Space Station
Actions Under Way to Manage Cost, but Significant Challenges Remain Gao ID: GAO-02-735 July 17, 2002The National Aeronautics and Space Administration (NASA) revealed that the cost to complete assembly of the international space station has risen from $25 billion to $30 billion. Much of that cost growth is due to inadequate definition of requirements, changes in program content, schedule delays, and poor program oversight. Weaknesses in the program's cost-estimating process call into question the credibility of NASA's plans to carry out its budget through fiscal year 2006. The cost growth has also severely affected the space station's ability to conduct scientific research. NASA has instituted several management and cost-estimating reforms, including a life-cycle cost estimate, a program management plan, and a reprioritized science program. However, significant challenges remain. Preparation of the life-cycle cost estimate may be difficult because NASA's financial management system is unable to adequately track space station costs. Many tasks and studies being undertaken will not be completed until September 2002, leaving NASA with little time to incorporate its results into its budget for fiscal year 2004. Finally, NASA has yet to reach an agreement with its international partners on an acceptable on-orbit configuration, the sharing of research facilities, and cost sharing.
GAO-02-735, Space Station: Actions Under Way to Manage Cost, but Significant Challenges Remain
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United States General Accounting Office:
GAO:
Report to Congressional Committees:
July 2002:
Space Station:
Actions Under Way to Manage Cost, but Significant Challenges Remain:
GAO-02-735:
Contents:
Letter:
Results in Brief:
Background:
Reasons for Cost Increases and Mechanisms That Should Have Alerted NASA
Management:
Mechanisms to Address Cost Growth Were Not Utilized or Were Ignored:
Impacts on Space Station‘s Utility:
Reforms Are Under Way or Planned:
Challenges Ahead:
Conclusion:
Agency Comments:
Scope and Methodology:
Appendixes:
Appendix I: Comments from the National Aeronautics and Space
Administration:
Appendix II: Prior GAO Reports and Testimonies Related to the
International Space Station Program:
Appendix III: Staff Acknowledgments:
Tables:
Table 1: Major Events Leading to Identification of Cost Growth:
Table 2: Allocation of Research Time Based on a Three-Member Crew:
Figure:
Figure 1: International Space Station On-Orbit:
Abbreviations:
DOD: Department of Defense:
GAO: General Accounting Office:
NASA: National Aeronautics and Space Administration:
OMB: Office of Management and Budget:
[End of section]
United States General Accounting Office:
Washington, D.C. 20548:
July 17, 2002:
The Honorable Ernest F. Hollings:
Chairman:
The Honorable John McCain:
Ranking Minority Member:
Committee on Commerce, Science, and Transportation:
United States Senate:
The Honorable Sherwood L. Boehlert:
Chairman:
The Honorable Ralph M. Hall:
Ranking Minority Member:
Committee on Science:
House of Representatives:
The National Aeronautics and Space Administration (NASA) has reportedly
spent about $20 billion for developing and operating the International
Space Station, but faces many challenges in completing the development
of a station that will meet program objectives. The estimated cost to
develop the space station has increased by about $13 billion since 1995
while the schedule has slipped about 4 years. Most recently, the agency
revealed that the estimated cost to complete assembly had increased by
about $5 billion”from about $25 billion to about $30 billion. This
reported cost-growth estimate might not be reliable, however, because
NASA does not have good cost-accounting systems or practices. [Footnote
1]
The estimated cost growth is having a profound effect on the utility of
the space station”namely, through substantial cutbacks in construction,
the number of crewmembers, and scientific research. Moreover, the
severity of these reductions has raised concerns among NASA‘s
international partners and the scientific community about the viability
of the program. In view of the concerns surrounding the cost growth,
you asked that we (1) identify the reasons for the cost increase and
analyze the mechanisms that should have alerted NASA to the cost
increase and the need for mitigation plans, (2) assess the impact of
the cost growth on the utility of the U.S. science program, (3)
identify the corrective actions planned by NASA, and (4) provide any
preliminary observations on the feasibility and status of NASA's
actions to mitigate the problem.
Results in Brief:
Much of the cost growth stemmed from the inadequate definition of
requirements, changes in the content of the program, schedule delays
that caused the late delivery of the station‘s elements, and inadequate
program oversight. A recent study by the International Space Station
Management and Cost Evaluation Task Force concluded that NASA‘s program
plan for executing the fiscal year 2002 through fiscal 2006 budget was
not credible because of weaknesses in the program's cost-estimating
processes. The task force pointed out that these problems occurred
because NASA had not instituted or had ignored many of the program‘s
control and contract oversight mechanisms that should have alerted the
agency to the growing cost problem and the need for mitigating actions.
