NASA Management Challenges
Human Capital and Other Critical Areas Need to be Addressed Gao ID: GAO-02-945T July 18, 2002This testimony discusses management challenges and program risks that the National Aeronautics and Space Administration (NASA) faces in maintaining a skilled workforce, controlling costs, and providing effective oversight for important projects. NASA is taking on a major transformation aimed at eliminating stovepipes; becoming more integrated and results oriented; and reducing risks while working more economically, efficiently, and effectively. Successfully addressing each of four challenges will be critical for NASA in making sure that it is equipped to achieve its vision for the future. The first--strengthening human capital--will require a concerted and sustained effort by NASA's leadership to commit to change; ensure an appropriate mix of employees to meet future business needs; implement effective approaches for acquiring, developing, and retaining talent; develop and retain talent; and create a results-oriented culture. The remaining challenges facing NASA--controlling International Space Station costs; implementing a faster, better, cheaper approach to space exploration; and correcting weaknesses in contract management--are equally important. Without better oversight and management over its most important programs and acquisitions, NASA's transformation stands to lose credibility and support among its partners in industry, the international community, and academia as well as the support of Congress.
GAO-02-945T, NASA Management Challenges: Human Capital and Other Critical Areas Need to be Addressed
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Mr. Chairman and Members of the Subcommittee:
I appreciate the opportunity to discuss the major management challenges
and program risks facing the National Aeronautics and Space
Administration (NASA). Right now, NASA is at a critical juncture.
Clearly, since its inception, NASA has advanced space exploration and
scientific knowledge and accomplished unparalled feats of engineering.
But NASA is now facing difficulties, particularly in terms of
maintaining a skilled workforce, controlling costs, and providing
effective oversight for important projects. Such problems have been
debilitating to important space missions. For example, substantial
space station cost growth, which NASA became aware of in early 2001,
has resulted in cutbacks in construction, the number of crew members,
and scientific research, and, in turn, raised concerns about the
viability of the program and has negatively impacted the agency‘s
credibility with the Congress.
Recognizing the need for change, NASA‘s new Administrator, Sean
O‘Keefe, has recently articulated a new vision for NASA--one that is
science-driven, not destination driven. To put NASA on a better footing
to fulfill this vision, the agency is taking on a major transformation
aimed at eliminating stovepipes, becoming more integrated and results
oriented, and reducing risks while working more economically,
efficiently and effectively. Although NASA is in the very early stages
of this transformation, it is already undertaking initiatives to
reshape and strengthen its workforce, including developing a strategic
human capital plan and an agencywide workforce planning and analysis
system. This subcommittee is also considering legislation proposed by
NASA that would provide the agency with an assortment of tools and
authorities to facilitate its efforts to recruit and retain skilled
personnel and reshape its workforce.
The subcommittee asked that we discuss the four major management
challenges we identified at NASA in our latest Performance and
Accountability Series report. These include: (1) strengthening human
capital; (2) controlling International Space Station costs; (3)
implementing a faster, better, cheaper approach to space exploration;
and (4) correcting weaknesses in contract management. First, however,
it is very important to recognize that NASA‘s efforts to address these
challenges and undertake a transformation represent a subset of a
larger need to fundamentally transform the federal government in light
of recent trends and long-range fiscal challenges. In this context, I
will discuss some of the essential actions that need to be taken by
NASA in order to assure that this transformation will become a reality.
Successfully addressing each of the four challenges will be critical
for NASA in making sure that it is equipped to achieve its vision for
the future. The first challenge--strengthening human capital--will
require a concerted and sustained effort by NASA‘s leadership to commit
to change; develop a strategy that ensures the organization has the
appropriate mix of employees to meet future business needs; implement
effective approaches for acquiring, developing, and retaining talent;
developing and retaining talent; and create a results-oriented culture.
The remaining challenges facing NASA--controlling International Space
Station costs, implementing a faster, better, cheaper approach to space
exploration, and correcting weaknesses in contract management--are
equally important to address. Without better oversight and management
over its most important programs and acquisitions, NASA‘s
transformation stands to lose credibility and support among its
partners in industry, the international community, and academia as well
as the support of the Congress.
