National Security

Has the Pentagon's Strategy Shop Gone MIA?

At the cash-strapped Defense Department, the bean counters now have the upper hand.

When then U.S. Defense Secretary Robert Gates began a series of meetings in 2009 on overhauling the Pentagon's budget, he made sure that Michèle Flournoy, his powerful policy chief, was a key player in the negotiations. After all, strategy is supposed to drive financial choices in the Pentagon. And the office of the undersecretary of defense for policy has long been seen as the Pentagon's strategy house.

Four years later, current Defense Secretary Chuck Hagel has called for a strategic review of the Pentagon's budget. But Flournoy's successor, James Miller, isn't in control.

Instead, Christine Fox, director of cost assessment and program evaluation at the Pentagon -- who's known for her budgetary and programmatic acumen -- is in charge of this so-called "Strategic Choices and Management Review." Within the Defense Department, that has been taken as a signal that the set of financial options for the Pentagon has been driven by resources, not policy. In cash-strapped 2013, the budget appears to determine the strategy, and not vice versa. The Pentagon's spending is in the ditch, the thinking seems to be, and the strategic review process is about how to get the Pentagon out of it.

That may make some sense as the Defense Department is forced to trim its budget by $487 billion over the next 10 years under the Budget Control Act, plus do another 10-year $500 billion cut under sequestration -- if Congress doesn't help the Pentagon by paring those cuts back.

But it has left some observers of the budget process concerned.  

"My view is that policy has taken a back seat," said one well-placed observer. "It is also my personal view that the back-seat role they're in is maybe not the wrong role for them to be in right now."

The sense that the Pentagon's policy shop hasn't played as much a role in the strategic review feeds the perception that has plagued the review: that it has been an exclusive process whose objectives are unclear and that the players who've been sitting at the table operate with unknown biases and disproportionate power. Loren Thompson, a consultant to a number of large defense firms, thinks the Pentagon is just in a different time and place.

"This seems to have been a budget-driven process, probably because threats are receding, but the demands of deficit reduction are pressing hard on the department," Thompson said.

The fact that Miller, the undersecretary for policy, recently floated the notion of major cuts to his staff doesn't exactly feed the sense that the policy team is ascendant.

But some officials think that the policy shop had its say already, devising the rebalance-to-Asia strategy that has figured so strongly in Pentagon strategy over the last year. Others say they think Miller may not have enough sway with the White House, or even with Hagel, and that helped sideline the policy shop's contributions. Still others claim this current process isn't all that important, even if it does amount to a precursor to next year's congressionally mandated Quadrennial Defense Review.

But a senior defense official said that policy is playing a key role in the strategic review. "Miller and his team have been instrumental in working on the hard choices that may come down the pike," the official said.

Indeed, representatives from the policy shop have attended the meetings and even co-chaired some of the subgroup meetings, and Miller and other civilian military leaders reportedly attend at least the high-level meetings. "Every undersecretary, service secretary, service chief, every combatant commander," the official said, referring to the wide representation across the building in the meetings.

Yet the tension inside the building over the Strategic Choices and Management Review (SCMR) is palpable. Each of the services is attempting to protect its "rice bowl," fighting for its programs and resources, but they say privately that they're doing so in the dark. They say they don't have a sense of what the Pentagon's overarching strategy will be.

And the process has moved forward without them, they also believe. More than a dozen "working groups" were formed on a variety of issues. The results of each group's efforts were then fed into a central office headed by Fox. There, top-level staffers assembled a final product. That contributed to a perception that once the program analysis had been completed, it was left to a small, powerful group of individuals to frame the product for Hagel. One military officer familiar with the process, but outside Fox's office, described it as an undertaking that was far from transparent.

"It's a mysterious process," the military officer said. "The real decisions are being made in a smoke-filled room." That officer said that if Miller and his people have been sidelined, it means budget thinking has trumped strategic thinking. "It is like letting the accountants write the business plan," he said. "They're not bad people, but they do not have a strategic perspective on anything but the bottom line. Our national security should be measured in more than just dollar signs."

