition and Budget Integration................................................................. 8-2 Figure 12-1 Performance Measurement Baseline.............................................................. 12-9 Figure 13-1 Safety Aspects in a Typical Design Stage....................................................... 13-6 Figure 13-2 Typical Environmental Activities for DOE ................................................. 13-11 Figure 13-3 CERCLA Regulatory Hierarchy .................................................................. 13-12 Figure 14-1 Risk Management Functional Flow Diagram ............................................... 14-2 Figure 14-2 Typical Risk Level Matrix............................................................................... 14-9 Figure 14-3 Estimate Allocation Analysis ........................................................................ 14-12 LIST OF TABLES Table 2-1 Critical Decision Authority Levels ................................................................... 2-3 Table 2-2 Performance Baseline Change Authority ........................................................ 2-8 Table 3-1. Federal Project Director and Contractor Project Manager Roles and Responsibilities ........................................................................................... 3-8 Table 8-1 Escalation Rate Assumptions For DOE Projects............................................ 8-6 Table 9-1 Types of Project Reviews................................................................................... 9-3 Table 13-1 ISMS Operations to Projects Relationships .................................................. 13-5 CANCELE D DOE M 413.3-1 vii (and viii) 3-28-03 FOREWORD This Manual is founded upon the key principles of line management accountability, effective up-front planning, management of risk, accurate performance measurement, and communication with stakeholders. Although the Department depends upon outstanding companies, universities and other partners for the day-to-day project execution and management, the overall execution, management and performance of DOE’s mission remain the ultimate responsibility of the Federal officials of this Department. A significant change introduced in this Manual is the change in position titles from Federal Project Managers to Project Directors. This change is being made to emphasize the important distinction between the roles filled by the Federal and contractor management staffs. The title Project Director is intended to convey a higher level of Federal and contractor interface than is conveyed by the title project manager. It is in keeping with the Department’s philosophy that the role of Federal officials is to develop the overall strategy; establish requirements and performance expectations; manage the contract, not the contractor; monitor and assess performance; and proactively anticipate and resolve issues that impact project success. While the overall project is executed under the “direction” of the Federal staff, it is the contractor that is actually “managing” the daily execution. Establishing the right balance between the Federal and contractor roles is a key goal and is critical to improving DOE’s performance executing projects.

Project Directors are responsible for the planning, programming, budgeting, and acquisition of capital assets. One of the principal outcomes in exercising this responsibility is the delivery of projects on schedule, within budget, with the required performance capability, and compliant with quality, environmental, safety, and health standards. This Manual identifies the DOE requirements related to the acquisition of capital assets and presents a common framework for implementing the requirements. The intent of this manual is not to impose additional requirements, but rather place existing requirements in the proper context. The target audience of this Manual includes Federal Project Directors, Program Managers, Acquisition Executives, and others involved in the DOE capital asset acquisition process. This Manual has two sections. Section I, Requirements, provides an overview of DOE’s project management system, identifies the requirements that shall be followed by all capital asset acquisitions greater than $5 million, and includes the roles and responsibilities of the key individuals responsible for successful project execution. Section II, Guidance, provides amplifying information on the implementation of requirements. Because of the diversity of projects within the Department, there is no single, uniform construct or set of activities that can apply to all projects. Consequently, Section I directs what must be done and Section II provides guidance on how it can be done. No requirement in this Manual shall be implemented in a manner that would conflict with the provisions of the National Nuclear Security Administration Act. CANCELE D Section I Requirements Section I provides an overview of DOE’s project management system, identifies the requirements that shall be followed for all capital asset acquisitions greater than $5 million, and includes the roles and responsibilities of the key individuals responsible for successful project execution. Section I directs what must be done. CANCELE D DOE M 413.3-1 1-1 3-28-03 CHAPTER 1. ACQUISITION MANAGEMENT SYSTEM OVERVIEW 1.1 INTRODUCTION AND KEY TERMS This chapter provides an overview of the Department of Energy (DOE) Acquisition Management System and introduces the various phases of a project life cycle. The relationship between projects and programs is discussed and the capital asset planning, programming, and budgeting process is summarized. Key terms used in this chapter include the following. • Secretarial Acquisition Executive • Acquisition Executive • Critical Decision • Major System project • Mission Need Statement • Other Project Costs • Project Engineering and Design funds • Performance Baseline • Total Project Cost • Total Estimated Cost 1.2 ACQUISITION MANAGEMENT SYSTEM The Acquisition Management System establishes a management process to translate user needs and technological opportunities into reliable and sustainable facilities, systems, and assets that provide the required mission capability. The system is organized by phases and “Critical Decisions.” The Deputy Secretary serves as the Secretarial Acquisition Executive (SAE) for the Department. As the SAE, he promulgates Department-wide policy and direction, and personally makes Critical Decisions for Major System projects. Designated Acquisition Executives make Critical Decisions for non-Major System projects. The phases represent a logical maturing of broadly stated mission needs into well-defined technical, system, safety, and quality requirements; and ultimately into operationally effective, suitable, and affordable facilities, systems, and other end products. Figure 1-1 illustrates the overall Acquisition Management System.

CANCELE D 1-2 DOE M 413.3-1 3-28-03 Figure 1-1. DOE Acquisition Management System. 1.2.1 Initiation Phase During the Initiation Phase, identified user needs are analyzed for consistency with the Department’s strategic plan, Congressional direction, administration initiatives, and political and legal issues. One outcome of the analysis could be a determination that a user need exists which cannot be met through other than material means. This outcome leads to the development and approval of a Mission Need Statement that discusses the user need in terms of required capability, not equipment, facilities or other specific products. This is the first Critical Decision of the acquisition process—Approve Mission Need. The information developed during this phase also provides the basis for the Project Engineering and Design budget request when preliminary design activities are planned. 1.2.2 Definition Phase Upon approval of mission need, the project enters the Definition Phase, where alternative concepts based on user requirements, risks, costs, and other constraints are analyzed to arrive at a recommended alternative. This is accomplished using systems engineering and other techniques and tools, such as alternatives analysis and value management, to ensure the recommended alternative provides the essential functions and capability at the optimum life-cycle cost, consistent with required performance, scope, schedule, and cost. During this phase, more detailed planning is accomplished which further defines the required capability. These efforts include conceptual design, requirements definition, risk analysis and management planning, and development of the acquisition strategy. The products produced by this planning provide the detail necessary to develop a rough order of magnitude or range for the project cost and schedule. The recommended alternative, when sufficiently defined and analyzed, is presented to the SAE or designated Acquisition Executive for review and approval (Critical Decision 1— Approve Alternative Selection and Cost Range). Range of Alternatives Cost Range CD-0 Approve Mission Need CD-1 Approve Alternative Selection and Cost Range CD-2 Approve Performance Baseline CD-3 Approve Start of Construction CD-4 Approve Start of Operations or Project Closeout Critical Decisions Operating funds/ Program funds PED funds PED funds Project fundsOperating funds/ Program funds Initiation Phase Definition Phase Transition/Closeout Phase Execution Phase Performance Measurement Earned Value (for projects over $20M) Range of Alternatives Cost Range CD-0 Approve Mission Need CD-1 Approve Alternative Selection and Cost Range CD-2 Approve Performance Baseline CD-3 Approve Start of Construction CD-4 Approve Start of Operations or Project Closeout Critical Decisions Operating funds/ Program funds PED funds PED funds Project fundsOperating funds/ Program funds Initiation Phase Definition Phase Transition/Closeout Phase Execution Phase Performance Measurement Earned Value (for projects over $20M) CANCELE D DOE M 413.3-1 1-3 3-28-03

1.2.3 Execution Phase Upon completing the Definition Phase, the project enters the Execution Phase where the focus is on further defining the selected alternative, developing preliminary designs, arriving at a high confidence baseline, and generating the complete project execution plan; all of which support a request for funds in the DOE budget. This part of the Execution Phase culminates with the development of the Performance Baseline, which is presented to the SAE or designated AE for approval (Critical Decision-2—Approve Performance Baseline). The Performance Baseline documents the Department’s commitment to Congress to execute the project at a specific cost and schedule threshold and achieve a specific performance capability. After Critical Decision-2, engineering and design continue until the project is ready for construction or implementation. Before major budget and other resources for construction or implementation are committed, an executability review is performed as a precursor to Critical Decision-3—Approve Start of Construction. 1.2.4 Transition/Closeout Phase The Transition/Closeout Phase is when the project is approaching completion and has progressed into formal transition, which generally includes final testing, inspection, and documentation, as the project is prepared for operation, long-term care, or closeout. Once implementation is substantially complete, transition to operations begins. The transition point will depend on the type of project. A project may seek approval to transition to operations (Critical Decision-4— Approve Start of Operations or Project Closeout) when required capability is implemented and functioning, operational resources are in place, have been trained and are able to perform their continuing responsibilities. 1.3 PROGRAM AND PROJECT RELATIONSHIP To execute its missions, the Department organizes related and interdependent mission elements into programs. Programs may be composed of ongoing operational activities with no set duration periods, acquisition activities with specific durations, or combined acquisition and operational programs. An operational activity is typically identified by multiyear activities that use relatively straight-line funding over an extended period of time and work planning that is normally accomplished for each year. Acquisition projects are structured to deliver defined capabilities within fixed timeframes and costs, and tend to have funding plans that peak in the middle of the project with a corresponding slope as the project progresses to completion. Planning for acquisition projects normally is multi-year from start to completion. While programs and projects may have many similar attributes, it is not the intent of this Manual to define requirements for operational program management. Rather the Manual defines requirements and the context for acquiring capital assets, improving or restoring existing capital assets, and demolishing and/or disposing of capital assets, regardless of the terms used to define the effort. CANCELE D 1-4 DOE M 413.3-1 3-28-03 1.3.1 Programs A program is an organized set of activities directed toward a common purpose, objective, or goal undertaken or proposed by an Agency to carry out assigned responsibilities. The term is generic and may be applied to many types of activities. Acquisition programs are programs whose purpose is to deliver a capability in response to a specific mission need. Acquisition programs may comprise multiple acquisition projects and other activities necessary to meet the mission need. This Manual does not apply to operational, research, or other programs whose end objectives are not new capital assets or the improvement, restoration, demolition and/or disposal of existing capital assets.

1.3.2 Projects Projects are specific undertakings that support a program mission; are undertaken to create a product, facility or system; and have defined beginning and endpoints. DOE projects range from relatively simple vertical construction of a building to developing, designing, and implementing large, complex, one-of-a-kind systems made up of multiple subsystems that require the integration of multiple locations and systems into a unified whole. Projects also include developing and installing software systems, remediation and disposition of contaminated sites and facilities, and restoration or modernization of existing facilities and infrastructure. Most projects are characterized as a collected set of overlapping, interdependent activities. For example, design may be ongoing in one project area while in another project area items may be in construction or testing. The following terms apply to classifying, characterizing, and reporting. • Plant. A complete and usable capability for the purpose of producing an output or product. • Facility Construction. A project whose end objective is a structure designed for general purpose use. • System. A complete and usable capability for scientific and technical purposes including research and development. • Environmental Restoration. A project whose purpose is the environmental restoration of real property. • Disposition. A project whose purpose is the demolishing and/or disposition of capital assets. CANCELE D DOE M 413.3-1 1-5 (and 1-6) 3-28-03 • Infrastructure Restoration or Modernization A project whose purpose is to repair, upgrade, improve, or rehabilitate existing assets. • Information Technology A complete and usable capability for the purpose of creating, storing, and processing information. DOE projects are classified as either Major System projects or Other Projects. Major System projects include those with a total cost of $400 million or more and other projects specifically designated as a Major System by the Deputy Secretary. 1.4 PLANNING, PROGRAMMING, BUDGETING, AND EVALUATION PROCESS Acquisition of capital assets is an integral part of the Department’s Planning, Programming, Budgeting, and Evaluation (PPBE) process. The PPBE process provides a systematic framework for prioritizing program needs, allocating resources, measuring performance and delivering results. The PPBE process is cyclical and its products are updated each fiscal year. The Acquisition Management System supports the PPBE process by providing project planning, budget justification, and project performance information. DOE’s Budget Formulation Handbook provides detailed explanations and formats for preparing budgets and identifying funding for specific types of projects and project phases. CANCELE D DOE M 413.3-1 2-1 3-28-03 CHAPTER 2. REQUIREMENTS 2.1 INTRODUCTION AND KEY TERMS The Acquisition Management System uses a cascaded set of requirements, direction, guidance, and practices that minimize mandatory requirements and provide balance and effectiveness while protecting the public trust. Requirements are contained in DOE Order 413.3, Program and Project Management for the Acquisition of Capital Assets. The requirements are also addressed in this Manual and are consolidated in this chapter. The requirements, which are identified using bold text, create the framework within which the Department acquires capital assets. Supplementary information and guidance on the content and format of the various requirements is contained in Section II of this Manual.

Key terms used in this chapter include the following. • Acquisition Strategy • Conceptual Design Report • Earned Value Management System • External Independent Review • Independent Project Review • Mission Need Statement • Performance Baseline • Project Assessment And Reporting System • Project Execution Plan • Risk Management Plan • Total Estimated Cost • Total Project Cost 2.2 REQUIREMENTS AND AUTHORITIES The requirements identified in this chapter shall be implemented by all projects with Total Project Costs greater than $5 million. CANCELE D 2-2 DOE M 413.3-1 3-28-03 Requirements are organized to correspond with the project phases described in Chapter 1 and the associated Critical Decisions. These requirements are intended to provide a solid foundation for effective project management, yet are adaptable to the wide variety of projects that support the Department’s diverse programs, customers, and users. Roles, responsibilities, and authorities drive the implementation of the Acquisition Management System. The authority to make decisions and the responsibilities for executing the decisions are aligned according to the complexity, criticality and cost parameters for all projects. This authority is by appointment and is designated or delegated as directed in this Manual. Roles, responsibilities, authorities, and approval thresholds in this Manual shall be complied with and delegated only as provided. 2.2.1 Critical Decisions Critical Decisions identify the exit points from one phase of the project and entry to the succeeding phase. As previously stated, each decision marks an increase in commitment of resources and is based on a successful and complete preceding phase. At the most fundamental level, the decisions confirm the following. • There is a need which cannot be met through nonmaterial means. • The selected alternative and approach is the right solution. • A definitive cost, scope, and schedule baseline has been developed. • The project is ready for implementation. • The project is ready for turnover or transition to operations. There is no defined or directed period of time between decisions. Many projects are able to quickly proceed through the early decision points because of the lack of complexity or the presence of constraints that reduce available alternatives, or the absence of significant technology and developmental requirements. In these cases, decisions may be made simultaneously. The thresholds and authorities for decisions are shown in Table 2-1. All projects with a Total Project Cost greater than $5 million shall use the defined Critical Decisions. • Critical Decision-0, Approve Mission Need • Critical Decision-1, Approve Alternative Selection and Cost Range • Critical Decision-2, Approve Performance Baseline • Critical Decision-3, Approve Start of Construction • Critical Decision-4, Approve Start of Operations or Project Closeout CANCELE D DOE M 413.3-1 2-3 3-28-03 Table 2-1 Critical Decision Authority Levels Critical Decision Authority Total Project Cost Secretarial Acquisition Executive > $400M or < $400M when designated by SAE Acquisition Executive Delegation Allowed* Under Secretary/ NNSA Administrator (Acquisition Executive) < $400M To Program Secretarial Officers or Deputy Administrators/Associate Administrators for NNSA < $100M To a Program Manager or field organization manager Program Secretarial Officers or Deputy Administrators for NNSA < $20M