BACKGROUND:
NASA‘s mission encompasses human exploration and development of space,
the advancement and communication of scientific knowledge, and research
and development of aeronautics and space technologies. Its activities
span a broad range of complex and technical endeavors--from
investigating the composition, evaluation, and resources of Mars; to
working with its international partners to complete and operate the
International Space Station; to providing satellite and aircraft
observations of Earth for scientific and weather forecasting purposes;
to developing new technologies designed to improve air flight safety.
In January 2001, we reported that, overall, NASA spends more than $12
billion annually for goods and services supporting these and other
activities, mostly on contracts with businesses and other
organizations.[Footnote 1]
Since 1990, we have periodically reported on government operations that
we identified as ’high risk“, because of their vulnerabilities to
fraud, waste, abuse, and mismanagement. Since 1999, we have provided
each new Congress with a series of reports entitled Performance and
Accountability Series: Major Management Challenges and Program Risks
providing a perspective on performance and management challenges across
the federal government, and updated those operations and programs that
we have identified as ’high risk“.
Our reports have identified a number of major management challenges at
NASA. In our last report,[Footnote 2] issued in January 2001, we
identified four challenges that warrant increased NASA attention,
including one area--contract management--that we continue to categorize
as high risk. These four challenges are still applicable today. We plan
to issue our next performance and accountability report in January
2003.
ESSENTIAL ELEMENTS OF:
MAKING A TRANSFORMATION:
NASA‘s recognition that it needs to make a transformation to a more
integrated and results-oriented organization comes amid a period of
profound transition for our government. This transition is being driven
by a number of key trends, including: global interdependence; diverse,
diffuse, and asymmetrical security threats; rapidly evolving science
and technology; dramatic shifts in the agency and composition of the
population; important quality of life issues; the changing nature of
our economy; and evolving government structures and concepts. These
trends present a range of challenges that have no boundaries. These
trends also contribute to the huge, long-range fiscal and budget
challenge facing the United States.
Given these trends and long-range fiscal challenge, the federal
government needs to engage in a comprehensive review, reassessment, and
reprioritization of what the government does, how it does business, and
who does the government‘s business.
For their part, agencies like NASA must re-examine their policies,
programs, and operations as well as their human capital policies and
practices. The status quo is simply unacceptable. The long-range
numbers do not add up. This re-examination will in turn require federal
agencies to transform their cultures and shift their overall
orientation from:
Process to results:
Stovepipes to matrixes:
Hierarchical to flatter and more horizontal structures:
An inward focus to an external (citizen, customer, and stakeholder)
focus:
Management control to employee empowerment:
Reactive behavior to proactive approaches:
Avoiding new technologies to embracing and leveraging them:
Hoarding knowledge to sharing knowledge:
Avoiding risk to managing risk:
Protecting turf to forming partnerships.
The nature and scope of the cultural transformation that needs to take
place in many agencies across the federal government will take years to
accomplish--easily outrunning the tenures of most political appointees.
At the same time, our work over the years has amply documented that
many agencies suffer from a range of long-standing management
challenges and a lack of attention to basic stewardship
responsibilities, requiring concerted action and sustained top-level
attention if they are to be addressed.
One option for addressing the issues agencies face is to create a Chief
Operating Officer (COO) position for selected departments and agencies
that would provide sustained management attention essential for
addressing key stewardship responsibilities in an integrated manner
while helping to facilitate the transformation process within an
agency. The long-term responsibilities, professional and nonpartisan in
nature, could include strategic planning, organizational alignment,
core values stewardship, human capital strategy, performance
management, communications and information technology management,
financial management, acquisition management, risk management,
knowledge management, matrix management, and change management.
Ideally, the COO position should be at the Deputy level, have a term
appointment of 5 to 7 years, and be subject to a performance contract.
I testified before the National Commission on Public Service, chaired
by Paul Volcker, earlier this week. During my testimony, I noted that
agencies that are experiencing particularly significant challenges in
integrating disparate organizational cultures along with agencies
engaged in major transformation efforts, like NASA, may be especially
appropriate first phase candidates for a COO position.[Footnote 3]
NASA is just beginning to undertake major efforts to transform itself.
Mr. O‘Keefe came on board as the agency‘s new Administrator in January
2002 and began articulating his vision for NASA‘s future this April.