For example, NASA did not prepare a life-cycle cost estimate for the
station and thus did not use those costs to manage the program. Another
contributing factor was NASA‘s focus on staying within annual budgets
instead of managing total costs. According to the cost analysis team
that supported the task force, this was perhaps the single greatest
factor in the program‘s cost growth.
The cost growth has severely affected the space station, primarily in
terms of the scope and capability of the station for conducting
scientific research. As a part of the restructuring, for example,
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 seven to three members. This will limit the crewmember
hours that can be devoted to research. For example, astronauts will
have limited time to be used as subjects in research on the effects of
space flight on humans. Additionally, NASA has cut back on the number
of facilities available for research from 27 to 20. This will eliminate
certain experiments, such as those relating to biotechnology. NASA's
international partners and the research communities are not satisfied
with these and other reductions in capabilities.
NASA is instituting a number of management and cost-estimating reforms.
As a result, we are not making any recommendations in this report.
Specifically, the agency is preparing a life-cycle cost estimate,
developing a program management plan, and reprioritizing the science
program. It intends to reflect the results of these reforms in its
budget submission for fiscal year 2004. These measures should help to
put NASA on a better footing for controlling costs and improving
management oversight.
But there are significant challenges to the implementation of such
reforms. First, the preparation of the life-cycle cost estimate may be
difficult because NASA's financial management system has proven
inadequate for tracking space station costs. Although NASA plans to use
a tested methodology and trained estimators, the agency will also have
to develop accurate, detailed cost data to serve as input to the
methodology and a means of comparing the resulting estimates with
actual costs when realized. Second, many tasks and studies being
undertaken, such as those on long-term operating costs, will not be
completed until September 2002, leaving NASA with just a small window
of opportunity to incorporate its results into the budget for fiscal
year 2004. Third, NASA has not yet reached an agreement with its
international partners on an acceptable on-orbit configuration, the
sharing of research facilities, and the sharing of cost. It is
exceedingly important for NASA to overcome these challenges.
Congressional and agency decision makers cannot assess the full impact
of the science program‘s restructuring and make decisions with regard
to the direction of the space station program until NASA develops a
credible, reprioritized research plan for the core complete station and
defines the desired final configuration of the on-orbit station.
Moreover, NASA will remain at risk of losing the support of the
program's international partners unless it can come to agreement with
them on what the station's capabilities will be in light of the
reprioritized science program. In its comments on a draft of this
report, NASA stated that the report represents the issues and actions
taken to address the cost growth. NASA‘s response is included as
appendix I.
Background:
NASA and its international partners (Canada, Europe, Japan, and Russia)
are building the space station as a permanently orbiting laboratory to
conduct materials and life sciences research and earth observations and
to provide for commercial utilization and related uses under nearly
weightless conditions. Each partner is providing hardware and
crewmembers and each is expected to share operating costs and use of
the station. The program‘s highest-priority goals are to (1) maintain a
permanent human presence in space, (2) conduct world-class research in
space, and (3) enhance international cooperation and U.S. leadership
through international development and operations of the space station.
The technical achievements of the station program have been exceptional.
Assembly of the space station began in November 1998 with the launch of
the U.S.-funded, Russian-built Zarya module, followed by the launch of
the U.S. Unity module in December 1998. The station‘s occupancy began in
October 2000 with the launch of the Expedition I crew. Since then, four
other three-person crews have occupied the station while assembly
continues. In addition, the crews have been conducting hands-on
scientific research. Figure 1 shows the International Space Station on-
orbit.
Figure 1: International Space Station On-Orbit:
[See PDF for image]
This figure is a photograph of the International Space Station.
Source: NASA.
[End of figure]
Since its inception in 1984, the space station has undergone a number of
redesigns and has been mired by cost growth and schedule slips. In
January 2001, NASA announced that an additional $4 billion in funding
over the next 5 years would be required to complete the station‘s
assembly and fund its operation. By May 2001 the estimated cost growth
had increased to $4.8 billion. In response to the announcement, the
administration directed NASA to take a number of actions, including
terminating the propulsion module, deferring the habitation module,
deferring the crew return vehicle, and reducing funding for scientific
research to stay within the President‘s budget projections.
The President‘s fiscal year 2002 budget blueprint and budget request
for the space station [Footnote 2] lay out a strategy for containing
cost growth that ensures the completion of the U.S. core station and
deploys the elements of the program‘s international partners. To
achieve this strategy, NASA was required to construct a plan of action
that addressed institutional and program reforms to establish processes
for executing the baseline program.
In July 2001, the NASA Administrator appointed the International Space
Station Management and Cost Evaluation Task Force to conduct an
independent external review and assessment of the station‘s cost,
budget, and management. The Administrator also asked the task force to
provide recommendations that could provide maximum benefit to the U.S.
taxpayers and the international partners within the President‘s budget
request. The task force reported its findings to the NASA Advisory
Council in November 2001. [Footnote 3]
In response to the task force‘s recommendations, NASA is undertaking a
number of initiatives to restore credibility to the station program. In
addition, the Office of Management and Budget (OMB), with input from
NASA, is developing criteria that are to be used for measuring progress
toward achieving a credible program.