To a direct reporting subordinate of the field organization manager *Critical Decision -0, Approve Mission Need, may not be delegated below Program Secretarial Officer or NNSA Deputy Administrator level. The Under Secretary/Administrator NNSA and the Deputy Secretary must be formally notified of all CD-0, Approve Mission Need, and CD-4, Approve Start of Operations or Project Closeout, decisions for non-major system projects $100M and over. Critical Decision-0, Approve Mission Need A Mission Need Statement documents a mission requirement that the Department cannot meet through nonmaterial means. It is the primary document supporting Critical Decision-0—Approve Mission Need. Mission needs are identified in terms of capability, not in terms of equipment, facility or other solutions. Mission needs must support DOE’s Strategic Plan and lower level plans for each program. Approval of the mission need is the authorization to develop alternative concepts and functional requirements. A Mission Need Statement shall be developed for projects having a Total Project Cost greater than $5 million, and shall be reviewed by the Office of Management, Budget and Evaluation (OMBE) prior to approval. For other than NNSA projects, the Program Secretarial Officer may request a waiver to the OMBE review for projects under $100 million. The waiver request shall be submitted to the Director, Office of Program Analysis and Evaluation, at least 60 days in advance of Critical Decision-0. The request must stipulate that the Program Secretarial Officer has reviewed all mission need requirements and must include a brief statement as to why the OMBE review should be waived. The Director, Office of Program Analysis and Evaluation, will notify the requesting official in writing of the decision on the waiver request. For NNSA Projects under $100 million, the above waiver process CANCELE D 2-4 DOE M 413.3-1 3-28-03 applies except that the NNSA Administrator may grant waivers to the OMBE review after seeking the advice of OMBE. If the Administrator rejects the advice of OMBE, he shall seek the approval of the Deputy Secretary prior to granting the waiver. Mission Need Statements are approved by the Program Secretarial Officers (PSOs)/Deputy Administrators. Delegation below this level is not allowed. Approval of the Mission Need Statement document does not represent approval of Critical Decision-0 for Major System projects, and other projects where the Acquisition Executive authority lies above the PSO/Deputy Administrator level. In those cases the key elements of the Mission Need Statement should be presented to the Secretarial Acquisition Executive/Acquisition Executive as part of the decision making process. Critical Decision-0, Approve Mission Need, formally establishes a project and initiates a requirement for project status reporting. The DOE Project Assessment and Reporting System (PARS) provides a web-based system to report project status. Starting at Critical Decision-0, project status shall be reported monthly utilizing the PARS, and the Acquisition Executive shall begin conducting quarterly progress reviews. The Office of Engineering and Construction Management (OECM) shall be invited to all quarterly reviews. The requirement for quarterly reviews cannot be delegated below the Acquisition Executive for non- major system projects. The SAE may delegate quarterly reviews for major system projects to the Under Secretary/National Nuclear Security Administration (NNSA) Administrator.

Critical Decision-1, Approve Alternative Selection and Cost Range Key activities that take place leading up to Critical Decision-1 include alternative and requirements analysis, conceptual design, development of an acquisition strategy, evaluation of project risks, hazards analysis, systems engineering, and value management. Requirements related to Critical Decision-1 are as follows. • Requirements that form the basis for the design and engineering phase of the project shall be clearly documented. • A Conceptual Design Report shall be developed that includes a clear and concise description of the alternatives analyzed, the basis for the alternative selected, how the alternative meets the approved mission need, the functions/requirements that define the alternative, and demonstrates the capability for success. • An Acquisition Strategy that accounts for risks and mitigation strategies shall be developed for each project, and shall be reviewed by OMBE prior to approval by the designated Program Secretarial Officer or NNSA Deputy/Associate Administrator. For other than NNSA projects, the Program Secretarial Officer may request a waiver to the OMBE review for projects under $100 million. The waiver request shall be submitted to the Director, Office of Engineering and Construction Management, at least 60 days in advance of Critical Decision-1. The request must stipulate that the Program Secretarial Officer has reviewed all acquisition strategy requirements and must include a brief statement as to why the OMBE review should be CANCELE D DOE M 413.3-1 2-5 3-28-03 waived. The Director, Office of Engineering and Construction Management, will notify the requesting official in writing of the decision on the waiver request. For NNSA projects under $100 million, the above waiver process applies except that the NNSA Administrator may grant waivers to the OMBE review after seeking the advice of OMBE. If the Administrator rejects the advice of OMBE, he shall seek the approval of the Deputy Secretary prior to granting the waiver. • All projects shall include a value management assessment. The assessment shall be conducted as part of the conceptual design process to include making a determination of whether a formal value engineering study is required. Any decision to not perform a formal value engineering study shall be documented in the Project Execution Plan. At the conclusion of the concept exploration process, the alternative selected as best solution to a mission need is presented for approval. While a range of costs, schedule, and performance bound the solution/alternative, there is no committed or approved baseline until the design matures— when estimates and schedules can be defined with an acceptable degree of certainty. The approval package must include a description of alternatives considered, trade studies, development efforts, and testing requirements. Approval of the alternative selection and cost range authorizes the beginning of preliminary design work. Critical Decision-2, Approve Performance Baseline

The Performance Baseline defines the cost, schedule, performance, and scope commitment to which the Department will execute the project. The Performance Baseline is generally the result of a mature design; detailed, resource loaded schedules cost estimate for the entire project; and the defined performance parameters and scope. Approval of the Performance Baseline marks the beginning of performance tracking. It also authorizes submission of the total project budget request. Key activities that take place leading up to the approval include preliminary design; development of key performance, scope and schedule parameters; risk assessment; establishment of a performance measurement system; identification of project interfaces; and development of the Project Execution Plan. Design may proceed throughout this phase of the project. However, if the project scope or cost has changed significantly from that which was identified in the conceptual design, the Acquisition Executive should weigh the risk of continuing the design against the potential need to revise the project scope or re-examine the alternatives available to satisfy the mission need. Requirements related to Critical Decision-2 include the following. • A Project Execution Plan shall be developed for each project that includes an accurate reflection of how the project is to be accomplished, resource requirements, technical considerations, risk mamagement, and roles and responsibilities. • All projects shall establish a Performance Baseline at Critical Decision-2 that includes key performance parameters to clearly establish the capabilities being acquired and the schedule and total cost to acquire the capabiltity. CANCELE D 2-6 DOE M 413.3-1 3-28-03 • The Performance Baseline shall account for risks and mitigation strategies and be adjusted for both durations and costs providing a realistic, achievable Performance Baseline commitment. • OMBE will validate all Performance Baselines prior to approval. An External Independent Review shall be performed by OMBE to support the baseline validation. • Every project shall have a functioning performance management system, no later than final Performance Baseline approval. • For projects with a total projected cost greater than $20M, the performance management system shall be an Earned Value Management System that is certified as compliant with ANSI/EIA-748. For projects executed under time-and-material contracts, firm fixed-price contracts, or level of effort support contracts, the Acquisition Executive may approve an alternative performance management system. The alternative performance management system must be described in the Project Execution Plan. • Starting at Critical Decision-2, project performance shall be reported monthly using PARS. Critical Decision-3, Approve Start of Construction Approve Start of Construction provides authorization to complete all procurement and construction and/or implementation activities and the planning, implementing, and completion of all acceptance and turnover activities. This authorizes the project to commit all the resources necessary, within the funds provided, to execute the project. An Executability External Independent Review will be conducted by OMBE prior to Critical Decision-3 for all Major System projects. Critical Decision-4, Approve Start of Operations or Project Closeout

Approve Start of Operations or Project Closeout is approval to transition or turnover to operations. It is predicated on the readiness of the operators to operate and maintain the system, facility, or capability. Transition and turnover does not necessarily terminate all project activity. It marks a point at which the operations organization assumes responsibility for the operation and maintenance. All projects shall have a project transition/closeout plan that clearly defines the basis for attaining initial operating capability, full operating capability, or project closeout, as applicable. The closeout/transition plan is normally included in the Project Execution Plan. 2.3 RISK MANAGEMENT Effective risk management is an essential element of every project. The DOE risk management concept is based on the principles that risk management must be analytical, forward-looking, structured, informative, and continuous. Risk assessments should be performed as early as possible in the project life cycle and should identify critical technical, performance, schedule, CANCELE D DOE M 413.3-1 2-7 3-28-03 and cost risks. Once risks are identified, sound risk mitigation strategies and actions should be developed and documented. As a project progresses, new information improves additional insight into risk areas and allows the continuous refinement of the risk mitigation strategies. Risk mitigation plans should not use contingency as the only mitigation strategy. They should be primarily focused on reduction and prevention risks, not on the resultant cost should a specific risk occur. Effective risk management requires involvement of the entire project team. The project team may be augmented, if necessary, by outside experts knowledgeable in critical risk areas such as technology, design, and cost, to assist in risk identification and assessment. In addition, the risk management process must address every element of the project throughout all phases of the project. It is important that all stakeholders participate in the assessment process so that an acceptable balance between cost, schedule, performance, and risk can be reached. A close relationship between the Federal project management staff and the contractor promotes a better understanding of program risks and assists in developing and executing the management efforts. Risk management shall be performed on all projects throughout the project life cycle. A formal Risk Management Plan is required for all Major System projects and for other projects having significant risk as determined by the Acquisition Executive. For projects where a formal Risk Management Plan is not required, the plan for managing and mitigating risks must be addressed in the Project Execution Plan. 2.4 CHANGE CONTROL

Project changes can be classified into two broad categories. First are those changes that directly impact the Performance Baseline (Total Project Cost, schedule, scope and performance parameters). Second are those that occur within the Performance Baseline, such as changes to project subelement costs and milestones. Changes to the Performance Baseline require senior management attention and involvement. Changes within the Performance Baseline are routinely accomplished during the development process as the design, engineering, execution or construction and risk management efforts continue. Establishing a formal change control process permits all changes to be managed to integrate the cost, schedule, and technical parameters that are affected by each change. Change control approval thresholds should be developed in a tiered manner, from the SAE to the PSO/Deputy Administrator level down to the Project Director and the contractor, commensurate with the size and significance of the proposed change. Project changes shall be identified, controlled, and managed through a traceable, documented change control process that is defined in the Project Execution Plan. Congressional notification is required whenever a project change results in a 25 percent increase in the Total Estimated Cost in accordance with applicable statutes. Project changes caused by Congressional action, such as a funding shortfall or the addition of new requirements, shall be called directed changes. Directed changes shall follow the change control process and shall be approved by the appropriate Acquisition Executive. 2.5 PERFORMANCE BASELINE DEVIATIONS A Performance Baseline deviation occurs when the current approved performance, scope, schedule, or cost parameters cannot be met. The Project Director must ensure management is promptly notified whenever the project performance indicates the likelihood of a Performance Baseline deviation. When a deviation occurs, the SAE is to be notified and a specific CANCELE D 2-8 DOE M 413.3-1 3-28-03 determination must be made by the approval authority identified below whether to terminate the project or establish a new Performance Baseline. New Performance Baselines established as a result of a deviation requiring specific approval by the SAE are identified in Table 2-2. The Under Secretary and NNSA Administrator are the approval authority for Performance Baseline changes below SAE approval level. The Under Secretary and NNSA Administrator may delegate their approval authority to PSOs/Deputy Administrators, but the authority may not be delegated below that level. These approval levels shall be incorporated into the change control process for each project. New Performance Baselines to be established as a result of a deviation must be validated by OMBE. A copy of approved documentation supporting establishment of new Performance Baselines shall be provided to OMBE. Table 2-2. Performance Baseline Change Authority Performance Baseline Changes Requiring Approval by the Secretarial Acquisition Executive Major System and Non-Major System Projects Technical Any change in scope and/or performance that affects mission need requirements or is not in conformance with current approved Project Data Sheet. Schedule 6 month or greater increase (cumulative) in the original project completion date. Cost Increase in excess of $25M or 25% (cumulative) of the original cost baseline. 2.6 TAILORING

Tailoring is an essential element of the acquisition process and shall be applied to all projects although the greatest amount of tailoring will typically be applied to smaller, low-risk, and noncomplex projects. The methodology and approach used to meet the various requirements listed in this chapter should to be tailored appropriately in consideration of the complexity, cost, and risks of each acquisition project. Requirements must be addressed to the extent necessary and practical for managing the project. Tailoring may involve consolidation of decisions, documentation, substituting equivalent documents, concurrency of processes, “bundling” similar projects together, or creating a portfolio of projects to facilitate a single Critical Decision, Acquisition Strategy, etc., for the entire group of projects. Tailoring may also include adjusting the scope of Independent Project Reviews and External Independent Reviews to match the size, risk, and complexity of projects being reviewed. Tailoring does not imply the omission of essential elements in the acquisition process, such as risk analysis or critical decisions, which are necessary for all projects, or other processes that are appropriate to a specific project’s requirements or conditions. Project Directors are accountable for ensuring project management requirements are tailored utilizing a systematic process that incorporates a cycle of reviews and comments by the Integrated Project Team members with final approval of the project requirements by the Acquisition Executive. CANCELE D DOE M 413.3-1 2-9 (and 2-10) 3-28-03 2.7 OTHER REQUIREMENTS This Manual is not the sole source for all requirements and guidance that applies to the acquisition of capital assets. Other DOE Orders and Manuals, especially regarding radiological design, engineering, safety and security; environmental and other laws; regulations, including the Federal Acquisition Regulation; and local and State laws all influence, guide, and direct the acquisition of capital assets. Identification, implementation, and compliance with other requirements are the responsibility of line management, including the Project Director and the Integrated Project Team. Indeed, one of the primary purposes of the Integrated Project Team is to ensure that the breadth of requirements is included in the project scope. CANCELE D DOE M 413.3-1 3-1 3-28-03 CHAPTER 3. ROLES AND RESPONSIBILITIES 3.1 INTRODUCTION AND KEY TERMS The key roles and responsibilities for the requirements and functions defined in this Manual are described in this chapter. Although Federal Project Directors are essential to successfully executing DOE capital asset projects, various other positions and organizations perform key functions and provide critical support during a project’s life cycle. The Department uses the Integrated Project Team approach for the acquisition of capital assets. The Integrated Project Team for each project is a formal team with the Project Director serving as the team leader. Integrated Project Team membership should comprise representatives from all the business and technical disciplines, such as legal, financial, contracting, safety, environmental health, and others, necessary for successful execution of the project. The Department executes its acquisition projects through contractors. Accordingly, DOE contractors perform many of the requirements necessary to effectively carry out the Project Director responsibilities. Contractor position titles such as “Project Manager,” “Program Manager” and others may be identical to government position titles.