Concurrently, NASA is undertaking human capital and other management
initiatives designed to foster better financial management, information
technology management, and budget and performance integration. In view
of these efforts, the Office of Management and Budget this week
identified NASA as leading the government in progressing toward the
implementation of five governmentwide change initiatives contained in
the President‘s Management Agenda. These include: strategic human
capital management; competitive sourcing; improved financial
performance; expanded electronic government; and budget and performance
integration. While NASA‘s progress is noteworthy, it is currently rated
as a ’red light“ in each of the five key areas in the President‘s
Management Agenda.
STRENGTHENING HUMAN CAPITAL:
The Challenge; Like many agencies, NASA is facing substantial
challenges in attracting and retaining a highly skilled workforce. Left
unchecked, reductions in the space shuttle workforce would have
jeopardized NASA‘s ability to safely support the shuttle‘s planned
flight rate. NASA is taking comprehensive steps to address this
problem, but the agency needs to make sure that it can sustain its
commitment to implementing a strategic approach to marshaling,
managing, and maintaining human capital.
[See PDF for image]
[End of figure]
Attracting and retaining a
workforce with science, engineering, and technology skills is critical
to keeping the space shuttle safe and operational.
Leading public organizations here in the United States and abroad have
found that strategic human capital management must be at the
centerpiece of any serious change management initiative and efforts to
transform the cultures of government agencies. People are an agency‘s
most important organizational asset. They define its culture, drive its
performance, and embody its knowledge base.
In January 2001, we designated strategic human capital management as a
governmentwide high-risk area. As our January 2001 High-Risk Series and
Performance and Accountability Series reports make clear, serious human
capital shortfalls are eroding the ability of many agencies, and
threatening the ability of others, to economically, efficiently, and
effectively perform their missions. Plainly, the problem is not federal
employees. Rather, the problem is the lack of a consistent strategic
approach to marshaling, managing, and maintaining the human capital
needed to maximize our government performance and ensure its
accountability. Our High-Risk report outlined four pervasive human
capital challenges now facing the federal government.
Leadership, continuity, and succession planning:
Strategic human capital planning and organizational alignment:
Acquiring and developing staffs whose size, skills, and deployment meet
agency needs:
Creating results-oriented organizational cultures.
As we reported in January 2001, the shuttle workforce had declined
significantly in recent years to the point of reducing NASA‘s ability
to safely support the program. Many key areas were not sufficiently
staffed by qualified workers, and the remaining workforce showed signs
of overwork and fatigue. To the agency‘s credit, NASA has recognized
the need to revitalize the shuttle‘s workforce, discontinued its
downsizing plans for the shuttle program in December 1999 and initiated
efforts to hire new staff. In September 2001, we testified that NASA
was hiring approximately 200 full-time equivalent staff and it had
focused more attention on human capital in its annual performance plan
by outlining an overall strategy to attract and retain a skilled
workforce. But even with these gains, there were still considerable
challenges. For example, NASA‘s new staff would require considerable
training and the agency still needed to deal with critical losses due
to retirements in coming years.
NASA believes that similar workforce problems affect the entire agency.
The average age of its workforce is over 45, and the agency is finding
it particularly difficult to hire people with engineering, science, and
information technology skills--fields critical to NASA missions. At
this time, within the science and engineering workforce, the over-60
population outnumbers the under-30 population nearly 3 to 1. Currently,
15 percent of NASA‘s science and engineering employees are eligible to
retire; within 5 years, about 25 percent will be retirement eligible.
At the same time, the pipeline of people with science and engineering
skills is shrinking. According to NASA‘s Inspector General, the agency
is also facing the loss of significant procurement expertise through
the year 2007.
NASA is taking steps to address its workforce predicament. For example,
it is developing an agency-wide integrated workforce planning and
analysis system as part of its new financial management system. This
system is expected to track the distribution of NASA‘s workforce across
programs, capture critical competencies and skills, determine
management and leadership depth, and facilitate gap analyses.