OMB has imposed a 2-year ’probation“ period on NASA to provide time to
reestablish the space station program‘s credibility. Activities that
are to take place during this period include establishing a technical
baseline and a life-cycle cost estimate for the remainder of the
program, prioritizing the core complete science program, and reaching
an agreement with the international partners on the station‘s final
configuration and capabilities. NASA is working toward completing these
activities by September 2002 in order to include results in its budget
request for fiscal year 2004.
Over the past 8 years, we have performed a body of work that highlighted
the space station program‘s cost growth and weaknesses in cost control.
In addition, we have pointed out weaknesses in the agency‘s financial
management system as well as inadequate contract management oversight.
Appendix II lists prior GAO reports and testimonies related to the space
station program.
Reasons for Cost Increases and Mechanisms That Should Have Alerted NASA
Management:
According to NASA officials, as a consequence of the inadequate
definition of requirements, changes in program content, schedule
delays, and inadequate program oversight, the estimated development
cost of the space station has grown by about $13 billion since 1995 of
which about $5 billion is attributable to growth since the fiscal year
2001 estimate. However, the agency could not associate specific amounts
of the estimated growth with the reasons cited. The program did not
utilize available cost control tools to monitor and contain the growth
and ignored NASA‘s guidance in many cases. In addition, because of its
focus on managing annual budgets, NASA failed to heed indicators of
future cost growth that contributed to the uncertainty regarding the
ultimate cost of the space station.
Reasons for Cost Growth:
One of the major reasons for the cost growth was NASA‘s inadequate
definition of requirements. For example, NASA originally estimated that
500,000 source-lines-of-code of space flight software would be required
for the station‘s operations. However, that estimate has now tripled to
1.5 million lines of code. In addition, NASA assumed that it could rely
on computer simulations as opposed to rigorous ground testing to
integrate the hardware and software of the various elements. However,
program schedule slips permitted additional ground testing, which
discovered significant integration problems that escaped notice during
the computer simulations. As a result, the program established a more
rigorous multi-element integrated testing program.
Changes in program content also contributed to the cost growth. A
significant item of cost was introduced to the program in 1997 through
the addition of the requirement for a crew return vehicle. NASA had
planned to use two Russian Soyuz vehicles, each with a maximum capacity
of three crewmembers, attached to the station for emergency crew return
after achieving permanent six-person crew capability. However, NASA
later determined that the Soyuz vehicle did not meet the requirements
necessary to return an ill or injured crewmember. Thus, the program was
modified to require a U.S.-built crew rescue capability for returning
seven crewmembers at an estimated total cost of about $1.5 billion.
Also, because of Russian funding problems that delayed the service
module‘s launch, NASA took on an additional development effort in
fiscal year 1997 to guard against Russian nonperformance. The actions
became collectively known as Russian Program Assurance and included an
interim control module and a U.S. propulsion module in the event the
Russians could not supply the service module and propellant logistics
flights. By February 2001, Russian Program Assurance had added $1.3
billion in total estimated cost through fiscal year 2006.
Schedule delays increased costs because, at a minimum, fixed costs such
as salaries, contractor overhead, and sustaining engineering continued
for a longer period than planned. When the space station was redesigned
in 1993, NASA established May 1997 as the launch date for the first
element and June 2002 as the assembly‘s completion date. However, the
first element was not launched until November 1998. By August 2000, the
assembly complete date had slipped to April 2006”a total slip of 46
months. On the basis of NASA‘s projected spending rate, the program
incurred an additional cost of about $100 million for every month of
schedule slippage.
The magnitude of the cost growth began to surface in the spring of 2000
during program operating plan reviews in preparation of the fiscal year
2002 budget request. Following the program operating plan reviews, the
program manager ordered a detailed assessment of costs to more
specifically determine funding requirements through fiscal year 2006.
Table 1 shows some of the major events leading up to the identification
of the space station‘s cost growth. The table illustrates that the
program office did not have a credible cost-estimating capability, as
the cost estimate changed and grew as the office continued to uncover
additional growth areas.
Table 1: Major Events Leading to Identification of Cost Growth:
Date: May 25, 2000;
Event: Program operating plan‘s review results for fiscal year 2002 show
$3.7 billion of potential areas of cost growth and/or new content in
budget rollup;
Reported to: Johnson Space Center Director and Associate Administrator
for Space Flight (NASA headquarters).
Date: July 13, 2000;
Event: For fiscal year 2002-2006, Office of Space Flight recommends
$365 million over President‘s budget for space station for fiscal year
2001;
Reported to: NASA Capital Investment Council.
