Evolved Expendable Launch Vehicle

The primary purpose of the Defense Department's (DOD) evolved expendable launch vehicle program is to reduce the costs of sending satellites into space and, at a minimum, maintain the reliability, operability, and capability levels of current launch systems. However, because of methodology weaknesses, DOD cannot be certain that its program to build a family of launch vehicles is economically justified. Until the government's total expenses are determined, including recurring and nonrecurring costs and the time value of money, the program's net savings will remain unclear.

GAO noted that: (1) DOD's goal in acquiring the EELV system is to reduce recurring production and launch costs by at least 25 percent for fiscal years 2002 through 2020 from the costs that would be incurred if the existing Delta, Atlas, and Titan launch vehicles were used; (2) using DOD's methodology, GAO estimated that the program would exceed the 25-percent goal; (3) however, the number, type, and timing of launches specified in the vehicle's mission model have continued to fluctuate, making a cost reduction estimate, based on the model, uncertain; (4) the major reasons for the fluctuations were that: (a) satellites were assigned to the wrong type of launch vehicle; (b) launch requirements were unverified; and (c) satellite downsizing has changed launch requirements; (5) the Air Force is in the process of developing a new launch cost baseline and cost reduction estimate, based on the most current EELV mission model, in preparation for the DOD milestone II review in June 1998; (6) more importantly, the Air Force's recurring cost methodology does not adequately measure the economic benefits of the program; (7) the reason is that nonrecurring investment costs, which DOD plans to incur to develop the system in order to achieve a cost savings, are not included; (8) the standard criterion for deciding whether a government program can be justified on economic principles--the primary purpose of this program--is net present value (NPV), which would include both recurring and nonrecurring costs and the time value of money; (9) DOD has not yet officially performed a NPV analysis and has not identified all government costs to do so; (10) the use of other transaction instruments for EELV development will challenge DOD in determining how best to protect the government's interests; (11) under DOD's revised acquisition approach, the contractors are not willing to guarantee system performance because their financial risk would be open ended and DOD's investment would be limited; (12) despite this position, the Air Force is counting on the contractors to provide launch services to satisfy the government's requirements, based on their financial interest in a growing commercial market for launch services; (13) in addition, the Air Force planning documentation states that the primary program risk is in meeting launch site facility preparation schedules; and (14) other Air Force planning documentation shows the continued use of certain launch facilities for several months after the facilities are scheduled to undergo site preparation for the vehicle.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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