But, he added, both the bean counters and the strategy folks need the practical perspective of each armed service. Without the heavy input of the Army, Navy, Air Force, and Marine Corps, the military can become overly focused on an issue such as China, say, and potentially ignore the need for capabilities in places like Somalia, Mali, or Syria, the officer said.

"Unrealistic understanding of the true cost-effectiveness/practicality of proposed courses of action can lead you to really bad strategic and budgetary conclusions," he added.

The SCMR, or "SCAMMER" as it's not so lovingly come to be called in the Pentagon, was first briefed to Hagel on June 6 and 7, with Fox, Deputy Defense Secretary Ash Carter, and others. The SCMR is supposed to be a comprehensive, top-to-bottom review of the Pentagon budget, looking at operations, strategy, compensation for military and Defense Department civilians, health-care costs, DOD education, and other costly programs. The Army is seen as the lowest-hanging budgetary fruit because of the wind-down of the land wars in the Middle East and Central Asia. The service will likely see the biggest cuts in what one defense official has characterized as the "biggest and most emotional and bureaucratically contentious" area in which to find cuts.

Fox was expected to leave the Pentagon at the end of June. Hagel spent nearly half of last week reviewing the strategic review, asking for tweaks and looking at the options he confronts. Hagel tried to explain that the SCMR would not be the genesis for a future budget strategy. "This is not a plan," Hagel told reporters in the Pentagon on Wednesday, June 26. "It was exactly what the title implies: Strategic Choices and Management Review. Review all the components of our budget, our responsibilities. Prioritize those based on these different scenarios so that -- so that we could be as prepared as we could be to make sure that the president is assured that he's got the options and -- and this country is capable to carry out the requirements to assure our national security."

Hagel also sought to manage expectations from Capitol Hill, academia, industry, and the media that there would not be a dramatic unveiling of the results of the review. In fact, he said, there may not be any such endpoint. "There will be no rollout of any grand plan on this." And for his part, Hagel said it has been an inclusive process, including the chairman of the Joint Chiefs of Staff, Gen. Martin Dempsey, as well as "all of our uniformed and civilian leadership was involved, top to bottom, which I wanted that. We looked at everything."

Alex Wong/Getty Images

National Security

Nuclear Waste

How the U.S. spent billions on a plan that increases the danger of proliferation.  

A multibillion-dollar U.S.-led effort to stem the threat of a terrorist nuclear blast is slowly unraveling because of huge cost overruns at a federal installation in South Carolina and stubborn resistance in Moscow to fulfilling the program's chief goal, according to U.S. officials and independent experts.

The 13-year-old Energy Department program, authorized in agreements with Moscow spanning three presidents, is meant to transform excess plutonium taken from retired U.S. and Russian nuclear weapons into fuel for nuclear plants, so that it can't be stolen and misused.

But that ambitious goal has been blocked by a tangle of technical, diplomatic, and financial problems. The Obama administration is now considering cancelling the project, an idea that has provoked furious opposition from some Republican lawmakers who say it is vital to U.S. national security.

Its potential demise has provoked cheers from some leading arms control and nonproliferation experts, however. They say that as a result of little-noticed revisions to the underlying pact with Moscow on the plutonium's disposal, the deal might actually wind up promoting Russia's production of as much or more plutonium as it was supposed to eliminate.

To keep its end of the bargain, the United States has spent more than a decade and $3.7 billion building a problem-plagued factory for making the plutonium-laced reactor fuel, located at the government's Savannah River complex south of Aiken. Its construction and related costs have recently hit more than $680 million a year, but Congress is now considering a White House plan to shrink that spending substantially.  

Russia has begun construction of a similar fuel factory in a tunnel complex deep in a mountain near Zheleznogorsk in Russia at an estimated cost of more than $2 billion, but current and former U.S. officials say Moscow is still counting on at least $400 million promised by Washington to help defray its costs.

The U.S. plant, now in the sixth year of construction, is beset by technical problems, and its total estimated cost is more than $6 billion above its original $1 billion budget. Its design is still incomplete, and there are no customers in the United States as yet for the so-called Mixed Oxide (MOX) fuel it will make from a mixture of plutonium powder and standard reactor fuel.