NASA has also developed a strategic human capital plan, which
incorporates strategies, tactical actions, and metrics to support human
capital goals. The plan has been submitted to the Office of Management
and Budget and the Office of Personnel Management for review. The plan
is based on a planning model developed by the Office of Personnel
Management (OPM) as well as our own model, which we published in March
2002.[Footnote 4] Our model is designed to help agency officials
effectively lead and manage their people and integrate human capital
considerations into their daily decision-making and the program results
they seek to achieve. In doing so, the model highlights the importance
of a sustained commitment by agency leaders to maximize the value of
their agency‘s human capital and to manage related risks. Consistent
with OPM‘s and the Office of Management and Budget‘s views, our model
of strategic human capital management embodies an approach that is
fact-based, focused on achieving strategic results, and incorporates
merit principles and other national goals.
Additionally, NASA has renewed attention to hiring applicants just out
of college and intends to pursue this even more aggressively in coming
years. It is also undertaking a number of initiatives and activities
aimed at acquiring and retaining critical needed skills, such as using
the new Federal Career Intern Program to hire recent science and
engineering graduates, supplementing the workforce with nonpermanent
civil servants where it makes sense, and implementing a program to
repay student loans to attract and retain employees in critical
positions.
This subcommittee is currently considering a series of legislative
proposals developed by NASA to provide it with further flexibilities
and authorities for attracting and retaining a skilled workforce. These
include streamlining hiring procedures; making noncompetitive
conversions of term employees to permanent positions; offering larger
recruitment, relocation, and retention bonuses; expanding use of early
retirement; and providing authority for permanent and enhanced buyouts.
Several of the NASA issues mirror aspects of other legislative
proposals such as the Federal Human Capital Act.[Footnote 5] While we
have not performed a detailed analysis of the support behind NASA‘s
legislative proposals, several points are worthy of consideration.
First, before agencies embark on major changes to their human capital
management strategy, they must come to grips with developing a
realistic picture of how they can reconcile their wants, needs, and
affordabilities. This will require difficult tradeoffs.
Second, the addition of flexibilities and authorities alone will not
solve an agency‘s workforce problems. Agencies need to undertake a wide
array of initiatives to attract, retain, and motivate a top quality
workforce. These include such actions as revitalizing recruiting and
college relations efforts; conducting employee feedback surveys to set
priorities and assess progress; conducting employee preference surveys
so employees can be given the opportunity to work in areas that
interest and energize them consistent with overall institutional needs;
inventorying the skills and knowledge of existing employees; initiating
professional development programs for newly hired staff to help them
transition and progress; implementing modern, effective, and credible
performance appraisal and management systems; redesigning training
programs to directly link them to core competencies; and implementing
employee-friendly benefits, such as day care centers, business casual
dress, flextime, and public transportation subsidies.
² Third, agencies need to make the most of current flexibilities and
authorities already available. These flexibilities are identified by
OPM in its guide, Human Resource Flexibilities and Authorities in the
Federal Government. They include such things as the ability to use
commercial recruiting firms to recruit for vacancies; customize merit
promotion plans and performance systems; increase basic pay to attract
and retain staff with unusually high or unique qualifications; and
grant substantial cash incentive awards. Agencies should develop a
sound business case for using these flexibilities by focusing on how a
given flexibility will address human capital challenges and ultimately
improve agency results. In tandem with exercising these flexibilities,
agencies must learn to effectively balance its pay and incentive
programs to encourage both individual and team contributions to
achieving results.
² Fourth, agencies need effective succession planning. NASA‘s workforce
profile, particularly for science and engineering workers, points to
the need for this. Faced with the same problems at GAO, we reinstated
our Executive Candidate Development Program, under which candidates are
selected through a rigorous competitive process and are prepared for
assignments at the SES level. While the potential loss of expertise
through retirements will be substantial, this turnover also affords
NASA‘s Administrator the opportunity to change culture, skill mix,
deployment locations, and other agency attributes. NASA will, however,
need to leverage technology and enhance its training efforts to help
make this transition and facilitate needed knowledge sharing
initiatives.
² Fifth, agencies must ensure that strategic human capital plans are
results-oriented and data driven. This includes developing appropriate
information on the number and location of employees and their key
competencies and skills as well as data on the profile of the
workforce, performance goals and measures for human capital approaches.
Further, agencies must effectively use this data to develop strategies
that continually ensure they have the right mix of employees to meet
its future needs. A key to success in this area will be NASA‘s ability
to implement its new financial management system, since it will
encompass the new workforce planning and analysis system.
