Space Acquisitions
Uncertainties in the Evolved Expendable Launch Vehicle Program Pose Management and Oversight Challenges Gao ID: GAO-08-1039 September 26, 2008The Department of Defense (DOD) plans to spend over $27 billion acquiring launch services through the Evolved Expendable Launch Vehicle (EELV) program over the next 12 years. The EELV program uses two families of commercially owned and operated vehicles to launch satellites. Partly because the commercial space market did not develop as expected, the EELV program has undergone significant changes. These include: adoption of a new acquisition strategy in 2005 that sought to ensure the viability of the two EELV launch vehicle providers, Boeing and Lockheed Martin; the subsequent decision by those two companies to form a joint venture called the United Launch Alliance (ULA); and a 10-year increase in the life of the program. In light of these changes, GAO was asked to (1) determine what uncertainties DOD faces in the EELV program and in the transition to ULA, and (2) assess how DOD is positioned to manage and oversee the effort. To accomplish this, GAO reviewed a wide variety of DOD documents and interviewed DOD and program officials.
The EELV program currently faces uncertainties in the reliability of the vehicles used to launch military and other government spacecraft as well as its budget for future years and in the merger of its two principal suppliers. Taken together, these unknowns require careful monitoring and oversight to ensure a fairly long track record of launch successes can continue. Though the program has had 21 successful operational launches, no single configuration from either family of launch vehicles has been launched enough times to demonstrate production process reliability. The ULA transition may also influence the demonstration of vehicle reliability because ULA plans to relocate production activities and may alter manufacturing processes. The consolidation of Boeing and Lockheed into ULA--a massive undertaking that seeks to combine two distinct corporate cultures, and consolidate launch infrastructure and business operations from five locations across the country to two--poses a variety of other cost, schedule, and performance uncertainties and risks. DOD does not know whether its EELV program budget is sufficient to manage the program in the short term because the Air Force reduced the EELV program budget to incorporate anticipated savings from the ULA transition, even though savings estimates were based on preliminary data. DOD has taken steps to position itself to effectively oversee and manage the ULA transition and EELV program but still faces significant challenges in these areas. More specifically, DOD has established a well-defined process for how the ULA transition will be overseen and established mechanisms that allow the diverse agencies involved to coordinate the analysis and raise critical issues to senior leaders. However, when DOD moved the EELV program from the research and development phases in 2007 to the sustainment phase, DOD eliminated requirements on the program to produce data that would illuminate what impacts the transition is having on the program, what cost increases are occurring and why, and what other programmatic and technical vulnerabilities exist and how they are being addressed. Furthermore, a new independent life-cycle cost estimate was not required for the program when it moved to the sustainment phase; as a result, DOD will not be able to rely on this estimate for making long-term investment planning decisions. According to DOD officials, the latest life-cycle cost estimate for the program is not realistic. In addition, as part of its effort to increase its oversight and gain program knowledge, in 2005 the Under Secretary of the Air Force expanded the program office's management responsibilities when he approved a new acquisition strategy for the EELV program. At the same time, program officials stated that they do not have the government staff necessary to perform what they consider to be inherently governmental functions related to the expansion of oversight.
RecommendationsOur 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.
Director: Team: Phone:GAO-08-1039, Space Acquisitions: Uncertainties in the Evolved Expendable Launch Vehicle Program Pose Management and Oversight Challenges
This is the accessible text file for GAO report number GAO-08-1039
entitled 'Space Acquisitions: Uncertainties in the Evolved Expendable
Launch Vehicle Program Pose Management and Oversight Challenges' which
was released on September 26, 2008.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to the Subcommittee on Defense, Committee on Appropriations,
House of Representatives:
United States Government Accountability Office:
GAO:
September 2008:
Space Acquisitions:
Uncertainties in the Evolved Expendable Launch Vehicle Program Pose
Management and Oversight Challenges:
Space Acquisitions:
GAO-08-1039:
GAO Highlights:
Highlights of GAO-08-1039, a report to the Subcommittee on Defense,
Committee on Appropriations, House of Representatives
Why GAO Did This Study:
The Department of Defense (DOD) plans to spend over $27 billion
acquiring launch services through the Evolved Expendable Launch Vehicle
(EELV) program over the next 12 years. The EELV program uses two
families of commercially owned and operated vehicles to launch
satellites.
Partly because the commercial space market did not develop as expected,
the EELV program has undergone significant changes. These include:
adoption of a new acquisition strategy in 2005 that sought to ensure
the viability of the two EELV launch vehicle providers, Boeing and
Lockheed Martin; the subsequent decision by those two companies to form
a joint venture called the United Launch Alliance (ULA); and a 10-year
increase in the life of the program. In light of these changes, GAO was
asked to (1) determine what uncertainties DOD faces in the EELV program
and in the transition to ULA, and (2) assess how DOD is positioned to
manage and oversee the effort. To accomplish this, GAO reviewed a wide
variety of DOD documents and interviewed DOD and program officials.
What GAO Found:
The EELV program currently faces uncertainties in the reliability of
the vehicles used to launch military and other government spacecraft as
well as its budget for future years and in the merger of its two
principal suppliers. Taken together, these unknowns require careful
monitoring and oversight to ensure a fairly long track record of launch
successes can continue.
* Though the program has had 21 successful operational launches, no
single configuration from either family of launch vehicles has been
launched enough times to demonstrate production process reliability.
The ULA transition may also influence the demonstration of vehicle
reliability because ULA plans to relocate production activities and may
alter manufacturing processes.
* The consolidation of Boeing and Lockheed into ULA”a massive
undertaking that seeks to combine two distinct corporate cultures, and
consolidate launch infrastructure and business operations from five
locations across the country to two”poses a variety of other cost,
schedule, and performance uncertainties and risks.
* DOD does not know whether its EELV program budget is sufficient to
manage the program in the short term because the Air Force reduced the
EELV program budget to incorporate anticipated savings from the ULA
transition, even though savings estimates were based on preliminary
data.
DOD has taken steps to position itself to effectively oversee and
manage the ULA transition and EELV program but still faces significant
challenges in these areas. More specifically, DOD has established a
well-defined process for how the ULA transition will be overseen and
established mechanisms that allow the diverse agencies involved to
coordinate the analysis and raise critical issues to senior leaders.
However, when DOD moved the EELV program from the research and
development phases in 2007 to the sustainment phase, DOD eliminated
requirements on the program to produce data that would illuminate what
impacts the transition is having on the program, what cost increases
are occurring and why, and what other programmatic and technical
vulnerabilities exist and how they are being addressed. Furthermore, a
new independent life-cycle cost estimate was not required for the
program when it moved to the sustainment phase; as a result, DOD will
not be able to rely on this estimate for making long-term investment
planning decisions. According to DOD officials, the latest life-cycle
cost estimate for the program is not realistic. In addition, as part of
its effort to increase its oversight and gain program knowledge, in
2005 the Under Secretary of the Air Force expanded the program office‘s
management responsibilities when he approved a new acquisition strategy
for the EELV program. At the same time, program officials stated that
they do not have the government staff necessary to perform what they
consider to be inherently governmental functions related to the
expansion of oversight.
What GAO Recommends:
GAO recommends the Secretary of Defense take actions to: ensure the
regular reporting of key information on program status, produce an
independent life-cycle cost estimate, and ensure the program‘s staffing
meets its needs. DOD concurred with the recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1039]. For more
information, contact Cristina Chaplain at (202) 512-4841 or
chaplainc@gao.gov
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Faces Numerous Uncertainties in the EELV Program and ULA
Transition:
DOD Has Made Strides to Effectively Oversee and Manage the EELV Program
but Challenges Exist in These Areas:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Scope and Methodology:
Appendix I: Comments from the Department of Defense:
Appendix II: Program Cost, Schedule, and Performance Status Information
Included in Defense Acquisition Executive Summary:
Tables:
Table 1: Evolved Expendable Launch Vehicle Configurations by Number of
Operational Launches:
Table 2: Uncertainties of the ULA Transition:
Table 3: DOD Responsibilities in Monitoring the ULA transition:
Table 4: OSD Program Cost and Status Reporting Requirements Not
Applicable to Programs in the Sustainment Phase:
Table 5: Additional EELV Program Office Responsibilities Resulting from
New Acquisition Strategy:
Table 6: Summer 2008 Projected Staffing Levels within the EELV Program
Office (as of March 2008):
Table 7: Oversight Information Contained in Defense Acquisition
Executive Summary Reports:
Figures:
Figure 1: Atlas V and Delta IV Families of Launch Vehicles:
Figure 2: Major Components of Atlas V and Delta IV Launch Vehicles:
Figure 3: Tenures of EELV Program Directors from June 1995 to the
Present:
Figure 4: Aerospace Corporation Assistance Provided to the EELV Program
Office:
Abbreviations:
AFB: Air Force Base:
CAE: component acquisition executive:
DAES: Defense Acquisition Executive Summary:
DCAA: Defense Contract Audit Agency:
DCMA: Defense Contract Management Agency:
DOD: Department of Defense:
EELV: Evolved Expendable Launch Vehicle:
EVM: earned value management:
FAR: Federal Acquisition Regulation:
FFRDC: federally funded research and development center:
FTC: Federal Trade Commission:
FTE: full-time equivalent:
NASA: National Aeronautics and Space Administration:
NRO: National Reconnaissance Office:
NSSO: National Security Space Office:
OSD: Office of the Secretary of Defense:
PBD: Program Budget Decision:
PEO: program executive officer:
SAR: Selected Acquisition Report:
SETA: systems engineering and technical assistance:
SMC: Space and Missile Systems Center:
ULA: United Launch Alliance:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 26, 2008:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
The Department of Defense (DOD) plans to spend over $27 billion
acquiring launch services through the Evolved Expendable Launch Vehicle
(EELV) program over the next 12 years. DOD's investment in the EELV
program, which uses two families of commercially owned and operated
vehicles to launch satellites, is intended to reduce the overall cost
of space launches, assure access to space, and preserve the space
launch industrial base.
The EELV program has undergone significant changes since its inception.
DOD's initial acquisition strategy was to have multiple companies
develop launch vehicles and then pick one launch vehicle provider in
1998. However, in November 1997 DOD decided to keep the two contractors
then competing, Boeing and Lockheed Martin, as EELV providers, and
later awarded contracts to both companies. DOD officials had expected
the emergence of a healthy commercial launch market that would support
two families of launch vehicles and ultimately mean lower costs to the
government. DOD determined launch service prices in the contracts based
on an assumption that a robust commercial market would help pay for the
launch providers' infrastructure costs. However, in the late 1990s the
commercial launch market collapsed, and in late 2003 DOD estimated that
average launch cost would increase significantly. DOD responded to
these developments with a new acquisition strategy in March 2005 that
recognized the government as the primary customer of EELV services and
sought to ensure the viability of the two EELV launch vehicle
providers.