Government audits have cited blown deadlines, poor oversight, and multiple construction snafus at the plant, making it a new, embarrassing symbol of mismanagement by the department's National Nuclear Security Administration, which oversees all U.S. nuclear weapons-related work.

The agency's large projects have repeatedly appeared on the government's "high risk" list of those vulnerable to fraud, waste, and abuse.

A close look at the factory's history reveals it had a weak contract from the outset. Officials in Washington initially paid little attention to it, despite the project's scope. Shoddy contracting practices cost the government more than $1.38 billion in avoidable expenses, and it has suffered quality control problems involving its steel rebar, piping, and other key components.

The government's current estimate is that the plant will not begin operation before 2019, seven years late. Estimates of its operating costs over a 15- to 20-year period range from $8 billion to $12 billion, meaning that it could cost around $20 billion in total to create fuel rods from all 34 tons of the plutonium that Washington has promised to eliminate.

But even if the government finds buyers for the fuel -- which seems doubtful -- it will not recoup more than $2 billion of its expenses, according to the Congressional Research Service. At the current price tag, eliminating each pound of plutonium at the U.S. plant may cost roughly $243,000, according to Matthew Bunn, a nuclear expert at Harvard.

So far, around $3.7 billion has been spent on the fuel factory, which could wind up an abandoned concrete shell in the middle of a pine forest. Another $700 million was used to design a related plutonium dismantlement facility that the NNSA never built.

Those expenditures have helped make it the single most expensive U.S. nonproliferation project now underway, according to independent experts.

A deal born in a crisis

When the disposal effort was first conceived in the 1980s, it was considered a top priority because the collapse of the Russian economy raised fears that some of that country's huge stockpile of fissile materials might be smuggled into rogue states or be seized by terrorists. In the right hands, only nine pounds of plutonium -- an amount the size of a baseball -- is needed to make a bomb as powerful as the bomb dropped on Hiroshima.

American officials never worried much about the security of their own stockpile, but agreed to eliminate some of it to ensure that the Russians did likewise. Problems arose from the start, however, because the two countries disagreed about how to implement the deal.

Washington initially wanted to seal the plutonium in glass and ceramic and bury it in deep holes. Russia, in contrast, pressed for the solution that both sides adopted: to burn it as fuel in reactors.

"The U.S. has always looked at plutonium as a proliferation risk," said Kenneth Bromberg, who helped set up the Energy Department's Office of Fissile Materials Disposition in the early 1990s and ran it from 2004 to 2011. "The Russians have always looked at it as an energy source."

Ernest Moniz, an MIT physicist who became energy secretary last month -- after a delay in his confirmation inspired by Republican efforts to rescue the project -- played a key role in resolving the early impasse while serving in the Clinton administration. His June 2000 deal, approved by the two countries' presidents, called for both sides to use the plutonium mostly as a reactor fuel, as Moscow sought.

But the deal also demanded that almost all of the fuel be burned in standard reactors, a process that would block Russia from readily recovering a lot of plutonium from the spent fuel.

Over the next few years, however, officials in both capitals became disgruntled with Moniz's deal. Russia wanted to develop different reactors, known as "breeders" because they can make more plutonium as they consume, creating an almost limitless source of energy. Breeders generate fast-moving neutrons that transform the uranium mixed into their fuel into additional plutonium. And the Russians saw the MOX fuel -- to be paid for partly by the West -- as ideal feedstock for their breeder program, which would help turn their Cold War investment into cash.

The United States had abandoned plutonium breeders at the urging of the Carter administration, over the nuclear industry's opposition, due to fears that the technology could vastly expand global supplies of the nuclear explosive. But Russia's ambitions found resonance with the Bush administration, which included many breeder advocates and supporters of an expanded nuclear industry.

So when Russia's atomic agency chief, Alexander Rumyantsev, proposed in a 2005 meeting in Paris to use the MOX fuel solely in breeder reactors, Washington did not push back. Instead, by 2007, Bush administration Energy Secretary Samuel Bodman agreed that Russia could renege on its promise to use the fuel in standard reactors.

