[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                      INSPECTOR GENERAL REPORT ON
                        NOAA WEATHER SATELLITES

=======================================================================

                                HEARING

                               BEFORE THE

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 11, 2006

                               __________

                           Serial No. 109-49

                               __________

            Printed for the use of the Committee on Science


     Available via the World Wide Web: http://www.house.gov/science

                                 ______



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                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas                 BART GORDON, Tennessee
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania            EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         LYNN C. WOOLSEY, California
KEN CALVERT, California              DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland         MARK UDALL, Colorado
VERNON J. EHLERS, Michigan           DAVID WU, Oregon
GIL GUTKNECHT, Minnesota             MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri               SHEILA JACKSON LEE, Texas
TIMOTHY V. JOHNSON, Illinois         BRAD SHERMAN, California
J. RANDY FORBES, Virginia            BRIAN BAIRD, Washington
JO BONNER, Alabama                   JIM MATHESON, Utah
TOM FEENEY, Florida                  JIM COSTA, California
RANDY NEUGEBAUER, Texas              AL GREEN, Texas
BOB INGLIS, South Carolina           CHARLIE MELANCON, Louisiana
DAVE G. REICHERT, Washington         DENNIS MOORE, Kansas
MICHAEL E. SODREL, Indiana           DORIS MATSUI, California
JOHN J.H. ``JOE'' SCHWARZ, Michigan
MICHAEL T. MCCAUL, Texas
MARIO DIAZ-BALART, Florida


















                            C O N T E N T S

                              May 11, 2006

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, 
  Committee on Science, U.S. House of Representatives............    23
    Written Statement............................................    25

Statement by Representative Bart Gordon, Minority Ranking Member, 
  Committee on Science, U.S. House of Representatives............    26
    Written Statement............................................    27

Statement by Representative Vernon J. Ehlers, Chairman, 
  Subcommittee on Environment, Technology, and Standards, 
  Committee on Science, U.S. House of Representatives............    28
    Written Statement............................................    29

Statement by Representative David Wu, Minority Ranking Member, 
  Subcommittee on Environment, Technology, and Standards, 
  Committee on Science, U.S. House of Representatives............    30

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science, U.S. House of Representatives............    31

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Committee on Science, U.S. House of Representatives....    32

Prepared Statement by Representative Sheila Johnson Lee, Member, 
  Committee on Science, U.S. House of Representatives............    32

                               Witnesses:

Mr. Johnnie E. Frazier, Inspector General, U.S. Department of 
  Commerce
    Oral Statement...............................................    33
    Written Statement............................................    34
    Biography....................................................    38

Vice Admiral Conrad C. Lautenbacher, Jr. (Ret.), Administrator, 
  National Oceanic and Atmospheric Administration
    Oral Statement...............................................    39
    Written Statement............................................    42
    Biography....................................................    45

Discussion
    NOAA's Response to IG Recommendations........................    46
    Cost Estimates...............................................    49
    Recent Program Changes.......................................    50
    Award Fee....................................................    51
    Future of NPOESS.............................................    52
    Management Structure.........................................    54
    Lessons Learned..............................................    58
    Management Structure (cont.).................................    61
    IG Recommendations...........................................    66
    Concluding Remarks...........................................    68

              Appendix: Answers to Post-Hearing Questions

Vice Admiral Conrad C. Lautenbacher, Jr. (Ret.), Administrator, 
  National Oceanic and Atmospheric Administration                    72
















 
          INSPECTOR GENERAL REPORT ON NOAA WEATHER SATELLITES

                              ----------                              


                         THURSDAY, MAY 11, 2006

                  House of Representatives,
                                      Committee on Science,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 10:10 a.m., in Room 
2318 of the Rayburn House Office Building, Hon. Sherwood L. 
Boehlert [Chairman of the Committee] presiding.






                            hearing charter

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                      Inspector General Report on

                        NOAA Weather Satellites

                         thursday, may 11, 2006
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

Purpose:

    On May 11, 2006 at 10:00 a.m., the House Science Committee will 
hold a hearing about a report by the Department of Commerce Inspector 
General (IG), ``Poor Management Oversight and Ineffective Incentives 
Leave NPOESS Program Well Over Budget and Behind Schedule.'' The IG 
report will be officially released at the hearing, which will be the 
first public discussion of the report's conclusions. (An embargoed copy 
of the Executive Summary of the report is attached as Appendix I.)
    The National Polar-orbiting Operational Environmental Satellite 
System (NPOESS) satellites are under development and are designed to 
become the Nation's key weather satellites, replacing the current 
generation of both civilian and military weather satellites as they 
reach the end of their useful lives. Yet the program is more than 25 
percent or as much as $3 billion over budget and anywhere from 17 
months to three years behind schedule, creating a possible gap in 
weather satellite coverage (if current satellites fail before new ones 
can be launched).
    The IG report examines how the NPOESS program got so off track and 
has two primary findings and related recommendations. The first finding 
is that the top officials at the agencies responsible for NPOESS did 
not exercise sufficient oversight and did not seek sufficient 
information from sources who were independent of the NPOESS program. 
The second is that the way the contract for NPOESS is written and the 
way it was implemented enabled the contractor to receive sizable award 
fees even when the program was not performing well.
    The agencies in charge of NPOESS are the National Oceanic and 
Atmospheric Administration (NOAA), the Department of Defense (DOD), and 
the National Aeronautics and Space Administration (NASA). The IG report 
only examines actions by NOAA (which is the only NPOESS agency within 
the Commerce Department IG's jurisdiction) NOAA is responsible for 
overall program management of NPOESS and, during most of the period 
under review, a NOAA employee was the day-to-day official in charge of 
the NPOESS program.
    The IG report includes comments from NOAA and the IG's responses to 
those comments. Under Department rules, NOAA also must, within 60 days, 
develop a plan to remedy the concerns raised by the IG. That period may 
be extended because the NPOESS program is already undergoing a top-to-
bottom review required by law because of the cost overruns. This 
review, known as a ``Nunn-McCurdy review,'' is described in greater 
detail below.

Witnesses:

Mr. Johnnie E. Frazier, Inspector General, U.S. Department of Commerce

Vice Admiral Conrad C. Lautenbacher (ret.), Administrator, National 
Oceanic and Atmospheric Administration

Background on NPOESS:

What is NPOESS?
    The Federal Government has traditionally launched separate weather 
satellites to serve military and civilian needs. NPOESS, begun in 1994, 
is the first joint civilian/military weather satellite program. NOAA 
and DOD together share the cost of developing the NPOESS satellites. 
NASA also supports the program primarily by overseeing the development 
of a small satellite, known as the NPP (for NPOESS Preparatory 
Project), designed to test some of the advanced sensors the NPOESS 
satellites will later carry, reducing the risk that these sensors will 
not work as expected.




    The NPOESS satellites are designed to fly in an orbit around the 
Earth's poles. They complement other weather satellites that orbit the 
Earth at the equator (so-called geostationary satellites because they 
orbit at the same speed as the Earth rotates, and so appear to hover 
above a fixed position on the ground). As polar-orbiting satellites 
circle the Earth, they provide global coverage of weather and climate 
conditions.
    NPOESS satellites are being built to carry instruments, or sensors, 
to measure a number of meteorological features important to developing 
three- to seven-day weather forecasts and for predicting severe 
weather, such as hurricanes. For example, some sensors are being 
developed to measure ocean winds to help predict El Nino and aid the 
military's operation of aircraft carriers. Others will measure soil 
moisture, which is important to military planning as well as 
agriculture and water resource managers. Aerosol detectors will help 
predict such aviation hazards as volcanic ash while helping the 
military predict whether it will be able to accurately spot its 
targets. Ocean-color sensors can track fish populations and ocean-borne 
pollution while helping the military sweep for mines. And as the events 
of the 2005 hurricane season showed, improved accurate forecasts can 
help better predict hurricane paths, allowing emergency managers to 
target their efforts and preventing unnecessary coastal evacuations 
that can cost up to $1 million a mile.
Past Problems with NPOESS
    NPOESS has a history of budget and technical problems.\1\ When 
first conceived in 1994, NPOESS was expected to cost $6.5 billion, a 
savings of $1.8 billion compared to the cost of separately developing 
new satellite systems for military and civilian use. The NPP test 
satellite was originally expected to be ready for launch in May 2006, 
while the first operational NPOESS, the C-1 satellite, was to be 
available for launch in June 2008.
---------------------------------------------------------------------------
    \1\ See the hearing by the Science Committee's Subcommittee on 
Environment, Technology, and Standards in July 2003, and by the Full 
Science Committee on November 16, 2005, both available at http://
www.house.gov/science/.
---------------------------------------------------------------------------
    The government and contractors drew up a new cost estimate and 
schedule for NPOESS (known as a ``rebaselining'') early in 2004 to take 
into account funding cutbacks in FY 2003 (by Congress) and FY 2004 (by 
the Administration). Under the new baseline, the total expected cost of 
the program rose by $900 million (to $7.4 billion) and the schedule was 
delayed by several months: NPP was to be launched in October 2006 and 
NPOESS C-1 was to be launched in February 2009.
    In November 2004, major technical and engineering problems emerged 
with one of the key sensors, known as VIIRS (pronounced like ``veers,'' 
the instrument is a type of infrared camera used to collect images of 
clouds and to probe sea surface temperature, an important aspect of 
hurricane prediction). In response to the problems with the sensor, 
Raytheon, the subcontractor building VIIRS, fired its entire technical 
team working on the instrument and put new staff on the task. By March 
2005, the problems with VIIRS had become so severe that Northrop-
Grumman Space Technologies, the prime contractor, notified the 
government it would not be able to deliver NPOESS on cost or schedule. 
That notification triggered a series of reviews by NPOESS officials.
    At the Full Science Committee's November 16, 2005 hearing, the 
Committee heard from the Air Force, NOAA, the prime contractor, and the 
Government Accountability Office (GAO) about the options under 
consideration to deal with the cost overruns and schedule delays. NOAA 
and the Air Force testified that the NPOESS program acquisition costs 
would increase by 15 percent over the program's most recent cost 
estimate and would likely result in a delay of at least two years. 
Committee Members pressed repeatedly for NOAA and DOD to justify their 
decision not to seek additional funding in fiscal years 2006 and 2007, 
even though the prime contractor on the program testified that 
increased funds in those years would significantly reduce life cycle 
costs, help resolve looming technical problems sooner, decrease the 
risk of a gap in weather satellite coverage, and increase the chances 
that the NPOESS development program overall will be successful. NOAA 
and the Air Force told the Committee they believed that no new funds 
were needed, at least in the short run, because slowed work on some 
sensors would free up funds to continue work on other sensors.
    About two months after the Committee's hearing, cost estimates for 
the NPOESS program rose to more than 25 percent above the program 
baseline estimate, triggering a Nunn-McCurdy certification review 
described in the next section.
Nunn-McCurdy Review
    The NPOESS contract follows DOD acquisition procedures. As a 
result, it is subject to the Nunn-McCurdy provisions of the DOD 
acquisition law (10 U.S.C. 2433). Under the Nunn-McCurdy law, if a 
program's costs increase by more than 25 percent, the Secretary of 
Defense (or the Secretary of the appropriate branch of the military) 
must certify the program in a period of time specified under the law or 
no additional funds can be obligated for the program. Certification 
requires a written justification that:

        (1)  The program is essential to the national security;

        (2)  There is no alternative that can provide equal capability 
        at less cost;

        (3)  New estimates of costs have been developed and are 
        reasonable; and

        (4)  Management structure is adequate to control costs.

    On January 11, 2006, the Secretary of the Air Force notified 
Congress that the NPOESS program would exceed the 25 percent Nunn-
McCurdy notification threshold (meaning that acquisition costs would 
increase by at least $1.85 billion over the program's most recent cost 
estimate of $7.4 billion). This triggered a formal certification 
process that effectively superseded any previous independent reviews as 
well as pending program direction decisions about mitigating cost 
overruns and schedule delays. The decision on whether to certify the 
NPOESS program is due no later than June 5, 2006.
    If the Secretary decides the program does not meet any or all of 
the four certification criteria and or if the required certification is 
not provided to Congress by the due date, no more DOD funds can be 
obligated for a major contract under the program (essentially 
terminating the program). If the Secretary does decide to certify a 
program, that certification is generally contingent on changes made to 
technical requirements (e.g., sensor design), cost, schedule, and/or 
management structure to ensure that costs do not continue to rise as 
the program moves forward.
    To address each of the four certification criteria for the NPOESS 
program, DOD established four Independent Program Teams, each assigned 
to look at one of the criteria. Each team consists of representatives 
of each of the three agencies responsible for NPOESS and other experts 
on both satellite acquisition and on the technical capabilities of 
satellites. The Nunn-McCurdy certification process for NPOESS 
represents the first time an interagency program has undergone a Nunn-
McCurdy review so this review has raised some unique concerns 
(including interagency representation on the teams). In December 2005, 
key members of the House Science and Armed Services Committees sent a 
letter to the DOD and Air Force officials responsible for the Nunn-
McCurdy process urging, among other things, full coordination of this 
process with NOAA and NASA. The Science Committee sent the letter, in 
part, because of concerns that a Nunn-McCurdy certification could 
recommend changes that would be detrimental to NOAA's satellite needs 
while still addressing DOD's needs.
    For 2006, the NPOESS program office (known as the Integrated 
Program Office, or IPO) and Northrop Grumman (the prime contractor) put 
together an interim program plan to continue building key components of 
the program pending a Nunn-McCurdy decision. Thus far the program is 
operating within the cost estimates and schedule set for this year.

Major Topics of Inspector General's Report:

1.  Executive Committee (EXCOM) oversight of NPOESS
    IG Finding: Despite increasing evidence of cost and schedule 
problems with VIIRS (the key NPOESS sensor), the EXCOM did not 
challenge the IPO's optimistic assessments that development of VIIRS 
would not delay launch dates for NPOESS. Also, the EXCOM met 
infrequently--just twice in 18 months--during the critical period when 
VIIRS problems were worsening, resulting in lost opportunities to 
investigate program status and make necessary program management 
decisions.
    IG Recommendation: The NOAA Administrator should ensure that the 
EXCOM receives regular, independent evaluations of NPOESS to enable 
ongoing, active oversight of the program.
    NOAA and IG Responses: In its written response to the IG report, 
NOAA argued that it had exercised oversight of the program through 
private discussions as well as EXCOM meetings. It also said that it has 
already taken action to institute independent reviews. In the report, 
the IG countered that private meetings cannot substitute for formal 
oversight. The IG said the EXCOM needs to have a formal, documented 
means to oversee the NPOESS program, in part because that enables 
greater continuity when program officials change. Also, the IG argued 
that any private meetings or reviews apparently did not result in any 
concrete actions to keep the program on track. Finally, the IG argued 
that NOAA needs to establish a clear process to get regular, 
independent evaluations beyond the ad hoc independent reviews that have 
already been undertaken to determine the current status of the program.
    Current Status of IPO: There have been significant management 
changes at the IPO and the prime contractor in the past few months, 
especially with regard to personnel. The NPOESS program director (that 
is, the head of the IPO) during most of the period covered by the IG 
report (a NOAA employee) has resigned, apparently under pressure, and 
the Northrop Grumman program director at the time many of the problems 
with VIIRS occurred no longer works on the program. In addition, the 
EXCOM has set up a new structure to centralize the responsibilities 
that reside below the EXCOM level. A single Program Executive Officer 
(PEO) has been inserted at a level between the EXCOM and the IPO, at 
least temporarily. The PEO structure is common in DOD acquisition 
programs. The current PEO is a Brigadier General in the Air Force with 
extensive experience in major procurements. The current IPO program 
director is an Air Force Colonel who is reporting to NOAA in his IPO 
role.
    Remaining Issues with IPO: This new structure means there is a lot 
of Air Force influence at the top levels of the NPOESS program and 
raises concerns about whether NOAA and NASA priorities will still 
receive adequate attention. Also, NOAA has not yet formally agreed to 
adopt the new PEO structure for NPOESS program management, pending the 
outcome of the Nunn-McCurdy process. Finally, NOAA has not said whether 
the EXCOM will meet more frequently or take a more hands-on approach to 
oversight.
    Remaining Issues with Independent Reviews: It is not clear whether 
the kinds of reviews NOAA has now put in place are sufficiently 
independent to satisfy the IG. On the other hand, while independent 
reviews are valuable and can provide new insights (and might have 
provided a check on IPO optimism earlier in the program), they also 
require time and money. Some satellite industry officials think that 
annual independent reviews of the NPOESS program overall would be 
useful, while others think independent reviews just at certain 
milestone events (such as technical reviews during critical tests of 
important sensors) would be more effective. Others think that with the 
Nunn-McCurdy review NPOESS has received sufficient independent analysis 
and does not require more independent review in the future.
2.  Contractor Award and Incentive Fee Structure and Management
    IG Finding: Under the NPOESS contract, the prime contractor is 
eligible to receive award and incentive fees to reward performance. 
These fees are over and above reimbursement for the actual costs of 
carrying out contract tasks. Under the NPOESS contract, Northrop 
Grumman can earn award and incentive fees equal to 20 percent of the 
program's actual costs. The IG concluded that the 20 percent award and 
incentive fee level is higher than what is allowed on almost all other 
DOD contracts. Moreover, Northrop Grumman received most of the award 
and incentive fees for which it was eligible even though the program 
was behind schedule and over cost. The award and incentive fees were 
determined by the IPO director, and the fees were often in excess of 
what a fee advisory board had recommended. Specifically, Northrop 
Grumman has received 84 percent of the award and incentive fees it 
could have earned to date even though NPOESS is as much as $3 billion 
over budget and 17 months behind schedule. Even during a period in 
which the IPO rated the contractor's performance as ``unsatisfactory,'' 
Northrop Grumman earned almost half of the possible award and incentive 
fee. (An overview of DOD contract award fees is in Appendix II.)
    IG Recommendations: The NOAA Administrator should ensure that the 
EXCOM revises the award and fee plan. The new fee plan should deny 
award and incentive fees when performance is not satisfactory. The IG 
also recommended reviewing the rollover provisions of the current fee 
structure. In the current fee structure, award and incentive fee 
determinations are made every six months, but award and incentive fees 
not earned in one six-month period are not always lost; instead, in 
some cases, those lost fees are simply added to (rolled over into) the 
amount of award fees available in the next six-month period. The IG 
also recommended that the IPO director not be the person who determines 
when the award and incentive fees are earned. DOD programs generally do 
not allow the program manager to determine the fees because the program 
manager has an inherent interest in claiming that progress is being 
made in the program and that progress is reflected in the award and 
incentive fees.
    NOAA and IG Responses: NOAA argued in its written response that the 
IG report does not fully characterize the award and incentive fee 
structure, but NOAA did not elaborate. NOAA also argued that the 
contractor will lose all award and incentive fee payments if it does 
not deliver a working satellite. Finally, NOAA pointed out that NPOESS 
is operated under a DOD contract. In the report, the IG countered that 
NOAA's comments did not deal with the heart of the IG's concerns about 
excessive contract fees. The IG also pointed out that while NPOESS 
operates under a DOD contract, NOAA, through the EXCOM, has a role in 
developing and implementing the contract. Moreover, the IG pointed out 
that the person managing the contract and determining award and 
incentive fees (the IPO director) was a NOAA employee.
    Current Status: The fee determining official for NPOESS is now the 
PEO rather than the IPO director, although it is not clear if this 
change will satisfy the IG. (The IG said in the report that the PEO 
would be a solution only if the PEO ``is not directly responsible for 
managing the NPOESS program.'') Related to the contract structure, in 
December 2005, GAO issued a report criticizing DOD award fee policies 
department-wide. Many of GAO's criticisms of DOD were similar to the 
issues raised by the IG with respect to NPOESS. In response to the GAO 
report, in March 2006, DOD instituted a new award fee policy that 
addresses GAO's concerns about providing an incentive for critical 
tasks, linking award fee more closely to contractor performance, and 
placing limitations on rollover. This new DOD policy does not 
automatically apply to the NPOESS contract but the Nunn-McCurdy process 
could ultimately result in changes to the award fee plan for NPOESS, 
some of which may address the issues raised by the IG.
    Remaining Issues: If DOD certifies NPOESS, the contract will have 
to be renegotiated, providing an opportunity to restructure the award 
fee structure. It remains to be seen how much NOAA can influence a new 
award fee structure because the Air Force is the lead on the NPOESS 
contract and procurement issues. However, NOAA does have an equal voice 
on the EXCOM and the EXCOM must approve the final renegotiated 
contract.