The identical use of any position titles by a contractor does not convey to the contractor the responsibility or requirements contained in this Manual. Contractual requirements will be stated in terms of the specific contract, not by position title. Authority for the acquisition of capital assets begins with the Deputy Secretary of Energy, as the SAE who is the Department’s senior executive for the Acquisition Management System. The Deputy Secretary may delegate Acquisition Executive authority for non-Major Systems to an Under Secretary or to the NNSA Administrator, both of whom may redelegate Acquisition Executive authority, as listed in Table 2-1. Following are the key terms used in this chapter. • Acquisition Executive • Energy Systems Acquisition Advisory Board • Integrated Project Team • Project Director • Secretarial Acquisition Executive CANCELE D 3-2 DOE M 413.3-1 3-28-03 3.2 KEY ROLES AND RESPONSIBILITIES This Manual emphasizes three themes regarding roles and responsibilities that are necessary to consistently achieve defined project objectives: • strengthening line management accountability for project management results; • clearly defining the roles and responsibilities of the Federal project management team relative to the contractor project management team; and • developing effective Integrated Project Teams to assist the Federal Project Director in planning, programming, budgeting, and acquisition of capital assets. Line managers will be responsible for successfully developing, executing, and managing projects within the approved Performance Baseline. Delegation of authority from one line manager to a lower level line manager shall be made consistent with DOE delegation authorities and the qualifications of the lower level line manager. Although the authority and responsibility for decision making may be delegated to a lower level manger, the senior manager remains accountable for the decisions made by the subordinate managers. Key roles and responsibilities of line managers are described below. 3.2.1 Deputy Secretary The Deputy Secretary, as SAE, reports directly to the Secretary and has line accountability for all program/project acquisitions. Additionally, the SAE serves as the Chief Operating Officer for DOE. The Deputy Secretary— • serves as the senior manager responsible and accountable for all project acquisitions; • exercises decision-making authority, including Critical Decisions for all Major System projects; • maintains a list of special interest projects and ensures senior executive level quarterly reviews are conducted for those projects; • approves disposition of projects and Performance Baseline changes at SAE approval level following Performance Baseline deviations; • serves as the chair for the Energy Systems Acquisition Advisory Board (ESAAB); • approves site selection for facilities for new sites; and • addresses and resolves issues that crosscut between NNSA and Energy, Science and Environment programs. 3.2.2 Under Secretary for Energy, Science and Environment and the Administrator for NNSA • Receive Acquisition Executive authority from the SAE. CANCELE D DOE M 413.3-1 3-3 3-28-03 • Delegate, as appropriate, Acquisition Executive authority. • Exercise decision-making authority, including Critical Decisions when functioning as Acquisition Executives. • Serve as chairs and appoint members for acquisition advisory boards.

• Approve disposition of projects and Performance Baseline changes below SAE approval level following Performance Baseline deviations (may be delegated to PSOs/Deputy Administrators). • Maintain lists of special interest projects and ensure senior executive level quarterly reviewss are conducted for those projects. • Establishe Project Management Support Offices or delegate responsibility to PSOs/Deputy Administrators/Associate Administrators. • Address and resolve issues that crosscut between programs reporting to them. 3.2.3 Program Secretarial Officers and Deputy Administrators/Associate Administrators for NNSA • Have line accountability for applicable program and capital asset project execution and implementation of policy. • Execute accountability for site-wide environment, safety, and health and safeguards and security. • Approve Mission Need Statement documents and Acquisition Strategy documents for all capital asset projects (cannot be delegated). • Approve disposition of projects and Performance Baseline changes below SAE approval level following Performance Baseline deviations, if delegated the authority (cannot be further delegated). • Exercise decision-making authority, including Critical Decisions when functioning as Acquisition Executive (see paragraph 3.2.7). • Responsible for Critical Decision-0, Approve Mission Need, for all projects $100 million and below (cannot be delegated). • Delegate as appropriate, Acquisition Executive functions. • Approve selection of the Project Director for projects no later than Critical Decision-1. • Serve as chairs, appoint members for acquisition advisory boards, and direct independent reviews. CANCELE D 3-4 DOE M 413.3-1 3-28-03 • Establish project management support offices when responsibility is delegeted or directed by Under Secretary/Administrator NNSA. 3.2.4 Project Management Support Offices (when established) • Provide independent oversight and report directly to the Under Secretary, NNSA Administrator, or PSO, as appropriate. • Serve as the Secretariat for the PSO/NNSA-level Advisory Board functions. • Coordinate quarterly performance reports. • Coordinate with other DOE organizations and offices, including OECM, to ensure effective and consistent implementation project management policies and directives. • Provide assistance and oversight to line project management organizations. • Analyze project management execution issues. • Actively assist senior management on issues related to project management perfomance, including implementation of corrective actions. Program Managers, Heads of Field Organizations and Others Reporting at this Level • Direct initial project planning and execution roles for projects assigned by the Acquisition Executive. • Initiate definition of mission need based on input from sites, laboratories, and Program Offices. • Establish Integrated Project Teams no later than Critical Decision-0. • Oversee development of project definition, technical scope, and budget to support mission need. • Initiate development of the acquisition strategy before Critical Decision-1 (during the period of time preceding designation of the Project Director). • Perform functions as Acquisition Executive when so delegated (see paragraph 3.2.7). • Develop project performance measures, and monitor and evaluate project performance throughout the project’s life cycle. • Allocate resources throughout the program. • Oversee the project line management organization.

CANCELE D DOE M 413.3-1 3-5 3-28-03 3.2.6 Project Directors • Are responsible for project management activities for one or more discrete projects under their cognizance. • Are accountable for planning, implementing, and completing a project using a systems engineering approach. • Develop and implement the Acquisition Strategy and the Project Execution Plan. • Define project objectives and technical, schedule, and cost scopes. • Ensure the design, construction, environmental, safety, health, and quality efforts performed by various contractors are in accordance with the contract, public law, regulations, and Executive Orders. • Ensure timely, reliable, and accurate integration of contractor performance data into the project’s scheduling, accounting, and performance measurement systems. • Evaluate and verify reported progress; make projections of progress and identify trends. • Serve as the single point of contact between Federal and contractor staff for all matters relating to the project and its performance. • Serve as the Contracting Officer’s Technical Representative, as appointed. • Develop, staff, and issue the Integrated Project Team charter when not accomplished by the program manager. • Lead the Integrated Project Team. • As delegated by site/field organization manager or program manager, approve changes in accordance with the approved change control process. 3.2.7 Acquisition Executives Acquisition Executive authority should be delegated to a level commensurate with the size and complexity of the project and in accordance with DOE policies and orders. Some key acquisition management decisions and approvals are reserved for specific management levels and cannot be delegated. The roles and responsibilities presented below are for illustrative purposes. Each designated Acquisition Executive should be guided by the specific limits of his/her delegated authority. • Approve Critical Decisions (Critical Decision-1, Approve Mission Need cannot be delegated below PSO/Deputy Administrator level). • Approve key project documentation with the exception of the Mission Need Statement and the Acquisition Strategies, which are approved by the PSO/Deputy Administrator. CANCELE D 3-6 DOE M 413.3-1 3-28-03 • Appoint and chair acquisition advisory boards to provide advice and recommendations on key project decisions. • Approve the selection of Project Directors. • Monitor the effectiveness of Project Directors and support staff. • Approve project changes in accordance with change control levels contained in Project Execution Plans. • Conduct monthly and quarterly project performance reviews. 3.2.8 Departmental Staff and Support Offices Departmental Staff and Support Offices develop policy and related implementing guidance, perform review functions, and provide advice and recommendations to Department leadership. These offices report directly to the Office of the Secretary and are responsible for administrative, financial, health and safety, international, safeguards and security, intelligence, counterintelligence, performance assurance, information and other services that cut across all organizational elements and all programs. Key roles and responsibilities of these offices regarding the acquisition of capital assets are described below. Office of the Chief Information Officer • Establishes and maintains Department-wide guidance for Information Technology investment management projects, including Information Technology hardware, software and application, and capital assets.

• Develops supporting policy, requirements, and guidance for Information Technology investments and projects. • Provides Information Technology investment management process assistance to Program Office, field elements, and contractor locations, as requested. • Regularly collects process performance measurement information, and prepares a summary report on the status and performance of Information Technology investment management processes. Office of Engineering and Construction Management within the Office of Management, Budget and Evaluation • Serves as DOE’s principal point of contact relating to project management. • Develops policy, requirements, and guidance for the acquisition of capital assets. • Assists in the planning, programming, budgeting, and execution process for the acquisition of capital assets in coordination with Program Secretarial Offices and project management support offices. CANCELE D DOE M 413.3-1 3-7 3-28-03 • Supports the Office of the Secretary, the SAE, the NNSA Administrator, and the Program Assistant Secretarial Office in the Critical Decision process and oversight of the acquisition management process. • Serves as Secretariat for the Energy Systems Acquisition Advisory Board functions. • Serves as an acquisition advisory board member for non-Major System projects over $20 million. • Manages the Project Manager Career Development Program. • Manages the Earned Value Management System certification process. • Provides an independent assessment and analysis of project planning, execution and performance. • Reviews acquisition strategies for all capital asset projects. • Coordinates review of Mission Need Statement with OMBE Office of Program Analysis and Evaluation. • Maintains a corporate project reporting capability. • Establishs, maintains, and executes a corporate independent review capability. • Validates the Performance Baseline for all capital asset projects to permit inclusion in the budget. 3.3 FEDERAL PROJECT DIRECTORS AND CONTRACTOR PROJECT MANAGERS Successful performance of DOE projects depends on professional and effective project management by the Project Directors as well as the Contract Project Managers. Roles and responsibilities of the Project Director team must be clearly defined relative to the contractor management team. Table 3-1 provides a side-by-side comparison to help illustrate the key roles and responsibilities of the Project Directors and Contractor Project Managers. 3.4 INTEGRATED PROJECT TEAMS The Integrated Project Team is an essential element of the Department’s acquisition process and will be utilized during all phases of a project life cycle. An Integrated Project Team is a team of professionals representing diverse disciplines with the specific knowledge, skills, and abilities necessary to support the successful execution of projects. Project Directors, contracting officers, safety and quality, legal, and personnel in technical disciplines compose the membership of typical Integrated Project Teams. As Integrated Project Team leader, the Project Director is responsible for— • preparing and maintaining a team charter and operating guidance, • providing the team with broad program guidance and delegating project decision-making authority appropriate to the member’s competency and limitations of authority, CANCELE D 3-8 DOE M 413.3-1 3-28-03 Table 3-1. Federal Project Director and Contractor Project Manager Roles and Responsibilities

FEDERAL PROJECT DIRECTOR AND CONTRACTOR PROJECT MANAGERS * Project Director Contractor Project Manager • Federal official responsible and accountable for overall success of the project • Contractor official responsible and accountable for successful execution of contractor’s project scope of work • Charters and leads the Integrated Project Team • Key member of the Integrated Project Team • Chairs the contractor’s Integrated Project Team • Tailors DOE project management requirements to the project • Supports Federal Project Director in implementing DOE project management process • Ensures timely completion and quality of required project documentation • Provides input on project documents and develops and maintains contractor project documentation • Assesses contractor project performance versus contract requirements • Defines the contractor project organization • Manages the day-to-day project execution activities • Implements contractor performance measurement system • Ensures quality and timely completion of project documentation and other deliverables • Delivers project deliverables as defined in the contract on time and within budget • Proactively identifies and ensures timely resolution of critical issues within Federal control that impact project performance - strives to remove any barriers to project success • Integrates and manages the timely delivery of Government reviews, approvals, property, services, and information • Proactively identifies and ensures timely resolution of critical issues within contractor’s control which impact project performance - strives to remove any barriers to project success • Assesses and reports project performance to DOE management • Communicates accurate and reliable project status and performance issues to DOE management • Monitors contractor’s risk management efforts • Identifies and manages project risks • Manages DOE project contingency funds • Manages contractor’s management reserve funds a* The table is not intended to be a comprehensive listing of all roles and responsibilities nor is it meant to impart a contractual obligation on DOE contractors. CANCELE D DOE M 413.3-1 3-9 3-28-03 • requesting and allocating budget, • maintaining an environment that rewards team success, • appointing appropriate leads within the team, • keeping the team and upper management informed, and • scheduling and holding regular meetings. Team members will be representative of all competencies that influence or affect the execution of the project. Integrated Project Teams can be composed of both DOE Federal staff and contractors. However, participation of contractors in inherently governmental functions, such as development of the Acquisition Strategy and other procurement-related decisions, must be in full compliance with all applicable policy and regulations. As a project progresses from Initiation to Transition/Closeout, the Integrated Project Team membership will change to incorporate the necessary skills and expertise required. This flexibility allows the Project Director to adapt the Integrated Project Team to meet the project needs as the project progresses. Team membership may be either full time or part time depending on the scope and complexity of the project. The team members are responsible to the team leadership for— • ownership of the Integrated Project Team’s charter, goals, and objectives; • supporting project performance, scope, schedule, cost, and safety and quality objectives;

• identifying and meeting commitments; and • maintaining communication with their respective departments/organizations, the Project Director, and other Integrated Project Team members. 3.4.1 Integrated Project Team Roles and Responsibilities • Supports the Project Director. • Develops a project contracting strategy. • Ensures all project interfaces are identified, completely defined, and managed to completion. • Identifies and defines appropriate and adequate project technical scope, schedule and cost parameters. • Performs monthly reviews and assessments of project performance and status against established performance parameters, baselines, milestones, and deliverables. • Plans and participates in project reviews, audits, and appraisals as necessary. CANCELE D 3-10 DOE M 413.3-1 3-28-03 • Reviews all Critical Decision packages for completeness and recommends approval/disapproval. • Reviews and comments on project deliverables (e.g., drawings, specifications, procurement, and construction packages). • Reviews change requests (as appropriate) and supportschange control boards as requested. • Plans and participates in operational readiness reviews. • Supports the preparation, review, and approval of project completion and closeout documentation. 3.5 ENERGY SYSTEMS ACQUISITION ADVISORY BOARD The Energy Systems Acquisition Advisory Board advises the SAE on Critical Decisions related to Major System projects, site selection, and Performance Baseline deviation disposition. • Membership. Energy Systems Acquisition Advisory Board membership includes the SAE as Chair, the Under Secretary and NNSA Administrator; the DOE General Counsel; the Director of OMBE/Chief Financial Officer; the Director of OECM; the Assistant Secretary for Environment, Safety and Health; the Assistant Secretary for Environmental Management; the Deputy Administrator for Defense Programs; the Director for Office of Science; and the Director of Procurement and Assistance Management. The Deputy Secretary may designate other Program Secretarial Officers or functional staff as board members, as needed. • ESAAB Secretariat. The Energy Systems Acquisition Advisory Board Secretariat resides in OECM and provides administrative and analytical support and recommendations to the Energy Systems Acquisition Advisory Board. 3.5.1 Non-Major System Project Advisory Boards The designated Acquisition Executive will appoint an advisory board to provide advice and recommendations on actions for projects that are not designated as Major Systems. The designated Acquisition Executive is the chair of the advisory board. The advisory board replicates and conducts identical functions to those performed by the corporate Energy Systems Acquisition Advisory Board. Members may be selected from within the Acquisition Executive’s organization. However, at least one member from an office not under that Acquisition Executive will be designated as a contributing representative. OECM will provide a member of each advisory board for projects having a Total Project Cost between $20M and $400M. For projects between $5M and $20M, OECM is not a board member but should be invited to attend the advisory board meetings. The implementing documentation and composition of the advisory boards, along with the agenda and minutes of each meeting will be provided to OECM. CANCELE D Section II Guidance Because of the diversity of projects within the Department, there is no single, uniform construct or set of activities that can apply to all

projects; therefore, Section II provides amplifying information on the implementation of requirements. CANCELE D DOE M 413.3-1 4-1 3-28-03 CHAPTER 4. INITIATION PHASE 4.1 INTRODUCTION The Initiation Phase begins prior to the identification of a capital asset need. During this phase, the program identifies the performance gap between its current and required capabilities and capacities to achieve the goals articulated in its strategic plan. A mission need is the translation of this gap into functional requirements that cannot be met through other than material means. The outcome of this phase leads to the development and Critical Decision 0, Approve Mission Need of the acquisition process. Mission need requirements should not be defined in equipment, facility, or other specific end item, but in terms of the mission, purpose, capability, schedule and cost goals, and operating constraints. Mission needs are independent of a particular solution, e.g., capital asset, technological solution, or physical end item. This approach allows the program the flexibility to evaluate a variety of solutions with an open mind and not limit potential solutions defining the mission need and requirements too narrowly. 4.2 STRATEGIC PLANNING Each program is responsible for developing a strategic plan which defines its long-range goals. The plan also identifies the peformance goals that lead to the attainment of its strategic goals. One outcome of the entire strategic planning process is the identification of gaps between the current performance and the required performance. 4.3 PRESENT PERFORMANCE ASSESSMENT To successfully attain the goals contained in the strategic plan, the programs must develop strategies and related resource requirements through a comprehensive assessement of current and required capacities and capabilities of the program and the Department. The first step in the Initiation Phase is the assessment of the existing capabilities and capacities within the Department to meet the performance requirements. This assessment should include the functionality, the life-cycle cost, and the capacity of the program to accommodate additional requirements. This performance assessment is a key element in determining when there is a requirement for a capital asset. It establishes the basis for a mission need. 4.4 PERFORMANCE REQUIREMENTS ANALYSIS Once the basis for the existing capability has been established, the program should identify the gap in terms of performance. Performance definitions establish what an asset must achieve, not what it is. An office building provides a working environment for a number of people and has the ability to support various functions. Performance definitions do not identify size, shape, systems, equipment, land, or other attributes that give an asset shape and form. Performance definitions must allow a comparison of required functionality with current functionality so that the gap that the proposed asset has to fill can be determined. CANCELE D 4-2 DOE M 413.3-1 3-28-03 4.5 ALTERNATIVES TO CAPITAL ASSETS With the completion of the performance analysis, the program must analyze the alternatives available to achieve the required performance. A primary question to be answered is whether these functions need to be performed by the Federal Government. Programs should not construe contracting for the function as performance by someone other than the Federal Government. When the Federal Government retains the ultimate responsibility and accountability for executing the function, the Federal Government is performing the function.