Date: July 18, 2000;
Event: OMB is advised that the space station‘s budget can accommodate
fiscal year 2000 requirements, but that fiscal year 2001 would be
’tight“ and fiscal year 2002 would see a shortfall against current
requirements;
Reported to: OMB.
Date: Oct. 20, 2000;
Event: Post-program operating plan cost review indicates program has a
$3 billion-plus funding shortfall through fiscal year 2006;
Reported to: NASA headquarters.
Nov. 9, 2000;
Event: NASA advises OMB of potential shortfall of $2 billion-plus for
fiscal year 2002 budget;
Reported to: OMB.
Date: Nov. 27, 2000;
Event: Assessment estimate of $2.2 billion-$2.4 billion provided to
OMB;
Reported to: OMB.
Date: Dec. 15, 2000;
Event: NASA presents to OMB a cost estimate that is $2.7 billion over
the fiscal year 2001 budget. NASA commits to complete a ’bottom up“
review by the end of January 2001;
Reported to: OMB.
Date: Dec. 28, 2000;
Event: NASA briefs White House Transition Team and advises the team
that the space station‘s cost increase could range from $2.5 billion-
$5.0 billion through fiscal year 2006;
Reported to: White House Transition Team.
Date: Jan. 18-19, 2001;
Event: NASA‘s headquarters alerts House and Senate Authorization and
Appropriation staffs that cost increase could range from $2.5 billion-
$3.0 billion;
Reported to: House and Senate staffs.
Date: Feb. 1, 2001;
Event: NASA reports to OMB that bottom-up review shows cost growth is
$4.0 billion;
Reported to: OMB.
Date: Mar. 5, 2001;
Event: NASA‘s headquarters briefs House and Senate staffs on results of
bottom-up assessment indicating the growth could be as high as $4.0
billion;
Reported to: House and Senate staffs.
Date: Nov. 7, 2001;
Event: OMB Deputy Director testifies before the House Science Committee
that, in May 2001, NASA informed OMB that the cost growth number had
grown an additional $800 million to $4.8 billion;
Reported to: House Science Committee.
[End of table]
Mechanisms to Address Cost Growth Were Not Utilized or Were Ignored:
NASA has controls in place that should have alerted management to the
growing cost problem and the need for mitigating action. These include
guidance requiring cost management on a project, and cost and risk
modeling capabilities. However, the management and cost evaluation task
force and the supporting studies found that NASA did not utilize or
ignored many cost control mechanisms because of its focus on fiscal
year budget management rather than on total program cost management.
NASA guidance requires that life-cycle cost be estimated, assessed, and
controlled throughout a program‘s life cycle. [Footnote 4] The
estimates are to be prepared to support major program reviews and the
development of budget submissions. A handbook instructs cost estimators
in selecting a cost model for use in the estimating process and on the
proper documentation of the results of the cost analysis.
NASA has considerable cost-modeling capability, including several cost
models and information related to the type of costing situations for
which they would be appropriate. A study performed by the Rand
Corporation for the Office of Science and Technology Policy, which
supported the management and cost evaluation task force, noted that
NASA has ’very good“ cost and risk modeling capabilities. [Footnote 5]
However, the study found that the in-house capabilities were not well
integrated into the program‘s planning and management. Because of its
short-term budget focus, the program had been reluctant to integrate
cost estimation and control practices sufficiently robust to yield
confidence in its budget estimates.
The management and cost evaluation task force found that the final space
station‘s cost estimate at completion had not been a management
criterion within NASA. According to the task force, because of NASA‘s
focus on executing the program within annual budgets, total cost and
schedule became variables. To stay within the annual budget limits, the
program‘s basic content slipped, and total program cost grew. In
addition, the cost analysis team that supported the task force cited
NASA‘s culture of managing the program to its annual budgets as perhaps
the single greatest factor in the program‘s cost growth.
The management and cost evaluation task force made recommendations
aimed at restoring cost credibility to the program. Some of those
recommendations mirror requirements already contained in NASA guidance,
as follows:
* Develop a life-cycle technical baseline to use as the basis for a
formal cost estimate.
* Develop a full space station cost estimate using the Department of
Defense‘s (DOD) cost assessment approach, including the use of a cost-
analysis requirements document to document the assumptions and
results of the cost analysis.
* Prepare an integrated program management plan delineating the work
to be accomplished, the work breakdown structure, [Footnote 6] required
resources, and schedules.
Impacts on Space Station‘s Utility:
In an effort to mitigate the effects of the large cost growth, NASA
reduced planned funding for space station research by about $1 billion
for fiscal years 2002 through 2006. The mitigation actions resulted in
significant and perhaps long-term reductions in the scope and
capability of the station for conducting scientific research. NASA
proposed major changes in the station‘s design for fiscal year 2001
that resulted in fewer on-orbit scientific facilities, and less
research, and limited the crew available for conducting research. The
research communities, international partners, and recent studies have
raised concerns about the viability of the space station‘s science
program.