Other NOAA Satellite Programs:

    NPOESS is not the only major satellite system vital to NOAA's 
ability to forecast weather and climate conditions. NOAA also relies 
heavily on geostationary satellites, which observe a fixed position on 
the Earth and fly in a higher orbit than polar satellites. 
Geostationary satellites are important for assessing current weather 
conditions and providing forecasts out to two days. NOAA plans to let 
the prime contract for its next generation of geostationary satellites, 
known as GOES-R, in Fiscal Year 2007 and is already well into the 
planning for GOES-R. NOAA is the sole agency funding GOES-R. The IG has 
stated that it expects NOAA to take the recommendations from the NPOESS 
report into consideration for future satellite procurements such as 
GOES-R.

Witness Questions:

    The witnesses were asked to address the following questions in 
their testimony.
Mr. Johnnie E. Frazier, Inspector General, U.S. Department of Commerce

        1.  Please outline the major findings and recommendations of 
        your report, ``Poor Management and Ineffective Incentives Leave 
        NPOESS Program Well Over Budget and Behind Schedule.''

        2.  What types of actions could NOAA take to satisfy the 
        recommendations of your report? Please be as specific as 
        possible.

Vice Admiral Conrad C. Lautenbacher (ret.), Administrator, National 
        Oceanic and Atmospheric Administration

        1.  Do you agree with the following recommendations from the 
        Department of Commerce Inspector General Report, ``Poor 
        Management and Ineffective Incentives Leave NPOESS Program Well 
        Over Budget and Behind Schedule?''

                1a.  Work to ensure that the EXCOM obtains regular, 
                independent evaluations of the status of the NPOESS 
                program (including progress on high-risk tasks and 
                tasks on the program's critical path and impacts of any 
                problems).

                1b.  Work to ensure that the EXCOM reviews and 
                considers changes to the structure of the Award Fee 
                Plan for NPOESS, including (1) whether the Award Fee 
                Plan adequately incentivizes high-risk tasks and/or 
                tasks on the critical path; (2) whether the contractor 
                should receive any award fee during a period for which 
                their overall performance is unsatisfactory; (3) 
                whether the award fee pool (up to 20 percent of the 
                contract's total estimated costs) is excessive and (4) 
                whether award fee ``rollover'' opportunities for NPOESS 
                are appropriate.

                1c.  Work to ensure that the responsibility for 
                determining the award fee for NPOESS is assigned to an 
                official who does not have responsibility for day-to-
                day program management.

        2.  What specific steps have you taken and will you take to 
        address each of the IG's recommendations listed below? How will 
        the IG's recommendations factor into the Nunn-McCurdy 
        certification review?

                2a.  Work to ensure that the EXCOM obtains regular, 
                independent evaluations of the status of the NPOESS 
                program (including progress on high-risk tasks and 
                tasks on the program's critical path and impacts of any 
                problems).

                2b.  Work to ensure that the EXCOM reviews and 
                considers changes to the structure of the Award Fee 
                Plan for NPOESS, including (1) whether the Award Fee 
                Plan adequately incentivizes high-risk tasks and/or 
                tasks on the critical path; (2) whether the contractor 
                should receive any award fee during a period for which 
                their overall performance is unsatisfactory; (3) 
                whether the award fee pool (up to 20 percent of the 
                contract's total estimated costs) is excessive and (4) 
                whether award fee ``rollover'' opportunities for NPOESS 
                are appropriate.

                2c.  Work to ensure that the responsibility for 
                determining the award fee for NPOESS is assigned to an 
                official who does not have responsibility for day-to-
                day program management.

        3.  What have you done and what will you do to address the 
        issues listed below and other lessons learned from NPOESS in 
        managing the acquisition of future satellites, including GOES-
        R?

                3a.  Timely communication to NOAA management regarding 
                risks and problems in the program;

                3b.  Regular, independent evaluations of the status of 
                the program (including technical, cost and schedule 
                performance); and

                3c.  Reasonable award fee structure and appropriate 
                administration of award fee (e.g., an independent fee 
                determining official).

Appendix I:




Appendix II:

                  NPOESS Award and Incentive Fee Plan

    The NPOESS award fee has three main parts:
Base Fee
    A base fee of two percent of total estimated costs is provided to 
the contractor automatically each billing period. The total base fee is 
currently $57 million over the lifetime of the NPOESS contract (10 
years). Essentially, this is the contractor's minimum profit on the 
NPOESS program.
Award Fee
    An award fee pool of 13 percent of total estimated cost is 
available. The total award fee pool is currently $369 million over 10 
years. Each award fee period (approximately every six months), an award 
fee determining board makes recommendations on what percentage of 
available award fee the contractor should receive. The recommendations 
are made based on the board's review of criteria for how well the 
contractor has met cost, schedule, and performance goals for that 
period. Then, the fee determining official weighs the board's 
recommendations and makes a final decision on how much fee the 
contractor receives for that period.
Mission Success Fee (Incentive Fee)
    A mission success fee pool of five percent of total estimated costs 
is available. The total mission success fee pool is currently $137 
million over 10 years. The mission success fee is tied to successful 
completion of seven critical events (critical design review of the 
program, NPP sensors complete and delivered, NPP ground readiness, 
processing of NPP data, NPOESS ground readiness, processing NPOESS 
data, interim operational capability). To date, none of the critical 
events has occurred.
Fees are At-Risk
    Finally, if the NPOESS satellites fail to operate properly once 
they are in orbit, the contractor must pay back to the government all 
of the award and mission success fee it received.

    GAO's December 19, 2005 report ``Defense Acquisitions: DOD has Paid 
Billions in Award and Incentive Fees Regardless of Acquisition 
Outcomes'' (GAO-06-66), provides helpful background about DOD 
contracts. The relevant portion of the GAO Report is attached:



    Chairman Boehlert. The Committee will come to order.
    And just a little housekeeping, for the first order of 
business. It will take just seconds.
    The Chair recognizes Mr. Gordon.
    Mr. Gordon. Thank you, Mr. Chairman.
    By direction of the Democratic Caucus of the Science 
Committee, I ask unanimous consent to ratify the election of 
Representative Doris Matsui of California to the Subcommittee 
of Research, thereby filling one of the existing Democratic 
vacancies.
    Chairman Boehlert. Well, thank you very much. And Ms. 
Matsui, welcome. We look forward to your usual eloquence and 
your passion for the subject at hand, and we are proud to have 
you as a Member of the Committee.
    Mr. Gordon. Mr. Chairman, if I could just add. Personally, 
I am delighted that Doris is going to join us on the Committee. 
I know that, particularly the research area, is very important 
to her. She is one of those Californians that get into all of 
this, and she is going to be a very valuable Member, and I am 
delighted that she is here.
    Chairman Boehlert. Thank you very much.
    Let us go to--all right, we have a couple of very 
distinguished witnesses. Before we do that, we will have 
opening statements, and then we will go from there. And I will 
open up with my statement.
    I want to welcome everyone this morning to this important 
hearing. We had a hearing on the NPOESS program back in 
November, and we will be holding another one in June, after the 
results of the Nunn-McCurdy certification process are released. 
NPOESS is a crucial national undertaking, and this committee 
will exercise continuing oversight of it.
    No doubt we will have some disputes at today's hearing, but 
I think that there are two points with which everyone on this 
dais and both of our witnesses can agree. The first point is 
that it is absolutely vital that the NPOESS program succeed. 
NPOESS will provide our ``eyes in the sky'' for both civilian 
and military weather forecasting, and we cannot afford to be 
stumbling around blind.
    A degraded satellite system will cost lives, whether those 
lives are the lives of civilians who do not get the best 
information about approaching storms, or military personnel who 
lack information on weather patterns that could affect the 
success of their operations.
    And the second point is that the NPOESS program is not 
succeeding right now. It is not achieving its technical goals. 
It is at least 17 months behind schedule, raising the specter 
of a gap in satellite coverage. And it is as much as $3 billion 
over budget. Three billion dollars. The entire budget of NOAA, 
by way of comparison, is under $4 billion. The NPOESS program 
is, to be colloquial, totally out of whack.
    So clearly, changes are desperately needed for NPOESS to 
succeed, and succeed it must. Our main purpose in holding this 
hearing is to ensure that the needed changes are made to the 
NPOESS program to get it back on track. And we also want to 
ensure that the mistakes of NPOESS are not repeated in NOAA's 
next big satellite program, GOES-R.
    Now I know that we will not be able to discuss all of the 
changes needed in NPOESS in detail today, because they are 
still being considered as part of the Nunn-McCurdy review. But 
that should not prevent us from hearing clearly whether NOAA 
itself agrees with the Inspector General's analysis of what 
went wrong and his suggestions for what needs to happen now to 
fix the program.
    Unfortunately, I find a certain defensiveness and a lack of 
clarity in parts of Admiral Lautenbacher's written testimony, 
as I did in NOAA's written response to the IG report. I hope we 
can get direct answers in our proceedings today.
    What I want to hear, what I hope to hear, clearly, is an 
admission that NOAA, and that means NOAA's leadership right up 
to the top, made some mistakes and can identify those mistakes 
and has plans to take corrective action. Otherwise, it is 
harder to place credence in general promises that the Nunn-
McCurdy process will take care of everything.
    I am made uneasy by statements like the one on page three 
of Admiral Lautenbacher's testimony that ``EXCOM has been 
actively and directly involved in the oversight and management 
of NPOESS'' when the information provided by the IG and the 
actual performance of the program indicate otherwise. NOAA 
argued, for example, in my readings, that oversight of the 
programs continued through private conversations. And the IG 
says private meetings or conversations cannot substitute for 
formal oversight. And I am made uneasy when the NOAA testimony 
never takes a position on the IG's conclusion that both the 
potential and earned contract award fees were excessive. For 
example, our analysis leads us to conclude that the IG 
concluded that a 20 percent award and incentive fee level is 
higher than most of the awards and incentive fees for which it 
was eligible even though the program was behind schedule and 
over cost. How do you get a reward for being behind schedule 
and over cost, and an award that is excessive to what is the 
norm within DOD?
    So these are troubling aspects of the whole exercise. We 
need to have a very frank and open discussion if this program 
is to get back on track. And Admiral, I have great respect for 
you, and I enjoy our working relationship. And I want us to 
work together, and I want us to start this thing out and go 
forward in a way that will best serve our national interests.
    I am not suggesting that anyone was not trying to do their 
best in running the NPOESS program, but I am suggesting that 
previous management procedures clearly did not do the job. And 
I am not suggesting that I don't see progress in the way that 
NOAA is approaching NPOESS. But I am suggesting that with a 
program this essential and this plagued by problems, we need to 
be sure that NOAA's leadership is fully committed to making 
every change necessary to ensure programmatic success.
    We understand that NPOESS is an extraordinarily complex 
program technically and organizationally, probably too complex, 
as we look back. But as the IG points out, that is only a 
reason to redouble efforts to manage it closely.
    I look forward to an open discussion today that will help 
inform this committee as we continue to oversee this complex 
program. We want to do our part to ensure that, at some point 
in the future, this committee's NPOESS hearings can be about 
the remarkably useful data our nation is receiving from an 
orbiting and functioning NPOESS satellite system.
    Thank you very much.
    Mr. Gordon.
    [The prepared statement of Chairman Boehlert follows:]
          Prepared Statement of Chairman Sherwood L. Boehlert
    I want to welcome everyone here this morning to this important 
hearing. We had a hearing on the NPOESS program back in November, and 
we will be holding another one in June, after the results of the Nunn-
McCurdy certification process are released. NPOESS is a crucial 
national undertaking and this committee will exercise continuing 
oversight of it.
    No doubt we will have some disputes at today's hearing, but I think 
there are two points with which everyone on this dais and both of our 
witnesses can agree. The first point is that it is absolutely vital 
that the NPOESS program succeed. NPOESS will provide our ``eyes in the 
sky'' for both civilian and military weather forecasting, and we cannot 
afford to be stumbling around blind.
    A degraded satellite system will cost lives, whether those are the 
lives of civilians who do not get the best information about 
approaching storms, or military personnel who lack information on 
weather patterns that could affect the success of an attack.
    And the second point is that the NPOESS program is not succeeding 
right now. It is not achieving its technical goals. It is at least 17 
months behind schedule, raising the specter of a gap in satellite 
coverage. And it is as much as $3 billion over budget--$3 billion; the 
entire budget of NOAA, by way of comparison, is under $4 billion. The 
NPOESS program is, to be colloquial, totally out of whack.
    So clearly, changes are desperately needed for NPOESS to succeed, 
and succeed it must. Our main purpose in holding this hearing is to 
ensure that the needed changes are made to the NPOESS program to get it 
back on track. And we also want to ensure that the mistakes of NPOESS 
are not repeated in NOAA's next big satellite procurement, GOES-R.
    Now I know that we will not be able to discuss all the changes 
needed in NPOESS in detail today because they are still being 
considered as part of the Nunn-McCurdy review. But that should not 
prevent us from hearing clearly whether NOAA itself agrees with the 
Inspector General's (IG) analysis of what went wrong and his 
suggestions for what needs to happen now to fix the program.
    Unfortunately, I find a certain defensiveness and lack of clarity 
in parts of Admiral Lautenbacher's written testimony, as I did in 
NOAA's written response to the IG report. I hope we can get direct 
answers in our proceedings today.
    What I want to hear clearly is an admission that NOAA--and that 
means NOAA's leadership right up to the top--made mistakes, can 
identify those mistakes, and has plans to fix those mistakes. 
Otherwise, it's harder to place credence in general promises that the 
Nunn-McCurdy process will take care of everything.
    I am made uneasy by statements like the one on page 3 of Admiral 
Lautenbacher's testimony that ``EXCOM has been actively and directly 
involved in the oversight and management of NPOESS'' when the 
information provided by the IG and the actual performance of the 
program indicate otherwise. I am made uneasy when the NOAA testimony 
never takes a position on the IG's conclusion that both the potential 
and earned contract award fees were excessive.
    We need to have a very frank and open discussion if this program is 
to get back on track.
    I am not suggesting that anyone was not trying to do their best in 
running the NPOESS program. But I am suggesting that previous 
management procedures clearly were not successful. And I am not 
suggesting that I don't see progress in the way that NOAA is 
approaching NPOESS. But I am suggesting that with a program this 
essential and this plagued by problems, we need to be sure that NOAA's 
leadership is fully committed to making every change necessary to 
ensure programmatic success.
    We understand that NPOESS is an extraordinarily complex program 
technically and organizationally--probably too complex, in retrospect. 
But as the IG points out, that's only a reason to redouble efforts to 
manage it closely.
    I look forward to an open discussion today that will help inform 
this committee as we continue to oversee this complex program. We want 
to our part to ensure that, at some point in the future, this 
committee's NPOESS hearings can be about the remarkably useful data our 
nation is receiving from orbiting NPOESS satellites.
    Mr. Gordon.

    Mr. Gordon. Thank you, Mr. Chairman.
    In your statement, you mentioned there might be disputes 
today. Well, there are not going to be disputes between 
Democrats and Republicans on this committee about the 
importance of this function and about the dire, dire 
circumstances that we are in.
    I would, though, point out, you mentioned a $3-billion-
overrun. My information is the DOD is now saying it may be $7 
billion, which is a very serious matter, and hopefully we can 
discuss it more.
    We are holding this hearing because this Committee 
understands the importance of these weather satellites to the 
Nation. Despite repeated assurances from Admiral Lautenbacher 
and other NOAA officials that problems in this program were 
being addressed, this program is still in complete disarray. 
The cost overruns are enormous, and it is far behind schedule. 
We are facing the very real possibility that NOAA will not 
fulfill its mandate to maintain continuity of weather data from 
our polar satellites.
    What does this really mean for the Nation? Well, the 
industries that have come to rely upon reliable three- to five-
day forecasts could find that they are experiencing more delays 
in delivering goods and services.
    Energy companies use these long-range forecasts to prepare 
for weather-driven spikes in demand for air conditioning and 
heating. So, we may be looking at more brown-outs and black-
outs in our power supplies.
    Citizens will have less reliable information on the lead 
time for severe storms, and therefore, less time to prepare to 
get out of harm's way and to secure their property from damage.
    Farmers use forecasts to determine optimal planting dates 
and times for application of fertilizers and pesticides. So 
their yields may suffer, and they may waste time and energy 
replanting or refertilizing their fields.
    This isn't just about the inconvenience of getting a little 
wet because you didn't take your raincoat. As the long-range 
forecasts have become more reliable, individual citizens, 
emergency managers, and our commercial enterprises have come to 
depend upon this information to make decisions that involve 
public safety and commerce. We simply cannot afford a failure 
in this program.
    We will not know the outcome of the DOD's review now 
underway as the result of the Nunn-McCurdy law until early next 
month. I hope DOD will not decide to withdraw from the program. 
The budget implications of that decision for NOAA would be 
extremely serious.
    I simply do not see how NOAA could develop its own polar 
satellite series without major increases in its budget, this 
year and beyond. I am writing today to the President calling on 
his involvement in securing a Nunn-McCurdy decision that gives 
this program the hope of success.
    And Admiral, I just don't know what to say. The Members of 
this Committee have tried for several years to cooperate with 
you and your agency to identify and address problems in this 
program.
    You and your staff denied the seriousness of these problems 
repeatedly when the Committee questioned the rate of program 
expenditures and the technical risk of the sensors identified 
by the GAO team working with us. Obviously, you did not take 
adequate steps to address the recurring problems presented to 
you in the monthly reports of the Integrated Program Office 
Manager.
    I think the Inspector General's report, very clearly, 
confirms this assessment. And Admiral, things have got to 
change. This program is too important to NOAA and our country 
for you not to be directly involved and invested in getting 
this program back on track.
    You may not be responsible for the technical challenges or 
inadequate budget assessment, but as the head of this agency 
and its representative to EXCOM, you are responsible for 
acknowledging problems and initiating steps to address them in 
a timely fashion. In this role, and I think we have to say, it 
has been a failure. While you now point to the whirlwind of 
activity that you have engaged in since last March when the 
lead contractor reported they could not deliver NPOESS to the 
baseline schedule and budget, that has been too little, too 
late. The time to have done your job was in the many months 
prior to that unwanted report.
    I think it is clear that no one above the IPO office was 
actually paying attention to the warning pulsing through the 
system. This doesn't look like particularly rigorous management 
and oversight to me, that you claim to have applied to this 
program in your testimony.
    Mr. Frazier, thank you for your report. I look forward to 
your testimony and exploring your recommendations for moving 
this program forward.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Gordon follows:]
            Prepared Statement of Representative Bart Gordon
    We are here this morning to hear about the Inspector General's 
report on the management of the National Polar-orbiting Operational 
Environmental Satellite System--NPOESS--the joint environmental 
satellite program for NOAA and DOD.
    But we are holding this hearing--the fourth during your tenure as 
Chairman--because this committee understands the importance of these 
weather satellites to the Nation.
    Despite repeated assurances from Admiral Lautenbacher and other 
NOAA officials that problems in this program were being addressed, this 
program is in complete disarray. The cost overruns are enormous and it 
is far behind schedule. We are facing the very real possibility that 
NOAA will not fulfill its mandate to maintain continuity of weather 
data from our polar satellites.
    What does this really mean for the Nation? Well, the industries 
that have come to rely upon reliable three to five-day forecasts could 
find they are experiencing more delays in delivery of goods and 
services.
    Energy companies use these long-range forecasts to prepare for 
weather-driven spikes in demand for air conditioning and heating. So, 
we may be looking at more brown-outs and black outs in our power 
supplies.
    Citizens will have less reliable information on the lead time for 
severe storms and therefore less time to prepare to get out of harm's 
way and to secure their property from damage.
    Farmers use the long-range forecast to determine optimal planting 
dates and times for application of fertilizers and pesticides. So their 
yields may suffer and they may waste time and energy re-planting or re-
fertilizing their fields.
    This isn't just about the inconvenience of getting a little wet 
because you didn't take your raincoat. As the long-range forecasts have 
become more reliable, individual citizens, emergency managers, and our 
commercial enterprises have come to depend upon this information to 
make decisions that involve public safety and commerce. We simply 
cannot afford a failure of this program.
    We will not know the outcome of the DOD's review now underway as a 
result of the Nunn-McCurdy law until early next month. I hope DOD will 
not decide to withdraw from the program. The budget implications of 
that decision for NOAA would be extremely serious.
    I simply do not see how NOAA could develop its own polar satellite 
series without major increases in its budget, this year and beyond. I 
am writing today to the President calling on his involvement in 
securing a Nunn-McCurdy decision that gives this program the hope of 
success.
    Admiral, I simply don't know what to say. The Members of this 
committee have tried for several years to cooperate with you and your 
agency to identify and address the problems with this program.
    You and your staff denied the seriousness of these problems 
repeatedly when the Committee questioned the rate of program 
expenditures and the technical risks of the sensors identified by the 
GAO team working with us. Obviously, you did not take adequate steps to 
address the recurring problems presented to you in the monthly reports 
of the Integrated Program Office manager. I think the Inspector 
General's report very clearly confirms this assessment.
    Admiral, things have got to change. This program is too important 
to NOAA for you not to be directly involved and invested in getting 
this program back on track. You may not be responsible for the 
technical challenges or inadequate budget assessments, but as the head 
of this agency and its representative to the EXCOM, you are responsible 
for acknowledging problems and initiating steps to address them in a 
timely fashion. In this role, you have shown nothing but failure.
    While you now point to the whirlwind of activity you have engaged 
in since last March, when the lead contractor reported they could not 
deliver NPOESS to the baseline schedule and budget, that has been too 
little too late.
    The time to have done your job was in the many months prior to that 
unwanted report. I think it is clear that no one above the IPO office 
was actually paying attention to the warnings pulsing through the 
system. This doesn't look like ``particularly rigorous management and 
oversight'' to me that you claim to have applied to this program in 
your testimony.
    Mr. Frazier, thank you for this report. I look forward to your 
testimony and exploring your recommendations for moving this program 
forward.

