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




                   IMPLEMENTING THE VISION FOR SPACE
                    EXPLORATION: DEVELOPMENT OF THE
                        CREW EXPLORATION VEHICLE

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

                                HEARING

                               BEFORE THE

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 28, 2006

                               __________

                           Serial No. 109-65

                               __________

            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





























0                           C O N T E N T S

                           September 28, 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............    39
    Written Statement............................................    40

Statement by Representative Bart Gordon, Minority Ranking Member, 
  Committee on Science, U.S. House of Representatives............    40
    Written Statement............................................    42

Statement by Representative Ken Calvert, Chairman, Subcommittee 
  on Space and Aeronautics, Committee on Science, U.S. House of 
  Representatives................................................    43
    Written Statement............................................    44

Statement by Representative Mark Udall, Minority Ranking Member, 
  Subcommittee on Space and Aeronautics, Committee on Science, 
  U.S. House of Representatives..................................    45
    Written Statement............................................    45

Statement by Representative Dana Rohrabacher, Member, Committee 
  on Science, U.S. House of Representatives......................    46

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science, U.S. House of Representatives............    47

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Committee on Science, U.S. House of Representatives....    47

                               Witnesses:

Dr. Scott J. Horowitz, Associate Administrator, Exploration 
  Systems Mission Directorate, National Aeronautics and Space 
  Administration (NASA)
    Oral Statement...............................................    48
    Written Statement............................................    50
    Biography....................................................    53

Mr. Allen Li, Director, Acquisition and Sourcing Management, 
  Government Accountability Office
    Oral Statement...............................................    54
    Written Statement............................................    56
    Biography....................................................    62

Discussion
  Congressional Oversight........................................    62
  GAO's Response to NASA Changes.................................    63
  Budget Concerns................................................    64
  Transition Challenges..........................................    67
  International Competition......................................    68
  More Transition Challenges.....................................    68
  Integration Challenges.........................................    70
  More Budget Concerns...........................................    71
  More Transition Challenges.....................................    75
  CEV Safety.....................................................    76
  Performance Margin.............................................    77
  Ares Rocket Development........................................    79
  Payload Capacity...............................................    80
  More on GAO's Response to NASA Changes.........................    82
  More on Integration Challenges.................................    84
  More on International Competition..............................    85
  More CEV Budget Concerns.......................................    86
  More Integration Challenges....................................    87
  More Budget Concerns...........................................    88

             Appendix 1: Answers to Post-Hearing Questions

Dr. Scott J. Horowitz, Associate Administrator, Exploration 
  Systems Mission Directorate, National Aeronautics and Space 
  Administration (NASA)..........................................    90

Mr. Allen Li, Director, Acquisition and Sourcing Management, 
  Government Accountability Office...............................    99

             Appendix 2: Additional Material for the Record

Letter addressed to Hon. Sherwood Boehlert, Chairman, and Hon. 
  Bart Gordon, Ranking Member, House Science Committee from 
  Gregory J. Junemann, President, International Federation of 
  Professional & Technical Engineers (IFPTE), dated September 18, 
  2006...........................................................   108


































 
IMPLEMENTING THE VISION FOR SPACE EXPLORATION: DEVELOPMENT OF THE CREW 
                          EXPLORATION VEHICLE

                              ----------                              


                      THURSDAY, SEPTEMBER 28, 2006

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

    The Committee met, pursuant to call, at 2:06 p.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

                   Implementing the Vision for Space

                    Exploration: Development of the

                        Crew Exploration Vehicle

                      thursday, september 28, 2006
                          2:00 p.m.-4:00 p.m.
                   2318 rayburn house office building

Purpose

    On Thursday, September 28th at 2:00 p.m. the House Committee on 
Science will hold a hearing to review the National Aeronautics and 
Space Administration's efforts to develop the Crew Exploration Vehicle 
(CEV), which NASA has recently announced will be called Orion. As laid 
out in the President's Vision for Space Exploration, Orion will carry 
humans to the International Space Station (ISS), the Moon, and beyond 
following the retirement of the Space Shuttle in 2010. On August 31st, 
2006, NASA selected Lockheed Martin as its industry partner for the 
development and production of Orion, signing a development and 
production contract worth, including all options, approximately $8.1 
billion through 2019.
    On Wednesday the 26th of July, the Government Accountability Office 
(GAO) released a report critical of NASA's contracting approach for the 
acquisition of Orion. The report, entitled ``NASA: Long-Term Commitment 
to and Investment in Space Exploration Program Requires More 
Knowledge,'' faults the Agency for committing to a long-term contract 
for Orion before reaching an appropriate level of understanding of the 
design and risks of the program. The GAO report says, ``NASA's current 
acquisition strategy for the CEV places the project at risk of 
significant cost overruns, schedule delays and performance shortfalls 
because it commits the government to a long-term product development 
effort before establishing a sound business case.''
    Following discussions with the GAO and the Science Committee, NASA 
revised its then pending contract with Lockheed Martin to address some 
of the GAO's concerns.
    NASA and Lockheed Martin have now started work under the Orion 
contract and expect to complete development by 2014 with a first 
demonstration flight occurring in 2013. Overall, NASA will be depending 
in part on the skills and knowledge in the contractor community to 
reach a final design for Orion. GAO argues that this design activity 
should be separated from longer-term production, allowing the 
government to have greater leverage to seek beneficial production 
terms. NASA, however, has chosen to include the entire design and 
production of Orion into one contract with the hopes that this will 
help control total life cycle costs. This hearing will explore NASA's 
development schedule and costs and provide a basis for ongoing 
oversight of this program.