In some cases, privatizing the function may be a viable alternative to performance by the Federal Government. However, when the Federal Government remains the only customer, retains some responsibility, or provides some support, the function is not wholly privatized. Alternatives to acquiring a new asset should also include a determination of whether another Federal, State, or local entity or the private sector can better perform the function. This determination should include consideration of not-for-profits, universities and even responsibility sharing arrangements. Finally, consideration of a need for a new asset must include consideration of improvements in efficiency, cost reductions, commercial technology, and process re-engineering as possible alternatives to a new asset. The cost versus benefit of providing a new asset, modifying an existing asset or other alternatives must be an inherent component of the analysis. 4.6 MISSION NEED STATEMENT The culmination of this planning and analysis is the identification of a mission need that cannot be met through other than material means. The decision to pursue a capital asset acquisition is the first of several key decisions in the acquisition process. The need documented in the Mission Need Statement summarizes the analytical process used by the program to evaluate and define the need. Mission need describes shortfalls or performance gaps between the current and the required state. Because the mission is defined in terms of capability rather than assets or the end project, there is not necessarily a one-to-one correlation between mission need and a specific acquisition of a capital asset. A mission need may result in multiple projects. The statement of the mission need is defined in terms of mission, goals, and general capabilities—not in terms of equipment or system specific performance characteristics. That information will be provided during the Definition Phase of the project. 4.6.1 Mission Need Statement Content The Mission Need Statement is a stand-alone document that provides the written rationale for the decision to proceed with the project. It should describe the general parameters of the project, how it fits within the mission of the Program Office, and why it is critical to the overall accomplishment of the Department mission, including the benefits to be realized. Interfaces with other DOE organizations, National Laboratories, or outside stakeholders should also be CANCELE D DOE M 413.3-1 4-3 3-28-03 described. The Mission Need Statement should include the following elements, but should be tailored to the specific requirements of each situation. Title Page. Prepare a title page with the following information. • Mission Need Statement Title • Identify as a Major or Non-Major System Acquisition Project • Submission Date • Originator • Originator’s Phone Number • Originator’s Organization • Approving Official’s Signature Page Statement of Mission Need. Identify and describe the mission need (capability shortfall or gap) and authority for its accomplishment. If applicable, identify a specific reference in the planning guidance, specific functional strategic plans, or other plans to which the need responds. Describe how the project fits within the mission of the Program Office and why it is critical to the overall accomplishment of the Department mission, including the benefits to be realized. Identify the functional capability needed, technological opportunity, or services to be provided. Describe the functional concept changes that create the mission need, or which are expected to improve mission effectiveness or efficiency. Cite any Congressional or other high-level direction to support the needed capability. Cite any statutory or regulatory authority for the need.

Analysis to Support Mission Need. Present the analysis that resulted in the identification of a capability shortfall and explain the performance analysis to identify and quantify the extent of the shortfall over time. This analysis must include an assessment of existing capability of systems, facilities, equipment, or other assets currently deployed or presently planned independent of this mission need, and the establishment of specific limitations of the existing capability to meet the projected requirements. There should also be a discussion of the range of alternatives being considered to meet the need. Define and explain the criteria used to measure performance. Include appropriate graphs, tables, and formulas to define the extent of the shortfall. Importance of Mission Need and Impact if Not approved. State the priority of this mission need relative to other agency needs through the description of benefits, achievement of Departmental and program goals and outcomes. Benefits may result from more efficient operations, increased safety, lower operational costs, or other savings. The summary of accrued benefits should describe ground rules and assumptions. First, assess the priority of this need relative to other needs within the program, and then assess the priority relative to needs across all programs. Characterize whether the mission need identifies internal or external capability shortfalls. Describe the impact if this capability shortfall is not resolved relative to DOE’s ability to CANCELE D 4-4 DOE M 413.3-1 3-28-03 perform mission responsibilities, on the mission area in particular and on the DOE community in general. Categories of impact include performance in safety, capability, productivity, efficiency, environmental impact, and security. Define the expected change in mission performance. Identify sources used to support the impact analysis. Explain performance analyses used to quantify the impact of not implementing the opportunity, and identify the external factors (such as validated growth projections) used to support the analysis. Constraints and Assumptions. Identify functional, technical, operational, and financial constraints that could apply to the exploration and acceptance of alternative potential solutions to satisfying the mission need. The impact of the following should be addressed. • Operational limitations in effectiveness, capacity, technology, organizations or other special considerations • Limitations associated with the organizational, geographic, or environmental location • Standardization and standards requirements • Environmental, safety and health requirements • Safeguards and security considerations • Interfaces with existing and planned acquisitions • Affordability limits on investment that can or will be placed on the possible development and acquisition • Goals for limitations on recurring or operating costs • Legal and regulatory constraints and requirements • Stakeholder considerations • Limitations associated with the program structure, competition and contracting, streamlining, and the use of development prototypes or demonstrations Applicable Conditions and Interfaces. State all significant conditions affecting the project, such as requirements for compatibility with existing or future systems and any known cost, schedule, and capability or performance constraints. Include the functional concept and operating methods used to accomplish the mission. Identify any cooperative opportunities, such as a program addressing a similar need at another Department component, Federal agency, university or other entity.

Resource Requirements and Schedule. Provide a timeline for key milestones for this acquisition. Identify the potential total cost range as well as a profile of funding required by fiscal year over the duration of the project based on the upper bound of the cost estimate. The resource requirements will also include costs for exploration of concepts as well as the development CANCELE D DOE M 413.3-1 4-5 and (4-6) 3-28-03 of solutions and alternatives. Resource planning estimates in the mission need statement are NOT engineering-derived life-cycle cost estimates, but should be sufficient to support budget requests for the planning period. Resource planning estimates are translated to engineering estimates after approval of the mission need. Include the measures that will determine whether or not the project was successful from a cost, schedule and scope standpoint and the major deliverables that would signify completion of the project. Development Plan. Summarize the previous planning activities which have occurred to date. List the activities and schedule for reaching the major milestones and Critical Decision points. Describe the approach to concept development and the expected outcome of the development process. Describe the possible alternatives to be pursued during concept development. The range of alternatives should include, in addition to a new capability, use of existing capability at other locations or modification of existing capability. 4.6.2 Critical Decision 0, Approve Mission Need All Critical Decision-0 submissions are preferred to be in electronic format (MS-Word) and sent to ESAAB.SECRETARIAT@hq.doe.gov at least 3 weeks prior to any requested or scheduled decisional briefings. A hard copy should be sent to OECM. OECM will coordinate with the Office of Program Analysis & Evaluation for assessment on all Mission Need Statements and associated justification documents, and the Office of Program Analysis & Evaluation will provide a recommendation to the Program Secretarial Officer/Deputy Administrator. 4.7 TAILORING The analytical rigor and documentation for new starts or new capabilities will likely be greater than for needs that relate to existing missions or assets. For example, a Mission Need Statement in support of routine infrastructure restorations does not require the same effort as a mission need supporting the capability to treat high-level waste. Mission needs related to renovation, repairs, and upgrades of existing capital assets will be typically based on eliminating or preventing degradation of existing missions, or improving efficiency and effectiveness. Mission needs for scientific system upgrades can be stated in terms of increased mission capability based on the results of prior research or technological advances in instrumentation. For instance, when a program envisions repairing and renovating multiple assets at the same location, the mission need may encompass the total program rather than each individual repair or renovation project. Similarly, remediation mission needs should define the total effort and not each individual operable unit. There is no required one-to-one correlation between mission needs and the acquisition process that is used to meet the need. Mission needs may and should, in some cases, result in multiple projects. CANCELE D DOE M 413.3-1 5-1 3-28-03 CHAPTER 5. DEFINITION PHASE 5.1 INTRODUCTION AND KEY TERMS

The Definition Phase comprises the iterative process that develops and analyzes the concepts and alternatives available for meeting the approved mission need. This process uses a systems methodology that integrates requirements analysis, risks analysis, acquisition strategies, and concept exploration to evolve a cost-effective solution to meet a mission need. Following are the key terms used in this chapter. • Acquisition Strategy • Conceptual Design • Life-Cycle Cost • Project Execution Plan • Risk Analysis • Systems Engineering • Value Management 5.2 CONCEPTUAL DESIGN The conceptual design effort is dependent on the nature of the need. While it is normal for solutions to quickly present themselves in response to a need, the conceptual design process must be approached methodically to ensure that the arrived at solution or alternatives are not merely responsive to an approved need, but are within the current technology, are affordable, and provide the best value to the Department. Research, development, testing and other efforts may be required that will contribute to the concept. The conceptual design process may also require negotiation with outside organizations, stakeholders or other legal entities to agree on functional, technical, operational requirements, performance requirements or standards. Value management is a key ingredient in the process that supports reaching the lowest cost alternatives. Value management should be employed as early as possible in the project development and design process so recommendations can be included in the planning and implemented without delaying the progress of the project or causing significant rework of completed designs. Value management conducted during the early phases of capital asset acquisition yields the greatest cost reductions. CANCELE D 5-2 DOE M 413.3-1 3-28-03 5.2.1 Requirements Analysis The requirements identification process begins in the project Initiation Phase with the development of the mission need. The mission need statement documents the requirement for a specific capability, defined in terms of its required performance. Upon approval, the project team begins concept development, conducting research and development, prototyping, technology demonstrations and other activities necessary to analyze alternatives and select the appropriate alternatives. During these activities, analysis and documentation of the requirements are accomplished. The requirements analysis process develops the programmatic, system, functional or technical requirements for hardware, software, facilities, personnel, procedures, technical data, personnel training, and initial spares needed to acquire, test, deploy, operate, and maintain a capital asset. Requirements analysis provides underpinning of the conceptual design process and connects the solution to the need. These requirements further define what an asset must achieve. Functional requirements are developed, describing the functionality of the asset and how the identified functions relate to each other. In many cases, functional requirements may be augmented with specific standards, design requirements, safety, quality, and other parameters that have some legal basis for their inclusion. Requirements define and describe the extent to which a function is to be executed and are generally measured in terms of quantity, quality, coverage, timelines, safety, and products. The requirements documentation provides the traceability throughout the entire acquisition process and connects the performance and operational testing to mission need to provide verification of having met the need. It is the critical element in maintaining the connection between the mission need and the conceptual design and alternatives.

The earlier project requirements can be identified and defined, the more effectively and efficiently a project will progress through the various phases, and meet project baselines, agreements, and commitments. As a project progresses from mission need through concept exploration, development, and design, the process of identifying, analyzing, and refining requirements is continual and is always traceable to specifications and designs. Because the requirements are the foundation for the entire acquisition process, they are part of the baseline and are placed under an established change control system. Requirements can and do originate from many sources, including— • mission need; • strategic plans and objectives; • legal agreements between the Federal Government and other legal entities and organizaitons; CANCELE D DOE M 413.3-1 5-3 3-28-03 • national codes and standards; • Department Orders, Manuals and Standards; • background and knowledge of project personnel; • operations concepts; • lessons learned from other projects; • research and development activities as well as pilot plant and full-scale testing; • industrial organizations and industry experts; and • other organizations such as the Defense Nuclear Facilities Safety Board, citizen’s groups, and stakeholders. As a project progresses through concept exploration and design, the requirements evolve into increasing levels of detail and specificity. Performance or System Functions. The overall functions and capabilities are specified. At this early stage, the functional statements address the areas of programmatic mission, safety, environment, and other necessary general functions. For large systems, facilities, or remediations, the functions should comprehensively describe how those systems contribute to meeting the need. These are the high-level requirements and form the basis for the performance parameters in the Acquisition Performance Baseline. System Functional Requirements. These requirements include sufficient detail to establish the criteria or limits against which the actual capability of the as-built or remediated system can be accepted. These requirements are used to evaluate potential alternatives or competing solutions. Subsystem and Component Requirements. Specific requirements required of component, subsystem, or subelement within an alternative. They provide the individual specification required of the subsystem or component that are necessary for the item to appropriately support the larger system. Specific Standards. These include the Codes, Standards, Regulations, and needed discipline (electrical, mechanical, nuclear, fire, radiation control, etc.) requirements to procure, fabricate, construct, inspect, and test the components, subsystems, and systems. They are generally detailed in individual specifications or drawings, however, some provide broad coverage, like a piping or building code which may be specified at a high level, but is to be carried through to the lowest level. CANCELE D 5-4 DOE M 413.3-1 3-28-03 5.2.2 Alternatives Analysis

While the requirements define what the asset must achieve and how it must perform, the process of analyzing alternatives leads to identification of the solution that will best meet those requirements. Often, a solution is obvious and other times it may only seem obvious. The analysis is necessary to determine if a potential solution is available, affordable, and where the benefits outweigh the cost. Consideration must be given to whether the technology is readily available to implement the potential solution. If research and development is necessary, has the technology advanced beyond the fundamental research? Are real applications to the necessary technology available? In some cases competing alternative design concepts must be pursued to determine the feasibility of a particular alternative. Consideration of the life-cycle costs, including operations, maintenance, and disposal, are part of the alternative analysis. The life-cycle costs incurred by a chosen alternative may not be affordable to the program and may constrain the ability of the program in meeting its overall strategic objectives. For assets that are intended to provide production capability, analysis must be conducted to ensure that production or manufacturing rates can be achieved with a specific alternative. Demonstrations and prototyping, which provide proof of principle, are sometimes necessary to determine if the technology used by an alternative is realistic and reliable. The selection of a recommended alternative must be based on a systematic analysis of the benefits and costs. 5.2.3 Systems Engineering And Value Management Planning Systems Engineering A system is an integrated composite of people, products, and processes that provides a capability to satisfy a need or objective. Systems engineering is an interdisciplinary collaborative approach that is accomplished by integrating three major elements. • Development phasing that controls the design process and provides baselines that coordinate design efforts • A process that provides a structure for solving design problems and tracking requirements flow through the design effort • Life-cycle integration that involves users in the design process and ensures that the developed product is viable throughout its life Each of these elements is necessary to achieve proper management of a development effort. The primary goal of the systems engineering process is to transform mission operational requirements or remediation into system architecture, performance parameters, and design details. The application of systems approach is tailored to the project’s needs. A project need not be a system to use a systems methodology. Systems engineering is a tool that consists of iterative processes, such as requirements analysis, alternative studies, and functional analysis and allocation. Integrated Project Teams perform this planning and analysis to develop the subfunctions and CANCELE D DOE M 413.3-1 5-5 3-28-03 their relationships that are necessary and sufficient to accomplish the desired top-level functions. These subfunctions form the key input for the project’s Work Breakdown Structure.