    Chairman Boehlert. Thank you.
    The Chair now recognizes Chairman Ehlers.
    Dr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. And thank you for 
holding this hearing, once again.
    Actually, I am disappointed that we need to have the 
hearing, because the last time we had this hearing, we thought 
things would be on track and we wouldn't have to do this. 
Instead, things continue to be off track.
    And this is a very important issue. The tragic scale of 
last year's hurricane season dramatically brought to light our 
nation's vulnerability to natural disasters. Nobody will 
disagree that the devastation would have been even more 
extensive, and the recovery even more heart wrenching if 
coastal communities had not had warning of what was coming and 
been able to determine--and been able to evacuate many people 
from the hurricanes' paths, a warning that was made possible by 
NOAA's polar-orbiting weather satellites. In fact, my 
understanding is the world didn't even know how serious it was 
until the clouds cleared and the weather satellites were able 
to send pictures of the extent of the damage and the water 
inundation.
    These satellites provide data that are critical to NOAA's 
ability to provide accurate three- to seven-day forecasts of 
severe weather, including hurricanes. We desperately need the 
new satellites of the NPOESS program in order to allow even 
more accurate and more timely forecasts in the future, 
forecasts that will save lives and livelihoods.
    Unfortunately, the NPOESS program is deeply troubled and 
appears to be in real danger. Even after re-baselining the 
program in 2003, at the cost of an additional $900 million and 
10 months delay, the program continued to run off-course and 
over budget. Two years ago, at the Environment, Technology, and 
Standards Subcommittee meeting, which I held on this subject, I 
was assured that the problems were being worked out. Seven 
months ago, we found out the problems had worsened and had not 
been worked out. And here we are again, now billions over 
budget, with delays long enough that we face large potential 
gaps in life-saving satellite data. This cannot continue. We 
must make sure that we have the satellites we need, when we 
need them, and effective management of the procurement and 
acquisition process is essential to meeting this goal.
    The Department of Commerce Inspector General took a long, 
detailed look into the NPOESS program to help us better 
understand what went wrong and how to make sure that mistakes 
won't be repeated. I am anxious to hear how NOAA is 
incorporating the report's recommendations into its satellite 
program management process. The NPOESS program is incredibly 
complex with undeniable management challenges. I hope to learn 
today what concrete steps NOAA has taken to assure that its 
experience, its bad experience, I might add, with the NPOESS 
program, and recommendations from the IG report, will inform 
its actions as the Nunn-McCurdy process moves into the next 
phase. It is equally important that NOAA apply the lessons 
learned from the NPOESS program to their other major satellite 
acquisition program, GOES-R, which is entering a critical stage 
this year.
    I look forward to a lively, informative discussion today. I 
want to thank our witnesses for being here, and I certainly 
hope that we can learn from the bad experiences here, but 
projects can go wrong to the tune of almost bankrupting a 
federal agency. I hope, based on what we learn we can make sure 
it doesn't happen again.
    I yield back the balance of my time.
    [The prepared statement of Mr. Ehlers follows:]
         Prepared Statement of Representative Vernon J. Ehlers
    Thank you Chairman Boehlert. I am pleased the Committee is holding 
this hearing today to examine such a critical issue.
    The tragic scale of last year's hurricane season dramatically 
brought to light our nation's vulnerability to natural disasters. 
Nobody will disagree that the devastation would have been even more 
extensive, and the recovery even more heart wrenching, if coastal 
communities had not had warning of what was coming and been able to 
evacuate many people from the hurricanes' paths--a warning that was 
made possible by NOAA's polar orbiting weather satellites. These 
satellites provide data that are critical to NOAA's ability to provide 
accurate three- to seven-day forecasts of severe weather, including 
hurricanes. We desperately need the new satellites of the NPOESS 
program in order to allow even more accurate and more timely forecasts 
in the future--forecasts that will save lives and livelihoods.
    Unfortunately, the NPOESS program is deeply troubled and appears to 
be in real danger. Even after re-baselining the program in 2003, at a 
cost of an additional $900 million and 10 months delay, the program 
continued to run off-course and over budget. Two years ago at the 
Environment, Technology, and Standards Subcommittee hearing I held on 
this subject I was assured that the problems were being worked out. 
Seven months ago we found the problems had worsened, and had not been 
worked out. And here we are again, now billions over budget, with 
delays long enough that we are facing large potential gaps in life-
saving satellite data. This cannot continue. We must make sure that we 
have the satellites we need when we need them, and effective management 
of the procurement and acquisition process is essential to meeting this 
goal.
    The Department of Commerce Inspector General took a long, detailed 
look into the NPOESS program to help us better understand what went 
wrong and how to make sure that mistakes won't be repeated. I am 
anxious to hear how NOAA is incorporating the report's recommendations 
into its satellite program management process. The NPOESS program is 
incredibly complex with undeniable management challenges. I hope to 
learn today what concrete steps NOAA has taken to ensure that its 
experience with the NPOESS program, and recommendations from the IG 
report, will inform its actions as the Nunn-McCurdy process moves into 
the next phase. It is equally important that NOAA apply the ``lessons 
learned'' from the NPOESS program to their other major satellite 
acquisition program, GOES-R, which is entering a critical stage this 
year.
    I look forward to a lively, informative discussion today. I want to 
thank our witnesses for being here, and I yield back the balance of my 
time.

    Chairman Boehlert. Thank you very much, Dr. Ehlers.
    Mr. Wu.
    Mr. Wu. Thank you very much, Mr. Chairman, for calling this 
very, very important hearing.
    It is hard to know what to say about this program, because 
every time we meet to talk about it, it seems that the news 
gets a little bit worse.
    Last summer, in July, the Vice Admiral and I and Mr. 
Boehlert, Mr. Gordon, and Mr. Ehlers discussed some of the 
problems that we were looking at and looked at significant cost 
overruns. At that time, I believe that the Vice Admiral was 
dismissive of GAO's concerns that there may be hundreds of 
millions of dollars of cost overruns. By the end of August last 
summer, the internal cost overruns at NOAA were showing that 
the overruns would exceed a billion dollars and that the 
program manager had resigned. By the time the Vice Admiral met 
with the Committee in November, the internal numbers, according 
to DOD's selected acquisition reports on Nunn-McCurdy watch 
programs, the price tag was $1.4 billion over the baseline.
    Within weeks of our November hearing, the costs had grown 
again, and the Nunn-McCurdy 25 percent cost growth level was 
breached. Under the law, the future of this program is now in 
the hands of the Department of Defense with the program's fate 
to be determined in just a few weeks time. As for the cost 
growth, we do not know what a robust number would be. DOD's own 
most recent selected acquisition report reports a cost overrun 
exceeding $7 billion as of December 31, 2005.
    I would like to think that this is a typographical error. I 
would certainly like to get to a clearer understanding about 
these numbers than we had last summer.
    The testimony submitted to the Committee today is somewhat 
perplexing. Basically, we have conflicting stories. The 
Inspector General's story is that management was not 
sufficiently engaged to see the storm coming and that it was 
building, with respect to this program. The solution is to 
create new accountability mechanisms to make sure that the Vice 
Admiral and General Kelly can do their jobs adequately. The 
Admiral's response to these findings is to deny that they were 
not involved, and yet he failed to meet with the Inspector 
General during the work on this report and to make that case to 
the Inspector General.
    The Vice Admiral elaborates on his story in the testimony 
submitted to this Committee. His version is that he and the 
Executive Committee have been aggressively managing this 
program, the biggest acquisition at his agency on his watch 
since day one. If that is true, I am left to wonder why this 
program is at least $2 billion over budget, years behind 
schedule, and tied-up in a Nunn-McCurdy review that could 
result in its termination. I believe the Admiral's claim, 
looking at the fact set--I have to wonder if top management at 
NOAA is just incompetent, that no system can make them do 
better at their jobs or this set--or that this may be as good 
as it gets at this particular item.
    And I look forward to the testimony to sort out the 
contradicting claims before this Committee.
    I yield back the balance of my time.
    Chairman Boehlert. Thank you, Mr. Wu.
    You have probably noted, the bells have rung, which is a 
call to the House for a vote. We have been rudely interrupted. 
The Speaker doesn't check with the Science Committee. I will 
have to talk to him about that.
    Now we will take a break right now. It looks like just one 
vote. We don't have any other opening statements. The tradition 
of the Committee is to go to the Chairman and Ranking Member, 
the Chairman of the Subcommittee and Ranking Member. What we 
are trying to do is get right to the witnesses so--thank you 
very much.
    Without objection, everyone's opening statement will appear 
in the record at this juncture. We will now pause for a wee bit 
as we go over and vote. We will dash right back. It will give 
you two a chance to get to know each other a little bit better.
    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good morning. I want to thank the witnesses for appearing before 
the Committee to discuss a report by the Department of Commerce 
Inspector General (IG) that will be revealed at today's hearing.
    The National Polar-orbiting Operational Environmental Satellite 
System (NPOESS) satellites are under development and are designed to 
become the Nation's key weather satellites. The agencies in charge of 
NPOESS are the National Oceanic and Atmospheric Administration (NOAA), 
the Department of Defense (DOD), and the National Aeronautics and Space 
Administration (NASA).
    The DOD is required by law to report to Congress any program they 
expect to have a 15 percent cost overrun. The NPOESS program breached 
this limit several months ago, with DOD providing notice to Congress on 
September 28, 2005. While I knew the NPOESS program would be at least 
15 percent above the estimate of $6.8 billion, I was shocked to learn 
after a Full Science Committee hearing on November 16, 2005, that the 
NPOESS program was projecting cost overruns exceeding 25 percent. A 
program with a numerical value higher than 15 percent triggers an 
additional requirement under the Nunn-McCurdy law. Specifically, the 
DOD Under Secretary must review the program and certify that it 
satisfies four criteria before the project can proceed.
    Because the Nunn-McCurdy process is closed to outside review, we 
are uncertain if the DOD will decide to go forward with the program. 
Further, it is unclear where additional funds would come from to 
complete the development of the NPOESS series or to develop and launch 
another polar satellite series. It is my understanding that the outcome 
of the Nunn-McCurdy review will not be known until the first week of 
June.
    The timing of the IG report is unfortunate. It is too late to 
prevent the cost and schedule overruns that have led to the Nunn-
McCurdy process. Further, the recommendations for improving this 
program do not solve the problem. Rather, the report merely establishes 
more program review procedures and allocates award fees. I am 
interested to hear from both the IG and NOAA witnesses because I 
believe the process was not the central problem. Instead, from reading 
the IG report, it seems procedures were not followed and NOAA 
management did not act on the information they received indicating 
serious problems with this program.
    I welcome the panel of witnesses and look forward to their 
testimony.

    [The prepared statement of Ms. Johnson follows:]
       Prepared Statement of Representative Eddie Bernice Johnson
    Thank you, Mr. Chairman and Ranking Member.
    The United States depends on an effective system of weather 
satellites for critical climate change and weather prediction 
capabilities.
    In Texas, severe drought followed by crippling fires have wreaked 
havoc on our agricultural industry. Hurricane Katrina evacuees who 
would have benefited from better advance notice have migrated to Texas 
by the thousands.
    Weather satellites are key to providing information about incoming 
storms as well as climate changes over time.
    Mr. Chairman, I am concerned that mismanagement of the National 
Polar-orbiting Operational Environmental Satellite System--called 
NPOESS--could threaten America's ability to monitor the climate and 
weather.
    Welcome to our witnesses today. The Committee is interested in 
hearing how we can all move forward to ensure there are no gaps in our 
national climate and weather capabilities.
    Thank you, Mr. Chairman. I yield back the balance of my time.

    [The prepared statement of Ms. Jackson Lee follows:]
        Prepared Statement of Representative Sheila Jackson Lee
    Thank you Mr. Chairman and Members of the Committee. I thank the 
witnesses for testifying today. I speak on the challenges with the 
polar satellite program which NOAA funds and manages with DOD and 
NASA--National Polar-orbiting Operational Environmental Satellite 
System (NPOESS). The polar satellites are crucial in providing weather 
and climate data at regular intervals during the day. The polar 
satellites collect information around the Earth and provide information 
about weather and climate conditions around the world that will 
eventually affect weather and climate in the United States. 
Particularly in the aftermath of Hurricanes Katrina and Rita, we know 
the damage that even expected natural disasters can wreak on our 
nation. The ramifications of the weather can be extreme, and I support 
pursuing any method we can to prepare us and inform us in advance of 
oncoming weather.
    For NOAA and NASA, a possible DOD withdrawal due to serious costs 
and schedule overruns would mean lack of funds to support this program. 
Without additional funds due to DOD possible withdrawal, this will 
create a major loss in a very vital program. In addition, NOAA now has 
only the N-Prime spacecraft remaining in its current generation of 
polar satellites and the production line does not exist to rapidly 
obtain others.
    It seems procedures were not followed and NOAA management did not 
act on the information they received indicating serious problems with 
this program.
    I would like to learn why more attention was not paid to 
indications of overspending and schedule overruns. I want to know why 
NOAA's leadership ignored the series of monthly reports showing ongoing 
cost and schedule problems with this program. Furthermore, I am very 
interested in learning what recommendations the IG proposes for 
improving procedures and cost management of this program.
    I am looking forward to your testimonies being presented today. 
Thank you Mr. Chairman.

    [Recess.]
    Chairman Boehlert. We will resume.
    The Democracy will be happy to learn that we voted not to 
adjourn. The House is still in session.
    We have two witnesses on our panel today, and only one 
panel. Mr. Johnnie Frazier, Inspector General of the U.S. 
Department of Commerce. Mr. Frazier, welcome. Vice Admiral 
Conrad C. Lautenbacher, Jr., Administrator, National Oceanic 
and Atmospheric Administration.
    It is good to have you both here. This is a very important 
subject matter under discussion. And we want to be facilitators 
for getting the program back on track. I know that is our 
common desire.
    And with that, we will hear first from the Inspector 
General, Mr. Frazier.

 STATEMENT OF MR. JOHNNIE E. FRAZIER, INSPECTOR GENERAL, U.S. 
                     DEPARTMENT OF COMMERCE

    Mr. Frazier. Thank you, Mr. Chairman.
    Mr. Chairman and members of the Committee, I appreciate the 
opportunity to discuss my office's work on NOAA's management 
and oversight of the NPOESS program, which, as you know, is now 
undergoing a Nunn-McCurdy review, as costs have grown by more 
than 25 percent.
    The report we are releasing today describes problems that 
have contributed to this vital program reportedly being more 
than $3 billion over initial cost estimates and significantly 
behind schedule while the contractor received $123 million, 
roughly 84 percent of available incentive payments. Clearly, 
NPOESS is an extraordinarily complex and technically 
challenging program that is vital to America's ability to 
monitor national and global weather and climate conditions. A 
program of such importance requires extremely close management 
oversight to ensure that challenges and problems that are dealt 
with promptly and effectively and that opportunities for 
success are maximized.
    Unfortunately, the record does not show this level of 
stringent oversight in the case of NPOESS. For example, the 
Executive Committee, known as EXCOM, in charge with overall 
program responsibility failed to take effective action even as 
monthly status reports consistently described the deteriorating 
program that was plagued by cost overruns and missed 
milestones. Although these reports repeatedly confirmed the 
development of a critical sensor, VIIRS, was falling behind 
schedule, the EXCOM convened only twice during a crucial 20-
month period from May 2003 through December 2004, when some of 
the most serious program issues were unfolding.
    By the time the EXCOM began meeting more frequently to 
examine problems and their impact, it was essentially too late 
to turn NPOESS around. Management's inattention had, in effect, 
postponed the critical evaluations and decisions that were 
needed to revamp the program's faltering elements, contain 
budget overruns, and put NPOESS back on track.
    Our audit uncovered two overarching management and contract 
weaknesses that contributed to the program's cost growth and 
schedule delays while adding insult to injury by allowing the 
contractor to receive more than 80 percent of available 
incentive payments during these periods.
    First, the EXCOM did not effectively challenge the program 
director's optimistic assessments of the impact of VIIRS 
problems on NPOESS despite a clear, unequivocal picture of a 
program in trouble that was portrayed in the monthly status 
report. One report, for example, dubbed VIIRS ``our problem 
child.'' Another stated, ``Our biggest challenge remains 
VIIRS.'' Still another said that ``VIIRS fiscal year 2004 
budget is very tight because of money that was spent to solve 
technical problems.''
    Although the EXCOM requested several independent studies of 
the program's status, we found little in the way of action by 
NOAA in response to these reviews. In fact, two of the studies 
were only initiated after the EXCOM learned that the first 
NPOESS launch would be delayed.
    The second major weakness we identified is a seriously-
flawed incentive fee plan that even rewards unsatisfactory 
contractor performance. The program director, understandably an 
advocate for NPOESS since his personal successes link to the 
program's success, is also the official who has the final 
decision on how much award fee the contractor receives.
    Moreover, the fee pool itself is excessive, allowing the 
contractor to earn up to 20 percent of the estimated contract 
amount. In light of the GAO review of the Defense Department 
award fee contracts, which found that less than one percent of 
these types of contracts provided award fees in excess of 15 
percent, we believe the fee amount available to the NPOESS 
contractor surely require careful reconsideration.
    Further, the evaluation criteria for determining fee 
amounts does not focus on the most high risk or critical tasks. 
The rollover feature in the award fee plan, which makes it 
possible to move unearned fees into subsequent performance 
periods, gives the contractor multiple, perhaps too many, 
opportunities to receive additional incentive dollars.
    But the most egregious deficiency of the plan is that it 
has clearly failed in its most fundamental objective: to 
encourage excellent performance. To emphasize the need for 
stringent, high-level oversight of NPOESS, we recommend that 
the Deputy Secretary ensure that NOAA works with other EXCOM 
members to obtain and review regular, independent, and I 
underscore independent, evaluations on the status of NPOESS.
    It is important to note here that the intent of this 
recommendation is to have qualified individuals who are 
independent of the NPOESS program and its management regularly 
review and determine the program status and risks relevant to 
the new budget, schedule, and technical baseline established 
during the Nunn-McCurdy certification. These reviews should 
occur at regular intervals, perhaps quarterly, and certainly at 
major milestone points.
    The independent reviewers should have extensive space 
program experience and expertise in management systems and 
engineering verification. They should also have an 
understanding of the current thinking on best practices for 
acquisition and testing of a large space system. The results 
and the recommendations of these reviews should be provided to 
both the EXCOM and the Deputy Secretary.
    And finally, the NPOESS award fee plan should be thoroughly 
reassessed, and as appropriate, revised.
    Thank you, and I will be happy to answer any questions.
    [The prepared statement of Mr. Frazier follows:]
                Prepared Statement of Johnnie E. Frazier
    Chairman Boehlert and Members of the Committee, I appreciate the 
opportunity to discuss my office's work on the National Polar-orbiting 
Operational Environmental Satellite System (NPOESS). The report we are 
releasing today, ``Poor Management Oversight and Ineffective Incentives 
Leave NPOESS Program Well Over Budget and Behind Schedule,'' describes 
problems that have contributed to this vital program being more than $3 
billion over initial life cycle cost estimates and 17 months behind 
schedule, according to the Government Accountability Office. Despite 
these problems, the contractor has received $123 million in incentive 
payments--84 percent of the amount available under the NPOESS award fee 
contract for the first six award periods.
    I am pleased to note that in his response to our report, Deputy 
Secretary Sampson stated that both he and Secretary Gutierrez are fully 
committed to providing strong oversight and management of NPOESS. My 
testimony will outline specific actions for NOAA to implement our 
recommendations, and we look forward to Secretarial direction and 
oversight in ensuring our recommendations are implemented.