Additionally, in December 2006 Boeing and Lockheed Martin formed a
joint venture called the United Launch Alliance (ULA) to provide EELV
launch services to the government. The ULA intends to maintain two
separate launch vehicle families while consolidating business,
engineering, and manufacturing activities to reduce costs. This
consolidation entails moving launch vehicle production facilities and
work forces to new locations. Finally, another significant change is a
recent 10-year extension to the life of the EELV program.
In light of the changes the EELV program has experienced, you asked us
to (1) determine what uncertainties DOD faces in the EELV program and
in the transition to the United Launch Alliance, and (2) assess how DOD
is positioned to manage and oversee the program.
To determine what uncertainties DOD faces in the EELV program and ULA
transition, we reviewed EELV budget and program status documents,
studies of EELV reliability and launch history, ULA joint venture
transition plans and status, and DOD risk tracking and mitigation
documentation. To assess how DOD is positioned to manage and oversee
the EELV program, we analyzed data on EELV program office[Footnote 1]
authorized staffing levels and compared them to filled positions. We
also reviewed reporting requirements under the new EELV acquisition
strategy, contract data requirements lists for both Atlas and Delta
contracts, EELV program oversight documentation, and DOD acquisition
policies. We interviewed officials from various DOD organizations as
well as launch contractors. We conducted this performance audit between
June 2007 and September 2008 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Results in Brief:
DOD faces numerous uncertainties in the EELV program and ULA transition
related to the reliability of the launch vehicles, the amount of work
remaining in the ULA transition, and program budget decisions based on
preliminary data. First, though the program has had 21 successful
operational launches, DOD does not yet know whether EELVs are reliable
because no single configuration from either family of launch vehicles
has been launched at least 7 times to demonstrate production process
reliability. According to a widely accepted measurement practice,
production process maturity can be demonstrated through 7 successful
launches. Additionally, DOD may be less certain of EELV reliability as
the ULA transition progresses, because ULA plans to relocate production
activities and may alter manufacturing processes. Second, DOD faces
uncertainties relating to the cost, schedule, and performance risks of
the ULA transition, mainly because the transition is still in its
initial stages, and numerous unknowns exist in areas such as
production, personnel management, and cost savings. Furthermore, the
ULA consolidation is a massive undertaking as it attempts to combine
two distinct corporate cultures into a unified workforce, and
consolidate launch infrastructure and business operations from five
locations across the country to two. Third, DOD does not know whether
its EELV program budget is sufficient to manage the program in the
short term because the Air Force reduced the EELV program budget to
incorporate anticipated savings from the ULA transition, even though
savings estimates were based on preliminary data.
DOD has taken steps to position itself to effectively oversee and
manage the ULA transition and EELV program but still faces significant
challenges in these areas. More specifically, DOD has a well-defined
process for how the ULA transition will be overseen and established
mechanisms that allow the diverse agencies with oversight
responsibilities to coordinate the analysis of the transition and raise
critical issues to senior leaders. However, by moving the EELV program
in 2007 to the sustainment phase, as opposed to the research and
development and production phases, DOD eliminated requirements on the
program to submit data to DOD offices responsible for program
oversight--data which could illuminate program variances and technical
risks and how they are being addressed. Furthermore a new independent
life-cycle cost estimate was not required for the program when DOD
moved it from the research and development phases to the sustainment
phase. As a result, DOD will not be able to depend on a reliable life-
cycle cost estimate for making long-term investment planning decisions
because, according to DOD officials, the latest life-cycle cost
estimate for the program is not realistic. In addition, as part of its
effort to increase its oversight and gain program knowledge, in 2005
the Under Secretary of the Air Force expanded the program office's
management responsibilities when it approved a new acquisition strategy
for the EELV program. However, program officials stated that they do
not have the government staff necessary to perform these expanded
duties, which include activities such negotiating contracts, performing
earned value management reviews, determining award fees, and assessing
contractor performance.
To improve DOD's ability to effectively oversee and manage the EELV
program, we are recommending that DOD (1) continue to produce and share
data with senior leaders on program cost and status using criteria that
apply to major research and development and procurement programs and
(2) prepare an independent life-cycle cost estimate once the ULA joint
venture transition is completed so that senior leaders and the program
can make decisions based on an estimate that reflects the span of
changes that have occurred in recent years. We are also recommending
that the Air Force assess the EELV program's staffing needs to
determine the extent to which personnel shortages exist, particularly
as they relate to functions integral to achieving DOD's goals for
enhanced program oversight. DOD agreed with our recommendations.
Background:
DOD initiated the EELV program in 1995 to develop a new generation of
launch vehicles. The EELV program--designed to provide assured,
affordable access to space for government satellites--consists of two
families of commercially owned and operated launch vehicles, the Atlas
V and Delta IV launch vehicles. It also includes manufacturing and
launch site facilities, and ground support systems. Each family of
launch vehicles consists of medium-, intermediate-, and heavy-lift
vehicles. To simplify the design and manufacture of the vehicles,
common components (such as booster engines) are being extensively used.
See figures 1 and 2 for depictions of the Atlas V and Delta IV launch
vehicle families and major components of the launch vehicles.
Figure 1: Atlas V and Delta IV Families of Launch Vehicles:
This figure is a picture of Atlas V and Delta IV families of launch
vehicles.
[See PDF for image]
Source: Copyright 2008 United Launch Alliance, LLC. All rights
reserved. Used with Permission.
Note: The Atlas V heavy-lift vehicle has not been built.
[End of figure]
Figure 2: Major Components of Atlas V and Delta IV Launch Vehicles:
This figure is a picture of major components of Atlas V and Delta IV
launch vehicles.
[See PDF for image]
Source: Copyright 2008 United Launch Alliance, LLC. All rights
reserved. Used with Permission.
[End of figure]
In 1995, the Air Force awarded $30 million firm fixed-price contracts
to four companies to define EELV system concepts and complete
preliminary system designs. In December 1996, two of those companies,
McDonnell Douglas (which became part of Boeing in 1997) and Lockheed
Martin, were each awarded an 18-month, $60 million cost-plus fixed-fee
contract to continue EELV design activities. At the end of their
contracts, DOD planned to down-select to one contractor with the most
reliable and cost-effective launch vehicle design. However, in November
1997 the Office of the Secretary of Defense (OSD) approved maintaining
competition between the two contractors. This decision was based on
forecasts that growth in the commercial space launch services market
would support more than one launch provider and translate into lower
costs for the government. More specifically, the strategy was designed
to:
* promote competition for launch services over the life of the program;
* encourage contractor investment and innovation for launch vehicle
development;
* procure launch services that include the vehicle, the lift-off, and
flight to orbit under one contract at a fixed price instead of
procuring launch vehicles and launch operations under two or more
separate contracts; and:
* leverage the benefits of a robust commercial marketplace.
In October 1998, the Air Force competitively awarded two $500 million
"other transaction agreements" to McDonnell Douglas before it merged
with Boeing and Lockheed Martin for the development of EELV families of
launch vehicles and launch infrastructure. Other transaction agreements
are transactions that are other than contracts, grants, or cooperative
agreements that are subject to federal laws and regulations applicable
to contracts, grants, or cooperative agreements. The Air Force used
other transaction agreements to provide flexibility in accommodating
the unique needs of the EELV program and the government. Simultaneous
with the Air Force's execution of the other transaction agreements, the
Air Force also competitively awarded firm fixed-price contracts, one
each to McDonnell Douglas (now Boeing) and Lockheed Martin, to procure
28 launches. At the time of award, the launch services contracts had a
combined value of $2.03 billion.
The robust commercial launch market upon which OSD based the EELV
acquisition strategy did not materialize. As a consequence, estimated
prices for future contracts for launch services increased, along with
the total cost of the program. DOD's December 2003 cost estimate for
the program showed an average procurement unit cost for EELV launch
services that was 77 percent higher than its 2002 cost estimate. This
resulted in a Nunn-McCurdy unit cost breach, which occurs when a major
defense acquisition program experiences a unit cost increase of at
least 15 or 25 percent.[Footnote 2] In April 2004, in response to the
unit cost breach, the Secretary of Defense sent Congress a
certification that the program was essential to national security and
established a new cost estimate. The new cost estimate increased the
launch service's average procurement unit costs by an additional 29
percent, due primarily to a reduction in the number of planned EELV
launches.
In March 2005, DOD revised the EELV acquisition strategy to reflect
changes in the commercial market assumptions since 1998 and the role of
the government as the primary EELV customer. The revised approach
involved a new contracting strategy consisting of two negotiated
contracts--EELV Launch Capability and EELV Launch Services--for each of
the two launch service providers. The EELV Launch Capability cost-plus
award fee contract is primarily for launch infrastructure, while the
EELV Launch Services fixed-price incentive fee contract is for launch
services. Under this contract approach, the government purchases launch
services through competitive negotiated acquisitions that provide more
government insight into contractor costs than contracts awarded under
commercial item acquisition procedures.[Footnote 3] This enables the
Air Force to collect previously unavailable certified cost or pricing
data. As with the original acquisition strategy, there are no
government ownership costs--the EELV program continues to provide
launch services and ownership of hardware and facilities is retained by
the contractors.
In May 2005, Boeing and Lockheed Martin announced plans to create a
joint venture that would combine the production, engineering, test, and
launch operations associated with U.S. government launches of Boeing's
Delta and Lockheed Martin's Atlas rockets. According to both
contractors, the joint venture, named the United Launch Alliance, would
reduce the cost of meeting critical national security and National
Aeronautics and Space Administration (NASA) expendable launch vehicle
needs. By joining together, the companies stated they could provide the
government with assured access to space at the lowest possible cost.
The ULA was structured as a 50-50 joint venture between Boeing and
Lockheed Martin--combining services provided separately by Boeing
Integrated Defense Systems' Expendable Launch Systems division and by
Lockheed Martin's Space Systems Company--for launches of each company's
respective rockets. Based upon initial contractor estimates, annual
savings to the government resulting from the joint venture were
expected to be approximately $100 million to $150 million.
The ULA joint venture--which was subject to government and regulatory
approval in the United States and internationally--drew initial
criticism from various organizations. The Federal Trade Commission
(FTC) was initially opposed to the ULA joint venture because of the
potential to limit competition in the launch industry--an industry with
already high barriers to entry. Other companies in the launch industry
also submitted formal concerns citing unfair competition. In response,
DOD stated that having two launch vehicle families would present unique
national security benefits that would outweigh the loss of competition.