The Work Breakdown Structure should define the total capability to be developed or produced; display the total capability as a product-oriented family tree composed of hardware, software, services, data, facilities and other components; and relate the elements of work to each other and to the end product. The objective of the Work Breakdown Structure is to provide the means to allocate resources, schedule, and control the project at the product level. Work Breakdown Structures with excessive level of effort or activity-based rather than product-based do not provide the insight to the resource load and critical path analysis necessary to ensure that the project is under control. For these and other reasons, product-oriented Work Breakdown Structures are the only acceptable WBS for the acquisition of capital assets. At each level (system, subsystem, and component), subfunctions are identified based on the functions, requirements, and resulting design decisions from the previous level. As the level of detail increases, the subfunctions are allocated to systems, subsystems, and/or components. For complex activities, a functional hierarchy diagram may be used to depict the breakdown of functions into subfunctions. Also, a functional flow block diagram may be generated to show the logical relationship of functions or subfunctions at the system or subsystem level. The functional flow diagram may be used to document which system, subsystem, or component performs the function and subfunctions. A systems engineering management plan may be necessary when the complex systems, plants, or other efforts are envisioned. For small, noncomplex projects, systems engineering may be used as an approach to ensure solutions meet needs. A systems approach is the preferred methodology for analyzing, defining, and designing solutions to meet mission needs. Value Management The value management methodology, (also known as value analysis, value engineering, value planning, etc.) is a consideration in all capital asset acquisition process phases. Value Management is defined as an organized effort directed at analyzing the functions of systems, equipment, facilities, services, and supplies for the purpose of achieving the essential functions at the lowest life-cycle cost consistent with required performance, quality, reliability and safety. Value management is a technique directed toward analyzing the functions of an item or process to determine “best value,” or the best relationship between worth and cost. The Value Management Program is an integral part of the overall project delivery process and is not a separate entity designed to “second-guess” the Integrated Project Team or design authority. The Department uses a two-tiered approach, as defined in the Federal Acquisition Regulation to implement a viable cost-effective value management program. The two approaches are the “mandatory program” and the “incentive” (also known as voluntary) program. CANCELE D 5-6 DOE M 413.3-1 3-28-03 Value Management Program. OMB allows Agencies to apply value management to achieve the greatest benefit. The minimum requirements consistent with the two approaches described in the Federal Acquisition Regulation, Part 48, are as follows.

One approach, mandatory value management program, is used for all facility construction activities. For maximum benefit, value management should be useed as early as possible in the project development and design process so valid recommendations can be implemented without delaying the progress of the project or causing significant rework of completed designs. Value management uses a systematic procedure for analyzing requirements and translating these into the most economical means for providing essential functions without impairing essential performance, reliability, quality, maintainability, and safety. This organized effort is commonly referred to as the Value Methodology Standard. The Value Methodology Standard is the systematic application of recognized techniques which identify the functions of the product or service, establish the worth of those functions, and provide the necessary functions to meet the required performance at the lowest overall life-cycle cost. All mandatory studies conducted before Critical Decision-2 are accomplished using value management methodology. The second approach, the value management incentive program, should be used in all contracts awarded on facility construction projects after Critical Decision-2, where the following contract conditions exist. • The Department or its agents have dictated the specifications, design, process, etc., that the contractor is to follow. • The contractor’s cost reduction effort is not covered under award fee (or any other incentive). • The contracting officer has confidence in the cost estimate for the work at issue(i.e., confidence the cost estimate is close to normal Federal Acquisition Regulation pricing conditions). • The contracting officer has great confidence in the contractor’s accounting system and/or can separately track costs of value management efforts based upon the contractor’s assertions and confirmation from the Department cognizant chief financial officer. • The proposal, if accepted, requires a change to the contract and results in overall savings to the Department after implementation. Additionally, it is the responsibility of the Department’s Under Secretaries and their respective organizations to develop criteria and guidelines that conform to Public Law104-106, National Defense Authorization Act for Fiscal Year 1996, and OMB Circular A-131, for both in-house personnel and contractors that identify programs and projects with the most potential to yield savings from the application of value management techniques. CANCELE D DOE M 413.3-1 5-7 3-28-03 5.2.4 Conceptual Design Report The Conceptual Design Report is developed during the conceptual exploration and design process when the outcome is envisioned as an asset that performs a specific function. When used in this Manual, the Conceptual Design Report refers to the documentation that identifies the requirements and concept for fulfilling those requirements. The Conceptual Design Report is often the first technical document produced during the acquisition process. It is a necessary element in decision making because it presents the results of analysis of requirements, risks, and alternatives to arrive at a recommended solution. The conceptual design or equivalent should clearly and concisely describe the recommended alternative, the requirements and functions that must be performed and the key performance parameters that form the basis of the Performance Baseline. When the purpose of the project is remediation, restoration, or demolishing, other forms of documenting the requirements and alternative(s) may be used.

Common elements of the report may include the following (and other items not listed) as necessary to support the transition from concept to design. • A description of the recommended alternative (design or characterization) and a synopsis of the development activities. In remediation projects, the report is a combination of applicable regulations and characterization. • A schedule and cost range (or rough order of magnitude cost) including resources necessary to complete the design and preparation activity. Including identified resources necessary for a Project Engineering Design budget request, when required. • An alternatives analysis including life-cycle costs, operational considerations, site development considerations, relationships to other site activities, and the comparison of alternatives, the risks, and the determined preferred alternative. Life-cycle costs are to include decontamination and demolition, transition (personnel and equipment moves), utilities, and maintenance including comparisons that incorporate a review of research and development and/or technology development challenges presented by the selected alternative. • A preliminary Safeguards and Security Plan • Performance parameters that are responsive to the mission need • A preliminary Project Execution Plan • The summary test and acceptance criteria • The Work Breakdown Structure, which identifies the elements of the end product and dictionary CANCELE D 5-8 DOE M 413.3-1 3-28-03 • Condition assessments for the facilities, if the project is upgrading existing facilities. These assessments may confirm the suitability of facilities for the proposed action. • A waste minimization/pollution identification and prevention plan, and a Waste Management Plan including control, storage, treatment, and disposal commensurate with the type of asset and maturity of the planning • A draft Decontamination and Decommissioning Plan, if required • Assessments of and strategy for: —The National Environmental Policy Act (NEPA). The level of NEPA documentation required and the plan for completing these documents in support of the proposed project schedule. —Safety. The level of safety documentation required for the project, and the plan for completing these documents in support of the proposed project schedule. An initial Hazards Assessment and/or Preliminary Safety Analysis. —Security Considerations. —Site Selection. The application of a coherent, defensible methodology to identify and evaluate site options. —Waste Management. Decontamination and decommissioning plans where appropriate and applicable; waste minimization efforts. • Public and/or stakeholder input • Preliminary interface control documents • System requirements and applicable codes and standards for design, procurement, construction, or characterization • Site selection criteria and site surveys/ evaluations • Anticipated/project products/deliverables (project end-state) • Known and anticipated project constraints • Conceptual design drawings/renderings/calculations • Readiness assessment or readiness review concepts • A vulnerability assessment • A preliminary plan for demobilization and/or disposal of facilities being replaced CANCELE D DOE M 413.3-1 5-9 3-28-03 5.3 RISK ANALYSIS

The Integrated Project Team conducts a comprehensive risk analysis for all projects. A full understanding of the risks for each potential alternative is a significant factor in the recommendation of a specific alternative. Risk analysis is accomplished in a formal setting that identifies the possible risks to successfully completing the project. The risks are identified by the likelihood of occurrence and the probable impact if the risk occurs. The complexity of many of the projects reflects the complexity of DOE’s missions. Often, a less complex alternative may not be available and the risks associated with some projects must be accepted. The purpose, of risk analysis is not solely to avoid risks, but to understand the risks to an acquisition and devise methodologies and strategies for managing the risks. Risk Management is discussed in detail later in this Manual. For the purposes of selecting an alternative, understanding the risks to successful completion of the project is a significant factor for decision makers. The risk analysis is analytical in nature and, while simulation tools aid the analysts in assessing the impact and consequences, no simulation tool can substitute for a logical deterministic process. Formal risk management plans are developed for projects, which have been designated as Major Systems. 5.4 ACQUISITION STRATEGY The mission need will have identified the range of acquisition alternatives. As the concept evolves and alternatives are investigated, an acquisition strategy is developed that will provide the conceptual basis of the plan a project follows in execution. A carefully developed and consistently executed strategy is one of the keys to a successful project. It is often a difficult and challenging task to blend the multitude of requirements for an acquisition into an acquisition strategy that also represents a consensus among the organizations that influence or are influenced by the project. An acquisition strategy is a high-level business and technical management approach designed to achieve project objectives within specified resource constraints. It is the framework for planning, organizing, staffing, controlling, and leading a project. It provides a master schedule for activities essential for project success, and for formulating functional strategies and plans. The strategy should be structured to achieve project stability by minimizing technical, schedule, and cost risks. Thus, the criteria of realism, stability, balance, flexibility, and managed risk should be used to guide the development and execution of an acquisition strategy and evaluate its effectiveness. The acquisition strategy must reflect the interrelationships and schedule of acquisition phases and events based on a logical sequence of demonstrated accomplishments, not on fiscal or calendar expediency. The acquisition strategy conveys the Integrated Project Team’s approach for the successful acquisition of the project, its intended outcomes, and rationale for that approach. The approach should address the market conditions, effective use of competition, and performance based contracting opportunities. Projects may require multiple contracts. The strategy should also CANCELE D 5-10 DOE M 413.3-1 3-28-03 address the management strategy that the program intends to use in order to integrate multiple contractor efforts. Approvals of mission needs and acquisition strategies do not constitute approvals required by the Office of Procurement and Assistance Management for specific contract clearance purposes, including contract acquisition plans.

Federal officials develop the acquisition strategy. The Integrated Project Team should review previous strategies for similar projects and discuss them with the key personnel involved to take advantage of lessons learned. Industry and laboratories may be consulted during the development of the acquisition strategy. However, care must be taken to avoid release or pre-procurement sensitive information that could be construed as giving existing contractors a competitive advantage. 5.4.1 Acquisition Strategy Content The strategy should be a logical extension from the approved mission need, narrowing the range of acquisition alternatives to the one or group best suited for the project. The strategy should be tailored based on the size, risk, and complexity of the project. When an element is not applicable, include a brief explanation. The strategy should focus on quality rather than quantity. For very large or complex projects, the acquisition strategy may include other supporting analysis or materials pertinent to the conclusion. The acquisition strategy should consider the following elements. • The project title should be the same as was presented in the mission need if the title has changed, reference the prior title. • Identify the primary office of responsibility for the project • Describe how the project fits within the mission of the program office and why it is critical to the overall accomplishment of the DOE mission, including the benefits to be realized. List the mission need approval date, the approving official, and summarize any material changes from the approved mission need. • Describe the key technical and performance parameters for the project, including the proposed location. For each new facility, show the square footage and address the elimination by transfer, sale, or demolition of excess buildings and facilities. Include important laws, agreements, or other factors which significantly influence the project. • Identify the projected Total Project Cost, expressed as a range, including a funding profile that distributes the cost by fiscal year. The Total Project Cost consists preconstruction construction or implemenation costs, costs, such as conceptual design, preliminary design, research and development, training and startup costs. Discuss lifecycle costs, including costs of dismantling and demolition at project completion. Identify the source of funds, including those from outside sources. Identify key milestones and events in the acquisition, development, and implementation process. Include the discussion of the total life-cycle costs and benefits consistent with the policies CANCELE D DOE M 413.3-1 5-11 3-28-03 described in OMB A-94,: Guidelines and Discount Rates for Benefit Cost Analysis of Federal Programs. • Identify applicable conditions and factors that may affect the operational, design, or execution requirements, such as those regulated bythe U.S. Environmental Protection Agency, State and other legal entities; economic factors, technological and political sensitivities and conditions should be discussed. For example, discuss the applicability of and expected milestones for the environmental assessment or environmental impact statement, and the proposed resolution of any environmental related requirements that affect the project.

• Identify the major acquisition, management, technical, cost, and schedule risks and how handling the risks will influence the strategy. While external risks, which originate from factors usually outside the control of the project and often associated with those requirements and constraints that define the project limits, should be discussed, the main emphasis should be on the internal risks over which the project has more direct control. They result from decisions made within the program or project office that affect cost, schedule, performance, and technical approaches to be used when the acquisition strategy is developed or modified. • Discuss the approach to the acquisition, including managing and executing the project. Identify the acquisition alternatives and site locations. The strategy should evolve from the possible alternatives that focus on the plan best suited for satisfying the mission need in the most effective, economical, and timely manner. The program should consider each alternative course of action across the following key discriminators which may may influence the selected strategy: cost, schedule, risks, technology requirements, interfaces and integration requirements, safeguards and security, location and site conditions, legal and regulatory considerations, significant environmental, safety, and health requirements, stakeholder issues, government furnished property, services, and information. For example, each alterntaive course of action should include the potential use of similar capabilities at other sites, modification or renovation of existing facilities, or doing nothing. Each alternative should also include contract alternatives, including the use of a prime contractor, integrating, or multiple contractors and the rationale for the recommended alternative. • Discuss the methods of competition that will be sought, promoted, and sustained throughout the course of the project. If full and open competition is not contemplated, summarize the decision why this is appropriate. If an existing prime contract will be used, discuss the rationale for this approach. Describe each major contract contemplated. Discuss the contract type selected (e.g., fixed-price, cost-plus), including incentive and fee arrangements. Identify the use of special acquisition procedures (e.g., design-build or design-negotiate-build) and demonstrations that may be used to reduce risk. Discuss whether sealed bidding or best value processes will be used and why. Describe the planned incentive approach and how performance incentives for each major acquisition (e.g., objective award fee, incentive fee, performance-based contract, cost savings/cost CANCELE D 5-12 DOE M 413.3-1 3-28-03 reduction) will be used to promote performance. The major types of contracts and incentives proposed should be based on consideration of major risks. • Discuss the approach to managing the project. Identify the Integrated Project Team, organization structure and staffing skills. Describe the approach to performance evaluation, verification, and validation. Describe the relationships and interfaces between organizational elements. Include descriptions of project management and control systems that will be useed to successfully execute the project.