Background

    In 1994, by Presidential Decision Directive, the National Oceanic 
and Atmospheric Administration (NOAA) merged its Polar Operational 
Environmental Satellite (POES) Program with the Department of Defense's 
Defense (DOD) Meteorological Satellite Program to produce the National 
Polar-orbiting Operational Environmental Satellite System (NPOESS). 
NPOESS was envisioned as a single state-of-the-art environmental and 
climate monitoring system that would reduce duplication and 
significantly cut the cost of satellite operations engaged in obtaining 
critical meteorological data. Early estimates for NPOESS put life cycle 
costs at $6.5 billion and set a deadline of March 2008 for the first 
satellite launch.
    The merger assigned shared management to NOAA and DOD, along with 
the National Aeronautics and Space Administration (NASA), whose 
experience with its own Earth observing satellites is expected to 
improve NPOESS capabilities. The three agencies formed an Integrated 
Program Office (IPO) within NOAA to manage NPOESS and specified their 
individual responsibilities in a memorandum of agreement (MOA). 
According to that document, NOAA is charged with overall management of 
the converged system and provides the system program director, who 
reports to the NOAA Administrator through the NOAA Assistant 
Administrator for the National Environmental Satellite, Data and 
Information Service (AA/NESDIS); DOD is the lead on acquisition 
matters; and NASA is the lead for promoting transition to new 
technologies. Because of the importance of NPOESS to national and 
global climate monitoring capabilities, overall program guidance was 
assigned to an executive committee (EXCOM) made up of top leadership 
from each agency: the Under Secretary of Commerce for Oceans and 
Atmosphere, the Under Secretary of Defense for Acquisition and 
Technology, and the NASA Deputy Administrator. Though not stipulated in 
the MOA, the agencies formed a steering committee to provide additional 
executive leadership: committee members include the assistant 
administrator for NESDIS and his counterparts at DOD and NASA, each of 
whom reports to the EXCOM member for their agency.
    NPOESS acquisition plans call for, among other things, procurement 
of six satellites and development of seven instruments, including the 
Visible/Infrared Imager Radiometer Suite (VIIRS)\1\--one of four 
sensors considered critical to the program. To reduce risk associated 
with the NPOESS program, NASA is conducting the NPOESS Preparatory 
Project (NPP)--which entails launching a demonstration satellite 
equipped with VIIRS and two other critical sensors to test their 
capabilities prior to the launch of the first NPOESS satellite.
---------------------------------------------------------------------------
    \1\ VIIRS collects visible/infrared imagery and radiometric data. 
Data types include atmospheric, clouds, Earth radiation budget, clear-
air land/water surfaces, sea surface temperature, ocean color, and low 
light visible imagery.
---------------------------------------------------------------------------
    In August 2002, the IPO, using DOD's contracting authority, awarded 
a single, satellite integration contract worth $4.5 billion to a prime 
contractor, incorporating previously awarded sensor contracts as 
subcontracts to the prime. The prime contract included an award fee 
arrangement to encourage outstanding performance, making it possible 
for the contractor to earn up to 20 percent of total estimated costs in 
three types of fees:

          Base fees are a guaranteed two percent of estimated 
        costs, paid to the contractor automatically each billing 
        period. The total base fee pool is $57,190,785.

          Award fees--capped at 13 percent of estimated 
        contract cost or $369,294,988--are tied to the government's 
        assessment of the contractor's performance in three broad 
        areas: management, technical, and cost.

          Mission success fees--capped at five percent of 
        estimated contract cost or $136,817,498--are tied to the 
        contractor's performance in meeting seven program milestones 
        (called ``events'').

    Criteria for the latter two fees are largely subjective. The plan 
also allows for unearned award and mission success fees from one 
billing period to be rolled over to subsequent periods, giving the 
contractor additional opportunities to earn them.

Audit Objectives

    The objectives of our audit were to determine (1) how problems with 
the NPOESS program are identified and communicated by the contractor to 
the IPO, and by the IPO to NOAA management, and (2) whether award fees 
to the contractor are being administered effectively. Because of the 
criticality of the VIIRS sensor and the problems experienced with its 
development, our audit focused on VIIRS issues as they affect NPOESS. 
Our review evaluated communication between the contractor and the IPO, 
and the IPO and EXCOM but did not assess the performance of the prime 
contractor or any of the subcontractors. We coordinated with the 
General Accountability Office to ensure that our work did not overlap 
their ongoing efforts in this area.

Overview of OIG Findings

    Our review uncovered two overarching management and contract 
weaknesses that contributed to the unchecked cost and schedule overruns 
in the NPOESS program. First, EXCOM--the committee comprised of top 
NOAA, DOD, and NASA officials and charged with providing overall policy 
and guidance--did not effectively challenge optimistic assessments of 
the impact of VIIRS problems on NPOESS. Second, the contractor received 
excessive award fees for a problem-plagued program.

Finding 1: EXCOM Did Not Effectively Challenge Optimistic Assessments 
of the Impact of VIIRS Problems on NPOESS

    Despite mounting evidence of serious problems as VIIRS development 
proceeded, EXCOM did not effectively challenge the IPO's optimistic 
assessments that the problems would not delay the first NPOESS launch 
or exceed the program's management reserve. Inadequate management 
oversight, in effect, postponed critical evaluations and decisions 
needed to replan the program's faltering elements and contain cost and 
schedule overruns. Time and money were thus wasted as NPOESS problems 
continued unchecked. And VIIRS is not the only high-risk element of 
NPOESS--another key sensor, CMIS poses significant risk.
    Our report discusses the communication between the contractor and 
the Integrated Program Office and between that office and the EXCOM, 
and focuses on the monthly status reports presented by the IPO to EXCOM 
that detail critical cost, schedule, and technical progress data on 
NPOESS and that contain a wealth of information about the problems with 
VIIRS.
    According to program officials, EXCOM was heavily involved early in 
the program, but its involvement dwindled over time. It met only 
sporadically throughout the period in which the VIIRS problems were 
occurring. In the 32-month period from May 2003 through December 2005, 
EXCOM met formally six times and did not meet at all from May to 
December 2003, even as monthly reports showed VIIRS subcontract-induced 
delays and dubbed the sensor ``our problem child.'' The 2004 monthly 
reports repeatedly advised of overruns on VIIRS as well; however, in 
that year EXCOM met only in June and July 2004. Although the monthly 
reports continued to warn of VIIRS schedule erosion and cost overruns, 
EXCOM did not meet again until late January 2005--one month after the 
report stating that VIIRS would not meet its deadline for delivery to 
NPP and the NPP launch would be delayed. At that meeting, the program 
director briefed EXCOM on the VIIRS problems, stating that NPOESS 
should not be affected. However, on March 31, 2005, the contractor 
advised the program director that VIIRS problems would delay the first 
NPOESS launch.

NOAA's Response to Finding on EXCOM

    NOAA emphasized that NPOESS is one of the most complex 
environmental satellite programs ever undertaken. NOAA also maintained 
that EXCOM was directly involved in program oversight and described 
various actions taken, including requesting various independent 
studies.
    NOAA, OIG, and all interested parties agree that NPOESS is an 
extraordinarily complex program. But it is precisely because of this 
complexity that we would have expected much closer and documented 
oversight by EXCOM. Although NOAA maintained that EXCOM was directly 
involved in program oversight, it identified little in the way of 
material decisions or impacts resulting from these actions. Moreover, 
EXCOM's request for two of the five studies referred to in its response 
to our draft report, were not proactive measures taken to gain control 
of a deteriorating program; rather, they were steps taken in reaction 
to a crisis--learning that the first NPOESS launch would be delayed. 
EXCOM requested two independent reviews in August 2005, well after the 
NPOESS launch delay had been identified. A third example cited by NOAA 
provides a stark reminder of the optimism characterizing the IPO's 
assessments. Although the results of that independent review yielded 
schedule and cost estimates considerably higher than those offered by 
the IPO, there is no indication that EXCOM questioned whether the IPO's 
estimate should be used.

Finding 2: Contractor Received Excessive Award Fees for a Problem-
Plagued Program

    Award fees are intended to motivate a contractor to strive for 
excellence in such performance areas as quality, timeliness, technical 
ingenuity, and cost-effective management. The NPOESS program currently 
is in Nunn-McCurdy breach, more than $3 billion over budget and at 
least 17 months behind schedule--hardly a model of cost-effectiveness 
or timeliness. Yet the prime contractor received more than $123 million 
in award fees--84 percent of the available fee pool for the first six 
award periods. For the first five periods, the contractor averaged 90 
percent of available fees. In light of the severe problems the NPOESS 
program is experiencing, the current award fee system is clearly not 
promoting excellent contractor performance.
    To determine how and why the contractor was paid so great a portion 
of the fees when the program was so troubled, we examined the award fee 
plan and identified several flaws in its structure. The plan's 
evaluation criteria are not sufficiently focused on the critical, high-
risk tasks. Also, the amount of fee the contractor can earn (up to 20 
percent of the contract's total estimated costs) appears excessive in 
comparison with other government award fee contracts. Finally, we 
question the practices of (1) paying award fees for performance rated 
``unsatisfactory'' and (2) allowing the contractor multiple 
opportunities to ``rollover'' unearned fee.
    Although the award fee payments appear excessive, they were deemed 
appropriate by the fee determining official--the government official 
designated to set award and mission success fee amounts earned by the 
contractor. In the case of NPOESS, the fee determining official also 
serves as the program director, and, as such, is responsible for day-
to-day management of the program. The intimate connection between the 
director's professional reputation and the success of both the program 
and the contractor could affect his objectivity as fee determining 
official in setting award amounts.

NOAA's Response to OIG Finding on Award Fees

    NOAA stated that our report did not fully characterize the 
contract's award fee structure, but failed to note any relevant details 
not already included in our report. It also criticized the report for 
failing to recognize that the NPOESS contract was a DOD contract, 
although the report clearly states that the contract was awarded by the 
IPO using DOD's contracting authority. Finally, NOAA stated that our 
report did not consider the very recent March 29, 2006, DOD policy memo 
on the administration of award fees. We are pleased to acknowledge this 
new policy on award fee contracts, which resulted from a December 2005 
General Accountability Office review of award and incentive fees at 
DOD. That policy addresses many of the issues we raised with regard to 
the NPOESS award fee structure, and if it is implemented in the NPOESS 
contract, should address our concerns about (1) the need for providing 
adequate incentives for high-risk, critical tasks, (2) rolling over 
unearned fees to subsequent periods, and (3) paying fees for 
unsatisfactory performance.
    The new DOD policy does not address all of our concerns, however. 
Specifically, it is silent on the issue of whether interim fee should 
be paid when mission success milestones are missed and on whether the 
award fee pool for this contract is excessive. In addition, as our 
report noted, one of the reasons we raised all of the issues about the 
NPOESS award fee structure is so that NOAA could consider those issues 
when crafting award fee plans for future major acquisitions. It is 
particularly critical that NOAA considers the problems we found with 
the NPOESS fee management and structure to NOAA's attention 
particularly given the fact that NOAA is currently engaged in its first 
major solo satellite acquisition.

OIG Recommendations

    We recommended that the Deputy Secretary ensure that the Under 
Secretary for Oceans and Atmosphere--in his role on EXCOM--works with 
the other EXCOM members to obtain and review regular, independent 
evaluations of the status of NPOESS. In particular, such evaluations 
should thoroughly assess progress toward completing high-risk or 
otherwise critical tasks and the associated impact of any problems 
encountered. NOAA, in its response to our report, agreed with the 
intent of our recommendation but suggests that is already obtaining 
regular, independent reviews of the NPOESS program.
    To ensure that there is no confusion on this point, it is important 
to highlight that the intent of this recommendation is for qualified 
individuals who are independent of the NPOESS program and not 
responsible for its management to conduct regular reviews of NPOESS 
(e.g., on a quarterly or semi-annual basis, as well as at major 
milestones) to determine the program's status and risks relative to the 
new budget, schedule, and technical requirements baseline established 
during Nunn-McCurdy certification. Collectively, these individuals 
should have extensive space program experience; expertise in 
management, acquisition, systems engineering, and verification and 
testing of large space systems; the requisite technical, cost, and 
programmatic expertise; and an understanding of the current thinking on 
best practices for acquisition of large space systems. Results and 
recommendations should be reported both to EXCOM and the Deputy 
Secretary of Commerce.
    Our second recommendation was that the Deputy Secretary should 
ensure that the Under Secretary for Oceans and Atmosphere--in his role 
as an EXCOM member of the NPOESS EXCOM--works with the other members of 
the EXCOM to critically review and revise the NPOESS award fee plan. 
Specifically, that review should take into consideration whether:

          interim fees should be paid when mission success 
        milestones are being missed,

          the plan provides adequate incentives for tasks that 
        are critical to the program's success and/or are high risk,

          fee amounts (i.e., up to 20 percent of the contract's 
        total estimated costs) are excessive,

          the contractor should receive fees for unsatisfactory 
        performance, and

          rolling over fees to subsequent award periods is 
        appropriate.

    As noted previously, the new DOD policy on award fee contracts, if 
implemented in the NPOESS contract, should address some, but not all, 
of the issues we raised.
    Further, we recommended that the Deputy Secretary should ensure 
that NOAA assign responsibility for determining fee awards to an 
official who does not directly manage the NPOESS program. NOAA's 
response indicated that the EXCOM has already addressed this 
recommendation with the proposed establishment of a Principal Executive 
Officer (PEO) over the program. If this position is established and the 
PEO is not directly responsible for managing the NPOESS program, that 
action should meet the intent of our recommendation.
    We purposely directed our recommendations to the Deputy Secretary 
to better ensure that the Department--for its part--provides NPOESS 
with the close and sustained management attention and oversight 
warranted by such a vital, complex, and troubled program.
    Our report is available on our web site at http://www.oig.doc.gov/
oig/reports/
audit-inspection-and-evaluation-
reports/index.html.

                    Biography for Johnnie E. Frazier
    On July 20, 1999, Johnnie E. Frazier was sworn in as the fourth 
Inspector General of the U.S. Department of Commerce, and thus assumed 
responsibility for monitoring the operations of one of the largest and 
most diverse government agencies: the Department of Commerce and its 13 
bureaus administer a vast array of business, scientific, economic, and 
environmental programs that in one way or another touch the lives of 
every American everyday. These programs range in focus from domestic 
enterprise and international trade matters to economic and demographic 
data gathering to weather forecasting and marine research.
    As Inspector General, Mr. Frazier is charged with (1) promoting 
economy and efficiency and (2) detecting and preventing fraud, waste, 
and abuse in these diverse programs and operations. He is one of the 
statutory federal IGs who, under the Inspector General Act of 1978, 
oversee independent units (Offices of Inspector General) within their 
respective agencies that investigate and evaluate agency programs and 
activities.
    Mr. Frazier's presidential appointment as Inspector General caps 
his more than three decades of distinguished public service, during 
which time he has helped shape the full range of OIG activities and 
operations--performance and financial audits, inspections, program and 
systems evaluations, and administrative and management functions. Under 
his supervision, the Commerce OIG has conducted a broad range of high-
profile reviews of key domestic, international, scientific, and 
economic programs that have streamlined government processes, 
significantly improved program management, and saved millions of 
federal dollars. Mr. Frazier has received numerous awards for superior 
leadership and extraordinary contributions to the work of the 
Department, including Commerce's two top honors--the Gold and Silver 
medals.
    Mr. Frazier chairs the Inspection and Evaluation Committee of the 
President's Council on Integrity and Efficiency (PCIE)--a federal 
organization that promotes interagency IG collaboration to address and 
improve government-wide management deficiencies. As Committee Chair and 
PCIE member, he is recognized as an innovator and creative force within 
the IG community. Mr. Frazier is on the Board of Directors of the 
Association of Inspectors General--a national organization of federal, 
State, and local IGs--and member of the Association of Government 
Accountants. He is a highly sought-after speaker and frequently 
addresses various organizations and groups dedicated to improving 
government.
    Mr. Frazier holds a Bachelor's degree in business administration 
from Howard University, a Master's degree in public administration from 
George Washington University, and he has completed extensive course 
work at Harvard's John F. Kennedy School of Government.

    Chairman Boehlert. Thank you very much, Mr. Frazier.
    Admiral Lautenbacher.

 STATEMENT OF VICE ADMIRAL CONRAD C. LAUTENBACHER, JR. (RET.), 
 ADMINISTRATOR, NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION

    Vice Admiral Lautenbacher. Thank you, Mr. Chairman.
    Chairman Boehlert, Representative Gordon, distinguished 
Committee Members and staff, I appreciate the opportunity to 
come before you this morning and discuss the recent report by 
the DOC Inspector General regarding the National Polar-orbiting 
Operational Environmental Satellite System, known as NPOESS.
    Let me briefly answer the question ``What is NPOESS?'' to 
start the conversation.
    The United States has historically operated two polar 
satellite systems, one for the military and one for civilian 
use. In 1994, a Presidential Decision Directive merged the two 
systems. The new program, known as NPOESS, was originally 
designed to be a series of six satellites and a total of 13 
different sensors. The new sensors will provide higher quality 
data leading to more sophisticated environmental models for 
weather, climate, and the oceans.
    NPOESS is a unique program in the Federal Government. It is 
jointly managed by the Department of Commerce, the Department 
of Defense, and the National Aeronautic and Space 
Administration, NASA, with funding equally provided by DOC and 
DOD. At the senior level, or agency head level, the program is 
overseen by the Executive Committee, which are the heads of the 
agencies, and the day-to-day operations are managed by the 
Integrated Program Office, or IPO, utilizing DOD acquisition 
policies and procedures.
    NPOESS is the most complex environmental satellite system 
ever developed, and the program has presented numerous 
technical, developmental, integration, and management 
challenges, as we have heard. As the Committee is well aware, 
serious design and manufacturing problems with one of the main 
sensors, called VIIRS, the Visible Infrared Imager Radiometer 
Suite, were identified in late 2004. On March 31, 2005, the 
contractor informed the government the NPOESS program would not 
meet cost and schedule, mostly as a result of problems with 
VIIRS. In November, after several EXCOM-directed independent 
reviews, the EXCOM decided on major management changes and 
narrowed a list of options on how to proceed with the program.
    In December, the IPO notified the Air Force of projected 
cost overruns for the NPOESS program in excess of the 25 
percent threshold, triggering a breach of the Nunn-McCurdy 
statute. For the program to continue, the Secretary of Defense 
must certify the program as essential to national security, 
there are no alternatives which provide equal or greater 
military capability at less cost, the new cost estimates are 
reasonable, and a management structure is in place to 
adequately manage and control costs.
    Although the Nunn-McCurdy process is run by the Office of 
the Secretary of Defense, given the unique nature of the tri-
agency management of the program, both NOAA and NASA are full 
participants in the process. And I want to assure the Committee 
that NOAA personnel and Commerce personnel, essentially, are in 
each of the review teams. Senior NOAA executives are part of a 
principals group, and I am part of the final decision at the 
Defense Acquisition Executive level.
    This whole process includes more than 150 people, experts 
from the three agencies, meeting around the clock since January 
studying every aspect of this program to find the best way 
forward. The EXCOM members have met several times this year as 
part of the Nunn-McCurdy process and continue to meet. The 
program must be certified by early June or the Department of 
Defense can no longer spent money on NPOESS.
    Throughout the Nunn-McCurdy process, work on NPOESS has 
continued, especially on the VIIRS sensor. The IPO and the 
contractor developed a specific work plan, which includes 
funding, milestones, and activities for fiscal year 2006. To 
date, the program has followed the interim plan without budget 
or schedule problems. VIIRS will go through several critical 
tests this year. It should be noted that VIIRS is not the only 
high-risk element of NPOESS. Another sensor, the Conical 
Microwave Imager Sounder, CMIS, may also pose significant risk, 
and its capabilities and functions are part of the Nunn-McCurdy 
review.
    In regards to the NOAA response to the IG report, I 
appreciate very much the efforts by the Office of the Inspector 
General to review the NPOESS program and agree with the thrust 
of the recommendations. I certainly agree that NPOESS has 
significant problems. It has had significant problems. I take 
responsibility as the agency head for the problems and for 
fixing these problems. I am committed to working through the 
Nunn-McCurdy process and Executive Committee to fix the 
problems to get the program back on track and to keep it on 
track.
    The EXCOM has identified similar problems and is taking 
actions, even right now, to improve program management 
consistent with the recommendations of the OIG report. We have 
already shared the findings and recommendations with our 
interagency partners, and the recommendations are being 
considered and addressed as part of the management structure 
review taking place in the Nunn-McCurdy process. NOAA's 
official comments about the report have been provided to the 
OIG.
    The Inspector General report basically includes three main 
recommendations: one, the EXCOM should obtain and review 
regular independent evaluations of the status of NPOESS; number 
two, the EXCOM should critically review and revise the award 
fee strategy, the overall amount of the fee and how it is 
distributed; and number three, the NPOESS award fee determining 
official should not be the program manager.
    In regard to the first recommendation, I strongly concur 
with the OIG recommendation about the importance of independent 
reviews, given past experiences and the complexity of the 
program. This is an important management tool as we move 
forward with the program. Prior to entering the Nunn-McCurdy 
process, the EXCOM was actively reviewing program options and 
program management changes.
    We briefed this committee several times on actions taken by 
the EXCOM and options under evaluation. For example, in 
November 2005, the EXCOM proposed establishing a new oversight 
function called a Program Executive Office, or PEO, responsible 
for conducting ongoing independent management analysis and 
reviews of the NPOESS program and reporting to the EXCOM. The 
PEO as proposed will have the mission and funding specifically 
to conduct these regular independent reviews for the use of 
independent experts.
    While the PEO structure has not been finalized due to the 
Nunn-McCurdy review, the EXCOM has already made several 
internal changes in oversight, reviews, and communications at 
the IPO. Daily reporting and weekly and monthly reviews now 
measure specific milestones so actions to correct any problems 
can happen much sooner. The EXCOM members have been provided 
monthly updates and status reports. These actions have already 
proven useful in keeping track of the 2006 milestones.
    In regard to the second recommendation about the award fee 
strategy, I agree with the recommendation, and we are 
considering all of the issues raised by the OIG report. For 
NPOESS Presidential Decision Directive, all acquisition matters 
are governed by DOD rules and regulations. Subsequently, the 
DOD, in a March 29, 2006 memorandum, revised DOD policy on 
award fee management. Several of the DOD policy changes are 
consistent with the OIG report. These include providing 
adequate incentives for tasks that are critical to the 
program's success, less than satisfactory performance is not 
entitled to an award fee, and the appropriate use of 
``rollover'' fees. If the Nunn-McCurdy process certifies the 
NPOESS program, these DOD changes will be applied to a new or 
restructured contract. In addition, discussions have already 
begun about the payment of interim fees and the overall award 
fee percentage and changes will be part of any new or 
restructured NPOESS contract. These actions are all consistent 
with the OIG recommendation.
    With regard to the third recommendation about the award fee 
determining official, I again strongly concur. The EXCOM 
directed a review of this issue in August 2005. As a result of 
the review, in November 2005, the EXCOM proposed an action to 
remove responsibility for determining award fees from the 
NPOESS program manager. Currently, Brigadier General (Select) 
Sue Mashiko is the award fee determining official while Colonel 
Dan Stockton is the NPOESS program manager.
    Again, final decisions on any changes of NPOESS management 
will be conducted within the Nunn-McCurdy process, and there is 
a specific Nunn-McCurdy review team for management issues. It 
is one of the four IPTs. NOAA personnel, including me, are 
ensuring that DOC OIG recommendations are being considered in 
the Nunn-McCurdy certification process.
    More importantly, NOAA is incorporating the findings and 
recommendations of the OIG report and other NPOESS lessons into 
future acquisitions. To facilitate this, I have formed a 
Program Management Council to provide regular review and 
assessment of selected NOAA programs and projects. NOAA's next 
generation Geostationary Operational Environmental Satellite, 
GOES-R series, is the first program being reviewed and 
monitored by the Program Management Council. Consistent with 
the OIG's recommendation, we intend to establish a Fee 
Determining Official separate from the System Program Director 
for GOES-R. In addition, I am working with the NOAA and DOD 
contracting officials to structure the award fee strategy using 
guidance from the OIG and GAO reports and the DOD award fee 
policy memorandum. Finally, I have established a GOES-R 
Independent Review Team, which will meet periodically over the 
life of GOES-R to review the program baseline, the risk, the 
cost, the schedule, and performance. As a matter of fact, the 
review team met this week.
    In closing, Mr. Chairman, I appreciate the sustained 
efforts and direct involvement by the Committee on this 
important issue. I also welcome the DOC OIG's review of the 
program and its recommendations, and I agree with everything 
the Committee said on the fact that NPOESS is a critical 
program to our Nation's ability to forecast the weather, to 
predict climate, and that we all must work together. While the 
Nunn-McCurdy process will determine the ultimate fate of the 
program, I can assure the Committee the OIG's recommendations 
are a major component of the review and will be reflected in 
any new or revised contract for the program. I am committed to 
working with the Department on a specific action plan to 
address the findings and recommendations of the OIG report with 
regard to NPOESS and other satellite acquisition programs.
    As I have said many times, and you can look at my record, I 
am a big proponent of learning from past errors, and I am 
working very hard to ensure NPOESS gets back on track and stays 
on track.
    I thank you for the opportunity to speak with you today and 
for your continued interest and support in this program.
    [The prepared statement of Vice Admiral Lautenbacher 
follows:]
     Prepared Statement of Vice Admiral Conrad C. Lautenbacher, Jr.