Instituting a results-oriented culture involves fostering a
collaborative environment where managers, teams, and employees are
empowered to accomplish programmatic goals. It also includes creating a
performance management system that provides candid and constructive
information to individual employees, objective and fact-based
information to managers, and the information and documentation
necessary to deal with poor performers.
Modernizing agency performance appraisal and management systems and
linking them to strategic plans and desired outcomes should be a top
priority. Leading organizations use their performance management
systems as a key tool for aligning institutions, unit, and employee
performance; achieving results; accelerating change; managing the
organization on a day-to-day-basis; and facilitating communication
through the year so that discussions about individual and
organizational performance are integrated and ongoing. To be successful
in doing this, the performance management system must link pay and
incentive programs to individual knowledge, skills, and abilities and
contributions to achieving organizational results.
² Lastly, it is critical for agencies to sustain commitment to
embracing human capital management. Agency leaders need to see people
as vital assets to organizational success and must invest in this
valuable asset. Agencies can foster this thinking and commitment in
their future leaders through efforts such as succession planning and
executive development. In addition, agencies need to hold managers
accountable for effectively managing people and actively supporting
these concepts. In NASA‘s case, the importance of the Administrator‘s
personal commitment to change the workforce as well as the way the
agency does business cannot be overstated. His leadership and
commitment is essential, but he will need help to be successful,
particularly from managers at NASA centers in order to overcome
resistance to share knowledge and new ideas.
CONTROLLING SPACE STATION COSTS:
The Challenge:
Development costs for the International Space Station have soared
to the point where NASA has had to make substantial cutbacks in the
program. This has negatively impacted NASA‘s credibility with
Congress and raised concern among international partners and the
scientific community about the viability of the space station.
NASA is taking action to keep costs in check, but its success in
this area still faces considerable challenges.
[See PDF for image]
[End of figure]
Cost overruns have hampered efforts to build and operate the
International Space Station.
The International Space Station is characterized as one of the most
challenging engineering feats ever attempted. It also represents an
important effort to foster international cooperation in scientific
research and space exploration. But NASA has been facing considerable
difficulties in controlling costs and maintaining the scheduling. The
cost to complete assembly has mushroomed by about $5 billion to the
current estimate of about $30 billion, and while assembly of the
station was originally expected to be completed in 2002, NASA now
expects it to be done in 2006. As a result, NASA has had to make
substantial cutbacks in the program, which in turn, has raised concern
among NASA‘s international partners and the scientific community about
the viability of the space station. The future of the space station
program hinges on NASA‘s ability to stem cost growth and schedule
delays and to reestablish its credibility with Congress, NASA‘s
international partners, and the scientific community.
NASA has had difficulty predicting and controlling costs and scheduling
for the space station since its inception in 1984. In September 1997,
we reported that the cost and schedule performance of the space
station‘s prime contract, which showed signs of deterioration in 1996,
had continued to worsen steadily and that program financial reserves
for contingencies had deteriorated, principally because of program
uncertainties and cost overruns. In our January 2001 Performance and
Accountability Series report, we reported that the prime contract for
the space station was initially expected to cost over $5.2 billion, and
the assembly of the station was expected to be completed in June 2002.
But by October 2000, the prime contractor‘s cost had grown to about $9
billion, of which $986 million was for cost overruns, and the station
was not expected to be complete until April 2006. NASA‘s Office of
Inspector General (OIG) reported the same cost overrun in a February
2000 audit report, and based on recommendations in that report, NASA
agreed to take several actions, including discussing the prime
contractor‘s cost performance at regularly scheduled meetings and
preparing monthly reports to senior management on the overrun status.
Our recent work shows that the reasons for continued cost growth
include inadequate definition of requirements, changes in program
content, and schedule delays and inadequate program oversight.[Footnote
6] NASA has controls in place that should have alerted management to
the growing cost problem and the need for mitigation, but these were
largely ignored because of NASA‘s focus on fiscal year budget
management rather than on total program cost management.