FTC agreed to allow the joint venture to move forward under the
conditions of a consent order, which requires ULA to be
nondiscriminatory to other companies seeking launch services. FTC
provided preliminary approval of the consent order in October
2006,[Footnote 4] and the joint venture officially began operations in
December 2006. To ensure that ULA follows the provisions of the consent
order, the order requires the Secretary of Defense to appoint a
compliance officer, currently the Director of the National Security
Space Office (NSSO),[Footnote 5] to have broad investigative and
remedial powers to ensure compliance. In addition, the consent order
requires ULA to establish--no later than 24 months after the formation
of ULA, or December 2008--separate communication networks and
management information systems from its parent companies, Boeing and
Lockheed Martin.
The first Atlas V and Delta IV launches occurred in 2002. According to
the Air Force, all 21 Atlas V and Delta IV launches through June 2008
have been successful.[Footnote 6] DOD estimates its investment in the
EELV program through fiscal year 2008 to be about $8.2 billion, and
future investment to be about $27.5 billion.
DOD Faces Numerous Uncertainties in the EELV Program and ULA
Transition:
DOD faces numerous uncertainties in the EELV program and ULA transition
related to the reliability of the launch vehicles, the amount of work
remaining in the ULA transition, and program budget decisions based on
premature data. First, DOD does not yet have enough launch experience
with EELVs to demonstrate their reliability, which may be accomplished
by carrying out a set number of successful launches. While all Atlas V
and Delta IV operational launches conducted thus far have been
successful, launch vehicle design and production reliability have yet
be demonstrated due to the limited number of launches. Additionally,
DOD may be even less certain of EELV reliability as the program
progresses as plans to relocate production activities under the ULA
transition may undo some of the progress made toward demonstrating EELV
reliability. Second, DOD faces uncertainties relating to the cost,
schedule, and performance risks of the ULA transition, mainly because
the transition is still in its initial stages, and numerous unknowns
exist in areas such as business and production processes, personnel
management, and cost savings. Third, DOD does not know whether its EELV
program budget is sufficient to manage the program over the next 5
years because the Air Force accounted for anticipated savings from the
ULA transition in the program budget,[Footnote 7] even though savings
estimates were based on preliminary data.
DOD Does Not Yet Know if EELVs Are Reliable:
DOD does not yet have enough launch experience with EELVs to
demonstrate their reliability. According to the Air Force, since the
first launches in 2002, all 21 Atlas V and Delta IV operational
launches have been successful.[Footnote 8] However, these launches
represent experience with only 9 of 15 possible EELV configurations
across both families of launch vehicles. As depicted in table 1, only 1
EELV configuration has been launched more than 3 times. This is
significant because the number of times a configuration has been
successfully launched can be an indicator of a configuration's design
and production process reliability, according to an Aerospace
Corporation[Footnote 9] study of EELV launch risk.[Footnote 10]
Through a study of the causes of worldwide launch vehicle success and
failures over a 13-year period, the Aerospace Corporation developed a
widely accepted measurement for demonstrating launch vehicle design and
production process reliability called the "3/7 Reliability Rule."
According to this rule, if a failure occurs during a configuration's
first three launches, the problem is most likely a design issue, and if
a failure occurs after the third successful launch but before the
seventh, the problem is most likely a production process issue. Once a
launch vehicle configuration is launched successfully three times, its
design can be considered to have demonstrated maturity; similarly, if a
vehicle is successfully launched seven times, both the design and
production process maturity of that launch vehicle configuration can be
considered as having been demonstrated. Until a launch vehicle
configuration demonstrates maturity, problems encountered during
launches of these configurations are more likely to uncover fleetwide
design or production process issues that could cause significant cost
and schedule impacts to the program.
Table 1 shows that only 3 of the 15 EELV configurations have been
launched three or more times, and none has been launched seven times.
The EELV program office agrees that the 3/7 Reliability Rule is
applicable to EELV configurations, and program officials state that the
program will continue to apply the rule when assessing the requisite
level of quality assurance activities for each configuration. However,
according to OSD officials, the 3/7 Reliability Rule is only partially
applicable to EELV configurations because of the commonality among the
vehicles. For example, the same common core boosters are used on all
Atlas vehicles; therefore, according to these officials, reliability on
the Atlas launch vehicle line can be demonstrated through fewer
launches of individual configurations than the 3/7 Reliability Rule
dictates. The same is true of Delta launch vehicles. Nevertheless,
these officials agreed that inherent risk lies in the integration of
launch vehicle configurations, which can be lessened with each
consecutive flight.
Table 1: Evolved Expendable Launch Vehicle Configurations by Number of
Operational Launches:
1;
Launch vehicle name: Atlas V;
Launch vehicle name: 401;
Vehicle configuration[A]: 4 - 0;
Number of operational launches: 6.
2;
Launch vehicle name: Atlas V;
Launch vehicle name: 411;
Vehicle configuration[A]: 4 - 1;
Number of operational launches: 2.
3;
Launch vehicle name: Atlas V;
Launch vehicle name: 421;
Vehicle configuration[A]: 4 - 2;
Number of operational launches: 2.
4;
Launch vehicle name: Atlas V;
Launch vehicle name: 431;
Vehicle configuration[A]: 4 - 3;
Number of operational launches: 1.
5;
Launch vehicle name: Atlas V;
Launch vehicle name: 501;
Vehicle configuration[A]: 5 - 0;
Number of operational launches: 0.
6;
Launch vehicle name: Atlas V;
Launch vehicle name: 511;
Vehicle configuration[A]: 5 - 1;
Number of operational launches: 0.
7;
Launch vehicle name: Atlas V;
Launch vehicle name: 521;
Vehicle configuration[A]: 5 - 2;
Number of operational launches: 2.
8;
Launch vehicle name: Atlas V;
Launch vehicle name: 531;
Vehicle configuration[A]: 5 - 3;
Number of operational launches: 0.
9;
Launch vehicle name: Atlas V;
Launch vehicle name: 541;
Vehicle configuration[A]: 5 - 4;
Number of operational launches: 0.
10;
Launch vehicle name: Atlas V;
Launch vehicle name: 551;
Vehicle configuration[A]: 5 - 5;
Number of operational launches: 1.
11;
Launch vehicle name: Delta IV;
Launch vehicle name: Medium;
Vehicle configuration[A]: 4 - 0;
Number of operational launches: 3.
12;
Launch vehicle name: Delta IV;
Launch vehicle name: Medium+ (4,2);
Vehicle configuration[A]: 4 - 2;
Number of operational launches: 3.
13;
Launch vehicle name: Delta IV;
Launch vehicle name: Medium+ (5,2);
Vehicle configuration[A]: 5 - 2;
Number of operational launches: 0.
14;
Launch vehicle name: Delta IV;
Launch vehicle name: Medium+ (5,4);
Vehicle configuration[A]: 5 - 4;
Number of operational launches: 0.
15;
Launch vehicle name: Delta IV;
Launch vehicle name: Heavy[B];
Vehicle configuration[A]: Heavy;
Number of operational launches: 1.
Total;
Launch vehicle name: [Empty];
Vehicle configuration[A]: [Empty];
Number of operational launches: 21.
Source: GAO analysis of Air Force data.
[A] The first number refers to the diameter (in meters) of the
compartment on the launch vehicle that houses the payload and the
second number refers to the number of add-on solid rocket boosters
mounted to the primary booster. The heavy configuration refers to a
launch vehicle consisting of three primary boosters. See figs. 1 and 2
for depictions of the launch vehicles and their components.
[B] Does not include a 2004 Delta IV heavy demonstration launch which
did not deliver the payload to the proper orbit.
[End of table]
ULA Transition Activities May Undermine Progress Made in Demonstrating
EELV Reliability:
Transition activities under the ULA joint venture include moving
production equipment to different facilities and possibly changing
manufacturing processes, and could reverse some of the progress made
toward demonstrating production process maturity of those EELV
configurations launched previously. Specifically, part of the ULA
transition plan includes relocating production of the Atlas line of
launch vehicles from San Diego, California, and Denver, Colorado, to
Decatur, Alabama. According to Aerospace Corporation officials and a
2007 study by Booz Allen Hamilton,[Footnote 11] relocating highly
calibrated production equipment from one facility to another and
changing manufacturing processes increases risk to launch vehicle
quality and may detract from progress made toward demonstrating
production process maturity. This means that launch vehicle
configurations (shown in table 1) that have been successfully launched,
and have therefore begun the process of establishing production process
maturity, may lose some of their accumulated progress.
The ULA transition plan also allows for changing one of its key
manufacturing processes. While the process may be more effective, it
has not been used before in Atlas production, though it is currently
used in the production of Delta launch vehicles. According to ULA
officials, incorporating the new process on Atlas vehicles could
potentially reduce the need for some rework. Risk reduction testing
through July 2008 has shown the technical viability of the new process,
according to the EELV program office, and additional discussions with
ULA will determine whether ULA will pursue it on the Atlas line of
vehicles.
Given the limited EELV launches to date, and the possibility that some
progress toward demonstrating maturity may be lost due to relocation of
production or changes to the process, DOD can not be fully confident in
the design and production process maturity of most of the EELV
configurations. According to program officials, although some EELV
configurations may never demonstrate design or production process
maturity throughout the life of the EELV program because of their
limited demand, using data from launches of other configurations
provides insight into the reliability estimates for those vehicles that
have not yet flown.
DOD Faces Numerous Uncertainties about the Cost, Schedule, and
Performance Risks of the ULA Transition:
Any corporate consolidation on the scale of the ULA joint venture poses
challenges and a great deal of uncertainty. In addition to bringing
together diverse cultures and ways of doing business, such endeavors
may involve complicated personnel relocations, the closing and opening
of facilities, implementation of new information technology systems,
and rethinking of business processes, while at the same time
maintaining high-quality customer service. Because many ULA transition
activities have only recently begun or are still in the planning
stages, numerous uncertainties exist, many of which are inherent in the
transition itself. They span business and production operations,
personnel management, and cost savings, and have the potential to
significantly affect the cost of the transition, and ultimately, launch
vehicle quality. Following are a few examples of these uncertainties.
* In addition to possibly introducing a new manufacturing process as
stated earlier, ULA will incorporate Atlas manufacturing equipment into
the Decatur facility. Current plans include a physical reconfiguration
of the facility to accommodate the influx of Atlas production,
including the movement of interior walls and a change in production
flow for the Delta production line, both of which could affect launch
vehicle quality.
* As Atlas production operations move to Decatur, ULA will try to
relocate as many Atlas staff as possible. ULA's goal is to move roughly
30 percent of staff from San Diego and Denver to Decatur, but Defense
Contract Management Agency (DCMA) officials state that they expect it
will be a challenge for ULA to retain even 10 percent of targeted Atlas
staff. The loss of manufacturing knowledge likely to result from the
relocation of Atlas production operations is regarded by DOD, Aerospace
Corporation, and ULA officials as one of the top risks of the
transition because the loss of critical manufacturing skills and
process knowledge could ultimately affect launch vehicle quality. The
relocation of Delta engineering and program operations from Huntington
Beach, California, to Denver as part of the ULA consolidation may also
result in the loss of critical engineering skills, according to
Aerospace Corporation officials, as many experienced staff will not
remain under ULA employment. ULA offered positions in Denver to all of
its salaried employees in the Huntington Beach facility, and 41 percent
reportedly accepted the offer to relocate.