Introduction

    Chairman Boehlert, Representative Gordon, and Committee Members, I 
appreciate the opportunity to discuss with you the recent report by the 
DOC Inspector General (IG) regarding the National Polar-orbiting 
Operational Environmental Satellite System (NPOESS). I am Conrad C. 
Lautenbacher, Jr., Under Secretary for Oceans and Atmosphere and 
Administrator of the National Oceanic and Atmospheric Administration 
(NOAA) in the Department of Commerce (DOC).

What is NPOESS?

    Let me just briefly remind the Committee about NPOESS and update 
the status of the program. The United States has historically operated 
two polar satellite systems, one for the military and one for civilian 
use. In 1994, a Presidential Decision Directive merged the civilian and 
military U.S. polar-orbiting operational environmental satellites 
systems. This new program, known as NPOESS, was originally designed to 
be a series of six satellites and a total of 13 different sensors. The 
new sensors will provide higher quality data leading to more 
sophisticated environmental models for weather, climate, and the 
oceans.
    NPOESS is a unique program in the Federal Government. It is jointly 
managed by DOC, the Department of Defense (DOD), and the National 
Aeronautics and Space Administration (NASA) with direct funding 
provided by DOC and DOD. At the senior level, the program is overseen 
by an Executive Committee (EXCOM) and the day to day operations are 
managed by an Integrated Program Office (IPO) utilizing DOD acquisition 
policies and procedures.
    I want to stress, NPOESS is one of the most complex environmental 
satellite systems ever developed, and we recognize it therefore 
requires particularly rigorous management and oversight. The program 
has presented numerous technical, developmental, integration, and 
management challenges. As the Committee is well aware, serious design 
and manufacturing problems with one of the main sensors for NPOESS, 
called VIIRS (Visible Infrared Imager Radiometer Suite), were 
identified in late 2004. By March 2005, the contractor informed the 
government the NPOESS program would not meet cost and schedule, mostly 
as a result of problems with VIIRS. In November, after several EXCOM-
directed independent reviews, the EXCOM decided on major management 
changes and narrowed a list of options on how to proceed with the 
program.
    In December, the IPO notified the Air Force of projected cost 
overruns for the NPOESS program in excess of the 25 percent threshold, 
triggering a breach of the Nunn-McCurdy statute. For the program to 
continue the Secretary of Defense must certify the program is essential 
to national security, there are no alternatives which will provide 
equal or greater military capability at less cost, the new cost 
estimates are reasonable and a management structure is in place to 
adequately manage and control costs.
    Although the Nunn-McCurdy process is run by the Office of the 
Secretary of Defense, given the unique nature of the Tri-Agency 
management of the program, both NOAA and NASA have had full 
participation in the process. This includes NOAA personnel on each of 
the review teams, involvement by senior NOAA executives as part of a 
principals group, and with me as part of the final decision at the 
Defense Acquisition Executive level. This process has been ongoing 
since January 2006 and the program must be certified or have spending 
terminated by early June.
    Throughout the Nunn-McCurdy process, work on NPOESS has continued, 
especially on the VIIRS sensor. The IPO and the contractor developed a 
specific work plan which includes: funding, milestones and activities 
for fiscal year 2006. To date, the program has followed the interim 
plan without budget or schedule problems. VIIRS will go through several 
critical tests this year. It should be noted that VIIRS is not the only 
high-risk element of NPOESS, another sensor, the Conical Microwave 
Imager Sounder (CMIS) also poses significant risk and its capabilities 
and functions are part of the Nunn-McCurdy review.

NOAA Response to IG Report

    This leads us to the recent report by the Department of Commerce's 
Office of Inspector General. I appreciate the efforts by the Office of 
Inspector General (OIG) to review the NPOESS program and agree with the 
thrust of the recommendations. I believe the EXCOM has identified 
similar problems and has taken actions to improve program management 
that are consistent with the recommendations of the OIG report. We have 
shared the report with our interagency partners and the recommendations 
are being considered and addressed as part of the management structure 
review taking place in the Nunn-McCurdy process.
    NOAA's official comments about the report have been provided to the 
OIG.
    The OIG report includes the following recommendations:

        1.  ``The Deputy Secretary should ensure that the Under 
        Secretary for Oceans and Atmosphere in his role on the EXCOM 
        works with the other members of the EXCOM to obtain and review 
        regular, independent evaluations of the status of NPOESS. In 
        particular, such evaluations should thoroughly assess the 
        progress toward completing high-risk or otherwise critical 
        tasks and the associated impact of any problems encountered.''

        2.  ``The Deputy Secretary should ensure that the Under 
        Secretary for Oceans and Atmosphere in his role as a member of 
        the NPOESS EXCOM works with the other members of the EXCOM to:

                1)  Critically review and revise the NPOESS award fee 
                plan, taking into consideration whether:

                          i.  interim fees should be paid when mission 
                        success milestones are being missed,

                         ii.  the plan provides adequate incentives for 
                        tasks that are critical to the program's 
                        success and/or are high risk,

                         iii.  fee amounts (i.e., up to 20 percent of 
                        the contract's total estimated costs) are 
                        excessive,

                         iv.  the contractor should receive fees for 
                        unsatisfactory performance, and

                         v.  rolling over fees to subsequent award 
                        periods is appropriate.

                2)  Assign responsibility for determining fee awards to 
                an official who does not directly manage the NPOESS 
                program.''

    In regard to the first recommendation, while we are working to 
improve all aspects of the management of the program, I believe the 
EXCOM has been actively and directly involved in the oversight and 
management of NPOESS and its members, including me, have been deeply 
involved in the on-going Nunn-McCurdy process. But, I concur with the 
OIG recommendation about the importance of independent reviews given 
the complexity of this program. Prior to entering the Nunn-McCurdy 
process, the EXCOM was actively reviewing program options and program 
management changes. We briefed this committee several times on actions 
taken by the EXCOM and options under evaluation. For example, the EXCOM 
proposed establishing a new oversight function, called a Program 
Executive Office (PEO), responsible for conducting ongoing independent 
management analysis and reviews of the NPOESS program and reporting to 
the EXCOM. The PEO as proposed will have the mission and funding 
specifically to conduct these independent reviews.
    While the PEO structure has not been finalized due to the Nunn-
McCurdy review, the EXCOM has directed several internal changes in 
oversight, reviews, and communications at the IPO. Daily reporting and 
weekly and monthly reviews now measure specific milestones so actions 
to correct any problems can happen much sooner. The EXCOM members have 
been provided monthly updates and status reports.
    In regard to the second recommendation, per the NPOESS Presidential 
Decision Directive, all acquisition matters are governed by DOD rules 
and regulations. Subsequently, in response to a Governmental 
Accountability Office (GAO) report of December 2005, the DOD in a March 
29, 2006, memorandum revised DOD policy on award fee management. 
Several of the DOD policy changes are consistent with the OIG report. 
These include: providing adequate incentives for tasks that are 
critical to the program's success and/or are high risk; less than 
satisfactory performance is not entitled to an award fee; and the 
appropriate use of the ``rollover'' provision. If the Nunn-McCurdy 
process certifies the NPOESS program, these DOD changes will be applied 
to a new or restructured contract. In addition, discussions have 
already begun about the payment of interim fees and the overall award 
fee percentage and changes will be part of any new or restructured 
NPOESS contract.
    With regard to the award fee determining official, the EXCOM 
directed a review of this issue in August 2005. As a result of the 
review, in November 2005 the EXCOM proposed an action to remove 
responsibility for determining award fees from the NPOESS program 
manager. Currently, Brigadier General (Select) Sue Mashiko is the award 
fee determining official, while Colonel Dan Stockton is the NPOESS 
program manager.
    Again, final decisions on any changes of NPOESS management will be 
conducted within the Nunn-McCurdy process. However, I want to remind 
the Committee there is a specific Nunn-McCurdy review team for 
management issues. Let me be clear, because I know it is of interest to 
the Committee, NOAA personnel, including me, are ensuring that DOC OIG 
recommendations are being considered in the Nunn-McCurdy certification 
process.

NPOESS Lessons Learned Applied to NOAA Acquisitions

    NOAA is incorporating NPOESS lessons learned into future 
acquisitions. To facilitate this, I formed a Program Management Council 
to provide regular review and assessment of selected NOAA programs and 
projects. NOAA's next Geostationary Operational Environmental Satellite 
(GOES-R series) is the first program being reviewed and monitored by 
the Program Management Council. Consistent with the OIG's 
recommendation, we intend to establish a Fee Determining Official (FDO) 
separate from the System Program Director (SPD) for GOES-R. In 
addition, I am working with NOAA and DOC contracting officials to 
structure the Award Fee strategy using guidance from the OIG and GAO 
reports and the DOD award fee policy memorandum. Finally, I have 
established a GOES-R Independent Review Team, which will meet 
periodically over the lifetime of GOES-R, to review the program 
baseline, cost, schedule, and performance. I am also prepared to 
incorporate any other lessons learned from the Nunn-McCurdy process.

Summary

    In closing, Mr. Chairman, I appreciate the efforts by the Committee 
to stay engaged in this important issue. NPOESS is a critical program 
to our nation's ability to forecast the weather and predict climate. I 
also welcome the DOC OIG's review of the program and its 
recommendations. While the Nunn-McCurdy process will determine the 
ultimate fate of the program, I can assure the Committee the OIG 
recommendations are a major component of the review and will be 
reflected in any new or revised contract for the program. Thank you for 
the opportunity to speak with you today and I am prepared to answer any 
questions.

           Biography for Vice Admiral Conrad C. Lautenbacher
    A native of Philadelphia, Pa., retired Navy Vice Admiral Conrad C. 
Lautenbacher, Ph.D., is serving as the Under Secretary of Commerce for 
Oceans and Atmosphere. He was appointed Dec. 19, 2001. Along with this 
title comes the added distinction of serving as the eighth 
Administrator of the National Oceanic and Atmospheric Administration. 
He holds an M.S. and Ph.D. from Harvard University in applied 
mathematics.
    Lautenbacher oversees the day-to-day functions of NOAA, as well as 
laying out its strategic and operational future. The agency manages an 
annual budget of $4 billion. The agency includes, and is comprised of, 
the National Environmental Satellite, Data and Information Services; 
National Marine Fisheries Service; National Ocean Service; National 
Weather Service; Oceanic and Atmospheric Research; Marine and Aviation 
Operations; and the NOAA Corps, the Nation's seventh uniformed service. 
He directed an extensive review and reorganization of the NOAA 
corporate structure to meet the environmental challenges of the 21st 
century.
    As the NOAA administrator, Lautenbacher spearheaded the first-ever 
Earth Observation Summit, which hosted ministerial-level representation 
from several dozen of the world's nations in Washington July 2003. 
Through subsequent international summits and working groups, he worked 
to encourage world scientific and policy leaders to work toward a 
common goal of building a sustained Global Earth Observation System of 
Systems (GEOSS) that would collect and disseminate data, information 
and models to stakeholders and decision-makers for the benefit of all 
nations individually and the world community collectively. The effort 
culminated in an agreement for a 10-year implementation plan for GEOSS 
reached by the 55 member countries of the Group on Earth Observations 
at the Third Observation Summit held in Brussels February 2005.
    He also has headed numerous delegations at international 
governmental summits and conferences around the world, including the 
U.S. delegation to 2002 Asia-Pacific Economic Cooperation Ocean 
Ministerial Meeting in Korea, and 2002 and 2003 meetings of the World 
Meteorological Organization and Intergovernmental Oceanographic 
Commission in Switzerland and France, as well as leading the Commerce 
delegation to the 2002 World Summit on Sustainable Development in South 
Africa.
    Before joining NOAA, Lautenbacher formed his own management 
consultant business, and worked principally for Technology, Strategies 
& Alliances Inc. He was President and CEO of the Consortium for 
Oceanographic Research and Education (CORE). This not-for-profit 
organization has a membership of 76 institutions of higher learning and 
a mission to increase basic knowledge and public support across the 
spectrum of ocean sciences.
    Lautenbacher is a graduate of the U.S. Naval Academy (Class of 
1964), and has won accolades for his performance in a broad range of 
operational, command and staff positions both ashore and afloat. He 
retired after 40 years of service in the Navy. His military career was 
marked by skilled fiscal management and significant improvements in 
operations through performance-based evaluations of processes.
    During his time in the Navy, he was selected as a Federal Executive 
Fellow and served at the Brookings Institution. He served as a guest 
lecturer on numerous occasions at the Naval War College, the Army War 
College, the Air War College, The Fletcher School of Diplomacy, and the 
components of the National Defense University.
    His Navy experience includes tours as Commanding Officer of USS 
HEWITT (DD-966), Commander Naval Station Norfolk; Commander of Cruiser-
Destroyer Group Five with additional duties as Commander U.S. Naval 
Forces Central Command Riyadh during Operations Desert Shield and 
Desert Storm, where he was in charge of Navy planning and participation 
in the air campaign. As Commander U.S. Third Fleet, he introduced joint 
training to the Pacific with the initiation of the first West Coast 
Joint Task Force Training Exercises (JTFEXs).
    A leader in the introduction of cutting-edge information 
technology, he pioneered the use of information technology to mount 
large-scale operations using sea-based command and control. As 
Assistant for Strategy with the Chief of Naval Operations Executive 
Panel, and Program Planning Branch Head in the Navy Program Planning 
Directorate, he continued to hone his analytic skills resulting in 
designation as a specialist both in Operations Analysis and Financial 
Management. During his final tour of duty, he served as Deputy Chief of 
Naval Operations (Resources, Warfare Requirements and Assessments) in 
charge of Navy programs and budget.
    Lautenbacher lives in Northern Virginia with his wife Susan who is 
a life-long high school and middle school science teacher.