Baseline Science Program Restructure:
The restructured science program will provide fewer facilities needed
for conducting scientific research on board the space station. The
station‘s baseline for fiscal year 2001 supported a crew of six to
seven astronauts and provided for the outfitting of 27 U.S. research
facilities and experiment modules for research in a range of science
disciplines. Following the announced cost growth, NASA‘s Office of
Biological and Physical Research, Office of Space Flight, and the space
station‘s Payloads Office at the Johnson Space Center initiated a
program restructuring activity to align the research program with the
on-orbit capabilities and resources available. This activity slowed
down selected fiscal year 2001 expenditures to better match the
availability of resources for fiscal year 2002 and optimized the
scientific utilization of the reduced on-orbit capability. The
reduction of content to the revised baseline was not reconciled against
standing agreements with the program‘s international partners.
The budget content for fiscal years 2002 and 2003 for the core-complete
station provides for the outfitting of 20 research facilities, known as
’racks,“ leaving about one fourth of the previously planned racks and
their utilization unfunded. Some research disciplines were severely
affected by the fiscal year 2002 reduction. For example, significant
experiments planned to conduct research on materials such as metals,
alloys, glasses, and ceramics, and in biotechnology were canceled.
In addition to less hardware for research, there are constraints to
utilization of the science facilities principally because the station‘s
crew size will be reduced from a planned seven to three. This will
limit the crewmember hours that can be devoted to research. For example,
astronauts will have limited time to be used as subjects in research on
the effects of space flight on humans. According to NASA officials, crew
research hours will be a major limiting factor on the number and
complexity of experiments after the arrival of the international partner
modules in 2004-2005, particularly constraining research that requires
the crew‘s interaction. NASA officials stated that some crew
interaction is required for nearly all space station investigations.
These activities include testing, monitoring, sampling, instrument
readings, completing questionnaires, and recording results. NASA
currently estimates that a minimum of 2.5 crewmembers will be required
for maintaining the station, exclusive of their science-related duties
during assembly.
NASA had planned that crew time for scientific research would be 100 +
hours per week, but the crewmember reduction would limit time to a
minimum of 20 hours per week. The 20-hour minimum threshold was
established by the space station program manager but has not been met.
Table 2 shows NASA‘s calculation of how the 20 research hours per week
would be allocated among the station partners. NASA is looking at ways
to mitigate the impact of this reduction.
Table 2: Allocation of Research Time Based on a Three-Member Crew:
Partner: Russia;
Time allocation (percent): 38.3;
Available hours per week: 7.7.
Partner: United States;
Time allocation (percent): 38.3;
Available hours per week: 7.7.
Partner: Japan;
Time allocation (percent): 12.8;
Available hours per week: 2.6.
Partner: Europe;
Time allocation (percent): 8.3;
Available hours per week: 1.7.
Partner: Canada;
Time allocation (percent): 2.3;
Available hours per week: 0.5.
[End of table]
In addition to the funding-driven research cuts cited above, the United
States would receive less research capability from an existing major
barter arrangement with the Japanese. In return for NASA‘s launch of the
Japanese Experiment Module, Japan is providing the centrifuge
accommodation module and centrifuge rotor, which are essential for
conducting controlled biological experiments. As a result of technical
risk and cost issues associated with the proposed design, NASA accepted
a Japanese Space Agency request to reduce the number of science habitats
supported from eight to four.
Concerns Over Science Restructure:
The research communities and international partners are not satisfied
with reductions in the space station‘s capabilities. In the fall of
2000, Congress directed the National Research Council and the National
Academy of Public Administration to organize a joint study of the
status of microgravity research [Footnote 7] in the life and physical
sciences as it relates to the station. In a late 2001 report, the team
concluded that the viability of the overall science program in
microgravity would be seriously jeopardized if the space station‘s
capabilities were reduced below fiscal year 2001 levels and there were
no annual microgravity research dedicated shuttle flights. The study
found that the U.S. scientific community is ready now to use the space
station but that this readiness cannot be sustained if (1) proposed
reductions in the scientific capabilities occur, (2) slippage continues
in both the development and science utilization schedules for the space
station, or (3) uncertainties continue in funding for science
facilities and flight experiments on the space station. The study
observed that readiness is beginning to deteriorate and that it will
continue to erode with further delays in the completion of the space
station. NASA officials stated that the station‘s international
partners have major concerns regarding the uncertainty that NASA will
meet its international commitments for the habitation function and crew
rescue capability. According to NASA, the partners have stated that a
station configuration that provides for only three crewmembers is
unacceptable. NASA plans to develop an optional space station
configuration and hopefully obtain appropriate U.S. and partner
concurrence by November/December 2002.