• Interfaces with other DOE organizations, National Laboratories, or outside stakeholders should be discussed. When a site is subject to the requirements of DOE Acquisition Letter 2000-08 of August 18, 2000, requiring a Site Utilization and Management Plan, the project should be consistent with that site plan. Discuss the impact of this project and its associated contracts and how coordination among programs/projects at the site has been considered for the attainment of the site's mission. Discuss what management system will be used by the Government to monitor the contractor’s effort (e.g., Earned Value Management System. Discuss Federal staffing, skills, and structure that will be required to manage the project. 5.4.2 Submission of the Acquisition Strategy All acquisition strategies for Critical Decision-1 are preferred in electronic format (MSWord) and sent to ESAAB.SECRETARIAT@hq.doe.gov at least 3 weeks prior to any scheduled decisional briefings. The acquisition strategy will be staffed through OECM (ME-90) for the OMBE recommendation. OECM will provide a recommendation memo to the appropriate Program Secretarial Officer or Deputy Administrator. Approval of the strategy does not imply approval of Critical Decision-1. Since the strategy is based on facts and circumstances existing at the time of development, it may be changed when additional information becomes available or conditions change. Change must make good business sense and be justified and documented. Material changes to the acquisition strategy, such as changes in contract type, competition or major milestones, must be documented and approved at the same approval level as the original. 5.4.3 Acquisition Strategy Format Project Title: Lead Program Office: Total Project Cost (TPC) Range: 1. Desired Outcome and Requirements Definition CD – 0 Approval Date, Approving Official and Any Material Changes Summary Project Description and Scope Performance Parameters Required to Obtain Desired Outcome CANCELE D DOE M 413.3-1 5-13 3-28-03 2. Cost and Schedule Range Total Project Cost Range Funding Profile Key Milestones and Events 3. Major Applicable Conditions Environmental, Regulatory and Political Sensitivities Others 4. Risk and Alternatives (Technical, Location, & Acquisition Approach) The major technical, cost, and schedule risks identified and analyzed to-date should be summarized along with what efforts are planned or underway to manage, monitor, reduce or eliminate risks and the consequences of failure to achieve goals. • Cost and Schedule Range • Funding Range and Budget Management • Technology and Engineering • Interfaces and Integration Requirements • Safeguards and Security • Location and Site Conditions • Legal and Regulatory • Environmental, Safety and Health • Stakeholder Issues 5. Business and Acquisition Approach Acquisition and Contract Types Incentive Approach/Linkage to Performance Metrics Competition CANCELE D 5-14 DOE M 413.3-1 3-28-03 6. Management Structure and Approach Identify IPT, Organization Structure and Staffing Skills Approach to Performance Evaluation and Validation (i.e., EVMS) Interdependencies and Interfaces 5.5 ESTIMATING COSTS

All organizations in the Department prepare life-cycle cost estimates in support of their programs and projects. A life-cycle cost estimate attempts to identify all the costs of an acquisition, from its initiation through disposal of the resulting system at the end of its useful life. Life-cycle cost estimates for the acquisition of capital assets serve two primary purposes. First, they are used at critical decision points and reviews to assess whether the system’s cost is affordable, or consistent with the Department’s/Project’s overall strategic plans and investment strategies. Second, life-cycle cost estimates form the basis for budget requests to Congress. As in other aspects of acquisition management, maximum use should be made of the Integrated Project Teams in the development and review of life-cycle cost estimates. Estimating cost is a continuous process that begins during the conceptual phase through execution. Early in the project, the cost estimates support the recommended alternative and acquisition strategy. The estimates during this early phase of a project contain considerable uncertainty. As the project matures, parametric estimates and then engineering estimates are used to refine the estimate for budget preparation 5.5.1 The Life-Cycle Management Model Based on all known requirements, the project office prepares an initial life-cycle cost estimate for the Acquisition. As the project passes through its various phases and critical decision points, the life-cycle cost estimate is updated by the project office and reviewed by decision makers. In the cases of Major Systems, at least one additional life-cycle cost estimate should be prepared by an organization independent of the project office and the acquisition chain of command. For acquisition projects, the life-cycle cost estimate helps decision makers assess the affordability of the system and provides input for necessary cost-benefit analysis. The cost- benefit analysis enables decision makers to assess whether the capital asset will produce satisfactory returns for its investment. Life-cycle cost estimates are prepared in terms of base- year dollars (also known as constant dollars) for a selected base year usually the year of project or program initiation or last critical decision review, (i.e., inflation is not considered for the multiple years over which funds will be required for the acquisition). Thereafter, those base-year dollar cost estimates (escalated to then-year dollars for inflation and outlay patterns) are used as the basis for input to the budgeting phase of the Planning, Programming, Budgeting and Execution System. These estimates ultimately form the basis for the acquisition project’s funding request contained in the President’s Budget submitted to Congress. CANCELE D DOE M 413.3-1 5-15 3-28-03 5.5.2 Life-Cycle Cost Model Life-cycle cost can be defined as the total cost to the government of a project or program over its full life, including costs for research and development, testing, production, facilities, operations, maintenance, personnel, environmental compliance, and disposal. Each of the project’s major stakeholders (Congress, project office, contractors, and DOE decision makers) prefers to view life-cycle costs grouped in ways that reflect its particular perspective. Following are the three major ways of grouping and viewing project life-cycle costs.

• Funding Appropriation. The Department receives appropriations from Congress falling into two major categories: (1) Capital Construction Expense and (2) Operating Expense. • Work Breakdown Structure. A project provides a framework for the project and technical planning, cost estimating, resource allocations, performance measurements, and status reporting. Cost breakouts by Work Breakdown Structure elements are useful to the project office and contractors in managing the project. • Life-Cycle Cost Categories. The Budget Formulation Handbook contains the detail on these cost categories. 5.5.3 Time Phasing of Costs In addition to looking at project costs aggregated in the various ways discussed above (i.e., appropriations, Work Breakdown Structure and life-cycle cost categories), the IPT must also be able to determine when these costs will be incurred. Obviously, all costs of a project are not incurred during one fiscal year, and because the Department requests and receives funding annually from Congress, the costs need to be allocated to the fiscal years in which the funds will be available. The time phasing of funding requirements is particularly important in the budget formulation process. 5.6 PROJECT EXECUTION PLAN All project teams prepare plans for managing their projects. The Integrated Project Team, with the leadership of the Federal Project Director, should develop the Project Execution Plan. The Project Execution Plan summarizes critical information necessary to manage a project. The plan uses the outcome from all project-planning processes and integrates them into a formally approved document used to manage and control project execution. Because of the importance of this particular document to the success of a project, considerable effort needs to be made to ensure that the Project Execution Plan is thorough and comprehensive. The execution plan is developed using an integrated, systematic approach that ensures a project management system based on effective management practices that are sufficiently flexible to accommodate the size and complexity of the project. Organizational policies, constraints, and assumptions are also inputs into the development of the plan. A preliminary plan should be CANCELE D 5-16 DOE M 413.3-1 3-28-03 prepared and submitted in support of Critical Decision-1, Approve Alternative Selection and Cost Range. The final plan should be prepared and submitted in support of Critical Decision-2, Approve Performance Baseline. The Acquisition Executive approves the plan. The plan should— • accurately reflect the manner in which the project will be managed and performed; • receive the necessary local reviews and approvals; and • be submitted to the appropriate Acquisition Executive in a timely manner, prior to the associated Critical Decision. Specific project activities and actions to be considered in developing and preparing a Project Execution Plan include— • identifying project participants’ responsibilities, authorities, and accountabilities; • organizing and preparing a project Work Breakdown Structure and dictionary; • creating responsibility assignment matrix by interfacing the Organizational Breakdown Structure with the Work Breakdown Structure for assignment of responsibility and delegation of authority; • identifying the time-phased budget or resource loaded schedule; • performing critical path calculations and establishing project activity durations; • developing resource loaded project activities;

• conducting risk assessment and mitigation planning; • developing a preliminary order of range project cost estimate; • establishing or identifying a progress (performance) measuring and reporting system; and • developing a method of communicating results, reviews, and revisions of project documentation to project participants and stakeholders. Once the project planning methodology is established, the combined skills and knowledge of project team members and external stakeholders are used to maximum advantage in developing the Project Execution Plan. The Project Director builds the team as the team builds the Project Execution Plan, developing both mutual consensus and a sense of ownership. • The minimum elements covered by the plan should include—Mission Need Statement and project objectives; CANCELE D DOE M 413.3-1 5-17 3-28-03 • Performance Baseline (cost, schedule and key performance parameters); • project description, including reference to operational, technical, and functional requirements; • acquisition strategy; • life-cycle costs; • Work Breakdown Structure and dictionary; • Organizational Breakdown Structure, including responsibility assignment matrix, roles, responsibilities, authorities, and accountabilities; change control management, support functions such as safety analysis, health physics, Environment, Safety, Health, and Quality;National Environmental Policy Act, etc.; • cost and schedule, associated with the Work Breakdown Structure, including identified contingency and management reserves; • risk analysis and risk management; • systems engineering and value management planning; • resource requirements (including budget, staffing, support contracts); • planned major procurements including long-lead procurement; • project control and reporting systems; • site development, permits, and licensing; • integrated Safety Management; • Quality Assurance Plan (generally separate, but updated); • research and development, test and evaluation, alternative studies, trade studies; • planned design reviews, including critical design reviews and other reviews; • change control and management; • inspection, testing, test evaluation, turnover, and startup; and • training and operational readiness plans. CANCELE D 5-18 DOE M 413.3-1 3-28-03 The plan may be tailored to meet the needs of a project, based on size, scope, complexity, cost, and schedule. As appropriate, topics may be included in the plan by reference. Following approval, the change control process should control changes to the plan. As a project progresses, changes may occur, which could require the plan to be modified or updated. Extensive revisions should be reviewed by and approved by the same organizations that reviewed and approved the original document. CANCELE D DOE M 413.3-1 6-1 3-28-03 CHAPTER 6. EXECUTION PHASE 6.1 INTRODUCTION AND KEY TERMS In the Execution Phase, the initial design concepts and preliminary design are further developed into detailed and final designs and plans. These plans will be used to procure or manufacture components, fabricate subsystems, perform remediation, or construct facilities. At this point, performance measurement baselines and change control are established and functioning, environmental and safety requirements are satisfied, and the final design configuration is approved and issued for procurement and implementation.

Execution comprises the longest and most costly phase of a project. It is the phase when controlling, directing, and reporting are most important. The Execution Phase encompasses the activities from preliminary design through turnover for operation and includes design, procurement, construction, testing and turnover, and acceptance. Following are the key terms used in this chapter. • Configuration Control Board • Configuration Management • Earned Value Management • Work Breakdown Structure 6.2 PRELIMINARY DESIGN Evolving the conceptual design into the preliminary design provides the depth and detail to allow the asset to take shape and form. Preliminary design initiates the process of converting concepts to a design appropriate for procurement or construction. This stage of the design is complete when it provides sufficient information to support development of the Performance Baseline. The appropriate completion percentage is dependent upon the project. When the project is less complex, such as a facility repair with single design, the percent complete is generally equivalent to 20 to 35 percent of the total design effort. For complex projects, the percentage of design may not be definitive because these projects may have many subsystems undergoing concurrent designs that may be at various stages of completion. Scientific systems, such as accelerators and detectors, production and manufacturing facilities, spacecraft and other systems, do not follow a linear process in which all subsystems reach the same maturity at the same time. Concurrency in these types of projects increases the risk because each subsystem design is dependent upon the design maturity of other subsystems. CANCELE D 6-2 DOE M 413.3-1 3-28-03 6.3 CRITICAL DECISION 2, APPROVE PERFORMANCE BASELINE When the design is at a level of maturity and the project is able to define the Performance Baseline with some certainty, the project is submitted to the Acquisition Executive for approval to formally establish the Performance Baseline. The Performance Baseline is the original baseline for the project and is used to prepare and submit project budget requests and capital asset plans to Congress and Office of Management and Budget. The Performance Baseline defines the key parameters for the project, including the performance parameters, technical scope, schedule, and cost to clearly establish the capabilities being acquired along with the total cost and schedule. Performance Baselines are discussed in detail later in this Manual. 6.4 FINAL DESIGN Final design is the last phase of development prior to implementation. The purpose of the Final Design Phase is to prepare final drawings, technical specifications, and contract documents required to obtain bids and quotes for procurement and construction. The final design should also include clear statements of testing requirements and acceptance criteria for the safety and functionality of all subsystems. The project scope should be frozen and changes should be permitted only for compelling reasons, (i.e., substantial economies achieved through value engineering, accommodation of changed conditions in construction, reduction in funds or changes in requirements). Design reviews are a vital component of the entire process and should be explicitly included in the schedule for the design effort. The fundamental purpose of the design review and design review checklists is to ensure the following. • Quality of the design

• Operational and functional objectives are met • Maintenance of costs within the budget • Design is biddable, constructible, and cost-effective • Interface compatibility • Final contract documents comply with the design criteria • A detailed, unbiased, analytical approach is given to all of the above items Many projects may not follow a linear final design process that follows preliminary design. For example, systems such as scientific instrumentation, industrial plants and other similar projects have several subsystems, each having a preliminary and final design stage. Consequently, final designs may be completed at various points in time in the system development process. Other projects may not require a formal engineering final design such as routine demolition of facilities. Regardless, design reviews should be conducted for all projects and should involve a CANCELE D DOE M 413.3-1 6-3 3-28-03 formalized, structured approach to ensure the reviews are comprehensive, objective, professional, and documented. 6.5 SCHEDULING AND CONTROLLING In its simplest form, a schedule is a list of activities and events organized by time. In its more complex form, a schedule encompasses all project activities and their relationships to each other in terms of realistic constraints of time, funds, and people (i.e., resources). The schedule is a powerful planning, control, and communications tool that when properly executed supports time and cost estimates, opens communications among personnel involved in project activities, and establishes a commitment to project activities. Scheduling is a key aspect of project management planning and is integral to a project’s acquisition strategy, risk management, and financial and technical management plans. In addition, scheduling is an important element of the other management functions including organizing, staffing, controlling, and leading. Effective scheduling provides the basis for effective communications within the government team and with contractors; identifies a baseline for project status monitoring, reporting, and project control; facilitates effective management; and provides the basis for resource analysis and leveling, exploration of alternatives, and cost/time tradeoff studies. On the other hand, poor scheduling can adversely impact a project in a number of areas. Haphazard schedules can make it difficult to determine a realistic completion date and to efficiently allocate resources to the entire project. This creates financial problems including escalation of project costs, increased support costs, delayed return on investment, funding cuts, or project termination. Project Directors must have a good working knowledge of scheduling practices and applications (such as Gantt, milestone, and network schedules) achieve project goals. Projects Directors may not always have to construct detailed schedules, but they must be able to understand and analyze schedules created by contractors. 6.5.1 Integrated Master Plans and Schedules