                               Discussion

                 NOAA's Response to IG Recommendations

    Chairman Boehlert. We will let the bells ring.
    Well, we have got 15 minutes to go vote, so we will go for 
about 10 minutes.
    You know, if there were a how not to manage government list 
of best sellers, the IG's report would vie for first position 
on that list. I would hope, Admiral, that you would distribute 
copies of your oral testimony, because they deviated somewhat 
from the written submission, and I am much happier with your 
oral presentation, because the first problem you have to 
address is acknowledging that the problem exists. Not only do 
you acknowledge it, you are talking about corrective action 
that is being taken. But there needs to be a lot more. You 
didn't come right out and say you agree, specifically, with the 
IG's report, but you say you agree with the thrust of their 
recommendations. Do you agree with the finding of the IG that 
the EXCOM needs to meet more often and take a more hands-on 
role in the management of NPOESS? I mean, two meetings from May 
of 2003 to December of 2004 on a program of this magnitude, a 
program that is deeply troubled. Do you think that the 
recommendations are worthy of being implemented?
    Vice Admiral Lautenbacher. Yes, I do. I think that we 
should have more auditable meetings. We are talking about 
having a record that shows the involvement, and I think that is 
important for the future.
    Chairman Boehlert. Well, that is good. That is 
constructive. Do you agree with the finding of the IG that the 
program needs more independent evaluation, that is, evaluation 
from outside the program office and perhaps from outside the 
entire NPOESS structure? And if so, who do you think is the 
best placed entity or individual to conduct such a review? And 
how often should that be conducted?
    Vice Admiral Lautenbacher. I believe in independent reviews 
completely. And the EXCOM has directed a number of independent 
audits and reviews over the period that I have been involved 
with, which is about four years, and there have been a number 
of reviews, not just the ones that we did recently. There were 
ones in the beginning of my tenure in this job in 2002. So I do 
believe in independent cost reviews, and I think they should 
come from outside the program structure, outside of----
    Chairman Boehlert. Is there a recommendation on who would 
best be able to----
    Vice Admiral Lautenbacher. Well, we have a number of 
independent groups, like Aerospace Corporation. We have a 
number of federally--what we call federally-funded research 
institutes that have experts. We also have a number of 
companies that are outside the scope of the people who are 
interested parties in the----
    Chairman Boehlert. All right. We have got you on a roll 
now. Do you agree with the finding that the award and incentive 
fees, included in the NPOESS contracts are excessive? I mean, I 
find it mind-boggling, incomprehensible, that a program 
billions of dollars over budget, years behind schedule has 84 
percent of the potentially-available incentive payments awarded 
for a cost of $124 million. I just can't comprehend that. Do 
you think that the award and incentive fees included in the 
contract are excessive? And what is the justification for the 
20 percent level? That is far above most DOD contracts.
    Vice Admiral Lautenbacher. I completely agree with it. I 
have suggested that we restructure the award fee process. I 
don't know what the right number is. I can't sit here and tell 
you it is not 20 percent; it is 13 percent, it is 14 percent.
    Chairman Boehlert. Well, then, let me ask you----
    Vice Admiral Lautenbacher. We rely on experts to come up 
and tell us----
    Chairman Boehlert. All right. So what management models are 
you looking to to prevent something like this from happening in 
the future? Are you looking to some models to change it? I 
mean----
    Vice Admiral Lautenbacher. Absolutely. We are going to have 
an independent fee structure official to deal with it. It has 
been taken away from the program office at this point. You 
know, there are two questions. I mean, why did it end up the 
way it is? It ended up the way it is because of the prevailing 
acquisition philosophy in management techniques at the time it 
was put into place, which was four years ago.
    Chairman Boehlert. Well, then why do we----
    Vice Admiral Lautenbacher. But we have proven that it 
doesn't work. I don't want to argue about the fact that----
    Chairman Boehlert. Okay. But with all due respect----
    Vice Admiral Lautenbacher.--it doesn't work.
    Chairman Boehlert.--I think the program, in general, ended 
up the way it is, in the situation we now find ourselves in, 
because not enough people at the top were paying enough 
attention to it, quite honestly. That is my analysis. And the 
good news today is we have acknowledged that problem. We have 
acknowledged that there is merit to the IG recommendations. And 
we have an express determination from the very top within NOAA 
to do something about it, to act constructively on these 
recommendations. And for that, I am thankful. But we have got 
to go forward together, because this is a troubled program. And 
when we talk about, as Mr. Gordon has introduced into today's 
discussions, the possibility of having $7 billion in overruns, 
that is almost double your total budget for the whole agency. 
There is something wrong in Muddsville.
    We have--I will recognize Mr. Gordon. We have 10 minutes 
before the next vote. He will complete his questioning. We will 
adjourn and go over and vote, recess, and then we will come 
right back.
    Mr. Gordon. Mr. Frazier, thank you for your work here. The 
IG office is a very important part of our government.
    And I don't--so let me say, I don't mean to demean the work 
you did, but to say that we need outside reviews, that we 
need--that they need to meet more often, that this award system 
was out of control is not brain surgery.
    Mr. Frazier. Right.
    Mr. Gordon. I mean----
    Mr. Frazier. Very definitely.
    Mr. Gordon.--you know.
    Mr. Frazier. What I have described it is not rocket 
science.
    Mr. Gordon. Yeah.
    Mr. Frazier. And it is clearly rocket science in terms of 
the technical parts of the NPOESS, but the----
    Mr. Gordon. Right.
    Mr. Frazier.--management issues here are not rocket 
science.
    Mr. Gordon. Right. And so, my question is, have any of the 
NOAA staff working on the Steering Committee or the Executive 
Committee, I mean EXCOM, changed? Have they changed?
    Mr. Frazier. Yes, sir. Well, obviously, the program 
director left. He has left the program. And at the same time, 
in NOAA, basically it is the same people on the EXCOM.
    Mr. Gordon. And so if these folks couldn't figure out that 
you are supposed to meet, you know, reasonably often, that you 
should have some outside review. This, to me, is not a matter 
of a systems breakdown. It is a people breakdown. It is a 
personnel breakdown. You know, so again, I thank you for your 
work, and it is important, but if you have the same folks 
trying to do these very elementary changes that you made, I 
don't see how we are going to have, you know, much change.
    But let me ask you, Admiral, the last time you were here, 
you said that you ``eat, sleep, breathe, and live'' NOAA. ``I 
wake up in the middle of the night worrying about these 
issues.'' So if you are so engaged in this, why did you not 
meet with the IG or any of his expert staff? I mean, if I was 
in charge of a program that was out of control, I would be 
looking for whatever help--you know, advice I could get. But is 
it true that you never even met with them?
    Vice Admiral Lautenbacher. We did not have a chance to meet 
before this report came out. That is absolutely true.
    Mr. Gordon. And so how long, Mr. Frazier, did you try to 
get that meeting set up?
    Mr. Frazier. We tried. We have a process to set up that--we 
always invite the Under Secretary to the entrance conference. 
We invited him to the entrance conference. He did not attend. 
We sent e-mails to try and set up meetings for the auditors and 
the evaluators who were working on this job. There is an audit 
trail that suggests that we made valiant efforts to try and do, 
because we thought it was very critical. And especially as we 
interviewed other members who were involved in NPOESS who said, 
``Well, you can't expect that the people on the EXCOM will be 
as knowledgeable and as involved as we are,'' well, we took 
exception to that. And again, we made valiant efforts to try 
and make sure that we would meet with the Admiral here. And 
again, when we had the exit conference, we had senior NOAA 
officials there, but the Admiral was not at those conferences.
    Mr. Gordon. I guess I have concern that you say you are 
listening and you are going to act, but if you wouldn't even 
meet with these people, you know, it just gives me a great bit 
of concern. You know, you are an Admiral. You know, I mean, 
that is a--you know. So this is just embarrassing. I just 
simply can't understand. I would be embarrassed to be in your 
situation and not try to do more, and not to even meet to get 
more information. It just gives me great concern.

                             Cost Estimates

    Let me raise another issue, and maybe you all can talk 
about it a little bit and we will when we come back. Trying to 
get a dollar figure here. In the defense acquisition management 
information retrieval report of December the 31st, it says that 
your baseline is approximately $6.8 billion and that the 
estimated cost is going to be $13.8 billion. Is that accurate? 
And if not, can you tell me--explain, so I can get a better 
idea of what really our figure is that we are looking at?
    Vice Admiral Lautenbacher. This is the DOD report and the 
selected acquisition reports, which they turn in every 6 
months. That is the current CAIG estimate for a program that 
started with the definition that I indicated in the beginning 
of my testimony. So it----
    Mr. Gordon. Well, that is a $7 billion deficit there.
    Vice Admiral Lautenbacher. It is really about a $5 billion 
change from a comparative number of $8.4 billion. But the 
point----
    Mr. Gordon. So the good news is----
    Vice Admiral Lautenbacher. The point is that that is still 
a large number, and I am not going to sit here and argue that 
that is not----
    Mr. Gordon. So the good news is we have got a $5 billion 
deficit rather than a $7 billion.
    Vice Admiral Lautenbacher. That is not good news. That is--
--
    Mr. Gordon. Okay.
    Vice Admiral Lautenbacher. That is a cost estimate from the 
CAIG. It is a cost estimate on a program that is not executable 
at this point. And it is a program that we are working on in 
Nunn-McCurdy to change to something that can be executed. So it 
is a number that doesn't have a great deal of credibility in 
the sense that we can't buy that program. We have to build--we 
have to restructure the program.
    Mr. Gordon. So is there any reason to think this number is 
going to go down rather than up?
    Vice Admiral Lautenbacher. We are working very hard to make 
this number go down.
    Mr. Gordon. Well, can you give me some comfort? I mean, 
because you all are going to do a better job, is that the 
reason it is going to go down? Or why should it go down?
    Vice Admiral Lautenbacher. We are looking at options to 
provide the kind of coverage we need. Continuity is very 
important. That is the number-one critical issue.
    Mr. Gordon. Well, we are going to have to go vote. But I 
think this is a pretty important issue. You all can--I don't--I 
am not trying to spring this on you. You know, this is a--this 
thing is six months old or whatever. So you all might talk a 
little bit about it, and then, when we get back, you might 
better give us a little idea of why--again, why $7 billion is 
really $5 billion but why it is going to get better.
    Thank you.
    Chairman Boehlert. With that, we will have to run. We have 
three minutes to go. As soon as we get voters back, we will 
resume this, because your time is valuable. They have 
questions. This is a very important hearing. I was hoping that 
they could get back in time so we don't have to pause, but we 
will pause for just a few moments. If you would like a cup of 
coffee or--oh, here we are.
    Dr. Ehlers will assume the Chair, but if you would like a 
coffee, the offer is still there.
    Mr. Ehlers. [Presiding.] Well, welcome to the Capitol 
Science Committee shuttle service. Okay. We will try to keep 
this going as fast as we can. And it happens to be my turn to 
ask questions. So let me just get at a few here.

                         Recent Program Changes

    Admiral Lautenbacher, in your testimony, you indicated that 
NOAA has and is taking actions to respond to program problems 
in the NPOESS program and also taking actions to improve 
program management. What differences or improvements are you 
seeing personally? Are you briefed regularly on program status 
and concerns? Are you now more confident that you are receiving 
accurate assessments of program status and problems, 
particularly with respect to high-risk, critical-path tasks? Is 
the nature of the quality of the information you are receiving 
different? And so on down the line. I would appreciate your 
analysis and comments.
    Vice Admiral Lautenbacher. The changes that have been made 
recently in the last six to eight months have improved the 
speed of the reporting process and improved the transparency of 
the process and have put a more independent layer of review of 
the issues that are coming up. So there are more people in the 
management process looking at this, and I feel more confident 
that there is a stream of responsible management, you know, 
accountable personnel dealing with the issues that have been 
coming up in the program. So I think these changes have made a 
big difference. To say we are schedule again with the revised 
2006 program and no one is over-expending the budget. So we are 
keeping to our budget, and we are making progress.
    Mr. Ehlers. How often are you briefed on the status and the 
concerns?
    Vice Admiral Lautenbacher. I receive monthly reports, and I 
am briefed more frequently on--than that by my chain of 
command, by my Deputy and by the program manager at times and 
by my chief of satellite services.
    Mr. Ehlers. And are you more confident now that the reports 
you are receiving, the assessments you are receiving, are 
accurate and give you the information you need to tackle the 
problems that arise?
    Vice Admiral Lautenbacher. The premise of the question is 
that I wasn't receiving information before, and that is not 
true. I don't want to----
    Mr. Ehlers. I asked about accurate assessments.
    Vice Admiral Lautenbacher. Yes, I believe the accuracy of 
the assessments has improved and the accuracy of the 
information is fundamentally better. The timeliness of the 
information is fundamentally better.
    Mr. Ehlers. What about the problems that occurred with 
VIIRS? Have all of those been addressed? Are we going to be 
able to complete VIIRS and fly it?
    Vice Admiral Lautenbacher. VIIRS is----
    Mr. Ehlers. Will it be ready?
    Vice Admiral Lautenbacher. VIIRS is basically through the 
tunnel. It is in testing right now, and I don't want to jinx 
it, because I am not going to sit here and make prognosis as to 
whether it will pass all of the tests or whether it doesn't 
have some issues that need to be--basically, VIIRS is at the 
end of its development cycle. It has caused a problem, we are 
through that tunnel and providing fixes, design changes, 
manufacturing, all of the technical difficulties that slowed 
that program down have been mostly overcome at this point. We 
are within a few percent of finishing that development.
    Mr. Ehlers. When is the testing supposed to begin?
    Vice Admiral Lautenbacher. The testing is being done now. 
Some tests have been passed already, and there are tests 
ongoing now, which we will be finished by the beginning of 
June, roughly.
    Mr. Ehlers. Okay. So if it passes the tests, VIIRS will be 
ready by the 1st of June?
    Vice Admiral Lautenbacher. Again, I don't want to jinx it, 
because we have had many issues, as you know, so I----
    Mr. Ehlers. Right. Right.
    Vice Admiral Lautenbacher.--try to give the progress 
without being either overly optimistic or overly pessimistic. I 
am giving you what I believe----
    Mr. Ehlers. Okay.
    Vice Admiral Lautenbacher.--the information that we have.

                               Award Fee

    Mr. Ehlers. Mr. Frazier, your report states that the 20 
percent fee for NPOESS is unusually large. Given that NPOESS is 
vital to our national security and protecting our citizens from 
natural disasters, it is critical that the satellite operate 
properly and smoothly once it is in orbit. Shouldn't we ensure 
the contractors perform well? If 20 percent is too high, do you 
have a recommendation for an appropriate level for such a high-
risk critical satellite program?
    Mr. Frazier. We would expect that the experts would look at 
what that fee should, in fact, be. In fact, we didn't come up 
with a specific amount. What we did was we looked at the 
information that GAO had put together in terms of the numbers 
of Defense contracts that were similar to this, and on average, 
it is like 85 percent of them have less than 15 percent, you 
know. So even 15 percent of a fee, incentive fee. So the 20 
percent, by itself, is a very high amount. But I think the most 
important point here is not just so much the amount of the fee. 
It is about the oversight in the management of the fee. You 
know, the contractor, you can make it 50 percent. If they don't 
earn it, they don't get it. You manage it. You monitor it. You 
make certain that whatever it is that you have decided that 
they should get is something that they are entitled to. That is 
where our real concern comes in. We have, in fact, said that 
you need to go back--that NOAA and the EXCOM need to go back 
and reassess it in conjunction with Nunn-McCurdy. But I think 
that the most important message that has to be received here is 
how important it is that the management will stay on top of the 
progress that is made so to make certain that that fee is not 
given out any quicker than it should be. That fee is intended 
to produce excellence. It is intended to encourage performance. 
If I give you 84 percent of the fee when you have a horrible 
track record, what incentive do you have to try and do better? 
I think almost none. So I think that the message is not so much 
the importance of the exact amount, and hopefully the experts 
will look at that and come up with something that is reasonable 
and that can be justified. But the important message here is 
the one that says that the overseers of that contract should 
manage it, monitor it, and make certain that the contractors 
don't get one penny more than they should. And I hasten to add, 
if they are entitled to it, then you give them every dime that 
they deserve.
    Mr. Ehlers. All right. The other programs that you have 
examined, similar to this one, what was the normal procedure, 
in terms of the amount of the award to be given?
    Mr. Frazier. We didn't examine any other programs, per se. 
What we did was----
    Mr. Ehlers. You have--you personally have not?
    Mr. Frazier. No, we personally have not.
    Mr. Ehlers. Okay.
    Mr. Frazier. The GAO has just released a marvelous report 
where they spend a great deal of time examining many of these 
types of contracts at the Defense Department. We have met with 
the GAO officials and discussed it at length with them. You 
know. But their report, I think, speaks volumes about the 
potential problem. So I think that that becomes just the 
standard against which people should be looking in terms of 
making the decisions.
    Mr. Ehlers. Thank you.
    I am now pleased--my time has expired.
    I am pleased to recognize Mr. Wu.

                            Future of NPOESS

    Mr. Wu. Thank you very much, Mr. Chairman.
    Vice Admiral Lautenbacher, we have at least some general 
agreement that we are significantly over budget on this 
satellite program. No matter what that overrun is, what is your 
plan for getting us back on track? Are we going to be 
sacrificing particular sensors, particular developmental 
sensors, sensor arrays, a number of satellites? What is your 
plan for getting us back on the financial track?
    Vice Admiral Lautenbacher. The plan right now is wrapped up 
in these Nunn-McCurdy deliberations that are going on. There 
are four integrated product teams, or IPTs, that have NOAA 
personnel, have DOD personnel, and have NASA personnel on them. 
They are experts. They are everyone we could find that has any 
proficiency, background experts working on options, looking, 
first of all, to find the best option, the lowest-cost option 
to meet the requirements and then providing assurance that the 
management scheme that is in place at the end of this will be 
the right one. That work will be completed in about three 
weeks. And it is hard for me to say. I cannot tell you what 
that program will look like until the final recommendations 
come to the EXCOM members and we have a chance to----
    Mr. Wu. You don't have an answer today?
    Vice Admiral Lautenbacher. I do not have an answer today. I 
wish I did. I am mad--I don't like the time it takes to work 
through bureaucratic processes, either, but this is a big 
program and deserves to have every possible review and level of 
expertise brought to it to make sure we take the best possible 
path.
    Mr. Wu. Well, I am somewhat concerned about this, because 
during our meeting last summer, one of the assurances that you 
gave me is that there are benchmarks to be met, and when we 
slide certain benchmarks, we can make it up by doing things and 
hitting the later benchmarks and ultimately coming out to where 
we want to be. This is a different situation here. You either 
sacrifice numbers of satellites, you sacrifice sensors, or the 
development of new sensors, and you are going to give up some 
future capability, are you not?
    Vice Admiral Lautenbacher. This program will be a different 
program than the one in the record that you see today that I 
have described, and that is exactly as a result of what we have 
told you. When you miss certain benchmarks and you miss certain 
schedule milestones, you have to then do something to 
accommodate. So----
    Mr. Wu. And when----
    Vice Admiral Lautenbacher.--this program will not be the 
same.
    Mr. Wu. And when you drop certain capabilities, you will be 
losing capability from the satellite, and will that not entail 
costs to the agency of the Federal Government?
    Vice Admiral Lautenbacher. I am not sure I follow. If we 
drop the capability, we should be paying less----
    Mr. Wu. Then there are certain----
    Vice Admiral Lautenbacher.--for the satellites.
    Mr. Wu.--things that you can't do, that the satellite can't 
do.
    Vice Admiral Lautenbacher. There are things we will not be 
able to do immediately, but the idea is to reach the capability 
to provide the options that allow us to get to the levels of 
achievement that we think are important for national security, 
severe weather and climate and that the types of things----
    Mr. Wu. I am sorry. Are you saying that ultimately all of 
the capabilities will be there?
    Vice Admiral Lautenbacher. I can't say that, because I 
can't make that decision myself. It is a three-agency decision 
that has to be agreed to over the next three to four weeks, and 
it would be unfair of me to sit here and prognosticate on 
something that I can't commit to, because----
    Mr. Wu. Okay.
    Vice Admiral Lautenbacher.--I don't know how that will come 
out.
    Mr. Wu. How close are you to this analytical process about 
what capabilities to drop? Because I am deeply concerned that 
you didn't find time to meet with the IG. And are you staying 
in close touch with this decision-making process?
    Vice Admiral Lautenbacher. Well, I spend a great deal of 
every day involved in this program. I have been intimately 
involved with it for the four years that I have been the 
temporary custodian of this agency over the course of the 
program. I am not unaware of what goes on. I understand the 
principles, and I have worked hard in my management structure 
with the people that work for me to do everything that I could 
do to keep this thing on track. I have not been disengaged from 
the process. Now you can look at it and make the judgment, 
``Well, nothing happened so you weren't effective,'' and that 
is a call you can certainly all make. But the point is, I have 
been engaged, and I will continue to be engaged on it. I have 
looked at the options. I have looked at many of the options. 
They require the same kinds of things we have talked about 
before. They require changing orbits. They require moving 
satellites. They require using the satellites that we have 
today. Remember, we have some left in the domestic side and the 
military side to cover orbits. And they also look at ways to 
spread out the development of the instruments so that we can 
afford them. Remember, I said we are not overspending our 
budget today. We are on track with the budget that you have 
approved, and we are going to stay to that. I have tried to be 
very prudent in the fiscal management that we have. So you may 
get the capabilities later, but I can't sit here and commit to 
that. But I can commit to the fact that we are looking at all 
of the possibilities of getting to the final requirements, I 
guess is the word that we want, that have been laid out for the 
program.
    Mr. Wu. Well, Mr. Chairman, the frustration is with the 
failure to deliver on commitments made last summer, and my 
confidence is somewhat shaken about any reassurances that we 
receive today. And if I have any further comments, I will make 
them later.
    Thank you, Vice Admiral.
    Vice Admiral Lautenbacher. Thank you.
    Mr. Ehlers. The gentleman's time has expired.
    The Chair recognizes the gentleman from California, Mr. 
Rohrabacher.