* Efforts to separate information technology and management networks
from parent companies and to set up accounting practices are proving
more complex and time consuming than originally anticipated and a
recent 10-month extension to the goal date of separation is expected to
result in higher-than-anticipated costs. As it moves toward separation,
ULA is buying infrastructure support services from its parent
companies, through "transition service agreements," and the additional
costs associated with prolonging the use of these agreements could
ultimately increase the cost of the separation effort. Furthermore,
financial repercussions are possible due to the large amount and
complexity of the work remaining to accomplish the FTC-mandated
information systems separation. The ULA recently requested a formal
extension to the FTC's specified deadline of December 2008, which was
granted by the NSSO Compliance Officer. The revised deadline for
separation is October 2009, representing a 10-month delay.
* ULA has provided DOD with a restructure proposal which projects the
cost and savings of the transition. According to DCMA, as a result of
review, the proposal currently meets federal statutory requirements for
the reimbursement of restructuring expenses. An advance agreement that
accompanies the proposal specifies the maximum amount of reimbursement
ULA may recover from DOD for restructuring expenses. DOD is currently
reviewing the proposal and advance agreement, in part, to determine if
they are based on sound business judgment and are equitable to all
parties. However, much of the transition has yet to occur, and some of
the transition activities that have begun are proving more complex than
anticipated. ULA estimates that consolidation of launch infrastructure
and operations under the ULA joint venture from fiscal years 2008
through 2012 will cost about $205 million, and it plans to recover much
of this expense from the government. According to federal statute, the
government may not reimburse a contractor--in this case ULA--for the
costs of the restructure, unless DOD determines in writing that (1) the
savings to DOD are at least twice the amount of the costs allowed, or
(2) the amount of projected savings to DOD will exceed the amount of
the costs allowed and that the business combination will result in the
preservation of a critical capability that otherwise might be lost to
the department.[Footnote 12] Should the cost of transition activities
exceed ULA's estimate, then according to DCMA, ULA may face pressure to
meet the requirements for reimbursement of restructure costs. We agree
with DCMA that if this happens, ULA may be at risk of making decisions
based more on cost considerations than on assuring quality within the
launch vehicle manufacturing process.
Table 2 provides a more complete description of ULA transition
uncertainties.
Table 2: Uncertainties of the ULA Transition:
ULA uncertainties: Business and production uncertainties;
Description:
* Implementation of information technology systems has experienced
multiple delays, and actual implementation time frames are unknown;
* Implementation of the Enterprise Resource Planning system is taking
significantly longer than expected, and DCMA expects deployment of this
system to cost nearly twice as much as originally estimated;
* According to DCMA, milestones for implementing the Manufacturing
Execution System, a part of the Enterprise Resource Planning system,
have slipped as much as 1 year because ULA's original schedule was too
aggressive;
ULA agrees schedule was inadequate;
* Several company stand-up activities have experienced delays and as of
September 2008 approval is still pending for;
* disclosure statement amendments outlining new accounting practices
and rate structures, and; a restructure proposal which finalizes the
transition plan and resulting cost savings;
* Separation of information technology and management networks from
parent companies is taking longer than planned, and has required a 10-
month extension to FTC's December 2008 deadline;
* Relocating Atlas production and reconfiguring Delta equipment may
reverse some of the progress made toward establishing production
process reliability;
* Modifications to the Decatur facility's building to accommodate Atlas
production could disrupt current processes for Delta production,
resulting in potential loss of progress toward demonstrating production
process reliability;
* Changing one of the key manufacturing processes on the Atlas family
of launch vehicles may reverse some of the progress made toward
establishing production process reliability.
ULA uncertainties: Personnel management uncertainties;
Description: * Loss of critical Atlas manufacturing and process
knowledge could result from inadequate personnel relocation and could
impact launch vehicle quality;
* Loss of engineering knowledge could result from impending separation
of senior Delta engineering staff from ULA, in turn impacting launch
vehicle quality;
* Combining two distinct corporate cultures while maintaining a
motivated, workforce may be difficult and morale could suffer.
ULA uncertainties: Cost savings uncertainties;
Description: * Many ULA activities have yet to begin; if ULA
underestimated resources needed for these activities, costs could
increase;
* Extending the FTC deadline for ULA separation of information
technology and management networks from parent companies could result
in prolonged need to purchase infrastructure support services from
parents, potentially increasing costs;
* Additional training costs could arise if ULA does not retain adequate
personnel following relocation of Atlas production;
* According to DCMA, if ULA does not pursue the new manufacturing
process on Atlas vehicles as originally planned, ULA will have to
replace the equipment currently used, potentially increasing cost, as
relocating this equipment to the Decatur facility is not an option;
* The EELV program office and DCMA are evaluating the qualification
requirements for the first Centaur tank produced following relocating
production to Decatur. One option could entail the production of a tank
solely for testing purposes, and if this option is executed, it would
deviate from ULA's baseline, which includes testing a tank intended for
operational use. This means production of the testing tank and the
associated testing regimen could increase costs.
Source: GAO analysis of data from DCAA, DCMA, the EELV program office,
and ULA.
[End of table]
DOD Adjusted the EELV Program Budget Using Premature Savings Estimates:
As described in table 2, despite the magnitude of activities that have
yet to be completed under the ULA transition, DOD has accounted for
over $100 million in savings in the EELV program budget, beginning in
2011. In 2005, before the joint venture was finalized, a small
contractor team that was formed to review the proposed joint venture
estimated the likely implementation costs and projected the savings
that would result. Preliminary calculations showed that the
consolidation of launch infrastructure and operations would yield up to
$150 million in savings per year, beginning in 2011. The Air Force
portion of these savings was projected at $105 million per
year.[Footnote 13] Program officials stated that while formulating the
program budget in 2006, prior even to final government approval of the
ULA joint venture, the Air Force was confident enough in the estimates
to subtract $105 million in savings per year from the EELV program
budget, to begin in 2011. Given the many activities remaining in the
transition, and the preliminary nature of the data used to calculate
the savings, it may have been premature for DOD to reflect the
anticipated savings in the EELV program budget. Furthermore, some
transition activities that have begun are expected to take longer than
originally planned, as discussed above. DOD officials stated that ULA's
current proposed savings estimate undergoing DOD review shows greater
annual savings than originally estimated. However, if the cost or
duration of the ULA transition is different than anticipated, actual
savings could differ from the predicted $105 million per year beginning
in 2011, leaving DOD at risk of EELV program budget shortfalls.
DOD Has Made Strides to Effectively Oversee and Manage the EELV Program
but Challenges Exist in These Areas:
In recent years, DOD has taken steps to effectively oversee and manage
the EELV program by closely monitoring the ULA transition and changing
its strategy for acquiring launch services. However, OSD's decision to
advance the program into the sustainment phase is limiting its ability
to provide effective oversight. In addition, the EELV program office
believes a shortage of staff with the right skills and experience is
limiting its ability to effectively manage the program. Air Force
staffing initiatives have done little to alleviate this shortage.
Multiple Offices within DOD Are Monitoring the ULA Transition:
DOD has taken positive steps to oversee the ULA transition. Various
organizations are monitoring the transition efforts and providing input
to OSD, the Air Force, and ULA on ways to mitigate risk. These efforts
range from activities by high-level OSD offices such as the Under
Secretary of Defense for Acquisitions, Technology and Logistics, down
to the day-to-day monitoring activities coordinated by the EELV program
office. For example, the Secretary of Defense assigned the Director of
the National Security Space Office as the FTC consent order compliance
officer to meet periodically with ULA to determine progress made and
formally report to FTC on an annual basis, while the EELV program
office holds regular meetings with ULA and provides progress updates to
Air Force leadership. DCMA conducts ongoing technical risk evaluations,
and advises the program office and ULA on a consistent basis of
relevant risk reduction measures. As table 3 shows, multiple
organizations coordinate with each other to monitor the transition.
Table 3: DOD Responsibilities in Monitoring the ULA transition:
Organization: National Security Space Office (NSSO);
Responsibilities:
* Verifies compliance with the FTC decision and order;
* Meets periodically with ULA to determine progress made;
* Reviews written reports by Lockheed Martin, Boeing, and ULA showing
progress made in achieving compliance with the FTC consent order;
* Reports conclusions to the FTC annually.
Organization: Defense Contract Management Agency (DCMA);
Responsibilities: * Performs the majority of transition monitoring
efforts, conducts surveillance through communications with ULA,
conducts risk assessments, and documents and reports results of its
evaluations to the program office;
* Participates in periodic Executive Board meetings to review progress
of transition;
* Provides status updates and raises critical issues to DCMA
Headquarters for guidance;
* Set up "Red Teams" consisting of DCMA officials at ULA facilities in
Decatur, Alabama, San Diego, California, and Denver, Colorado, to
monitor transition operations;
* Makes determinations and recommendations including, but not limited
to, indemnification packages, cost accounting system acceptability,
novation[A] agreements, and restructure proposal.
Organization: EELV Program Office;
Responsibilities: * Reviews documents such as indemnification packages,
novation agreements, and the restructure proposal and coordinates with
DCMA and other appropriate offices;
* Holds regular meetings with ULA to obtain updates of transition;
* Provides progress updates to Air Force leadership in Executive Board
meetings;
* Monitors, with Aerospace Corporation assistance, the risks of the ULA
transition to launch success.
Organization: Defense Contract Audit Agency (DCAA);
Responsibilities: * Supports DCMA and the program office by reviewing
and providing audit findings on ULA proposals.
Organization: Office of the Under Secretary of Defense for
Acquisitions, Technology and Logistics[B];
Responsibilities: * Approves final restructure proposal.
Source: GAO presentation of DOD data from DCAA, DCMA, EELV program
office, and NSSO.
[A] With respect to government contracts, a novation agreement is a
legal instrument executed by the contractor (transferor), successor in
interest (transferee), and government, and by which, among other
things, the transferor guarantees performance of the contract, the
transferee assumes all obligations under the contract, and the
government recognizes the transfer of the contract and related assets.
FAR 2.101.
[B] The Under Secretary of Defense for Acquisitions, Technology and
Logistics serves as an advisor to the Secretary of Defense for all
matters involving acquisitions, technology, and logistics.