Bodman also recommitted Washington to providing $400 million in aid for the project and promised to seek additional sums from U.S. allies. He declined comment for this article, but Linton Brooks, who served from 2002 to 2007 as head of the NNSA, defended the arrangement.

Brooks said in an interview, "If the alternative is having Russian and U.S. plutonium sit around for a long time, I'm fully happy with what the administration did. I would not accept the view that we added to proliferation rather than reduced proliferation."

Construction flaws emerge

By 2005, troubles at the Savannah plant had themselves begun to proliferate, however. That year, Energy Department Inspector General Gregory Friedman disclosed that technical obstacles and poor planning had caused costs to more than triple. The design itself was flawed: It turned out that the facility needed nearly 1,400 miles of electrical cabling, not 735 miles; it also needed stronger and more costly engineering supports.

Friedman said lingering design problems had consumed nearly half the construction funds, and that only a handful of Energy Department employees were overseeing it. Monthly reports on the work were confusing and misleading, and budgets lagged months behind. Mistakes in the purchase of supplies also started to pile up, with a large delivery of the wrong steel alone costing $680,000 to correct, according to a report by Friedman in 2009.

The contractors had little incentive to find efficient solutions, Friedman said, because the NNSA had ignored warnings and signed a contract in which the firms passed on to the government whatever costs they incurred.

When Obama took office, there was little consideration of alternatives to the Bush administration's pact, which was not yet signed. It took until April 2010 to finally nail down all the details in a deal between Secretary of State Hillary Clinton and Foreign Minister Sergei Lavrov that contained a new U.S. concession.

Under the original deal in 2000, Russian reactors used in the program were essentially locked up: The country could not extract residual plutonium from the fuel burned in those reactors for several decades, a significant nonproliferation achievement.

But the Obama administration agreed to Russia's demand that it immediately extract some plutonium from fuel burned in one of the breeders used in the program. The deal also still called for the United States to share technical and financial support that Russia could use to develop its breeder reactors. Russia promised, however, to accumulate new plutonium only for civilian power rather than new weapons.

Arms control advocates -- and a few administration officials who privately express regrets -- say that as a result, Washington will be helping Russia expand its plutonium production in the future, if it chooses, or help others expand theirs.

"Down the road, we could see the MOX program in Russia lead to the creation of more separated plutonium, not less," said Tom Z. Collina, a senior analyst with the Arms Control Association. "That's one of the dangers of the agreement. It could ultimately defeat the original purpose ... which is to eliminate stocks of separated plutonium."

Anatoli Diakov, a Russian physicist who founded and directed an arms control and energy study center in Moscow, said in an interview that no matter what the United States does, Russia "is going to use the plutonium fuel" in breeder reactors.

Breeder reactors, Russia's nuclear energy chief said last year, "are the basis of our competitiveness" in the global contest for nuclear plant construction contracts. The country is now discussing the sale of two to China.

Key U.S. lawmakers keep the program alive

This shift in the deal's fundamental terms -- from an agreement meant to shrink the global stockpile of plutonium to one that could expand it -- has sapped the support of some of the nonproliferation experts who helped create it. Frank von Hippel, a White House science official in the early 1990s who chaired a working group on the issue, said the MOX plant has "become from my point of view a pretty meaningless program" that should now be killed.

"The problem ... is that Russia doesn't intend to dispose of its plutonium permanently, right?" said von Hippel. "In fact, it's setting itself up to produce and recycle its plutonium indefinitely." That creates risks "that this stuff will get stolen, so in fact the security situation gets worse."

The last major attempt to kill the program occurred in 2005, when Rep. David Hobson, then chairman of the House Appropriations Energy and Water Subcommittee, tried to block funding due to its rapidly rising costs and Russia's plans to shift from standard reactors to breeders.

"It should never have been done," said Hobson, now 76, about the factory's construction. "Everything I said would happen, has happened.... And there is no end in sight."

For years, the plant has been kept alive by South Carolina's mostly Republican congressional delegation, which includes many strident critics of federal spending, budget deficits, and mammoth public works projects -- including Sen. Tim Scott and Rep. Joe Wilson. On the issue of the MOX plant, which employs 2,100 workers, they have been hugely supportive.