An integrated master plan is a very effective tool for project management. It is the contractor’s event-based plan for accomplishing the requirements contained in Statements of Work, Performance Work Statements, Work Authorizations, and other documents which communicate requirements to the contractors. The plan identifies the key activities, events, milestones, and reviews that make up the program or project. The program or project office, support contractors or the prime contractor may prepare the plan. The plan also identifies those events and activities that will be included in the integrated master schedule. The integrated master schedule is a networked multilayered schedule generated by the contractor that begins with all identified integrated master plan events, accomplishments, and criteria. It also shows the expected start and finish dates of these events and contains all contractually required events and milestones such as reviews, tests, completion dates, and deliveries specified in the Work Breakdown Structure. The integrated master plan is prepared prior to completion of the Conceptual Design process and is CANCELE D 6-4 DOE M 413.3-1 3-28-03 subsequently maintained by the government and the contractor through a collaborative effort involving all the stakeholders. The integrated master plan and schedule tie together all project tasks by showing their logical relationships and any constraints controlling the start or finish of each task. This process results in a hierarchy of related functional and layered schedules derived from the Work Breakdown Structure that can be used for monitoring and controlling project progress. 6.5.2 Controlling The controlling function involves all the activities which ensure that the actual project conforms to the developed plan and the necessary actions to maintain the schedule if possible. The project schedule can serve as a baseline against which to measure progress. If there are indications that an activity is falling behind schedule, this information is used by the manager as a basis for corrective action. However, considering schedule information alone can be misleading. Successful management requires the integration of the technical, schedule, and cost aspects of a project. Thus, some form of integrated performance measurement is needed for monitoring and controlling a project. The concept of earned value management provides such a capability. 6.5.3 Earned Value Management Earned Value Management is the use of an integrated management system that coordinates work scope, schedule, and cost goals and objectively measures progress towards these goals. The purpose of Earned Value Management is to provide contractor and government managers with accurate data to monitor project execution. It is also intended to provide an adequate basis for sound contractor and government decision making by requiring that the contractor’s internal management control systems produce data that indicate work progress; properly relate cost, schedule, and technical accomplishments; are valid, timely, and able to be audited; and provide managers with information at a practical level of summarization. The Earned Value Management System is the responsibility of the contractor to implement. One element of this system is the contractor’s scheduling system which includes the following attributes: • A summary or master schedule and related subordinate schedules showing vertical traceability from the master to the detailed schedules

• Horizontal traceability showing the interrelationships among various activities • Identification of key milestones and activities, and significant constraints and relationships • Identification of current status and forecasted completion dates of scheduled work to enable comparison of planned and actual status of project accomplishments • A clearly established schedule baseline CANCELE D DOE M 413.3-1 6-5 3-28-03 The schedule baseline usually consists of a hierarchy of vertically integrated schedules, with each lower-level schedule more fully identifying and expanding the tasks necessary to meet the project’s objectives. Generally, three sets of schedules are prepared: • Master Schedule. The top-level schedule that summarizes key project activities and milestones and depicts the logical progression of events throughout a contract. • Intermediate Schedules. The schedule that ties the Major System to the detailed schedules. It allows for rollup of detailed schedules to summary levels that are useful for management. • Detailed Schedules. The schedules at the control account or work package level. Work packages must be distinguishable from each other and must include definite start and completion dates. They are prepared by the contractor with government concurrence. 6.6 CONFIGURATION MANAGEMENT Configuration management is the process of identifying and defining items in a project or system, controlling changes of these items throughout their life cycles, recording and reporting the status of items and change requests, and verifying the completeness and correctness of items. Configuration management consists of a multilayered structure including policy, process, and procedures, with each layer providing an increasing level of detail. This structure provides high- level configuration management requirements and details for how these requirements are to be met. Configuration management applies to all systems, subsystems, and components of the project, including key documents such as the Project Execution Plan. Configuration management control begins with baselining of requirements documentation and ends with decommissioning of equipment. The configuration management discipline may be applied to hardware, including power systems, software, firmware, documentation, test and support equipment, facility space, spares, training and courseware, and Manuals. A Configuration Control Board ensures that documentation associated with an approved change to a project is updated to reflect the appropriate baseline. Affected documentation may include training material, courseware, and other documentation. The activities that constitute the configuration management discipline are planning and management, configuration identification, change management, status accounting, and configuration verification and audit. Integrated Project Teams evaluate, select, and tailor specific configuration management activities and develop the processes necessary to perform configuration management in their specific product environment. All Integrated Project Teams, perform the planning, identification, change control, status accounting and audit activities. CANCELE D 6-6 DOE M 413.3-1 3-28-03 6.6.1 Configuration Management: Planning, Coordination and Management

Configuration Management includes planning, coordinating, and managing all tasks necessary to implement configuration management principles and to conduct configuration management activities. Configuration management planning and management occurs throughout all life-cycle phases. Documentation of the planning process and development of the configuration management plan ensures continuity of configuration management practices at all levels of management. Integrated Project Teams identify configuration items and develop appropriate configuration documentation to define each configuration item. This includes the development of a product top-down structure that summarizes the total units and configuration documentation for the system or configuration item, and the assignment of specific identifiers. Integrated Project Teams implement and document a systematic and measurable change process that is consistent with national configuration management policy. The implemented change process ensures proposed changes are properly identified, prioritized, documented, coordinated, evaluated, and adjudicated. Approved changes need to be properly documented, implemented, verified, and tracked to ensure incorporation in all systems and spares. The Integrated Project Team verifies that the project’s requirements have been met and the design meeting those requirements has been accurately documented before a configuration is baselined. Verification often takes the form of a functional configuration audit and a physical configuration audit. The functional configuration audit provides a systematic comparison of requirements with the results of tests, analyses, or inspections. The physical configuration audit determines whether the product is consistent with its design documentation. In addition, operational systems must be periodically validated to ensure consistency between a product and its current baseline documentation. 6.6.2 Configuration Control Boards A Configuration Control Board with a charter and operating procedures is the official forum used to establish configuration management baselines and to approve or disapprove subsequent changes to configuration management baselines. Proposed changes to configuration management baselines should be submitted to the appropriate Configuration Control Board. 6.7 CRITICAL DECISION-3, APPROVE START OF CONSTRUCTION With design and engineering essentially complete and a critical or final design review and all environmental and safety criteria met, the project is ready to begin construction, implementation, procurement, or fabrication activities. It is submitted to the Acquisition Executive for Critical Decision-3, Approve Start of Construction. CANCELE D DOE M 413.3-1 6-7 (and 6-8) 3-28-03 6.8 EXECUTION OR IMPLEMENTATION Executing or implementing the project requires close coordination and integration of the various physical, contractual, technical, financial, and organizational interfaces. This stage of the project entails significant expenditure of resources and the cost and schedule impact of errors is significant. The importance and both configuration control and performance management cannot be over-emphasized. The continued use of systems engineering techniques, including value management, ensures the project will provide the essential functions at the lowest life-cycle cost consistent with performance, reliability, quality, and safety requirements. Execution of safety, environmental, and quality plans and requirements are also continued throughout this phase.

During this stage of the project, the critical success factors include: • Clearly identified contract, procurement, and construction contractor requirements • Effective management and control of technical, scope, schedule, cost baselines, and risk allocations • Efficient and effective change control • Oversight and management of subcontractors and vendors • Well-planned commissioning and acceptance activities CANCELE D DOE M 413.3-1 7-1 3-28-03 CHAPTER 7. TRANSITION/CLOSEOUT PHASE 7.1 INTRODUCTION A planned, structured, and organized project transition and closeout is essential to the success of any project. Transition and closeout is the progression of a project from implementation to turnover for operations. 7.2 TRANSITION AND TURNOVER The project may begin transition and turnover at the point when it is substantially complete. This point may be defined in terms of beneficial occupancy, initial operating capability, or full operating capability. For facility construction projects, beneficial occupancy is the point at which the facility is turned over to the user or occupants. For environmental restoration projects, initial operating capability may be defined as the point when packaging and disposal of all waste is completed or at the transition to long-term maintenance and surveillance. A project may also define the turnover point at full operational capability. The point at which a project is considered substantially complete, whether classified as initial operational capability, full operational capability, beneficial occupancy or other milestone, is to be defined as part of the Performance Baseline. Planning for transitioning to the operator, end user, or other organization is an integral part of project planning and performance, and includes the identification of the budget necessary to perform the required activities. Proper planning, preparation, adequate funding, and staffing are essential to transitioning, turnover, and closeout activities. Without proper planning, these activities become time consuming, costly, and may ultimately prove unsatisfactory. Although a completed facility is the expected end result in buildings, the phased nature of the more complex projects where delivered end items are staggered, due to the concurrent nature of the development, may require partial turnovers. This is particularly the case when there is a mission need or other considerations which warrant incremental operations and completion. Partial turnovers can include equipment items, operating systems, or facility areas. In all cases, a properly planned and implemented project transition and turnover develops ownership within the user organization and serves to transfer ownership from the project to the user. The following activities, some of which precede Critical Decision-4 and some of which follow, are the responsibility of the Project Directors as a project progresses from execution to closeout. These activities can be tailored based on the needs of the project. The Project Director, with the support of the Integrated Project Team, should establish a turnover, occupancy, and acceptance process that includes punch list item resolution, user walk- downs, verification of compliance with contract requirements, system startup for proper CANCELE D 7-2 DOE M 413.3-1 3-28-03

operation, operations and maintenance workforce training, and documented transition from the project and acceptance by the user. They may also include functional and physical configuration audits. An early turnover activity may be to prepare a memorandum of understanding with the user to document the extent of the turnover package, such as, spare parts, Manuals, procedures, vendor data, etc., that typically are deliverables to the operating organization from the developing organization. 7.3 CHECKOUT, TESTING, AND COMMISSIONING Early turnover and transition activities include facility walk-downs for identification and correction of physical, process, safety, quality, or environmental deficiencies; and planning, preparation, performance, and documentation of equipment and systems testing and operation. Checkout and test planning and preparation typically begin at the equipment (item) level, progress to the system level, and culminate at the facility level. Test planning begins during design to ensure that physical features necessary to support testing are provided. 7.3.1 Checkout Equipment, systems, facility checkout and walk-down efforts are performed by the contractor in cooperation with the project organization to identify problems and deficiencies. The team maintains lists of findings punch lists and initiates documentation to implement corrective actions. Identified corrective actions are tracked through closeout. Walk-downs are performed by organizing combined project and operator teams that review and inspect equipment, systems, or facilities as they are declared complete by the construction contractor, and comparing the “completed product” against approved requirements. The team documents discrepancies and deficiencies using a punch list, identifies corrective actions, assigns a responsible individual for each deficiency, and identifies a corrective action completion date. Deficient items are tracked to completion and then re-inspected and retested for acceptability if necessary. The walk-down activity should serve as a one of the elements for user acceptance of a completed project. Generally, the contractor is responsible for correcting deficiencies and problems. For facilities, a safety walk-down is especially important. The safety walk-down should be performed by qualified project and user safety personnel immediately prior to facility transition. A safety walk-down identifies any facility, system, or equipment safety deficiencies that might still exist. A safety walk-down team is instructed concerning the purpose of the walk-down and is to be totally focused on safety. 7.3.2 Testing, Evaluation, and Commissioning The purpose of testing is to ensure that the delivery product meets not only the technical specifications, but also the function requirements established during the conceptual design. The development of system and component test procedures is prepared prior to the completion of the CANCELE D DOE M 413.3-1 7-3 3-28-03 implementation effort. Test and commissioning teams can be structured to possess the capabilities necessary to prepare test plans, perform all test activities, evaluate test results, and identify and initiate corrective actions. The test teams may include project and operator staff. Testing serves to verify that the components, systems, and facilities meet or exceed design requirements and performance parameters, and to helps to train operator personnel in the operation of the equipment, systems and other components of the completed project. Key activities include the preparation and approval of test procedures, and the organization of test teams. Procedures are prepared by personnel who are or will be part of the test teams. Staff from the operator organization is also part of the test teams.

7.4 KNOWLEDGE TRANSFER The project organization works closely with the user in developing and presenting specific process and facility related training, and continues to provide support to the operations and maintenance staff throughout transition and turnover. Initial training is one of the primary mechanisms for transferring knowledge regarding the asset. This training may take of the form of “on the job training,” formal classes or combinations of the two. A key benefit of training is the transfer of knowledge and experience gained by development and engineering staff to the operating organization prior to the loss of the project team once the project is completed. 7.5 DOCUMENTATION Turnover of a completed project to the user should include the turnover of appropriate project documentation/records. Records should be complete, properly identified, approved, and orderly. Records not provided to the customer are prepared for storage or disposal. Records include design, procurement, construction, pre-operational testing, startup, safety, quality, operations and maintenance Manuals, manufacturer’s warranties, and as-builts. In certain cases, electronic and hard copies of project records may be provided. As appropriate, project documentation that supports transition, turnover, operational readiness review, and operation are to be made available to the user organization. All records that are turned over to the user or sent to storage should be accompanied by a complete inventory list. A duplicate of these lists should be maintained by the project organization. 7.6 LESSONS LEARNED At completion, the project should prepare, distribute, and place into the permanent project records, a lessons learned document. This includes any lessons learned from value management. If properly planned, a project lessons-learned program is in place when the project is organized, with frequent distribution of interim lessons learned reports. The final lessons learned report then becomes merely the assembling and issuing interim reports as a single document. CANCELE D 7-4 DOE M 413.3-1 3-28-03 7.7 LOGISTICS The Integrated Project Team should ensure the following items are available as part of the turnover process: Operating and maintenance Manuals and procedures Vendor data files including drawings, Manuals, and specifications Manufacturer’s warranties Preventive maintenance procedures and preventive maintenance records for those items of equipment purchased by the project that have required or will require preventive maintenance prior to turnover Special tools, lubricants, and spare parts as recommended by vendors, with sufficient inventory provided for one year of operation Initial spares that would ensure continued operation without extended downtime to meet reliability, availability, and maintainability requirements The Integrated Project Team should also ensure that operations and maintenance staff are properly trained and qualified to operate and maintain the equipment, systems, and facilities being turned over. 7.8 READINESS REVIEWS The Integrated Project Team remains engaged during the readiness assessment and operational readiness review to provide support, advice, and expertise to the operational organization.

Depending upon the type, size, and complexity of the asset, the operational readiness review and acceptance process can be lengthy and costly. Consequently, the review planning and preparation begins during conceptual design and continues throughout the project life cycle. Planning may involve the Integrated Project Team as well as the operating organization. Typically, the Project Director is responsible for ensuring the facilities, equipment, systems, and documentation are ready for an operational readiness review. The operating organization is responsible for staff selection, training, qualification, and certification as well as operating, maintenance, and safety procedures. The operating organization is also responsible for interfacing with and supporting the operational readiness review team. 7.9 CRITICAL DECISION-4, APPROVE START OF OPERATIONS OR PROJECT CLOSEOUT When construction, testing, and turnover are complete and the operational capability has been attained, the project is ready for Critical Decision-4, Approve Start of Operations or Project Closeout. A key part of obtaining Critical Decision-4 is the delivery of appropriate project- CANCELE D DOE M 413.3-1 7-5 3-28-03 related documentation to support the initiation of operations. The key discriminator in the turnover is the operational organization’s readiness for assuming operational responsibility and the government acceptance of the asset. 7.9.1 Prerequisites for Critical Decision-4 Verify performance criteria have been met. Issue a Final Safety Analysis Report or appropriate safety documentation. Prepare operating and maintenance procedures. Complete acceptance testing and correct deficiencies. Complete a readiness assessment or operational readiness review. Provide a trained and qualified operations and maintenance staff. Complete and issue a project transition-to-operations report. If necessary, prepare and issue a project closeout plan that includes management agreement for final fiscal cost and administration closure. 7.9.2 Post-Activities for Critical Decision-4 Demobilize the project. Approve and complete a migration to production for software. Complete operational documentation. Complete as-builts. Prepare and issue a lessons learned report. Prepared and issue a project completion report. 7.10 PROJECT CLOSEOUT Termination of a project involves bringing the project to a planned and orderly conclusion, with as much care and attention as other project phases. Termination and closeout phases need to be controlled to avoid an occurrence where project personnel either leave or are reassigned prior to final project closeout, leaving others to “clean up.” The primary issues that arise during completion are procedural and emotional. The Integrated Project Team should strive to effectively resolve both as part of the closeout effort. CANCELE D 7-6 DOE M 413.3-1 3-28-03 7.10.1 Demobilization Demobilization is a significant event for the project staff. Emotional issues involve project team breakup and loss of identity, a need for fewer personnel during project completion, pressure from functional organizations to return personnel, and project personnel concerns about their next assignment. To smooth out the demobilization process, the Project Director should consider the following: A closeout plan including an evaluation of existing resource requirements Meeting with the project team to provide information, finalize remaining tasks and provide support to remaining team members