Several recent studies and NASA‘s actions highlight concerns regarding
the space station‘s science program. The November 2001 report of the
management and cost evaluation task force found that the U.S. core
complete configuration as an end-state would not achieve the unique
research potential of the space station. A December 2001 NASA
Independent Implementation Review found that budget reductions, crew
hour limitations, and the realization of other resource constraints
have all significantly reduced the anticipated space station research
content in terms of quality and quantity. For example, there are fewer
flight investigations and tests, and some science disciplines cannot
achieve planned program goals. In addition, the scientific community
and the international partners have raised concerns. The research
reductions, if not mitigated, may jeopardize the scientific
community/partner‘s capacity for conducting high value research.
Reforms Are Under Way or Planned:
NASA has several institutional and program reforms under way to respond
to the management and cost evaluation task force‘s recommendations and
to bring cost-estimating credibility to the space station program.
Specifically, the agency is preparing a life-cycle cost estimate,
developing a plan to strengthen program management and controls, and
reprioritizing the station‘s science program. NASA is attempting to
complete many of these tasks by September 2002 to influence its fiscal
year 2004 budget submission.
Cost-Estimating and Program Management Reforms:
In July 2001, NASA developed a plan that described the actions that the
agency believed were required to respond to the President‘s budget
blueprint requirements, defined conditions for closing the actions, and
provided for OMB to monitor NASA‘s progress in implementing the
reforms. The plan called for measures to improve cost-management and
cost-estimating accuracy, such as metrics designed to alert management
to pending problems, including an early warning system for potential
cost growth, and the establishment of a cost-estimating capability to
take advantage of the latest estimating and management tools and
techniques.
To strengthen the cost-estimating and control function, the program
office is also establishing a management information system and hiring
cost estimators. An interim management information system will be used
initially, and the permanent system is to be available by March 2003
during the implementation of a key component of the Integrated Financial
Management Program at the Johnson Space Center. The program office has
the authority to hire 10 estimators, which it plans to use to establish
a cost-estimating capability in the station‘s program office. NASA is
in the process of preparing its life-cycle cost estimate using the DOD
cost assessment approach and plans to have it completed in early August
2002. An independent team headed by a DOD Cost Analysis Improvement
Group official will prepare an independent cost estimate, also
scheduled for completion in August 2002. The in-house and independent
cost estimates will then be reconciled.
The program office is also developing a plan to strengthen program
management and controls. According to NASA officials, cost, schedule,
and technical reviews will be implemented to provide the program manager
with an early warning of potential problems, such as cost growth and
budget overruns. The program will also develop risk analysis tools and
improve risk system and cost integration.
Science Program Reprioritizing:
NASA is also taking steps to reprioritize the science to be performed
on the space station. In consultation with the White House Office of
Science and Technology Policy and OMB, NASA has assembled an ad-hoc
external advisory committee to assist the agency in prioritizing its
entire research program, including both station-based research as well
as nonstation-based research. Consistent with recommendations from the
management and cost evaluation task force, NASA is attempting to place
the highest priority on investigations requiring access to the space
environment. The scientific community will have representation on the
ad-hoc committee and will therefore be involved in helping to
reestablish science objectives and improving scientific productivity.
The research advisory committee‘s charter is to evaluate and validate
high-priority science and technology research that will maximize the
research returns within the available resources. It plans to (1) assess
the degree to which key research objectives can or should be addressed
by the space station, (2) identify and assess how options among the key
research objectives would change if the station remains at the U.S.
core-complete configuration or evolves with additional funding, and (3)
recommend modification or addition to the Office of Biological and
Physical Research‘s goals and objectives. In addition, the advisory
committee will also identify and recommend criteria that can be used to
implement specific research activities and programs on the basis of
priorities. According to a NASA official, the agency plans to report
the advisory committee‘s findings to OMB in August 2002. The report is
to include the prioritized research program and the roadmap to getting
there. NASA‘s goal is to reflect the science research priorities in its
fiscal year 2004 budget submission.
Challenges Ahead:
Successfully completing these initiatives is vitally important, since
they are integral to providing Congress and agency decision makers with
the information they need to make decisions on the future of the space
station. But there are significant challenges facing NASA in completing
them.
NASA‘s milestones provide for almost no slippage. Specifically, the
preparation of a reliable life-cycle cost estimate may be difficult
because NASA currently lacks a modern integrated financial management
system to track and maintain data needed for estimating and controlling
costs. Such a system was not available when NASA prepared the $4.8
billion cost growth estimate and thus the accuracy of that estimate is
questionable. The NASA Administrator has established the integrated
financial management program as one of his top priorities. The
successful implementation of the first major component, the core
financial system, by June 2003 is critical to the agency‘s ability to
control costs. In addition, many tasks and studies being undertaken
will not be completed until September 2002, leaving NASA with a very
short time frame to incorporate its results into the 2004 budget. These
include NASA‘s study and independent validation of lifecycle costs, its
assessment of long-and short-term options for increasing the station‘s
crew complement, and its assessment of how research can be maximized
with limited deliveries of samples and equipment. (Deliveries would be
limited because NASA plans to reduce space shuttle flights from seven
to four per year.)