[End of table]
DOD officials stated that frequent coordination and communication
between the contractor and the government and among the various offices
within DOD have ensured a good understanding of progress and issues to
date. For example, according to a DCMA senior official, DCMA--which is
responsible for many of the transition monitoring efforts--actively
participates in Executive Board meetings where all issues pertaining to
the transition are raised. The Executive Board consists of senior
representatives of several organizations and is chaired by the Air
Force Program Executive Officer for Space, who is responsible for all
acquisition programs at the Air Force Space Command's Space and Missile
Systems Center. The EELV program office, DCMA, NASA, DCAA, National
Reconnaissance Office (NRO), and the consent order compliance team are
all members of the Executive Board, which convenes approximately
quarterly to discuss transition issues, discuss major obstacles, and
collectively resolve them. For example, at an Executive Board meeting
earlier this year, it was noted that the ULA transition efforts
required a detailed master schedule in order to review all schedules
for each critical work stream. Consequently, the transition plans now
include a much more detailed master schedule that has made it easier to
track all critical work activities.
OSD's Capability to Provide Effective Oversight Hampered by Sustainment
Decision:
While DOD has taken positive steps to oversee and manage the ULA
transition, another action within DOD will make it more difficult to
monitor the ongoing progress of the EELV program. OSD's decision to
advance the EELV program from the development and production phases,
which began in 1998, to the sustainment phase will significantly reduce
EELV's reporting requirements to OSD, such as program cost and status
information, limiting its own ability to oversee the program.[Footnote
14] According to OSD, the program was placed in sustainment in August
2007 because OSD had determined EELV had completed its development and
production phases. However, according to OSD officials, the sustainment
decision may have been influenced by other factors such as avoiding
imminent Nunn-McCurdy unit cost breaches and possible subsequent
certification efforts that invariably would have led to decisions to
continue DOD's investment in the EELV program. According to these
officials, in 2006 the program was facing one or more possible Nunn-
McCurdy unit cost breaches, as a result of unplanned cost increases
resulting from the change in the acquisition strategy and a decrease in
the demand for EELV launches (factors include satellite program
development delays and cancellations, and operational satellites
lasting longer than anticipated). These officials stated that even
given the anticipated cost savings associated with the ULA joint
venture, the program would still have faced a unit cost breach.
When the program was placed into sustainment, however, certain program
cost and status information was no longer required because sustainment
programs, having completed their development and production phases,
generally do not generate the types and kinds of information
traditionally produced during development or production. Since this
information is generally not produced, program offices are not required
to report it to OSD or Congress. For example, the EELV program will no
longer be required to submit to OSD a quarterly cost and status report
called the Defense Acquisition Executive Summary (DAES). The DAES is a
detailed, multipart document that serves as an early-warning report to
OSD by describing actual program problems, or warning of potential
program problems, and describing mitigating actions taken or planned.
According to DOD guidance, the DAES report contains the minimum
necessary information for oversight purposes. (See app. II for a more
extensive list of what the DAES contains.) Table 4 lists other OSD
oversight reporting requirements that do not apply to sustainment
programs. According to officials in the program office and the office
of the Assistant Secretary of Defense for Networks and Information
Integration, the EELV program is still required to prepare and submit
annual budget request documentation and congressional program status
briefings, and the program office still reviews earned value management
data and produces monthly program cost and status reports for the Air
Force Program Executive Officer for Space. Additionally, the OSD
officials stated that while at this time there were no plans to
continue performing oversight analysis of the data required by the
reports we cite, they agreed that finding a way to continue reporting
these data would be valuable.
Table 4: OSD Program Cost and Status Reporting Requirements Not
Applicable to Programs in the Sustainment Phase:
Reporting requirement: Defense Acquisition Executive Summary (DAES);
Description: At a minimum, the DAES should report program assessments,
unit costs, and current estimates. It should also report the status of
exit criteria and vulnerability assessments;
Primary user: OSD.
Reporting requirement: Nunn-McCurdy unit cost tracking provisions;
Description: The Secretary of Defense is required to notify Congress
when a major defense acquisition program exceeds certain thresholds;
Primary user: Congress.
Reporting requirement: Updated program life-cycle cost estimate;
Description: Contains summary of program office cost estimate and Cost
Analysis Improvement Group independent cost estimate and compares or
reconciles the two estimates, includes assessment of program risks,
compares (time-phased) Cost Analysis Improvement Group cost estimate to
current program funding, and makes recommendations concerning program
funding;
Primary user: OSD and program office.
Reporting requirement: Earned value management (EVM) data;
Description: Contains pertinent data that combine measurements of
contractor technical performance, such as accomplishment of planned
work, schedule performance, and cost performance;
Primary user: OSD and program office.
Reporting requirement: Selected Acquisition Report (SAR);
Description: Submitted to Congress, contains details on major defense
acquisition program cost, schedule, and performance changes on a
periodic basis, summarizing the latest estimates of a program's cost,
schedule, and technical status;
Primary user: Congress.
Source: GAO presentation of DOD data.
[End of table]
In addition, a new independent life-cycle cost estimate was not
required for the program when it transitioned into the sustainment
phase. As a result, OSD will not be able to rely on an updated life-
cycle cost estimate for making long-term investment planning decisions.
According to DOD officials, the latest life-cycle cost estimate for the
program is not realistic, due in part to an optimistic launch vehicle
production rate. Additionally, Air Force Space Command recently
extended the life of the program by 10 years to fiscal year 2030,
making the current life-cycle cost estimate--which only includes costs
up until 2020--even less realistic. An updated independent life-cycle
cost estimate for the program (developed once the ULA joint venture
transition is completed and periodically updated thereafter to account
for significant changes, such as fluctuations in launch vehicle demand)
could help DOD to establish relevant and reliable baselines for the
program as it moves forward and increase congressional insight into
program costs. As we reported in 2006, costs for DOD space acquisitions
over the past several decades have been consistently underestimated--
sometimes by billions of dollars--because DOD typically does not update
life-cycle cost estimates frequently enough to account for significant
events and changes.[Footnote 15] As we reported, at times the only
mechanism that forced an updated estimate was DOD policy that the OSD
Cost Analysis Improvement Group support the Nunn-McCurdy certification
process for programs breaching a certain unit cost threshold. Prior to
the August 2007 OSD decision to move EELV into the sustainment phase,
the Air Force revised its acquisition strategy in part to obtain
greater insight into contractor performance.
DOD Expanded Its Program Management Responsibilities:
As part of its effort to increase its oversight and gain program
knowledge, in 2005 the Under Secretary of the Air Force expanded the
program office's management responsibilities when he approved a new
acquisition strategy for the EELV program. Under the previous
acquisition strategy, the government had less insight into contractor
performance because it did not collect or have access to cost or
pricing data and contractor performance data, making program costs
difficult to estimate and limiting congressional insight into the
program. Additionally, due to the size of the program office, there
were limited opportunities to review and provide comments on launch
vehicle technical design and production. The new acquisition strategy,
"Buy 3," allows the government significantly more insight into the
contractor's technical, cost, and schedule performance information
because of the change in contract type and contracting strategy. For
example, program officials told us that the launch capabilities
contract now requires full earned value management[Footnote 16] reviews
that assess cost, schedule, and performance. In addition, contractor
performance is more thoroughly evaluated and documented through
assessment reports. Table 5 summarizes some of the additional primary
program office responsibilities under the new acquisition strategy.
Table 5: Additional EELV Program Office Responsibilities Resulting from
New Acquisition Strategy:
Program office responsibilities: Award fee criteria determination and
evaluation;
Sets criteria for award fees including fee determination, evaluates
contractor performance, and recommends the amount of the award fee.
Program office responsibilities: Earned value management (EVM) reviews;
Reviews new data requirements and cost data reports and complies with
defense acquisition regulations for EVM data monitoring requirements.
Program office responsibilities: Report reviews/new reporting
requirements;
Reviews contractor cost data reports that include financial information
on the costs that DOD contractors will incur while working on the
program; Generates a Contractor Performance Assessment Report that
assesses and records a contractor's performance on a given contract
during a specific period; each assessment is based on objective facts
and supported by program and contract management data, such as cost
performance reports, quality reviews, etc.
Program office responsibilities: Integrated business reviews;
Attends meetings to discuss cost performance and business issues
resulting from EVM data reviews.
Program office responsibilities: Contract negotiations (the procuring
contracting officer, who resides in the program office, performs these
activities);
On behalf of the government, conducts complex contract negotiations for
both Atlas and Delta launch vehicles whenever a new launch is ordered
and/or major changes are made to the infrastructure contracts; Is
responsible for all oversight operations at the launch ranges including
operations and maintenance associated with facilities and facility
upgrades; consequently, the program office must validate requirements
for facility maintenance and upgrades and determine the roles and
responsibilities for paying for these activities including:
* determining cost-sharing responsibilities because facilities are used
for both commercial and governmental purposes, and;
* addressing issues such as how to provide additional facilities for
the contractor's use and making modifications to contractor property
(leaky roofs, rusting tooling, etc.)
Program office responsibilities: New entrant process;
Certifies whether launch providers other than ULA meet program
requirements, including key performance parameters and cost savings,
via formal reviews of design, cost, and flight data.
Engineering responsibilities: Pedigree reviews;
Reviews vehicle and component data packages to ensure that the subject
articles have been manufactured and tested in accordance with approved
processes.
Engineering responsibilities: Design reviews;
Conducts many design engineering analysis evaluations (as resources
permit) due to earlier nonparticipation in launch vehicle design,
larger number of launch vehicle configurations than heritage launch
vehicles, and executing first-time satellite-to- launch vehicle
integration activities.
Engineering responsibilities: Flight worthiness certification;
Evaluates systems analyses, mission design and integration tasks,
unplanned technical issue resolution, etc. to support certification of
launch vehicle as ready to launch.
Engineering responsibilities: Launch Operations;
In conjunction with launch base personnel, conducts day-of-launch
operation to execute mission assurance activities leading to launch and
deployment of DOD payloads.
ULA transition responsibilities: Monitoring teams;
Will monitor the technical transitions from both California to Colorado
and from California and Colorado to Alabama.
ULA transition responsibilities: Senior leadership involvement;
Are responsible for coordinating key transition goals such as the
approval of the restructure proposal by the Under Secretary of Defense
for Acquisition, Technology and Logistics, novation of contracts, and
negotiation of leases.
Source: GAO presentation of EELV program office data.
[End of table]
Staffing Shortage Impacts Program Office Ability to Manage the EELV
Program:
Although the increase in program management responsibilities has
positioned the program office to better manage the EELV program,
program officials told us that staffing in the EELV program office has
not grown commensurately. As a result, they said the program now faces
a shortage of government personnel with the right skills and experience
to fulfill these new responsibilities. Program officials told us the
staff shortage is a result of funding limitations, including the recent
"force shaping" initiative to reduce Air Force military positions, as
well as overall Air Force-wide recruiting challenges. According to
program officials, this shortage of staff has hampered the program
office's ability to complete the current workload. Currently, the
program office has approximately 211 military and civilian personnel,
as well as over 290 contractor staff.[Footnote 17] However, given the
change to the acquisition strategy, the program office has found it
challenging to complete all tasks requiring a greater degree of
specialized skills.