                          Management Structure

    Mr. Rohrabacher. Thank you very much, Mr. Chairman.
    I think it is a bit ironic that we are looking at a 
program, which was originally sold to Congress as something 
that would be a cost-effective way of meeting the goals that we 
had set, the various sensor and space-related goals that we had 
set. And instead of getting a cost-effective way of doing this, 
what we have ended up with is a catastrophe. And when you have 
$3 billion that are no longer available to health, education, 
to other science programs, to--I mean, I had a person in there 
talking today about a couple hundred million dollars for 
juvenile diabetes and what it would mean to young people around 
this country. And mismanagement, it appears, has eaten up $3 
billion, which is now not available to little children who need 
it for diabetes research or education or even bullet-proof 
vests for our men who are in action right now. This is not just 
mismanagement. This is a catastrophe: $3 billion that no longer 
exist that can be traced back to decisions, or lack of 
decisions, by people in management positions.
    Mr. Frazier, I want to congratulate you for your testimony, 
and I look forward to hearing more reports from you in the 
future, as well, on how we can improve the way we run different 
programs to make sure that we don't duplicate this disaster.
    Mark Twain once said that, you know, ``Put all your eggs in 
one basket, but watch that basket.'' And you know what? That is 
what this was all about. We are going to put all of these 
sensors and all of these capabilities in one satellite, but 
Mark Twain was wrong, and my mother was right, which she talked 
about, you know, basically don't put all your eggs in one 
basket. And my mother also said something about too many cooks 
spoil the soup. I look at the program structure, and I see 
NOAA, NASA, the Air Force, the Executive Committee, the tri-
agency Steering Committee, and Integrated Program Office, all 
of whom have some sort of decision-making process in the--and 
oversight of this. Mr. Frazier, is this a situation where we 
had so many people responsible that nobody was responsible?
    Mr. Frazier. That could be part of the problem. It is 
important that all of the players, surely, are on the same 
page, that they are all talking to one another. You know. I 
think that accountability is always important. You know, we 
need to know that, at the end of the day, who we are going to 
be able to hold accountable for what goes right and what goes 
wrong. I am a big believer, personally, in having processes in 
place, having mechanisms and systems that will provide checks 
and balances. And I think that the concept, or the intent is, 
when it was initially structured, was to provide that. 
Unfortunately, it doesn't seem like that is what, in fact, 
happened, because I think that the intent clearly was to put in 
place the checks and balances. So if I am sending the reports 
and the reports are going to all of the interested parties, one 
would think that if party A doesn't deal with it, then party B 
surely will raise that question. And so I am surprised that 
with the number----
    Mr. Rohrabacher. Yeah.
    Mr. Frazier.--of players----
    Mr. Rohrabacher. One person would need to be able to 
oversee that. One person would be able to have to say, ``Is 
this happening?'' Who is that one person?
    Mr. Frazier. I can't answer that question. I don't know. 
You said who should it be?
    Mr. Rohrabacher. Well, who was it----
    Mr. Frazier. No, I----
    Mr. Rohrabacher. Who was it in this program?
    Mr. Frazier. I can't answer that question, because 
clearly----
    Mr. Rohrabacher. Okay. So we have got all of these----
    Mr. Frazier.--it is a----
    Mr. Rohrabacher. As you described, you need checks and 
balances.
    Mr. Frazier. Yes.
    Mr. Rohrabacher. You need these people working together, 
but there isn't one person to oversee to make sure----
    Mr. Frazier. No, you have----
    Mr. Rohrabacher.--that the checks and balances are working.
    Mr. Frazier. You have the EXCOM that is there, in theory, 
but that is--those are three key individuals of equal ranking 
there.
    Mr. Rohrabacher. Okay. Mr. Frazier, was anyone fired over 
this incompetence?
    Mr. Frazier. Not to my knowledge.
    Mr. Rohrabacher. Admiral, was anyone fired? Can you name us 
a few people who were fired?
    Vice Admiral Lautenbacher. A program manager was changed 
both inside the government and in the contractor, and there 
were numbers of people that were removed----
    Mr. Rohrabacher. Okay.
    Vice Admiral Lautenbacher.--and replaced.
    Mr. Rohrabacher. So there were?
    Vice Admiral Lautenbacher. Yes, sir.
    Mr. Rohrabacher. All right. We had people fired.
    Vice Admiral Lautenbacher. There were changes made.
    Mr. Rohrabacher. Admiral, one of the changes that you have 
included in your statement here that have been made was that 
now the--in--consistent with the OIG report, you are no longer 
giving less than--you are never--no longer giving award fees to 
the less-than-satisfactory performance, which Mr. Frazier said 
was so important. Why did it take a report from the IG's office 
to quit rewarding people who were not meeting their goals with 
awards for superior performance?
    Vice Admiral Lautenbacher. I--we had discussed this before 
the IG's report and agreed that this was not working. The 
philosophy at the time that this system was installed was 
designed to incentivize the contractor. It was designed to 
allow the program manager to be able to have some control over 
incentivizing the contractor. It turns out that that is not a 
good idea, because there are not enough checks and balances.
    Mr. Rohrabacher. Well, let me tell you something. The first 
award that went to someone who was behind schedule and over 
budget, the first performance award that went should have been 
a tip-off to somebody. And I am trying to figure out who that 
somebody is who should have said, ``This is wrong, and we 
shouldn't be doing this.'' But what we see, again, is there are 
so many crooks, nobody really knows who is responsible for the 
soup.
    One last note, Mr. Chairman. My reading of this program is 
some of the things that were added on to this program, which 
was first conceived of in 1994, were aimed at, again, global 
climate change, which I guess will--and from this Congressman's 
perspective, is yet another wasteful expenditure to again prove 
global warming.
    And so, with that said, I am sorry that whatever that $3 
billion that we have that is not coming to fruition now on this 
project that dealt with that issue, I am sorry that we had to 
couple that with needed scientific information about weather 
and actual weather conditions that will meet our military, et 
cetera, and our private sector.
    So with that, thank you very much, Mr. Chairman.
    And I would ask the Chairman that we have another one of 
these hearings as soon as Nunn-McCurdy issues their report. And 
I would hope that, at the very least, Congressional oversight 
is beefed up and that we do our job, on this end of it, as well 
as demanding that you folks do your job.
    Thank you very much, Mr. Chairman.
    Chairman Boehlert. Thank you very much, Mr. Rohrabacher. 
You will notice that when you mention global climate change, 
people came out of the woodwork, including me.
    It is for real. I wish to assure you of that. It is not a 
figment of our imagination.
    The gentlelady from California, Ms. Matsui, is recognized.
    Ms. Matsui. Thank you, Mr. Chairman.
    And I want to thank both Chairman Boehlert and Ranking 
Member Gordon for welcoming me here today for my first meeting. 
And I am honored to be on the Science Committee, because I feel 
this work is so central to the challenges that we are facing 
today.
    And as we are looking at this issue today, NPOESS, which 
is--I am learning a whole new vocabulary here, it is 
particularly critical, at this point in time, as you well know, 
because of what happened on the Gulf Coast with Katrina. And if 
we did not have some advanced weather forecasting, things would 
have been worse, as was stated before.
    I am particularly concerned about this because of the fact 
that I--my home district is Sacramento, and we are next to the 
Gulf Coast, probably the most at-risk region, because we have 
two rivers. And we are vitally, vitally interested in what this 
means for us as far as advanced weather forecasting. Our flood 
control management is really dependent upon these weather 
forecasts. And in fact, we have had a particularly wet winter 
and wet spring this year. And we were very challenged. But 
because we had very good weather forecasting, we were able to 
retain more water in the reservoirs and determine how much 
water needed to be released. Of course, you know, some of this 
weather forecasting is still on the edges a little bit, at this 
point in time, but without it, we would not have known how to 
manage some of the flows. So for me, in particular, and my 
constituents, this is critically important that we move ahead.
    And I am very, very concerned about the cost overruns and 
the fact that we are at this juncture today. And my concern is 
that, Mr. Frazier, on--I think on page 13 of your report, you 
note that NOAA disputes your characterization of EXCOM's 
involvement with this program. And as I listened to the 
Admiral's testimony, I don't believe it has still been resolved 
yet, do you believe that EXCOM acted expeditiously to intervene 
in this program when problems first occurred?
    Mr. Frazier. No.
    Ms. Matsui. Do you have any suggestions as how it have--how 
could we have--how could this have been better, you know--
apparently, problems were--we were aware of these problems.
    Mr. Frazier. Right.
    Ms. Matsui. But the communication was not efficient.
    Mr. Frazier. In fact, one of the things that I think that 
was a surprise to us when we initially started this particular 
review was we went in almost expecting to find that there was a 
shortage of information that was flowing. Because sometimes you 
will find that there is just not the information there. In this 
case, there was a very comprehensive, elaborate paper trail 
with monthly reports and other work that had been done that was 
highlighting the nature of the problems and the severity of the 
problems. And that information was reportedly being sent to the 
EXCOM. One of the things that was happening was that the 
program manager, in all fairness, was often putting his spin on 
things. In other words, he knew that there were problems, but 
you know, ``I will be able to solve these problems down the 
road. I have got a reserve here, and I will be able to take 
care of it with this reserve.'' But here is where I expect that 
the EXCOM, and others, will come in and challenge that 
individual. You know, his job was to come in and to try and 
give you the facts. But at the same time, he was an advocate 
for the program. That is not being negative. That is not a 
negative statement. But you have to challenge people who have 
this much control, who have a vested interest. He was the 
person who was rewarding, if you will, the contractor for this 
performance. And when you saw those kinds of things happening, 
at that point, I would expect that everybody above him would be 
playing devil's advocate. They had a responsibility to call him 
to task on what he was saying, you know. And if it is so 
optimistic, if you believe that you can do this, you ought to 
be able to document this, you know. And I think that that is 
where I think that, more than any place else, they fell down on 
their job. We have a responsibility, those of us in oversight 
roles to challenge what is told to us, to look for the facts, 
you know, to get behind it. You know, if we don't do that, I 
think that we are equally guilty.

                            Lessons Learned

    Ms. Matsui. Okay. Admiral Lautenbacher, you state that NOAA 
is incorporating NPOESS lessons learned in future acquisitions. 
What lessons have you learned?
    Vice Admiral Lautenbacher. I have agreed that we have 
learned the lessons that Johnnie has talked about. This is a 
difficult program to manage, because it has three agencies, and 
it has complexities involved technically, which are very, very 
challenging. So the issue here is to have more--and remember, I 
am the head of an agency. So I have got lots of people and lots 
of problems and lots of programs that all need help. This is 
the top priority, and I spend a lot of time on this one, but 
there is only so much that I can absorb and understand 
continuously. So we need the independent reviews. We need the 
pieces in the chain of responsibility and oversight to ensure 
that all of these things are happening as they ought to, they 
are being challenged at the right time, and that the process, 
the management processes put into place will hopefully correct 
some of these issues that we have had about--as Johnnie said, 
maybe the program manager was over optimistic. But remember, 
the program manager is working his tail off on my direction to 
make this work. He had a specific budget. He had agreed to the 
schedule. I had hundreds of technical experts that came in and 
say, ``You can do this.'' The contractor bid on it and said he 
could do it. There were incentives in the program that the 
acquisition experts in the Department of Defense said would 
work. You line up these people, and you ask them, and you grill 
them, and you challenge them, which is what I did and have been 
doing. And that is not auditable, and I feel that is a failing. 
As I have mentioned, we should have auditable meetings that are 
then on the public record, on the record to come in and talk to 
you about. But the fact is that there were not enough 
independent reviews and there were not enough auditable 
processes in place to allow this to be managed at a, what I 
would call, finer grain level than what was put into the 
original structure. I think we have learned those lessons over 
the last several years.
    Chairman Boehlert. The gentlelady's time has expired.
    I would take it, from what you have just said, that it is a 
mea culpa of sorts. It is not good enough to say a lot of 
people working for you, hundreds of people working for you, a 
lot of complex problems. Quite frankly, that is why you got the 
title, and that is why you have got the level of compensation 
you have. And we don't get paid for the easy ones. We get paid 
to deal with the difficult ones. You say that you can assure 
that the IG recommendations are being considered in the Nunn-
McCurdy review process, but are you advocating specifically for 
any of the changes recommended by the IG?
    Vice Admiral Lautenbacher. I will advocate for all of the 
changes that are recommended in there. Absolutely.
    Chairman Boehlert. Okay.
    Vice Admiral Lautenbacher. I just can't commit to what the 
other two people are going to say until the Nunn-McCurdy report 
is done.
    Chairman Boehlert. But you are an important--you are the 
leader of the troika, and so you are an important ingredient in 
this whole formula.
    But let me ask you this. You are going to try to apply the 
lessons of NPOESS. How about GOES-R? I need more information on 
this than you provide in your testimony. Who is on the Program 
Management Council, and what authority will the Council have?
    Vice Admiral Lautenbacher. The Program Management Council 
will be headed by the COO of NOAA, General Kelly.
    Chairman Boehlert. All right.
    Vice Admiral Lautenbacher. It will include all of the 
contract people, our acquisition people, and our leaders of the 
organizations that have authority over acquisition----
    Chairman Boehlert. And what are----
    Vice Admiral Lautenbacher.--satellites, weather----
    Chairman Boehlert. All right.
    Vice Admiral Lautenbacher. So it will include--it is 
basically akin to, if you are familiar with the Department of 
Defense Oversight Council. They have changed. It used to be 
called the D-SARF. There is a council that is set up that is 
chaired by the Deputy Secretary of Defense.
    Chairman Boehlert. What is going to be your personal 
involvement at GOES-R?
    Vice Admiral Lautenbacher. I will be involved in it like I 
am everything else that we do. I am the agency head and 
responsible for it. They will report to me. I meet with Jack 
Kelly daily on all of the issues that NOAA has across all of 
our programs, acquisitional and operational.
    Chairman Boehlert. Well, we just don't want to have a 
repeat of the mistakes made in NPOESS when we go to GOES-R, so 
we have learned some valuable lessons from this process, and I 
hope those valuable lessons are going to be implemented, what 
you have learned from that.
    Beyond looking at the IG and GAO reports, what are you 
reviewing to determine the appropriate contract structure? And 
are you consulting with experts outside of government? We are 
on GOES-R now.
    Vice Admiral Lautenbacher. Yeah, on GOES-R, we are working 
internally with Department of Commerce. The object here is the 
unity of command sort of thing. The Department of Commerce will 
run this one, not going to turn it over to anybody. It will be 
unity of command and responsibility.
    Chairman Boehlert. Are you consulting with outside----
    Vice Admiral Lautenbacher. Yes, we will consult--we are in 
the process of doing that. We have not completed the 
deliberations for setting the fee for the next contract. We 
are, right now, in the risk-reduction phase of the contracts. 
There are three contractor consortiums working on advanced 
design and risk reduction at this point.
    Chairman Boehlert. And who will be on the GOES-R 
independent review team?
    Vice Admiral Lautenbacher. We have a list of 20 outside 
experts at this point who are not employed by NOAA or not 
employed by the contractors, who are well recognized. And they 
will operate under principles of openness.
    Chairman Boehlert. And how often will they submit reports 
and report to the review team?
    Vice Admiral Lautenbacher. They will report to the Program 
Management Council, and we will have independent reviews of the 
program as it goes on, beyond the chain that involves the 
program manager.
    Chairman Boehlert. And how often would you anticipate those 
reviews with----
    Vice Admiral Lautenbacher. That has not been decided yet, 
but that will be part of the deliberation, whether they are 
monthly or whether they are based on milestones, or whether 
they are based on situational issues. The normal review process 
is structured to support the various milestones and review 
processes, as it was in NPOESS. That is why there is a flurry 
of activity around the contract award and a flurry of activity 
when the contractor and the program manager reported the issues 
that they were having in solving the problems. So a normal 
method is to do it situationally. It can be done on a monthly, 
bi-monthly--you can pick a time basis, too. You can say no less 
than six months. You could do it situationally. That is to be 
decided.
    Chairman Boehlert. Well, this is an expensive lesson 
learned, but you are going to apply lessons learned from NPOESS 
to GOES-R?
    Vice Admiral Lautenbacher. It is an expensive lesson 
learned, and it will cost us money. I mean, all of this--all of 
the extra management attention that we are putting on NPOESS 
has cost more money.
    Chairman Boehlert. Well, I would suggest----
    Vice Admiral Lautenbacher. It takes money to do that.
    Chairman Boehlert.--that if more management attention was 
paid earlier, it wouldn't have cost as much. That is fair, I 
think. It is not a low blow. I am not dealing from the bottom 
of the deck. I am dealing from the top of the deck.
    But--all right. My time has expired.
    We will go to Mr. Gordon.

                      Management Structure (cont.)