Lastly, NASA has not yet reached agreements with its international
partners on an acceptable on-orbit configuration as well as how
research facilities and costs should be shared. Such agreements are
important not only to reach a decision on the end-state of the space
station but also to strengthen support of the program‘s international
partners.
Conclusion:
NASA is at a critical juncture with the space station program. Because
of the cost growth, the program is essentially unable to carry out the
full intent of its original objectives. This has raised concerns from
NASA‘s international partners. To begin working through this dilemma,
NASA must first develop a credible budget for the core-complete
station, define a station configuration that will be acceptable to the
international partners, and obtain OMB‘s approval. This is a difficult
endeavor in itself, since NASA is facing a highly compressed schedule
and does not have an integrated system for estimating and controlling
costs. The agency is attempting to use the latest estimating and
management tools and techniques but needs accurate, detailed cost data
and the ability to compare resulting estimates with actual costs. If
NASA cannot succeed with a viable budget for fiscal year 2004, it will
jeopardize the opportunity for Congress and the administration to
regain confidence in the program.
If NASA does succeed with the fiscal year 2004 budget, it still faces
considerable challenges with the space station program. In the short
run, it must successfully work with its international partners to
decide how to best use the resources that remain available to the
program. This is a significant challenge because it involves
prioritizing research programs for which partners already have a vested
interest. Moreover, in the long run, NASA must find ways to make sure
that the restructured program stays on track. This not only means
making sure that the root causes of problems that have plagued the
program are sufficiently addressed, but that any schedule slippage or
cost growth is immediately addressed and that oversight mechanisms
already in place are vigilantly adhered to.
Agency Comments:
In written comments on a draft of this report, NASA‘s Associate Deputy
Administrator for Institutions said that the report represents the
issues and actions taken to address cost growth. He also stated that
other external reviews are scheduled for September 2002 and that
continued evaluations by GAO would be appreciated.
Scope and Methodology:
To determine the reasons for the cost growth, we evaluated previous
internal and independent analyses of the space station‘s cost growth. We
also interviewed NASA officials regarding cost estimates and the process
by which cost information is studied and communicated throughout NASA.
To assess program oversight mechanisms, we reviewed NASA‘s policies and
procedures governing program management. We also interviewed
procurement and program management officials to identify specific tools
used in the program‘s oversight and assessed the extent to which the
program relies on contractor inputs to perform its internal cost
analyses.
To assess the impacts of cost reduction proposals on the space station‘s
utility, we evaluated the minutes from Space Station Utilization
Advisory Subcommittee meetings, along with internal and external
studies on the effects of cost reduction proposals on station research
activities. In addition, we reviewed a report by the National Research
Council related to the research capabilities of the space station. We
also interviewed cognizant program officials and officials within the
research community.
To accomplish our work, we visited NASA headquarters, Washington, D.C;
Johnson Space Center, Texas; and Marshall Space Flight Center, Alabama.
We also coordinated our work with independent and NASA-internal teams
performing space station program reviews.
We conducted our work from June 2001 through April 2002 in accordance
with generally accepted government standards.
Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days from its issue date. At that
time, we will send copies to the NASA Administrator; the Director,
Office of Management and Budget; and other interested parties. We will
also make copies available to others on request. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
Please contact me at (202) 512-4841 if you or your staffs have any
questions about this report. Major contributors to this report are
listed in appendix III.
Sincerely yours,
Singed by:
Allen Li:
Director:
Acquisition and Sourcing Management Team:
[End of section]
Appendix I: Comments from the National Aeronautics and Space
Administration:
NASA:
National Aeronautics and Space Administration:
Office of the Administrator:
Washington, DC 20546-0001:
June 21, 2002:
Mr. Allen Li:
Director:
Acquisition and Sourcing Management:
General Accounting Office:
Washington, DC 20548:
Dear Mr. Li:
This letter is in response to your correspondence dated May 16, 2002,
forwarding your draft report on actions underway to manage cost growth
of the International Space Station (ISS) (GAO Code 120076). The report
provided for review represents the issues and actions taken to address
cost growth. Given the broad set of management and financial actions
taken to restore confidence in the ISS Program, and the absence of
additional recommendations in the draft report, I hope it is your
impression that we are seriously and aggressively addressing our
weaknesses.