According to program officials, personnel shortages have occurred
particularly in highly specialized areas such as avionics and launch
vehicle groups. For example, program officials stated that 7 of 12
positions in the engineering branch for the Atlas group are now vacant.
These engineers work on issues such as reviewing components responsible
for navigation and control of the rocket. As table 6 shows, only half
the government jobs in some key areas were projected to be filled.
Table 6: Summer 2008 Projected Staffing Levels within the EELV Program
Office (as of March 2008):
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Program Management;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 86;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 28;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 67.4%.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Program Management: Commander Wing;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 5;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 2;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 60.0.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Program Management: Management Operations;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 4;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 1;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 75.0.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Program Management: Program Control;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 39;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 16;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 59.0.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Program Management: Contracting;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 38;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 9;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 76.3.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Engineering;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 26;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 13;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 50.0%.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Atlas Group;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 32;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 16;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 50.0%.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Atlas Group: Engineering;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 12;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 7;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 41.7.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Atlas Group: Integration;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 11;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 7;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 36.4.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Atlas Group: Mission Support;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 7;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 2;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 71.4.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Atlas Group: Management;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 2;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 0;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 100.0.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Delta Group;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 37;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 17;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 54.1%.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Delta Group: Delta IV;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 12;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 4;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 66.7.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Delta Group: Delta II;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 11;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 6;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 45.5.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Delta Group: Delta Program Integration;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 13;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 7;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 46.2.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Delta Group: Management;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 1;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 0;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 100.0.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Space Lift Range Groups;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 129;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 26;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 79.8%.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Space Lift Range Groups: Spacelift Range Group
(Los Angeles, AFB);
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 31;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 14;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 54.8.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Space Lift Range Groups: Spacelift Range Group-
Eastern Range (Patrick AFB, FL);
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 31;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 2;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 93.5.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Space Lift Range Groups: Spacelift Range Group-
Western Range (Vandenberg AFB, CA);
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 27;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 7;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 74.1.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Space Lift Range Groups: Range Sustainment
(Peterson AFB, CO);
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 40;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 3;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 92.5.
Launch & Range Systems Wing staffing profile (as of March 2008):
Program office group: Total;
Launch & Range Systems Wing staffing profile (as of March 2008):
Authorized: 310;
Launch & Range Systems Wing staffing profile (as of March 2008):
Vacant: 100;
Launch & Range Systems Wing staffing profile (as of March 2008): %
Staffed: 67.7%.
Source: GAO analysis of EELV program office data.
[End of table]
In addition to the perceived shortage of skilled personnel, turnover in
leadership could also hamper the program office's ability to
effectively manage the program. As GAO recently reported in
congressional testimony on accountability issues in the acquisition
environment, lack of program management tenure makes it difficult to
hold program officials accountable for the business cases they are
entrusted to manage and deliver.[Footnote 18] According to the program
office, the EELV program has recently experienced a loss in leadership,
including the Wing Commander, or program director, responsible for the
program office; the Delta Group Commander; the ULA Formation Program
Manager; and the ULA Formation Contract Manager. While the Wing
Commander has been replaced and the previously vacant Vice Commander
position has been filled, there remains the loss of some of the most
experienced personnel familiar with program execution and critical
issues such as the ULA transition and current contract negotiations,
according to the program office. Since the inception of the EELV
program, the tenure for an EELV program director has ranged from 8
months to 49 months (the current program director has been with the
program since June 2008), as shown in figure 3. With the exception of
the first program director, this tenure falls short of DOD's workforce
policy, which provides that the tenure period for program managers of
major defense acquisition programs is the program milestone closest to
4 years or as tailored by the acquisition executive based on unique
program requirements[Footnote 19].:
Figure 3: Tenures of EELV Program Directors from June 1995 to the
Present:
This figure is a bar graph showing tenures of EELV program directors
from June 1995 to the present. The X axis represents the program
tenure, and the Y axis represents the months.
Program Tenure: June 1995-July 1999;
Months: 49.
Program Tenure: July 1999-May 2002;
Months: 34.
Program Tenure: May 2002-Dec 2003;
Months: 19.
Program Tenure: Dec 2003-Dec 2005;
Months: 24.
Program Tenure: Dec 2005-August 2006;
Months: 8.
Program Tenure: August 2006-June 2008;
Months: 22.
Program Tenure: June 2008-present;
Months: 3.
[See PDF for image]
Source: GAO analysis of EELV program office data.
[End of figure]
While program officials could not specifically quantify the amount of
work not being performed, they stated that the staffing shortage has
affected the program's ability to complete programmatic and
administrative tasks on time. According to program officials, the EELV
program is also experiencing an increase in unplanned engineering work,
which is considered critical to launch success and therefore
prioritized over other tasks. These officials stated a portion of
unplanned work has increased as a result of the lack of DOD's
involvement in design engineering reviews early in the EELV program
(during the design phase of the program under the previous acquisition
strategy when DOD had limited oversight). For example, the program
office became aware that the design assumptions for a Centaur inter-
stage adapter[Footnote 20] were flawed because they were based on old
assumptions and no longer valid. As a result, the program office had to
redesign the adapter, which currently does not meet load-carrying
requirements. This redesign could have been averted had the Air Force
been involved sooner, according to Air Force officials. In essence, the
program has been trying to "catch up" by conducting engineering
analyses or reviews that would have typically been conducted much
earlier during the EELV design phase, which began in 1998 and ended in
2003. Additionally, program officials stated that an increase in the
number of first-time integrations of new generations of satellites to
EELVs adds to the number of design issues the program needs to address.
Usually, the EELV program has been able to avoid delaying launches in
order to complete unplanned work because the schedules for the programs
developing the launch vehicle payloads have been delayed as a result of
development difficulties. However, a launch delay resulting from the
need to complete unplanned work has recently occurred. Specifically, an
anomaly experienced during a June 2007 Atlas V launch resulted in a 2-
month delay to the subsequent launch of another DOD satellite. Without
enough personnel to complete the work, program officials are concerned
that the EELV program may soon face additional launch delays.
Air Force Initiatives Have Not Alleviated the EELV Program's Staffing
Shortages:
Air Force officials reported that recent Air Force personnel reductions
had a disproportionate impact on the EELV program and its acquisition
center. Beginning in 2006, the Air Force cut over 40,000 positions
across the board in an effort to save money under Program Budget
Decision (PBD) 720.[Footnote 21] In addition, PBD 720 directed
reductions to staffing levels of contractors that provide assistance to
acquisition programs, particularly federally funded research and
development centers (FFRDC) and systems engineering and technical
assistance (SETA) contractors. Senior officials at the Manpower and
Personnel Directorate at the Air Force Space and Missile Systems Center
(SMC)--where EELV is managed--told us that PBD 720 affected SMC
disproportionately because it relied heavily on FFRDC and SETA
contractors to provide an array of services. According to SMC
officials, PBD 720 may have further disproportionately affected the
EELV program because it relied more heavily on uniformed personnel and
assistance contractors than other space programs at SMC. EELV program
officials told us they are in the process of awarding an engineering
contract for technical assistance, but PBD 720 now limits the amount of
contractor technical assistance the program can obtain due to funding
limitations. Figure 4 shows how the program had increasingly relied on
the Aerospace Corporation--its largest support contractor--for EELV
engineering work over the past 10 years. This increase is largely due
to efforts to prevent launch failures of legacy vehicles which occurred
shortly after the EELV program was initiated. As figure 4 indicates,
Aerospace Corporation's assistance to EELV, as shown by the number of
personnel, increased slightly after 2006 but leveled off by 2008 as
funding became more limited.[Footnote 22]
Program officials cautioned that although Aerospace Corporation
personnel have assisted with technical tasks the program office can not
complete due to the staff shortage, the program can not rely on
contractors to perform inherently governmental functions.[Footnote 23]
As we reported in September 2007, an increasing reliance on contractors
to perform services for core government activities challenges the
capacity of federal officials to supervise and evaluate the performance
of these activities.[Footnote 24] As one program official noted,
mission assurance is an inherently governmental function,
accountability for which should fall solely on the government.
Figure 4: Aerospace Corporation Assistance Provided to the EELV Program
Office:
This figure is a line graph showing aerospace corporation assistance
provided to the EELV program office. The X axis represents the years,
and the Y axis represents the number of personnel.
Year: 1998;
Number of personnel: 22.2.
Year: 1999;
Number of personnel: 45.8.
Year: 2000;
Number of personnel: 71.8.
Year: 2001;
Number of personnel: 117.7.
Year: 2002;
Number of personnel: 162.1.
Year: 2003;
Number of personnel: 189.1.
Year: 2004;
Number of personnel: 213.5.
Year: 2005;
Number of personnel: 228.6.
Year: 2006;
Number of personnel: 270.5.
Year: 2007;
Number of personnel: 294.5.
Year: 2008;
Number of personnel: 292.
[See PDF for image]
Source: GAO analysis of program office data.
[End of figure]
Program officials stated that Air Force-wide efforts to address
staffing shortages have not alleviated the EELV program's staffing
shortages. Among these efforts was an attempt to counter the impacts of
PBD 720 by converting some military positions to civilian positions--a
move that would allow some of the military personnel who accepted the
Air Force buy-out and left the service to return to the program as
civilians. For example, when the Air Force initiated voluntary
reductions by offering buy-outs to officers, 142 officers at SMC
accepted. When SMC attempted to refill these positions as civilian
positions, only 15 percent of the officers accepted the option to be
rehired as civilians. In addition, the hiring process often takes too
long to process such conversions, according to the program office. For
example, when the EELV program was given eight military positions to
convert to civilian positions, the program office lost all the
candidates for these positions. In the time it took the program to
create the new civilian positions, the candidates had found jobs
elsewhere. (In a recent testimony, the Under Secretary of Defense for
Acquisition, Technology and Logistics acknowledged that the hiring
process takes too long and has contributed to the problem of retaining
competent people in the acquisition field.) In addition, program
officials said it was difficult to recruit and retain civilians in the
Los Angeles, California, area given its high cost of living and its
many opportunities for government contractor work for greater pay.
Moreover, although manpower studies conducted by various DOD
organizations have shown Air Force-wide staffing shortfalls, EELV
program officials contend that these studies have not led to actions
directed towards alleviating these shortfalls.