The estimated cost growth is having a profound effect on the utility of
the space station--with substantial cutbacks in construction, the
number of crewmembers, and scientific research. As a part of the space
station restructuring, further work and funding for the habitation
module and crew return vehicle have been deferred, thus requiring the
on-orbit crew to be reduced from 7 to 3 members. This will limit the
crewmember hours that can be devoted to research. Additionally, NASA
has cut back on the number of facilities available for research--from
27 to 20. This will eliminate some experiments, such as those relating
to biotechnology. NASA‘s international partners and the scientific
community are not satisfied with these and other reductions in
capabilities and have raised concerns about the viability of the space
station science program.
NASA is instituting a number of management and cost estimating reforms.
But there are significant challenges to their successful
implementation. First, NASA is now preparing a life cycle cost estimate
for the program. Completing this may be difficult because NASA‘s
financial management system has proven inadequate for tracking space
station costs. Second, NASA is undertaking several studies to see how
research can be maximized, but these will not be completed until
September 2002, leaving NASA with a small window of opportunity to
incorporate their results into the 2004 budget. Third, NASA has not yet
reached an agreement with its international partners on an acceptable
on-orbit configuration, sharing of research facilities, and the sharing
of cost. Thus, the capacity and capabilities of the space station, the
scope research that can be accomplished, and the partners‘ share of
operating costs are unknown at this time.
IMPLEMENTING A FASTER, BETTER, CHEAPER APPROACH TO SPACE EXPLORATION:
The Challenge;
NASA has been following a faster-better-cheaper
management philosophy to reduce costs, become more efficient, and
increase scientific results by conducting more and smaller missions in
less time. While NASA has had many successes, failures of two Mars
probes shows that there are limits to this approach, particularly in
terms of NASA‘s ability to learn from past mistakes. NASA has taken
steps in recent years to strengthen lessons learning within the agency,
but more needs to be done to overcome cultural and organizational
impediments.;
[See PDF for image]
The Mars Sojourner Rover was built under the faster-
better-cheaper philosophy.
[End of figure]
Since 1992, NASA has been following a faster-better-cheaper management
philosophy to reduce costs, become more efficient, and increase
scientific results by conducting more and smaller missions in less
time. The faster-better-cheaper approach works by focusing on building
less expensive space probes much quicker than in the past. It is
intended to stimulate innovative development and application of
technology, streamline policies and practices, and energize and
challenge a workforce to continue to safely and successfully undertake
bold new missions in an era of diminishing resources.
While the approach has been successfully used for numerous missions,
the failures of two missions to Mars brought increased scrutiny. The
Mars Climate Orbiter, which was intended to observe Mars‘ seasonal
climate and daily weather from a low orbit around the planet, was lost
on September 23, 1999. Then on December 3, 1999, the Mars Polar Lander,
a robotic spacecraft intended to land near the South Pole of Mars for a
planned 90-day mission to study the planet‘s layered polar terrain, was
also lost.
NASA-sponsored investigative boards found that opportunities to
identify and resolve problems were missed due to poor communications,
budget pressures, and poor management and engineering practices. Upper
management officials were not aware of the extent of the programs‘
problems.
In our January 2001 Performance and Accountability report, we reported
that NASA still faced significant challenges to creating highly
reliable missions and fostering open communications under the budget
constraints of the agency‘s faster-better-cheaper space exploration
strategy. In addition, success required an integration of lessons
learned from failures on an agency-wide basis.
NASA now recognizes the importance of learning from the past to ensure
future mission success and uses several mechanisms to capture and
disseminate lessons learned. In January 2002, for example, we
reported[Footnote 7] that NASA had developed a Web-based lessons
learned database, and used training, program reviews and periodic
revisions to agency policies and guidelines to communicate lessons.
However, we also found that these tools were limited in their
effectiveness. NASA program and project managers reported to us that
they were unfamiliar with lessons generated by other centers and
programs and many stated that they were dissatisfied with NASA‘s
lessons learned processes and systems. For example, they were not using
NASA‘s lessons learned information system partly because it was time-
consuming to do so.
We also identified problems hampering knowledge sharing within NASA
that certainly reflect a need for a significant transformation within
the agency. In particular, many program and project managers told us
that they believed senior management support was lacking for sharing
lessons learned. There were also significant cultural barriers to
knowledge sharing--beyond the difficulties associated with a stovepiped
environment. For example, there were no agency-wide incentives for
sharing knowledge; many managers simply lacked time to take part in
knowledge-sharing activities; and the sharing of lessons learned was
not highly valued across the board. Clearly, with the difficulties the
agency is facing in hiring highly skilled employees, leveraging the
institutional knowledge of its experienced workforce is critical.
