Controlling Federal Costs for Coal Liquefaction Program Hinges on Management and Contracting Improvements.
GENERAL ACCOUNTING OFFICE WASHINGTON DC PROCUREMENT AND SYSTEMS ACQUISITION DIV
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GAOs review of the H-Coal and Exxon projects showed inadequacies in DOEs contracting practices and a failure by DOE to properly plan, manage, and monitor, especially the H-Coal project. The initial Government-industry H-Coal agreements regarding the level of investment by private sponsors and the ceilings imposed on sharing in cost growth were imbalanced. Larger investments by private sponsors and sharing of cost growth provides an incentive to private sponsors to control costs and helps to assure that each party is fully committed to the success of the project. DOE started the H-Coal project prematurely before sufficiently detailed designs were available and without adequate project planning for functions such as construction scheduling, materials handling, inventory systems, and quality control. DOE staffing was inadequate at both projects to effectively monitor progress and contribute to timely decisions. Its contracts for the H-Coal plants were poorly written and administered. DOE plans for two large demonstration plants need careful review and attention in light of escalating cost and the risks involved in scaling up to the 6,000-ton-a-day facilities.
- Administration and Management
- Economics and Cost Analysis
- Fluid Mechanics