Conclusions:
Early in the EELV program, DOD was faced with two primary challenges:
(1) reducing technical, design, and production risk to a point where it
could avoid problems that caused previous, costly launch failures and
(2) adopting an appropriate acquisition and supplier strategy that
would help contain costs. By adding technical staff--primarily FFRDC--
and strengthening quality assurance practices, DOD largely met the
first challenge and has subsequently enjoyed a long string of
successful launches though more experience is needed to fully prove
reliability. At the same time, however, costs have increased
significantly because assumptions supporting the first acquisition
strategy never materialized and because DOD never pared down to one
supplier as originally envisioned.
With the transition to ULA and the new acquisition strategy, it is
hoped that cost savings can be achieved and the government can have
more insight into cost drivers as well as technical risks. DOD has
recognized that the transition itself presents enormous challenges and
adds risk to the program by coordinating oversight efforts and
expanding the program office's role in oversight. At the same time,
however, OSD has limited these positive steps by designating EELV as
being in sustainment, which effectively stops the formal transmittal of
research and development and procurement data on program costs and
vulnerabilities to entities involved in overseeing the program,
including Congress. The Air Force may have also limited these steps by
constraining program office staff. Given the broad span of changes
affecting the program, the high cost of launching military and other
government spacecraft, and assumptions that have been made about cost
savings that will result from the consolidation of suppliers, DOD
cannot afford to pare back acquisition and supplier oversight on any
front.
Recommendations for Executive Action:
To improve DOD's ability to effectively oversee and manage the EELV
program, we recommend that the Secretary of Defense direct the Under
Secretary of Defense for Acquisition, Technology and Logistics to:
* require the program to continue to provide OSD, and Congress as
appropriate, with updates of program cost and status information using
criteria that apply to major research and development and procurement
programs; and:
* direct the Director of the Cost Analysis Improvement Group to conduct
an independent life-cycle cost estimate of the EELV program once the
ULA joint venture transition is completed, and periodically update the
estimate to account for significant program changes.
Additionally, we recommend that the Secretary of Defense direct the
Secretary of the Air Force to assess the EELV program's staffing needs,
including those that are inherently governmental, to confirm whether
shortages exist, and if they do, develop a plan for addressing them.
Agency Comments:
We provided a draft of this report to DOD for review and comments. DOD
concurred with our findings and recommendations. DOD's response can be
found in appendix I.
Scope and Methodology:
To determine what uncertainties the Department of Defense (DOD) faces
in the Evolved Expendable Launch Vehicle (EELV) program and United
Launch Alliance (ULA) transition and to assess how DOD is positioned to
manage and oversee the EELV program, we reviewed and analyzed documents
from and interviewed officials in Washington, D.C., at the Office of
the Undersecretary of Defense for Acquisition, Technology and
Logistics; Office of the Director, Program Analysis and Evaluation;
Office of the Secretary of Defense, Cost Analysis Improvement Group;
Congressional Budget Office; and Federal Trade Commission. We also
reviewed and analyzed documents from and interviewed officials in
Virginia at the Office of the Assistant Secretary of Defense for
Networks and Information Integration; Office of the Under Secretary of
the Air Force for Space Acquisitions; Office of the Joint Chiefs of
Staff; Office of the Director, Operational Test and Evaluation; and
Orbital Sciences Corporation. In addition, we reviewed and analyzed
documents from and interviewed officials at Air Force Space Command and
Booz Allen Hamilton, Peterson Air Force Base, Colorado; the Launch and
Range Systems Wing, Air Force Space and Missile Systems Center, Los
Angeles Air Force Base, California; Defense Contract Audit Agency, Fort
Belvoir, Virginia, Huntington Beach, California, and Littleton,
Colorado; Defense Contract Management Agency, Springfield, Virginia,
Lakewood and Littleton, Colorado, and Decatur, Alabama; National
Aeronautics and Space Administration, Washington, D.C. and Cape
Canaveral Air Force Station, Florida; National Reconnaissance Office,
Aerospace Corporation, and Space Exploration Technologies, El Segundo,
California; National Security Space Office, Washington, D.C. and El
Segundo, California; U.S. Strategic Command, Offutt Air Force Base,
Nebraska; Microcosm, Inc., Hawthorne, California; and United Launch
Alliance, Littleton, Colorado and Decatur, Alabama.
We will send copies of the letter to the Department of Defense and
other interested congressional committees. We will also make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Should you or your staff have any questions on matters discussed in
this report, please contact me at (202) 512-4841 or chaplainc@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Principal
contributors to this report were Art Gallegos, Assistant Director, Greg
Campbell, Jeremy Cockrum, Claire Cyrnak, Tim DiNapoli, Gayle Fischer,
Laura Hook, Rich Horiuchi, Ken Patton, Sylvia Schatz, Josie Sigl, and
Hai Tran.
Signed by:
Cristina Chaplain:
Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Comments from the Department of Defense:
Office Of The Assistant Secretary Of Defense:
6000 Defense Pentagon:
Washington, DC 20301-6000:
Networks And Information Integration:
September 16, 2008:
Ms. Cristina Chaplain,
Director:
Acquisition and Sourcing Management:
U.S. Government Accounting Office:
441 G Street, N.W.:
Washington D.C. 20548:
Dear Ms. Chaplain,
Enclosed is the Department of Defense (DoD) response to the Government
Accounting Office (GAO) draft report (GAO-08-1039), "Defense
Acquisitions: Uncertainties in the Evolved Expendable Launch Vehicle
Program Pose Management and Oversight Challenges," dated August 14,
2008 (GAO Code 120652).
DoD appreciates the opportunity to review and comment on this draft
report. After reviewing the draft report, DoD concurs with all three
recommendations. Point of contact for this draft report is Colonel
Thomas Doyne at 703-607-1091.
Signed for:
Dr. Steven Huybrechts:
Director, Space Programs & Policy
Enclosure:
As Stated:
Government Accounting Office (GAO) Draft Report Dated August 14, 2008
GAO-08-1039 (GAO CODE 120652):
"Defense Acquisitions: Uncertainties In The Evolved Expendable Launch
Vehicle (EELV) Program Pose Management And Oversight Challenges":
Department Of Defense (DoD) Comments To The GAO Recommendation:
Recommendation I: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics to require the EELV program to continue to provide the Office
of the Secretary of Defense and Congress, as appropriate, with updates
of program cost and status information using criteria that apply to
major research and development and procurement programs. DOD RESPONSE:
Concur.
Recommendation 2: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics to direct the Director of the Cost Analysis Improvement Group
to conduct an independent lifecycle cost estimate of the EELV program
once the United Launch Alliance joint venture transition is completed
and periodically update the estimate to account for significant program
changes.
DOD Response: Concur.
Recommendation 3: The GAO recommended that the Secretary of Defense
direct the Under Secretary of the Air Force to assess the EELV
program's staffing needs, to include those that are inherently
governmental, to confirm whether shortages exist, and if they do.
develop a plan for addressing them.
DOD Response: Concur. Attachment
[End of section]
Appendix II: Program Cost, Schedule, and Performance Status Information
Included in Defense Acquisition Executive Summary:
The Defense Acquisition Executive Summary (DAES) is a detailed,
multipart document which reports program information and assessments
and serves as an early-warning report to the Office of the Secretary of
Defense by describing actual program problems, or warning of potential
program problems, and describing mitigating actions taken or planned.
According to Department of Defense guidance, the DAES report contains
the minimum necessary information for oversight purposes. The DAES
consists of eight sections. Table 7 contains a description of each of
the sections.
Table 7: Oversight Information Contained in Defense Acquisition
Executive Summary Reports:
Section: Executive summary;
Description: Provides a summary-level assessment of and key information
on the status of the program, including a synthesis of the issues that
follow in the report (e.g., design problems exist that affect cost,
schedule, and test and evaluation). This section also provides
information on general program status (e.g., acquisition category and
date and type of next major program oversight review) and the program's
cost, schedule, and performance baseline history.
Section: Assessments;
Description: Represents the program manager's best independent judgment
on program performance and serves an early indication of the risk in
various aspects of the program. Using a color-coded rating system, the
program manager applies performance ratings against the following
indicators:
* Performance characteristics: assesses the status of a broad range of
mission performance criteria, including, but not limited to, essential
physical, technical, operating, software, reliability, availability,
maintainability, durability, manpower, training system effectiveness,
and other similar characteristics needed to meet field or fleet needs;
* Test and evaluation: assesses the status of system test planning,
system testing, test article availability, test support, test center
and range availability and funding, test success, and achievement of
test schedules;
* Logistics requirements and readiness objectives: assesses initiatives
to achieve or maintain logistics management and support requirements
(e.g., manpower, support equipment, training) and the ability of a
system to undertake a specified set of missions or capabilities at
planned peacetime and wartime utilization rates (e.g., for a missile
system, established time to launch; for aircraft, previously agreed
upon number of planes ready for take-off or time for take-off);
* Cost performance: assesses the program's cost performance status
based on performance to date, including the executability of the
program within approved resources (based on cost and schedule
performance status of the program's major contracts and the probable
effects of those contracts on cost estimates for future effort on the
program); and considers potential unit cost reporting threshold
breaches and status of cost reduction or cost/performance tradeoff
initiatives;
* Funding: assesses the overall adequacy and availability of programmed
and budgeted funds by fiscal year, including effect of potential
funding shortfalls, reductions or nonavailability due to congressional,
Office of the Secretary of Defense, component, and/or cooperative
allied country actions; program areas not funded to the approved
acquisition program baseline; and whether the program is executable to
the baseline, or if actual obligation rates are as planned;
* Schedule performance: compares program's overall schedule performance
and deliveries to date with program schedule milestones and annual
delivery schedules; and considers the effect of schedule variations on
major decision points, operational capability dates, and whether any
major component of the system being developed or procured is not
meeting the planned schedule;
* Contracts: reviews all aspects of contract performance including
technical and schedule achievement, cost performance, deliveries,
contract change proposals and negotiations, and quality; identifies
potential contract adjustments and their impact on ability to properly
execute the contract; assesses all significant aspects of the contract
award schedule, including definitization dates; and considers the
effect of delays that threaten to extend major contract award dates
that are on the critical path of program master schedule activities or
that threaten to expose the government to unnecessary cost risk;
* Production: assesses the overall status of the planning and execution
of production and continuous process improvement activities, including
all hardware and software aspects of the program; and considers key
production requirements such as configuration management, technical
data package availability, contractor capital investment, material
availability, surge and mobilization planning, and capacity to meet
delivery requirements;
* Management structure: assesses areas that do not fit the above
assessment areas, such as the status of documentation, effect of
problems from interrelated programs on this program, dependence of and
problems for this program on government-or contractor-furnished
equipment that are not managed or controlled by the program manager,
adequacy of program office manpower to accomplish current or planned
future requirements, relevant national security issues, or other areas
of significance to the program office.