We made several recommendations to address these underlying problems as
well as recommendations to improve NASA‘s current knowledge sharing
mechanisms. NASA generally agreed with our recommendations and plans to
implement them.
CORRECTING WEAKNESSES IN CONTRACT MANAGEMENT:
The Challenge;
Much of NASA‘s success depends on the work of its
contractors--on which it spends the greatest part of its funds. But for
many years, NASA has not been able to effectively oversee contracts,
principally because it has lacked accurate and reliable information on
contract spending and it has placed little emphasis on end results,
product performance, and cost control. NASA has addressed many
acquisition-related weaknesses, but key tasks remain, including
implementation of a new integrated financial management system.
[See PDF for image]
The initial effort to develop the Propulsion Module for
the International Space Station was unsuccessful because NASA proceeded
with the contractor‘s proposal without following fundamental contract
management processes.
[End of figure]
[End of section]
Since 1990, we have identified NASA‘s contract management function as
an area at high risk due to its ineffective systems and processes for
overseeing contractor activities. Our reports and testimonies since
then, have demonstrated just how debilitating contract management and
oversight weaknesses can be to important space programs. Our July 2002
report on the International Space Station, for example, found that NASA
did not effectively control costs as well as technical and scheduling
risks, provide adequate oversight review, or effectively coordinate
efforts with its partners.[Footnote 8] In other examples, we found that
NASA lacked effective systems and processes for overseeing contractor
activities and did not emphasize controlling costs. NASA‘s accounting
systems were designed prior to implementation of current federal cost
accounting and financial systems that require agencies to track and
maintain data for estimating and controlling costs, performance
measurement, and making economic trade-off decisions.
In recent years, NASA has made progress in addressing its contract
management challenges. In July 1998, for example, we reported that NASA
was developing systems to provide oversight and information needed to
improve contract management and that it had made progress evaluating
its field centers‘ procurement activities on the basis of international
quality standards and its own procurement surveys. In January 1999, we
found that NASA was implementing its new system for measuring
procurement-related activities and had made progress in evaluating
procurement functions in its field centers.
But much work remains to be done to strengthen contract oversight. A
key task is modernizing NASA‘s financial management systems. According
to NASA, the agency‘s financial management environment is comprised of
decentralized, nonintegrated systems with policies, procedures, and
practices that are unique to its field centers. For the most part, data
formats are not standardized, automated systems are not interfaced, and
on-line financial information is not readily available to program
managers. Thus, it is difficult to ensure contracts are being
efficiently and effectively implemented and budgets are executed as
planned. In addition, NASA has pointed out that the cost to maintain
these systems has been high, since both data and software are
replicated at each field center.
The inadequacy of NASA‘s financial management system has further
impact. Without a more effective financial management system, NASA will
likely continue to have difficulty providing relevant, reliable, timely
financial data--including cost information--that can be used on a real-
time basis by program managers to monitor costs, schedule, and
performance. In March 2002, we testified[Footnote 9] that NASA was
unable to provide us with detailed support for amounts obligated
against cost limits established by the fiscal year 2000 NASA
Authorization Act. This was due, in large part, to NASA‘s lack of a
modern, integrated financial management system.
To its credit, NASA is working toward implementing an integrated
financial management system that it expects to be fully operational in
fiscal year 2008 at an estimated cost of $691 million. This is NASA‘s
third attempt toward implementing a new integrated financial management
system. The first two efforts were abandoned after 12 years and after
spending a reported $180 million. NASA‘s current approach focuses on
learning from other organizations‘ successes in implementing similar
projects, as opposed to revisiting its own failures. NASA has also
abandoned the single product approach that the two prior attempts had
as their basic architecture. Instead, the project will be broken down
into implementable modules on the basis of the availability of proven
software products.
Given the high stakes involved, it is critical that NASA‘s leadership
provide the necessary direction, oversight, and sustained attention to
ensure that this project is successful. In this regard, NASA‘s
Administrator comes to the position with a strong management background
and expertise in financial management. Based on our discussions with
the Administrator, he has made clear that he plans to make financial
management a top priority.