Initial evaluation of ISS performance against recommendations provided
by the ISS Management and Cost Evaluation Task Force and NASA Advisory
Council, will be scheduled for September 2002. As NASA considers
external audit and advisory groups essential to our success, continued
evaluation by the GAO and any future recommendations will be
appreciated as we proceed ahead to complete this tremendous laboratory
in space.
Cordially,
Signed by:
Michael D. Christensen:
Associate Deputy Administrator for Institutions:
[End of section]
Appendix II: Prior GAO Reports and Testimonies Related to the
International Space Station Program:
NASA: Compliance With Cost Limits Cannot Be Verified. GAO-02-504R.
Washington, D.C.: Apr. 10, 2002.
NASA: Leadership and Systems Needed to Effect Financial Management
Improvements. GAO-02-551T. Washington, D.C.: Mar. 20, 2002.
NASA: International Space Station and Shuttle Support Cost Limits.
GAO-01-100R. Washington, D.C.: Aug. 31, 2001.
Space Station: Inadequate Planning and Design Led to Propulsion Module
Project Failure. GAO-01-633. Washington, D.C.: June 20, 2001.
Space Station: Russian-Built Zarya and Service Module Compliance With
Safety Requirements. GAO/NSIAD-00-96R. Washington, D.C.: Apr. 28, 2000.
Space Station: Russian Compliance with Safety Requirements. GAO/TNSIAD-
00-128. Washington, D.C.: Mar. 16, 2000.
Space Station: Russian Commitment and Cost Control Problems. GAO/NSIAD-
99-175. Washington, D.C.: Aug. 17, 1999.
Space Station: Cost to Operate After Assembly Is Uncertain. GAO/NSIAD-
99-177. Washington, D.C.: Aug. 6, 1999.
Space Station: Status of Russian Involvement and Cost Control Efforts.
GAO/T-NSIAD-99-117. Washington, D.C.: Apr. 29, 1999.
Space Station: U.S. Life-Cycle Funding Requirements. GAO/T-NSIAD-98-
212. Washington, D.C.: June 24, 1998.
International Space Station: U.S. Life-Cycle Funding Requirements.
GAO/NSIAD-98-147. Washington, D.C.: May 22, 1998.
Space Station: Cost Control Problems. GAO/T-NSIAD-98-54. Washington,
D.C.: Nov. 5, 1997.
Space Station: Deteriorating Cost and Schedule Performance Under the
Prime Contract. GAO/T-NSIAD-97-262. Washington, D.C.: Sept. 18, 1997.
Space Station: Cost Control Problems Are Worsening. GAO/NSIAD-97-213.
Washington, D.C.: Sept. 16, 1997.
NASA: Major Management Challenges. GAO/T-NSIAD-97-178. Washington,
D.C.: July 24, 1997.
Space Station: Cost Control Problems Continue to Worsen. GAO/T-NSIAD-
97-177. Washington, D.C.: June 18, 1997.
Space Station: Cost Control Difficulties Continue. GAO/T-NSIAD-96-210.
Washington, D.C.: July 24, 1996.
Space Station: Cost Control Difficulties Continue. GAO/NSIAD-96-135.
Washington, D.C.: July 17, 1996.
Space Station: Estimated Total U.S. Funding Requirements. GAO/NSIAD-
95-163. Washington, D.C.: June 12, 1995.
Space Station: Update on the Impact of the Expanded Russian Role.
GAO/NSIAD-94-248. Washington, D.C.: July 29, 1994.
Space Station: Impact of the Expanded Russian Role on Funding and
Research. GAO/NSIAD-94-220. Washington, D.C.: June 21, 1994.
[End of section]
Appendix III: Staff Acknowledgments:
Jerry Herley, James Beard, Fred Felder, Erin Baker, Cristina Chaplain,
Belinda LaValle, and John Gilchrist made key contributions to this
report.
[End of section]
Footnotes:
[1] In response to a legislative mandate, we recently reported that
NASA‘s systems could not provide the data necessary for us to verify
amounts obligated for the International Space Station. NASA‘s
independent auditor reported similar problems while attempting to verify
costs for the space station that were reported in the agency‘s fiscal
year 2001 financial statements.
[2] See The President‘s Budget Blueprint: A Blueprint for New
Beginnings, a Responsible Budget for America‘s Priorities (Feb. 2001).
[3] See Report by the International Space Station Management and Cost
Evaluation Task Force (Nov. 1, 2001).
[4] NASA Policy Directive 7120.4B, Program/Project Management and NASA
Procedures and Guidelines 7120.5A, NASA Program and Project Management
Processes and Requirements.
[5] See RAND Perspectives on ISS Budget Issues (Jan. 23, 2002).
[6] A work breakdown structure is a method of organizing a program into
logical subdivisions at lower and lower levels of detail.
[7] Research that is concerned with the effects of reduced gravity on
physical, chemical, and biological phenomena.
[End of section]
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