    Mr. Gordon. Admiral, other than the project director, have 
there been any kind of NOAA staff changes on the Steering 
Committee or at the EXCOM level?
    Vice Admiral Lautenbacher. The EXCOM are the agency heads. 
There have been several agency head changes. Remember that Mike 
Griffin has taken over NASA.
    Mr. Gordon. Right. I said the NOAA staff changes.
    Vice Admiral Lautenbacher. In the NOAA staff?
    Mr. Gordon. Yeah, that are working on the Steering 
Committee or in EXCOM.
    Vice Admiral Lautenbacher. The Steering Committee, 
remember, it is Jack Kelly--it is three people.
    Mr. Gordon. Okay. Well, then----
    Vice Admiral Lautenbacher. It is thin organization, so it 
is----
    Mr. Gordon. Okay. Well, let me----
    Vice Admiral Lautenbacher. It is the deputies.
    Mr. Gordon. Okay.
    Vice Admiral Lautenbacher. There have been changes in the 
program office. Remember----
    Mr. Gordon. Are you expecting----
    Vice Admiral Lautenbacher.--that the program manager----
    Mr. Gordon. Okay. Okay. That is fine. Let me----
    Vice Admiral Lautenbacher.--is gone.
    Mr. Gordon. Let me try a different way.
    Are you expecting to make any personnel changes?
    Vice Admiral Lautenbacher. I am not expecting in the near-
term to make any----
    Mr. Gordon. Yeah.
    Vice Admiral Lautenbacher.--personnel changes.
    Mr. Gordon. Okay. This whole thing is bizarre. I mean, we 
are talking about more money that you are over budget than is 
in your budget for a year. You know, Mr. Frazier, when you had 
this conversation with Ms. Matsui, again, it was just bizarre. 
What you were doing, you know--your suggestions are they need 
to work a little harder, they need to, you know, have more 
outside reviews, but you didn't in your discussion with her, 
you said they had warning after warning after warning after 
warning. And so if they have had warning after warning after 
warning, then so what if some outside folks come in and give 
them more warning. I mean, what is going to change if you have 
the same people doing the same thing? I mean this is a big 
deal. This thing is out of control.
    Mr. Frazier. One of the big changes, if--and when you read 
our report, that report is unique in several ways. That report 
is addressed to the Deputy Secretary. If you go back, you will 
never see a report addressed to NOAA and to the Deputy 
Secretary. It is the first one. Because what we believed is 
that the Deputy Secretary----
    Mr. Gordon. But somebody has to----
    Mr. Frazier.--has to step in and----
    Mr. Gordon. Okay.
    Mr. Frazier.--to make certain that there is an additional 
level of oversight. I think that it is about management 
attention to it. The Deputy Secretary has quarterly reviews, 
that I am aware of. And as a part of those reviews, I am sure 
that now we have met with the Deputy Secretary.
    Mr. Gordon. Are you sure that there are adults somewhere in 
this chain of command that are going to step forward and make 
some changes and take control of this? I mean, let me--your 
report was entitled ``Poor Management Oversight and Ineffective 
Incentives Leaves NPOESS' Program Well Over Budget and Behind 
Schedule.'' You know, that rings some bells. And then, when you 
look through the report, you see many pages that were redacted. 
And would you like to explain why that was done?
    Mr. Frazier. Yeah. In fact, we made available to the 
Committee an unredacted version to make sure that the 
Committee--one of the reasons that the public version is 
redacted is that there is potentially proprietary information 
because of the contractor, and we are not certain what is going 
to come out of the Nunn-McCurdy review. If the contract, for 
example, had to be renegotiated, we think that that information 
could potentially be proprietary information.
    Mr. Gordon. But reading this over, again it is just what 
you talked about: warning after warning after warning.
    Mr. Frazier. Yeah.
    Mr. Gordon. I mean, I don't really see anything here that 
is that proprietary. It is just warning after warning after 
warning that was ignored and ignored.
    Mr. Frazier. We sent it to our lawyers, and we asked them. 
They know that we don't redact any more than we feel that is 
absolutely necessary. And that is what was recommended to be 
pulled out for the public release. But we thought it was 
important for the decision-makers, those of you here on the 
Committee, as well as all of what NOAA has, what the 
Secretary's office has, and any of the other key players has, 
even all the other members of the EXCOM, they will have the 
full version of the report. Also, if you look, I think it is, I 
want to say, page 19 of the report where we have the summaries 
of what that information was redacted. So I think that 
hopefully that there is nothing that is lost in even the 
redacted version. The message still comes through in terms of 
what should have happened that did not happen.
    Mr. Gordon. And so what is your level of confidence if you 
have the same people doing the same thing here? I mean, what is 
going to change? Apparently, they can't be embarrassed, and so 
you know, the whole thing just gives me the willies.
    Mr. Frazier. Well, there are two things that I would add at 
this point. One, I think all of us are waiting to see what 
comes out of the Nunn-McCurdy review. But I think even more to 
the point, we were very much interested in, in going--when we 
go forward in terms of the GOES-R, we already have additional 
people starting in our office to look at that process, who are 
monitoring what is happening there, because you do want to see 
new signs. Again, we know that the program director is gone. 
But one of the other things, Congressman, that we do in the 
IG's office is that we try not to serve, in this case, as the 
judge and the jury. We are the detectives here. We give you the 
information, and we bring that to the decision-makers, the 
policy-makers. And with the exception of criminal cases where 
we may then work with the Assistant U.S. Attorney or someone, 
we don't usually say, ``You need to move person A or person 
B.'' What we do is charge the responsible officials with 
looking at the circumstances, getting behind it, looking at the 
facts, and then taking appropriate action to make certain that 
the changes that we want to see. And then as part of that 
process until the intent of every recommendation in our report 
is dealt with, those recommendations remain open. We are there. 
This is not something that we issue a report and are going to 
walk away from.
    Mr. Gordon. Well, please don't. I mean, we want Groundhog 
Day to stop. And again, we thank you for what you have done. 
You will continue to do a service to your country if you do 
stay after this, and keep reminding us.
    Chairman Boehlert. Thank you.
    Dr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman.
    Just a short question for each of you.
    First, Admiral Lautenbacher, in your testimony, you 
indicate that NOAA officials, including you, have been full 
participants in the Nunn-McCurdy review process. Do you have 
any concerns about the extent to which NOAA's priorities and/or 
the recommendations of the IG are or are not being addressed as 
part of this process, the Nunn-McCurdy process?
    Vice Admiral Lautenbacher. It is premature to say until the 
process comes to an end, but I don't have any concerns now that 
they are listening to our priorities, our requirements for the 
domestic side and are aware of and involved in dealing with the 
issues that Johnnie has brought up to us today. That is primary 
material that is given to all of the IPTs, and they have it, 
and we are working on it. And we will continue to work. I might 
add that I have a very strong internal process that goes over 
every IG recommendation. Remember, we are 65 percent of the 
Department of Commerce, so this is not the only business that 
we have with the IG. We have a system that looks at every one 
of those open recommendations. We will take strong action, as 
we will in this case, to go through and manage the expectations 
and to Johnnie's expectations that we have incorporated those 
changes in our processes in our management programs, and that 
goes for this as well as all of the others that we do 
regularly. I have been in IG, and I understand the value of 
this.
    Mr. Ehlers. Thank you.
    Mr. Frazier, given what you learned during the preparation 
of the IG report and what you have heard at today's hearing, do 
you believe NOAA is on the right track to address the findings 
and recommendations in your report?
    Mr. Frazier. I would like to say that the proof will be in 
what happens. I think that there were processes. I think that 
there were procedures. It is all about how it gets implemented. 
I think that very few of us can take issue with what has been 
said. The proof will be in what happens after we go forward 
from here today. The proof will be in following through on the 
promises that are made, and implementing the recommendations. 
It is fairly easy for us to make the recommendations that we 
did. I mean, there is a directorate that laid it out, and as 
someone has said on the Committee, it wasn't rocket science for 
us to reach those conclusions. And the challenge is to make 
sure that they are implemented and to keep the pressure on it, 
to keep the attention on the issue. I cannot believe that when 
the Nunn-McCurdy review is completed that you will not see a 
great deal of additional attention. I cannot believe that you 
will not see it at the Secretary's level. I would surely hope 
that it will surely be at the top of NOAA's agenda. And as I 
listen today, I can surely hear that it is going to be on the 
Committee's agenda. And I would hope that those levels of 
pressure will see some progress.
    Mr. Ehlers. Thank you very much, Mr. Chairman.
    I yield back the balance of my time.
    Chairman Boehlert. Thank you.
    Mr. Wu.
    Mr. Wu. Thank you, Mr. Chairman.
    When I was asking Vice Admiral Lautenbacher earlier about 
what sensors, sensor suites, or satellites had to be sacrificed 
in order to meet the current--or try to get back within our 
cost timeframes, I believe the Admiral's answer was, basically, 
the process is going on, and he didn't have an answer for me 
right now. Well, that I understand. But Admiral, you went on to 
say that things could be added back later on when I asked about 
the costs of not having certain capabilities in the satellite 
or in the set of satellites. Admiral, what I am concerned about 
is in your statement that capabilities could be added back 
later on, isn't that true only if we fund this at higher levels 
later on? I mean, in essence, you are talking about pushing 
costs out of this current timeframe and into a further-out 
timeframe in order to get that capability back?
    Vice Admiral Lautenbacher. That is a logical conclusion. If 
you are going to add more, it will cost more. So I am not and I 
can't----
    Mr. Wu. So what you are----
    Vice Admiral Lautenbacher. I can't deliver you----
    Mr. Wu. So what you are----
    Vice Admiral Lautenbacher.--a profile----
    Mr. Wu. So what you are saying now is it is a sure thing 
that we are going to lose capability?
    Vice Admiral Lautenbacher. I didn't say that. I did not say 
that. You asked me if we were looking at all possible options, 
and I am trying to tell you that we are looking at all possible 
options----
    Mr. Wu. But----
    Vice Admiral Lautenbacher.--even changing----
    Mr. Wu.--under the current cost constraints, it is a sure 
thing that we are going to lose capability?
    Vice Admiral Lautenbacher. I don't want to make that 
statement clear-cut. I mean, I don't have an answer from the 
Nunn-McCurdy review process, because you hold me to everything 
I say five months later. For me to say that, at this point, and 
then come back and have something different, I think, would be 
unfair of me, particularly to the other folks that are not here 
that are involved with this process. We are trying hard, but 
remember, you have asked me that--would I look at additional 
funding to maintain the capabilities that we need. And I 
responded: yes, I would. And I am looking at all of the 
options.
    Mr. Wu. Well, Admiral, it seems to me that if all of the 
options that you are looking at involve giving something up, 
and what you have said is that some of those things could be 
added back later on, doesn't it make sense to you that for the 
current cost constraints, you are inevitably giving something 
up, and in order to add that capability back later on, you are 
pushing those costs into the outyears?
    Vice Admiral Lautenbacher. I can't disagree with that. That 
is an option, but you have asked me to look at all options. In 
the last hearing, you asked me to look at all options. And I 
said that I am looking at all options. I am not trying to 
create an artificial cost cap and say, ``That is the only thing 
we are looking at.'' I am trying to look at the requirements 
that the country has in all respects, and I am sure that my 
other members in this deliberative committee are----
    Mr. Wu. The artificial----
    Vice Admiral Lautenbacher.--doing the same.
    Mr. Wu.--cost cap you are referring to is what this program 
was supposed to come in or the overrun that was built into it?
    Vice Admiral Lautenbacher. It was artificial cost cap. Pick 
a cost cap, pick a number. Are we going to use cost as an 
independent variable, which is a discussion we have a great 
deal of, you know--it is a wonderful discussion at the happy 
hours in the evening. Is cost an independent variable? Or do we 
have requirements that this country has to have for its 
security? And I am talking about environmental security, 
economic security, and national security. And do we try to look 
at the balance, the priorities of what those requirements are 
versus the costs? I have said that I am trying to look at the 
holistic view of the program: what are the requirements and 
what are the costs.
    Mr. Wu. And what you are saying right now, what I am 
hearing is if we need to meet those other requirements, yes, it 
will cost more. Is that what you are telling us right now?
    Vice Admiral Lautenbacher. I am not going to commit to 
telling you anything, at this point, because I don't know what 
the answer is. If you are talking about a hypothetical program 
off in the----
    Mr. Wu. It is not a hypothetical program----
    Vice Admiral Lautenbacher. Then I don't want to----
    Mr. Wu. It is this----
    Vice Admiral Lautenbacher.--commit to saying to
    you----
    Mr. Wu. This is the program----
    Vice Admiral Lautenbacher.--what the capabilities----
    Mr. Wu.--as originally configured and promised.
    Vice Admiral Lautenbacher. The program that was originally 
configured and promised is not deliverable at this point. I 
have testified to that, and it has been proven by the other 
technical experts that have looked at it. You cannot buy the 
program that was originally forecasted. There is no way to do 
that. You can't go back in time.
    Mr. Wu. Thank you, Mr. Chairman.
    Chairman Boehlert. Thank you, Mr. Wu.

                           IG Recommendations

    Mr. Gutknecht.
    Mr. Gutknecht. Thank you, Mr. Chairman.
    And I want to thank the witnesses.
    I particularly want to thank you, Mr. Frazier. I commend 
you for your professionalism. This has been one of the most 
thorough reports that we have received, and I apologize. I have 
had a couple of other meetings that I have had to be in and out 
of, so I haven't heard all of the questions.
    But I do really want to get to what I think is the nub of 
this question, because your report is incredibly tough. And I 
want to thank you for that. We need that. And you get right up 
to the edge. It sounds to me that--well, let me say it this 
way. We don't ask for a criminal investigation, but do you 
think there should be one?
    Mr. Frazier. We have not seen the evidence that would 
suggest that at this point, because one of the things, and I 
will be very candid, is that we go into these types of reviews 
looking for, what we call, the fraud indicators. And one of the 
reasons that on this particular job, one of our key people, I 
put my Counsel to the IG on it. That is how important it is to 
me. This is a person who works day-in and day-out with the 
investigators. So we are very mindful of that. We also put out 
some of our best auditors on it. So again, I don't go in with 
blinders on in saying that the possibility doesn't exist. When 
we started seeing the relationship, quite candidly, between the 
program manager, we said, ``Why would he do that?'' And we 
looked for the indications to go forward. We didn't see that. 
We did not see that. And in fact, you know, we explored a 
little more, without going into great detail, we explored. So I 
want you to understand that we went forward with this review 
looking for indicators that we should go forward, you know, and 
we have not found that.
    Mr. Gutknecht. So I don't know if that makes us feel 
better, because, in some respects, when you see that--what I 
would describe, and I think most of the folks that I work for 
back home would describe, as enormous bonuses being paid out 
for work that isn't being done. It is either there is something 
criminal going on here or just gross incompetence. Either one 
is not exactly an answer we want to hear.
    Mr. Frazier. The sad news here, and the sad commentary, is 
that, as the GAO report clearly delineates, this is not an 
anomaly. This is something that happens way too often. I mean, 
they had----
    Mr. Gutknecht. And that doesn't make us feel better, 
either.
    Mr. Frazier. It doesn't. You know, I am not going to be 
able to give you the kind of level that--of comfort, I think, 
that you would like, because that is what is so troubling, you 
know, when you see how pervasive it is. In fact, people say, 
``In this community, this is what normally happens,'' because a 
lot of times people don't understand the complexity of the 
issues. And so it is like, ``Okay. We better go ahead and give 
you this money.'' You know. ``We will go ahead, because we 
don't want to alienate you.'' GAO did a superb job in looking 
at that, and of course, what they have done in their 
recommendations is now to recommend that the Air Force and that 
the Defense Department, which has the preponderance of these 
types of contracts, that they look at this and go back and try 
and make a reassessment. But the message always is how 
important it is for the program people to monitor, to stay on 
top so that they are in a position to make certain that people 
don't get awards and incentives that they are not entitled to. 
You know, I always hasten to add, I want to be the first person 
to make sure that contractors get what they deserve in terms of 
incentives, because they are the ones who are going to make or 
break these programs. But we need to make sure that we stay on 
top of it, we, being the program officials here, on top of them 
so that we can make certain that they don't get one dime more 
than they are entitled to.
    Mr. Gutknecht. Well, I think what you have outlined here, 
and I hate to think that this is a pattern, but I can see how 
it could become a pattern, you know, an agency, or a 
Congressional Committee says, ``Hey, we want the technology to 
do this, this, and this.'' And if you are the contractor, the 
advantage is to say, ``Oh, yeah. We can do that. We can do 
that. Just,'' you know, ``it is going to be expensive, but we 
can do that.'' And then, as you find out, ``Well, maybe we 
can't do that.'' You say, ``Well, what we need is more money.'' 
And so it just becomes this pattern. And I guess what I want to 
come back to is maybe we should start with some of these--and I 
am a big believer in DARPA and some of the other research 
agencies we have. Maybe we should start with them and say, 
``Will this work?'' And if they can prove that the technology 
works, then maybe we should put it into projects like this one. 
What do you think?
    Mr. Frazier. Well, I think that there are a number of 
possibilities, in terms of improving the situation that you are 
very concerned about, and justifiably so. But I think that none 
of it replaces the importance of having program managers stay 
on top of what is going on. Because the way that the process is 
set up is that you have a contracting officer representative 
who is charged with the monitoring of those contractors. Sad to 
say, in fact, all of the IGs got together last week in 
Portsmouth, Virginia for two days. And we were comparing our 
top challenges. And out of 24 statutory IGs, 20 of us have on 
our list, as a material weakness top management challenges, the 
procurement issues and because of issues just like this. You 
know, you will find the same scenario--we see people getting 
awards, and sometimes it is just buying pencils and paperclips, 
and people will give them the same kind--how can that be? Or 
you will see that people have been given an incentive award and 
they haven't performed. You know. And again, they are not these 
multi-billion-dollar programs. So part of it has to be that you 
have got to get the message out there that project managers, 
contracting officers, and contracting officer technical 
representatives should be on top of this and should make 
certain that people don't get one dime more than they are 
entitled to. And at the same time, give them the incentives so 
that they will come up with the creative solutions, that they 
will move forward with the solutions that are important to get 
these satellites up and to be on the cutting edge of science.
    Mr. Gutknecht. Well, Mr. Frazier, my time has expired, but 
once again, thank you. I mean, on behalf of the taxpayers and 
this committee, thank you and I think you are exactly right. I 
mean, I do believe it is systemic. I think it invades lots of 
areas of the Federal Government. And it is an attitudinal 
thing. And somehow, we have an obligation to see that it 
changes. But the answer, Mr. Chairman, is not simply to give 
these agencies more money. And that seems to be what happens 
year after year after year. When you have got a program that is 
not working, the answer Congress gives is, ``Well, I guess we 
just have to give them more money.'' I think that is a mistake, 
and I think it teaches bad habits.
    And I yield back the balance of my time.

                           Concluding Remarks

    Chairman Boehlert. I thank the gentleman.
    And I would acknowledge that Mr. Frazier's excellent report 
does not make us feel very good. His job is not to make us feel 
very good; it is to inform us. And I would point out that this 
committee has been on top of this emerging problem for a long 
time with discussions with the Inspector General's office, and 
we have been encouraging every step of the way to do this 
report. We have had a number of meetings with Admiral 
Lautenbacher and other people within the EXCOM, and we are 
going to continue on this.
    And Mr. Frazier, I have one final question for you, but 
before that, just let me say, you gain credit in the 
professionalism and objectivity of the Inspector Generals, and 
I thank you for your service.
    Let me just close by asking, would it be okay for the 
Program Executive Officer, in your view, to serve as the fee 
determining official if that PEO is not involved in the day-to-
day management of the program? And how would you define such 
involvement?
    Mr. Frazier. I think that you can almost craft any kind of 
arrangement as long as it is monitored and managed very 
carefully in that there is a check and a balance. I don't think 
that there are any programs that should be allowed to have one 
individual or one group of individuals to have total say on any 
particular component. I think you always have to make sure that 
there is a check and a balance. And I am an accountant, so that 
is what we always look for, you know. And I think that the 
arrangements can be made in a variety of ways. I don't think 
that you can have somebody who has a vested interest in the 
program being the same person who is going to make that 
determination as to what that incentive fee should be, you 
know. But at the same time, whatever arrangement you come up 
with, it is absolutely critical that you have a check and a 
balance on that. And that is through the reports that come out. 
One of the things that we have said in most of the 
recommendations is that now, in addition to sending the report 
to EXCOM, that you also send it to the Office of the Secretary. 
Will they look at it in great detail? Maybe not, but I will 
tell you what will happen as a result of that. If you know that 
another senior official is looking at it, or if it is the 
Committee or somebody else, I think that there is a greater 
tendency to make certain that what you are doing is something 
that will be very transparent and that will stand up to the 
test of evaluation.
    Chairman Boehlert. Would you have any sense of whether the 
NPOESS PEO is sufficiently removed from daily issues to handle 
fee determinations?
    Mr. Frazier. Again, we have the plan, as it still exists 
until the Nunn-McCurdy review is complete, is the way that we 
describe it in the report. I know the direction that we have 
been told, you know, that Sue will be taking on one 
responsibility and Colonel Stockton will be taking on another 
one. And again, in theory, and on paper, that should work very 
well. That should work very well. But again, on paper, what we 
had before was going to work very well. So I think that the 
test will be as to how that plays out, you know.
    Chairman Boehlert. I thank you for that. And this is not 
the first, nor will it be the last, chapter in this sorry saga. 
We are going to remain on top of it, and we appreciate both of 
you being here today, and the candor of your remarks.
    Stay tuned. Very important.
    Hearing adjourned.
    [Whereupon, at 12:20 p.m., the Committee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Vice Admiral Conrad C. Lautenbacher, Jr. (Ret.), 
        Administrator, National Oceanic and Atmospheric Administration

Questions submitted by Representative Dana Rohrabacher

Q1.  Are any of the following individuals Certified Project Management 
Professionals (PMPs) (were they as of May 11, 2006)?

A1. The National Polar-orbiting Operational Environmental Satellite 
System (NPOESS) government Program Management team has met all 
certification requirements of their respective agencies, and the 
specific certifications for each individual are listed below. The PMP 
certification is not widely used in the aerospace industry, whereas the 
Department of Defense (DOD) certification process is mandated by law. 
The PMP and DOD certifications are equivalent. We note that not all 
agencies have a formalized certification process. Some agencies use 
experience and performance evaluations and peer assessments as the 
criteria for assignment to key technical development positions.

Q2.  For any Government and Military personnel in the above list, 
please provide the Defense Acquisition University (DAU) level of 
Program Management Certification, as well as Defense System Management 
College DSMC Program Manager School completion status of PMT 401 
(Program Manager) and PMT 402 (Executive Program Manager) courses.

A2. 

          Brigadier General (S) Susan Mashiko, NPOESS Program 
        Executive Officer (U.S. Air Force)

                  Department of Defense (DOD) Level III Certification 
                in Program Management

                  Program Manager Career Track (PMT) 401 completed

          Colonel Dan Stockton, NPOESS System Program Director 
        (U.S. Air Force)

                  DOD Level III Certification in Program Management

                  PMT 401 completed

          Mr. Carl Hoffman, Senior Navy Advisor (U.S. Navy)

                  DOD Level III Certification in Program Management

                  PMT 401 completed

          Captain Timothy Wright, NOAA Corp, NPOESS Executive 
        Director (NOAA)

                  No certification requirement

          Mr. Steve Simione, NPOESS Deputy System Program 
        Director (U.S. Air Force)

                  DOD Level III Certification in Program Management 
                and Systems Planning, Research, Development, and 
                Engineering (SPRDE) from Defense Acquisition Workforce 
                Improvement Act from the Defense Acquisition University 
                through the U.S. Air Force

                  PMT 401 completed

          Mr. Stan Schneider, Director, Advanced Technology and 
        Planning (NASA)

                  No certification requirement

          Mr. David Spencer, Chief Systems Engineer (U.S. Navy)

                  No certification requirement

          Mr. Hal Bloom, Payload Division Chief (NOAA)

                  DOD Level III Certification in Program Management

          Lieutenant Colonel Laura Blackburn (U.S. Air Force, 
        retired)

                  Lieutenant Colonel Blackburn has retired from 
                federal service (with the U.S. Air Force) and is no 
                longer working with the NPOESS program; we do not know 
                her certification status

          Mr. James Valenti, Deputy Chief, Ground Systems 
        Division (NOAA)

                  DOD Level III Certification in Program Management

                  PMT 401 completed

          Mr. Joe Mulligan, Interface Data Processing Segment 
        (IDPS) Lead (NOAA)

                  No certification requirement

          Mr. Peter Wilczynski, NPOESS Program Executive Office 
        Staff (NOAA)

                  No certification requirement

          Mr. Bruce Needham (NOAA)

                  No certification requirement

          Any other Integrated Program Office (IPO) 
        Professional Staff:

                  There are no other relevant staff positions

          Any Government personnel who hold Program or Project 
        Manager (or Deputy) positions for NPOESS Instruments:

                  David Furlong, NPOESS Chief of Staff (NOAA)

                          DOD Level III Certification in 
                        Program Management

                          PMT 401 completed

                  Lieutenant Colonel David Beckwith, Chief, Program 
                Control (U.S. Air Force)

                          DOD Level III Certification in 
                        Program Management

                          PMT 401 completed

                  Karen St. Germain, Algorithm Division Chief (NOAA)

                          No certification requirement

                  Gary R. Ross, Visible/Infrared Imager/Radiometer 
                Suite (VIIRS) Instrument Manager (U.S. Air Force)

                          DOD Level II Certification in Program 
                        Management

                  Captain Chris Brann, Conical-scanning Microwave 
                Imager/Sounder (CMIS) Instrument Manager (U.S. Air 
                Force)

                          DOD Level II Certification in Program 
                        Management, Test, and SPRDE

                  Captain Jonathan A. Varoli, Survivability Sensor 
                Instrument Manager (U.S. Air Force)

                          DOD Level II Certification in Program 
                        Management

                  Michael Tanner, National Environmental Satellite, 
                Data, and Information Service (NESDIS) Headquarters 
                Senior Program Advisor for NPOESS (NOAA)

                          Program Management Acquisition Level-
                        3 certified from Defense Systems Management 
                        College

                          Certified National Aeronautics and 
                        Space Administration (NASA) Executive Program 
                        Manager

          Any Prime and Sub-contractor (Northrop Grumman, 
        Raytheon, Ball Aerospace, Boeing, etc.) Program or Project 
        Managers (and Deputies):

                  Prime and sub-contractors do not require 
                certification.

                  Northrop Grumman stated that the average experience 
                level of senior members of their management team is 28 
                years. David Ryan, current NPOESS Program Director, has 
                29 years experience and has participated in 64 
                satellite programs. Experience and track record are the 
                primary criteria in industry for assignment to critical 
                programs.
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