The task ahead, however, is daunting. In a recent internal review, NASA
found that the total cost estimate for deployment of the core financial
module at all NASA centers had grown considerably beyond the cost
initially contemplated. The review also revealed interoperability and
security vulnerabilities within the current information
infrastructure. To address these continuing problems, the Administrator
appointed an executive to provide leadership and accountability in the
direction and operation of the new system. He also recently decided
that the near-term focus of the program should be to ensure a
successful and rapid deployment of the core financial module--the
backbone of the system--and that the schedule of the remaining modules
should undergo further risks assessments before moving forward.
While modernizing NASA‘s financial management system is central to
producing accurate and reliable financial information needed to support
contract management activities, technology alone will not solve NASA‘s
contract management problems. NASA must also ensure that the cost data
collected and maintained in its financial management system are
sufficiently detailed to allow comparisons of actual costs to estimates
and thereby provide an early warning of cost overruns or other related
difficulties. As we reported in August 2001, NASA‘s management
practices and business processes do not always facilitate the
development of this type of data. For example, we reported that NASA
does not track the actual costs of completed space station components
even though it often estimates the cost of these components for
planning and budgeting purposes. Also, in programs such as the space
station, NASA needs to effectively implement new controls planned to
strengthen technical and scheduling reviews as well as risk analyses.
We are continuing to monitor NASA‘s progress in addressing contract
management weaknesses. In response to a May 24, 2002 bi-cameral, bi-
partisan request from the Senate Commerce, Science, and Transportation
Committee and the House Science Committee, we are currently assessing
the extent to which NASA‘s management of the financial management
system acquisition is in accordance with effective system acquisition
practices and is designed to support NASA‘s decisionmaking needs and
external reporting requirements.
In closing, NASA has a long and proud history, and it does many things
well. But, times have changed, and NASA must change with the times in
considering what it does and how it does business. Moreover, the agency
is facing management challenges, which if not effectively addressed,
stand to hurt NASA‘s credibility with the Congress and its partners and
hamper important space missions. I would like to commend Mr. O‘Keefe
for recognizing the need to transform and making a personal commitment
to the transformation effort. The steps he is taking should lay a sound
foundation for change. This is reflected in OMB‘s recent
characterization of NASA as leading the government in its progress
implementing the five governmentwide initiatives identified in the
President‘s Management Agenda. Clearly, NASA is off to a strong start
on what will be a long-term effort. The challenge ahead for NASA will
be to maintain the momentum to transform, to effectively use existing
and new authorities to strategically manage its people, and to quickly
implement the tools needed to strengthen management and oversight.
CONTACTS AND ACKNOWLEDGEMENTS:
For further information regarding this testimony, please contact Allen
Li at (202) 512-4841. Individuals making key contributions to this
testimony include, Jerry Herley, Cristina Chaplain, Shirley Johnson,
Charles Malphurs, and Sarah Marquis.
FOOTNOTES
[1] U.S. General Accounting Office, Major Management Challenges and
Program Risks: National Aeronautics and Space Administration, GAO-01-
258 (Washington, D.C.: Jan. 2001).
[2] GAO-01-258.
[3] U.S. General Accounting Office, Managing for Results: Using
Strategic Human Capital Management to Drive Transformational Change,
GAO-02-940T (Washington, D.C.: July 15, 2002).
[4] U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO-02-373SP (Washington, D.C.: March 2002).
[5] We previously testified on this proposed legislation in March 2002.
See U.S. General Accounting Office, Managing for Results: Building on
the Momentum for Strategic Human Capital Reform. GAO-02-528T
(Washington, D.C.: March 2002).
[6] U.S. General Accounting Office, Space Station: Actions Underway to
Manage Cost, but Significant Challenges Remain, GAO-02-735 (Washington,
D.C.: July 18, 2002).
[7] U.S. General Accounting Office, NASA: Better Mechanisms Needed for
Sharing Lessons Learned, GAO-02-195 (Washington, D.C.: Jan. 30, 2002).
[8] GAO-02-735.
[9] U.S. General Accounting Office, National Aeronautics and Space
Administration: Leadership and Systems Needed to Effect Financial
Management Improvements, GAO-02-551T (Washington, D.C.: March 20,
2002).