Section: Program manager comments;
Description: Summarizes and explains observations, advisory comments,
and potential or significant program problem areas for the categories
shown in Defense Acquisition Executive Summary (DAES) Section 2, with
emphasis on changes since the previous reporting period. At a minimum,
this section is to include a description of problems and their
significance relative to major program objectives; discussion of
actions to be taken to accomplish program objectives and whether and
how the program objectives need to be changed; an assessment of the
status of corrective actions since the last DAES report; an assessment
of any pending or proposed acquisition program baseline parameter
changes, reasons for the changes, and associated risk assessments; and
an assessment of changes made to any data parameters contained in
approved program data (see DAES Section 5) that are not part of the
acquisition program baseline.
Section: Program executive officer/component acquisition executive[A]
comments;
Description: Provides program executive office and component
acquisition executive assessments and perspectives on the program,
including changes in the relative level of risk associated with the
program, the significance of problems reported by the program manager,
the program manager's proposed corrective actions, the level of risk
associated with these actions and other significant changes to the
program; and comments on any pending or proposed acquisition program
baseline parameter changes or changes to additional data elements that
are not part of the acquisition program baseline but are contained in
official program documentation and are integral to achieving the
program objectives.
Section: Approved program data;
Description: Displays, in tabular form, key program parameters
(including initial and current acquisition program baseline parameters
as well as any additional data contained in other official program
documents such as the acquisition plan or acquisition decision
memoranda) in the following categories: performance characteristics,
schedule milestones, and program acquisition cost. Data also include
the program manager's current estimates for performance, schedule, and
cost. This section is a key starting point for the program manager's
evaluation of the program status in section 2; Performance
characteristics: mission performance criteria needed to meet the
significant objectives required by the end users (such as physical,
technical, operational, software, survivability, reliability, and
durability characteristics); initial and current acquisition
performance baselines; results of demonstrated performance through
testing; the program manager's current estimates relating to
performance; and differences between the current estimates from major
program objectives are to be explained in the appropriate part of
Section 3; Schedule milestones: include initial and current approved
schedule milestones as well as the program manager's current estimate
for achieving schedule milestones. When the current estimates differ
from the approved schedule milestones, the differences are explained in
the appropriate part of Section 3; Program acquisition cost: displays
total program costs for the entire acquisition process-
-from concept exploration and definition through production and
deployment--as well as the program manager's current estimates of
program costs. Costs include those related to research, development,
test, and evaluation; procurement; program-specific military
construction; and program acquisition-related operation and
maintenance. This section also includes information on quantities of
end items as well as unit costs.
Section: Program background data;
Description: Provides descriptive program-related information on total
costs and total quantities for all years through the end of the
acquisition phase for all DOD components, including information on and
assessment of (as appropriate), program elements and procurement lines
by appropriation, unit cost reporting data, procurement deliveries,
contractor costs, international cooperative programs, other
participating DOD components, and vulnerability assessments.
Section: Supplemental contract cost information;
Description: Displays, in tabular form, summary-level contract
identification, schedule, and performance information; Contract
identification data: include contract name, number, and type;
contractor name and location; program acquisition phase for which work
is being done; negotiated contract cost or not-to-exceed value; target
price; and ceiling price; Contract schedule data: include contract
definitization date; work start date; dates of critical contract
schedule milestones; and program manager's estimate of contract
completion date; Contract performance data: include earned value
management data for the most recent reporting period; the contractor's
and program manager's current estimates of costs at completion; program
manager comments on contract performance; and assessment of any changes
to unit costs.
Section: Funding summary;
Description: This section enables program offices to provide the
approved funding profile and is intended to be used as the basis for
identifying funding changes that could result in acquisition program
baseline breaches, Nunn-McCurdy unit cost breaches, or other changes.
Source: GAO presentation of guidance on preparing Defense Acquisition
Executive Summaries located on the Defense Acquisition University Web
site.
[A] A program executive officer (PEO) is a military or civilian
official who has responsibility for directing several major defense
acquisition programs and for assigned major system and nonmajor system
acquisition programs. A PEO has no other command or staff
responsibilities within the component, and only reports to and receives
guidance and direction from the DOD component acquisition executive
(CAE). The CAE is a secretary of a military department or head of a
military agency with the power of redelegation. In the Air Force, the
delegated CAE is the Assistant Secretary of the Air Force
(Acquisition). CAEs are responsible for all acquisition functions
within their components.
[End of table]
Footnotes:
[1] The EELV program office's official name is the Launch and Range
Systems Wing.
[2] The Nunn-McCurdy provision (10 U.S.C. § 2433) currently requires
DOD to take specific actions when a major defense acquisition program's
growth exceeds certain cost thresholds. Some of the key provisions of
the law require, for example, that for major defense acquisition
programs, (1) Congress must be notified when a program has an increase
of at least 15 percent in program acquisition unit cost above the unit
cost in the current baseline estimate and (2) the Secretary of Defense
must certify the program to Congress when the program has unit cost
increases of at least 25 percent of the current baseline estimate or at
least 50 percent of the original baseline estimate. The current law
also includes cost growth thresholds from the program's original
baseline estimate.
[3] Under Federal Acquisition Regulation (FAR) Part 12 procedures, the
government had less insight into a contractor's costs since cost or
pricing data cannot be required in the acquisition of commercial items.
[4] The FTC finalized the consent order on May 1, 2007, following a
public comment period.
[5] NSSO facilitates the integration and coordination of defense,
intelligence, civil, and commercial space activities.
[6] Of these 21 launches, 10 have been for DOD, 3 for civil government
agencies (NASA and the National Oceanic and Atmospheric
Administration), and 8 for commercial companies (based on payload).
[7] The fiscal year 2008 EELV program budget spans 6 years: fiscal
years 2008 through 2013.
[8] The program office defines launch success as placing a satellite
into orbit such that the payload is able to perform its mission. For
example, during a June 2007 Atlas V launch of a National Reconnaissance
Office (NRO) payload, an upper stage engine cut off 4 seconds early,
placing the payload in a lower-than-desired orbit; however, the Air
Force is confident the payload will be able perform its mission, and
thus considers the launch a success.
[9] The Aerospace Corporation is a federally funded research and
development center that provides objective technical analyses and
assessments for military, civil, and commercial space programs.
[10] This 2002 report, entitled "Building Confidence in EELV," was an
assessment of EELV launch risk and was prepared for the Air Force
Assured Access Study.
[11] Booz Allen Hamilton, Launch Mission Assurance Assessment Study
(April 2007). This study was requested by the Director, National
Reconnaissance Office and the Commander, U.S. Air Force Space Command.
[12] 10 U.S.C. § 2325 (a) (1) (A) and (B).
[13] he Air Force portion of savings corresponds to the proportion of
program costs for which it pays--70 percent (the NRO pays 30 percent)-
-and the resulting annual savings to the Air Force were projected at
$105 million (70 percent of $150 million), beginning in 2011.
[14] Typically, for nonspace major defense acquisition programs, the
sustainment phase begins when the acquired weapons or automated
information systems have been fielded or deployed. In this phase, DOD
oversight is normally reduced and program emphasis is on activities
such as supply, maintenance, and transportation.
[15] GAO, Space Acquisitions: DOD Needs to Take More Action to Address
Unrealistic Initial Cost Estimates of Space Systems, GAO-07-96
(Washington, D.C.: Nov. 17, 2006).
[16] Earned value management (EVM) is a program management tool that
integrates the technical, cost, and schedule parameters of a contract.
During the planning phase, an integrated baseline is developed by time-
phasing budget resources for defined work. As work is performed and
measured against the baseline, the corresponding budget value is
"earned". Using this earned value metric, cost and schedule variances
can be determined and analyzed. EVM provides significant benefits to
both the government and the contractor. An EVM system is required on
all DOD space program-related contracts meeting certain thresholds
unless waived by the DOD Space Milestone Decision Authority. National
Security Space Acquisition Policy, No. 03-01 (Dec. 27, 2004).
[17] The EELV program office was unable to provide us with the total
number of personnel from all contractors providing assistance to the
program office; therefore, we were only able to analyze numbers of
Aerospace Corporation personnel. Military and civilian personnel
figures are as of March 2008 and Aerospace personnel figures are as of
May 2008.
[18] AO, Defense Acquisitions: Better Weapon Program Outcomes Require
Discipline, Accountability, and Fundamental Changes in the Acquisition
Environment, GAO-08-782T (Washington, D.C.: June 3, 2008).
[19] Department of Defense Instruction No. 5000.66, Operation of the
Defense Acquisition, Technology and Logistics Workforce Education,
Training, and Career Development Program (Dec. 21, 2005), p.21.
[20] The inter-stage adapter connects the Atlas booster stage to the
Centaur upper stage.
[21] Program Budget Decisions (PBD) reflect the decisions of the Office
of the Secretary of Defense as to appropriate program and funding to be
included in the annual defense budget request which, in turn, may be
included in the President's Budget. PBD 720 outlines how manpower
reductions will be accomplished to ensure the Air Force meets the force
reduction mandated by PBD 720 and maintain mission capability. With PBD
720, the Air Force planned to eliminate 40,000 Active Duty, National
Guard, and Reserve full-time equivalent (FTE) positions in order to
self-finance the recapitalization and modernization of their aircraft,
missile, and space inventories. PBD-720 also accelerated the retirement
of a portion of the Air Force's aircraft inventory (F-117s, some B-52s,
C-21s, and U-2s).
[22] In the late 1990s, the United States experienced a series of
major, and costly, heritage launch vehicle failures. As a result, DOD
commissioned a Space Launch Vehicles Broad Area Review to examine the
causes of the launch vehicle failures and make recommendations to help
ensure success for the remaining launches of heritage vehicles and for
the transition to EELVs. Among the recommendations made by the review
was for the Air Force to formulate a formal EELV launch risk management
program, including an increased focus on launch success by identifying
opportunities and resources needed for value-added government
independent reviews of launch vehicle development and production. As a
result of this recommendation, the EELV program office and Aerospace
Corporation developed a rigorous launch mission assurance process, and
Air Force investment in independent assessments increased
substantially. For example, Aerospace Corporation involvement in the
EELV program has increased from 25 personnel at EELV program initiation
to the current level of about 290.
[23] The FAR provides that contracts must not be used for the
performance of inherently governmental functions. FAR 7.503(a).
Inherently governmental functions are so intimately related to the
public interest that they should only be performed by government
personnel. These functions include those activities which require
either the exercise of discretion in applying Government authority or
making value judgments in making decisions for the government, and
should not be performed by contractors.
[24] GAO, Defense Management: DOD Needs to Reexamine Its Extensive
Reliance on Contractors and Continue to Improve Management and
Oversight, GAO-08-572T (Washington, D.C.: Mar. 11, 2008).
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office:
441 G Street NW, Room LM:
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