Sen. Lindsey Graham joined others on Capitol Hill in January in asserting that "the time has come for the president to face up to the need to control federal spending." Since then, Graham has lectured DOE officials at hearings on the diplomatic and security disaster that would ensue if the Savannah River project was halted.

With three other Republican senators, Graham pledged in a joint statement last month to hold up nominations and use the budget process "to ensure the [MOX] program moves forward."

Graham declined to comment for this article. According to an analysis by the Center for Public Integrity of campaign donations and leadership committee receipts listed by the Center for Responsive Politics, Graham has received $46,500 since 2001 from three private firms with a stake in the MOX project. In total, the firms provided at least $437,000 in campaign funds during this period to members of the four congressional committees that decide the Energy Department's annual budget.

Rep. James Clyburn, who has long been a member of the House Democratic leadership and who has boasted about helping block Hobson's challenge to the plant, collected $51,000 in political funding from the firms, the lobbyists and officers of which also donated $40,000 to a golf charity he runs. Clyburn's spokeswoman, Hope Derrick, said the congressman "is solely motivated by the best interests of the people and communities he serves in Congress." 

The plant is being built by Shaw Areva Mox Services LLC, which until this year was a joint venture between the Shaw Group and Areva SA, the French government-owned international nuclear giant. Shaw, based in Baton Rouge, was purchased in February by the Netherlands-based Chicago Bridge & Iron NV -- which now controls 70 percent of the MOX project.

In the last three years alone, Areva and Shaw have spent a total of $6.3 million to lobby for their legislative interests, including efforts by at least four former congressmen and some former committee staffers that advocated spending on MOX and nuclear issues, according to an analysis by the Center for Public Integrity.

Kelly Trice, president of Shaw Areva MOX Services, the lead contractor, has praised the progress at the plant. He blamed the overruns mostly on the unexpected difficulty of finding and retaining qualified workers and suppliers and a need to get regulatory approval for "every piece of equipment, every piece of pipe, the concrete, even the dirt under the facility."

New budget troubles arise

Austerity pressures in Washington have created new obstacles for the companies and their lobbyists. The Obama administration, after convening four high-level meetings about the MOX plant this spring, urged a 50 percent cut in its planned spending in fiscal year 2014, to just $320 million.

"Cost growth and fiscal pressure may make the project unaffordable," the Energy Department said in its formal budget proposal to Congress. A spokesman for the department declined comment about the review now underway.

Joan Rohlfing, a former DOE official who is president of the Nuclear Threat Initiative, a nonprofit group that promotes action to reduce the dangers posed by plutonium, said she believes the project is still worth completing. Halting "our near-term ability to dispose of excess plutonium would be a setback to our ability to reach critical security goals," she said.

Likewise, a Russian government official who has followed the program closely denied that the breeder program undermined nonproliferation goals and said the project was still worth pursuing to reduce the threat of a theft of nuclear materials.

But Matthew Bunn, who helped launch the effort, says the current deal is too modest and, under the best of circumstances, would leave Russia with enough plutonium to build more than 25,000 new nuclear weapons. Some things are worth doing for $10, but not for $100, he says.

Von Hippel joined three other scientists last May in advocating the burial alternative in a scientific journal article about Britain's plutonium stocks. One co-author was Rodney Ewing, whom Obama has since appointed to head a federal nuclear waste panel, and another was Allison MacFarlane, now chair of the Nuclear Regulatory Commission. The MOX plant, if it is completed, needs an NRC license.

Ewing, emphasizing that he was speaking for himself, said in an interview that recent research leaves no doubt that plutonium can be locked into a crystalline ceramic material and stored safely underground for tens of thousands of years.

Administration officials say the main purpose of their "strategic reassessment" is to reexamine the burial alternative. A DOE report in 2002 concluded it would cost hundreds of millions of dollars less than building the MOX plant. But it cited two factors that trumped the cost savings then and may do so again: Russia's hostility to the idea and the absence of "employment that would have been created in South Carolina."

The Center for Public Integrity