Determine assignments to complete final project documentation such as a summary status report, budget report, final costs report, and executive summary Provide information presentations for the Department staff, the operational organization, stakeholders, and media Work with functional peers and team members to establish clear phase-out procedures in terms of each individual’s responsibilities, availability, and future assignments Meet with human resources, functional managers, and line managers to identify personnel needs; assist team members in scheduling interviews; and participate in matching needs, capabilities, and availability Acknowledge and recognize the contributions of all project participants. 7.10.2 Administrative and Financial Closeout After either achieving the objectives or being terminated for other reasons, a project requires closeout. Administrative and financial closeout verifies and documents project results to formalize acceptance of a project by the user. It includes project records, analysis of project success and effectiveness, and archived information for future use. Administrative and financial closeout activities are not deferred until project completion. Each phase of the project should be properly closed to ensure that important and useful information is not destroyed or lost. Contracts are closed in a timely fashion and plans are laid for final closeout prior to the loss of key project institutional knowledge. All documents that record and analyze project performance, including planning documents that establish the framework for performance measurement, are to be available for review during administrative closeout. This includes appropriate project records that aid understanding project initiation, performance, technical, schedule, and cost scopes. Documents that describe the project deliverables (plans, specifications, technical reports/studies, drawings, electronic files, etc.) may also be available for review. CANCELE D DOE M 413.3-1 7-7 (and 7-8) 3-28-03 A set of indexed project records is prepared by the project for archiving. Any project-specific or program-wide historical databases pertinent to the project are updated. When projects are performed under contract, or when they involve significant procurement activity, particular attention may be given to archiving financial records. Documentation stating that a client/sponsor/user accepts the product of a project is to be prepared, signed, distributed, and filed. 7.10.3 Final Closeout Final Closeout involves procedural issues and phase-out administrative procedures, transfer of responsibilities, financial closeout activities, and preparation of appropriate documentation. The purpose of a project closeout effort is to ensure a timely, orderly, and cost-effective project termination. If the closeout is complex and may take substantial time, a closeout plan should be issued prior to full project demobilization. To ensure orderly closeout of a project, the Project Director should, at the direction of DOE—once all costs are incurred against the project with invoices and contracts are closed—prepare a project closeout report following the approval of Critical Decision-4. The following items should be addressed in the closeout report: Technical, scope, cost, and schedule baseline accomplishments Financial closeout, including a final cost report with details as required (including claims and claims settlement strategy where appropriate)

Deactivation, decontamination and decommissioning planning (if required) Closeout approvals Permits, licenses, and/or environmental documentation Contract closeout status Adjustments to obligations and costs Photographic documentation Baseline change control log CANCELE D DOE M 413.3-1 8-1 3-28-03 CHAPTER 8. PROJECT BUDGET DEVELOPMENT 8.1 INTRODUCTION AND KEY TERMS This chapter provides an overview of project budget development and the relationship to DOE’s Planning, Programming, Budgeting and Evaluation Process. Specific requirements for preparing and submitting a budget can be found in the Budget Formulation Handbook. Key terms used in this chapter include the following. • Budget Authority • Capital Asset Plans • Constant-Year Dollars • Contingency • Management Reserve • Project Data Sheets • Then-Year Dollars 8.2 PLANNING, PROGRAMMING, BUDGETING, AND EVALUATION Budgeting for the acquisition of capital assets is an integral part of DOE’s Planning, Programming, Budgeting, and Evaluation (PPBE) Process. The PPBE Process provides a systematic framework for prioritizing program needs, allocating resources, measuring performance and delivering results. The PPBE Process is cyclical and its products are updated each fiscal year. Building a project budget evolves from the total estimate for the project. Project cost estimates are normally done in constant-year dollars ignoring the effects of inflation and the budgeting implications of using various appropriations, or “colors of money.” However, both of these factors must be taken into consideration in constructing the project budget in then-year dollars. A summary level integration of the project process and the budget process is illustrated in Figure 8-1. 8.3 CONSTRUCTING A DEFENSIBLE BUDGET REQUEST Constructing a defensible budget request follows a logical sequence. • Determine what the project is expected to accomplish. • Break the work into quantifiable elements. CANCELE D 8-2 DOE M 413.3-1 3-28-03 • Allocate resources (labor, materials, equipment) to the work elements. • Schedule the work. • Optimize the use of resources across the schedule. • Assess risk and determine contingency. • Determine the annual funding requirement. Concept and Direction Clear direction minimizes miscommunication in execution. The Performance Baseline sets forth key cost, schedule, technical scope, and performance objectives for the project. The Performance Baseline should clearly identify the key parameters for the end capability being developed. Work Breakdown Structure A key step in defining an acquisition project is establishing the Work Breakdown Structure, which breaks down the entire project into its component elements. The Work Breakdown Structure provides a comprehensive basis for projecting financial requirements. Whether the government or a contractor performs the elements, the structure must be compatible with cost estimating and scheduling requirements. Figure 8-1. Acquisition and Budget Integration. FY05 Planning FY05 Programming FY04 Budgeting FY04 Execution FY05 Budgeting FY05 Execution FY06 Planning FY06 Programming Update of Departmental Strategic Plan and Planning Guidance. New mission needs for capital assets Strategic Plan Secretary’s Planning Guidance Approved Multi- Year Program Plans - Integrated Budget & Performance Plan - Appropriations Performance and Accountability Reporting Ten-Year Site Plans update Long-term plans updated

Budget Request for Capital Assets: Capital Asset Plans (Exhibit 300) Facilities and Infrastructure Crosscut Monthly status reporting Quarterly update of maintenance expenditure. CANCELE D DOE M 413.3-1 8-3 3-28-03 Resource Allocation The next step is to define the resources necessary to execute each Work Breakdown Structure element. Resources include labor, materials, and equipment. These resources are a part of work packages which define the work for each Work Breakdown Structure element. The labor and materials are assigned unit costs that are summed to determine the total cost for each work package. Planning packages are used when the work has not been completely defined. Budget is assigned to planning packages based on a mature estimate, until such time as a work package can be developed. Note, that when the number of planning packages far exceeds the number of work packages, there is increased risk. It does not necessarily mean that the project is not ready to proceed. However, the number of planning packages should be kept to a minimum. Project Master Schedule With a sound Work Breakdown Structure and well-developed work packages you can create a master schedule. You need a reliable estimate of the total time required to accomplish each task and the sequence in which the tasks must be executed. The schedule should reveal if there are tasks which must be completed or partially completed before other tasks begin. These interrelationships are provided by a critical path-type schedule. Task schedules evolve by balancing the work to be done against the time when the work must be completed in order to achieve project milestones. Resource Leveling Because resources are finite and all works cannot be accomplished simultaneously, work must be re-organized to ensure existing resources are not overtaxed or underutilized. This effort is called resource leveling. A resource, such as engineering or craft labor, cannot be scheduled to accomplish more than one work package simultaneously. Just as you cannot be in more than one place at a time, neither can the staff assigned to a project execute more than a single work package at the same moment. The resource leveling does not only involve staff. The same piece of equipment cannot be operated in more than one location at a time. There may be other limitations as well, such as capacity of specific work areas, which prohibit multiple activities. The sequencing of the tasks, therefore, is not just an exercise in determining the order of things to be accomplished. It requires planning and analysis to determine what can be done when and in what order. Contingency Prudent managers will include “risk dollars” as part of the cost estimate for each Work Breakdown Structure element as appropriate. These risk dollars are the project funds reserved to deal with contingencies when things do not go as planned. The method used should be adapted to the specific needs of each project. Contingency is the portion of the project budget that the government holds in reserve to accommodate unknowns regarding requirements and uncertainty that is outside the scope of the contract, but is within the scope of the project. Contingency may be used for additional scope and work that is necessary to meet current requirements. Contingency is not used for new requirements. The contractor uses management reserve. CANCELE D 8-4 DOE M 413.3-1 3-28-03

Management reserve is not allocated to work packages or planning packages, but is held in reserve by management to provide flexibility to manage within the contractor Performance Measurement Baseline. Management reserve is used to control the workflow and adjust work packages for rate changes and other unknowns, but is never used for additional scope outside of the authorized work scope. The method used by the programs to develop their contingency budget may vary depending on the type of project being executed. For some projects where complexity is low and the construction is straightforward, the contingency requirements may be fairly low and may be developed by using an added factor to the budget. In other cases where the uncertainty is greater because of technological, environmental, or other issues, the contingency requirements may be much higher. Contingency is developed through the risk analysis process that weighs the risk likelihood and impact and results in a plan to mitigate the risk. Projects may use probabilistic simulation and analysis to assist in deciding how much contingency would be appropriate for a project. However, DOE does not advocate, nor has it established a standard for probability simulation-based confidence levels. In general, projects should not be undertaken unless the program has high confidence that it can be completed within the established Performance Baseline. Projects where the confidence is low must only be undertaken when the need is great, no other alternatives are feasible and the senior leadership of the Department fully understands the risk. Developing the Annual Budget The next step is to total the resources requirements for each fiscal year that will require funding. The annual funding requirements must be evaluated to determine whether there are any spikes to be leveled or if other external budgetary constraints exist that must be taken into account. If adjustments are required, another pass through the scheduling and resource leveling process will be needed to adjust the plan to accommodate the external constraints. In some cases this results in an increase in cost when it becomes necessary to delay some activities due to these constraints. It must also determine what appropriation will be used to fund each task to comply with applicable funding policies. 8.4 APPROPRIATIONS To execute the project, budget authority is provided by Congress to incur obligations and make payments. Budget authority is most commonly provided by an appropriations act, in which Congress specifies the purpose(s) for which each particular appropriation may be used, as well as the amount of budget authority provided under each appropriation. The Department receives two appropriations which may be used for the acquisition of capital assets: Operating Expense and Capital Construction. Because of the cost and size, many Department projects cannot be executed within a single fiscal year and consequently financing of the total requirement in one fiscal year is not feasible. However, when the project will take longer than 12 months but less than 18 months, financing the total requirement should be sought in a single fiscal year. Depending on the project and its stage, the budget requests, along with the Capital Asset Plans and Project Data Sheets, will contain a request for one or both types of funds. CANCELE D DOE M 413.3-1 8-5 3-28-03

Long lead procurement and construction funds comprise the Total Estimated Cost of a construction project. The Total Estimated Cost should not be construed to be the total cost for the project. Additional operating expense funds are required and need to be included in the overall project cost. The total cost for a capital asset acquisition is the sum of the Total Estimated Cost and all Other Project Costs necessary to complete the project. The sum of these two cost elements is the Total Project Cost. The Total Project Cost is used in the Performance Baseline and is the cost against which the project measures performance. Costs for the acquisition of capital assets begin to accrue at the point that the Department has approved the mission need. Costs that accrue during the planning process prior to mission need, when performance gaps are being identified, are not normally project costs. Detailed explanations and formats for preparation of budgets and the direction regarding what funds are to be identified for specific types of efforts are found in the Budget Formulation Handbook. 8.5 APPLICATION OF INFLATION TO THE FINANCIAL FORECAST Inflation, defined as an increase over time in the general price level, is a pervasive phenomenon affecting all aspects of financial planning and therefore directly impacts the development of cost/funding forecasts for projects. When a program puts together a cost estimate, it is usually done in constant dollars. Constant dollars are tied to a specific year, with no inflation across the life of a project. This is very useful for cost estimating, since it is easy to make changes across the years without having to consider the impact on the cost of money over time. It is also beneficial if you want to analyze a program to see things like cost growth and the impact of learning curves. However, budget requests are projections into the future, so what is budgeted for today must be what is expected to be paid in the future; i.e., our budget estimate must account for inflation. To properly factor in inflation, it is necessary to account for the effects of rising prices and the timing of when those bills will actually be paid. Since program budget requests must be made prior to receiving and negotiating contract cost proposals, estimates of the anticipated costs and the time-phased profile of their incurrence must be developed. OMB provides the estimated inflation rates or escalation rates that are used to convert constant dollars to then-year dollars. The Department uses these rates along with other economic information to develop inflation rate information tailored to specific types of projects. Then-year dollars are used in the budget and other baseline documents. Computation of the inflation premium, while complex, is purely mechanical. These inflation factors are usually published in January each year. A sample escalation table follows, as shown in Table 8-1 below. Many things need to be considered when building a project budget. For each of the various project elements, factors such as work content, time-phasing, expected costs, and the proper appropriation to be used need to be determined. For each appropriation requested, the relevant funding policy (annual, incremental, or full funding) must be applied and any exceptional circumstances to properly time-phase the budget request must be considered. In addition, you must ensure that the correct escalation indices are applied to convert cost estimates prepared in base-year dollars to budget estimates submitted in then-year dollars.

CANCELE D 8-6 DOE M 413.3-1 3-28-03 Table 8-1. Escalation Rate Assumptions For DOE Projects (January 2003) Project Categories FY Construction EM IT O&M R&D 2002 1.000 N/A 1.000 N/A 1.000 N/A 1.000 N/A 1.000 N/A 2003 1.021 2.1 1.020 2.0 1.008 0.8 1.018 1.8 1.023 2.3 2004 1.046 2.5 1.047 2.7 1.017 0.9 1.045 2.6 1.051 2.8 2005 1.076 2.9 1.075 2.7 1.022 0.5 1.073 2.7 1.080 2.7 2006 1.106 2.8 1.103 2.6 1.032 1.0 1.101 2.6 1.108 2.6 2007 1.135 2.6 1.130 2.4 1.041 0.8 1.127 2.4 1.136 2.5 2008 1.164 2.6 1.157 2.4 1.049 0.8 1.154 2.4 1.164 2.5 EM = Environmental Management; IT = Information Technology; O&M = Operations and Maintenance; R&D = Research and Development. 8.6 PROJECT ENGINEERING AND DESIGN FUNDS Project Engineering and Design (PED) funds are requested using a Project Data Sheet as “design only” funds for preliminary and final design. PED funds are not to be used for construction, long-lead procurement, or major equipment items. PED funding requests are developed from historical data or parametric estimates. The objectives for the use of PED funds are to: • Improve the accuracy of the project cost estimate and support establishment of the Perfromance Baseline • Improve the DOE’s planning, programming, and budgeting process for the acquisition of projects • Provide funds for VM activities (see OMB A-11, Section 5.3.4, and FAR). Acquisition planning, the acquisition strategy, and Critical Decision processes play important roles in the PED process. Critical Decision-0 determines if a capital asset is required and the date by which it will be provided. That requirement date, together with the project’s risk assessment, projected construction uncertainties, equipment lead times, funding constraints, and other related factors, will determine when to request PED funds. PED requests should be confirmed and updated as part of the Critical Decision-1 process. 8.7 Key Documents Two key documents used to integrate projects with the PPBE are Project Data Sheets and OMB Exhibit 300s. Both documents provide key information to OMB and Congress. Capital Asset Plan (OMB Exhibit 300) requires information that demonstrates the capital programming and capital planning and investment control policies defined in OMB Circular CANCELE D DOE M 413.3-1 8-7 (and 8-8) 3-28-03 A-11, Preparation, Submission and Execution of the Budget. The Capital Asset Plan documents the Performance Baseline and communicates the performance of projects; demonstrates a direct connection to the agency’s strategic plan; a positive return on investment for the selected alternative; sound acquisition (program and procurement) planning; comprehensive risk mitigation and manage