Witnesses

Dr. Scott J. (Doc) Horowitz, Associate Administrator, Exploration 
Systems Mission Directorate, NASA

Mr. Allen Li, Director, Acquisition and Sourcing Management, Government 
Accountability Office

Overarching Questions

        1)  What is NASA's strategy for developing Orion?

        2)  Does NASA have the knowledge required to enter into a long-
        term development contract?

        3)  What steps can NASA take to ensure timely and cost-
        effective development of Orion?

Background

    Following President Bush's January 14th, 2004 announcement of the 
Vision for Space Exploration, NASA began a number of studies to 
determine how the Agency could implement the new direction laid out in 
the President's speech. The agency announced the results of its 
Exploration Systems Architecture Study (ESAS) in September, 2005 and 
has continued to refine this approach to date.
    NASA has presented a plan designed to enable a crew of four to land 
anywhere on the Moon, stay for up to seven days initially, and abort 
and return to Earth at anytime. To enable this mission concept, NASA 
has chosen to separate crew and cargo using two new launch vehicles. 
Crew will travel aboard the Crew Exploration Vehicle, now called Orion, 
a capsule capable of supporting a crew of four to six. Orion will 
initially transport crew to the International Space Station and will 
eventually ferry astronauts to the Moon and back. This design will 
include a launch escape system that should allow the crew to safely 
abort in the event of a launch failure. NASA argues that this design 
has a safety factor many times higher than that of the current Space 
Shuttle. The capsule will launch on top of a new launch vehicle, 
previously described as the Crew Launch Vehicle (CLV), and which has 
recently been named the Ares I. This launch vehicle will use the Space 
Shuttle's Solid Rocket Booster (SRB) as an initial stage and an upper 
stage utilizing an Apollo derived engine, the J-2X. After Orion and 
Ares I have been developed, NASA plans to begin work on a new heavy-
lift launch vehicle of a capacity slightly greater than that of the 
Saturn V. This vehicle, the Ares V, would launch the equipment needed 
to land on the Moon--equipment the CEV would link up with in low-Earth 
orbit. Ares V will utilize two Space Shuttle SRBs and five engines from 
the Boeing Delta IV, on an external tank similar to Shuttle's. NASA is 
calling the overall program for the development of Orion, Ares I and V, 
and future lunar activities the Constellation Systems program.

Issues

What has NASA committed to in the Orion development contract with 
        Lockheed Martin?
    Lockheed Martin was selected for the Orion contract on August 31, 
winning out over a partnership between Northrup Grumman and Boeing. The 
Lockheed contract is expected to cost about $3.9 billion for 
development and testing of two test flight capsules; it is a cost-plus 
contract so the exact figure cannot yet be known. The signed contract 
also includes two additional options, named Schedules B and C, under 
which NASA would contract with Lockheed to produce the operational 
vehicles. Schedules B and C include price ceilings for the vehicles and 
associated support services. The contract value of the options totals 
approximately $4.25 billion through 2019 assuming a schedule of five 
flights per year.
    Initially, the contract did not make clear that Schedules B and C 
were options and that therefore the government could end the contract 
prior to production of operational vehicles without penalty. As a 
result of the GAO study, the contract language was changed so that it 
is now clear that Schedules B and C are options.

Why was Lockheed Martin chosen?
    Selection documents show that NASA judged Lockheed Martin's bid 
superior based on cost, technical approach, and past performance.

Does NASA have the knowledge needed to sign a long-term contract?
    GAO's first concern is the Agency's approach of committing to a 
long-term contract for Orion before completing design work and 
developing a firmer cost estimate. GAO fears that committing now to a 
long-term development contract could raise costs as design changes are 
worked out.
    Responding to the GAO report, NASA argues that it has a good sense 
of how the project will proceed because it is largely based on existing 
technology developed for the Apollo or Shuttle programs. Also, NASA 
points out that two teams of NASA employees conducted design studies 
independent of the contractor (and of the NASA teams was independent of 
the Constellation program). NASA also believes that making clear that 
Schedules B and C are merely options has also reduced the risk of cost 
overruns.
    NASA also has included explicit milestones for the contractor to 
meet and given the government the ability to terminate the contract if 
the project is not meeting NASA's requirements.
    GAO, in turn, points out that space projects in general, and NASA's 
in particular do not have a good record of coming in within expected 
costs. GAO also points out that NASA still does not have a final design 
or cost estimate for Orion or Ares I. NASA has just begun the detailed 
design work necessary before production of the first test units. NASA 
expects to have preliminary designs completed by summer 2008 and final 
designs by spring 2010.

Why has NASA chosen a long-term contract?
    NASA says it requires industry expertise to complete the design and 
development of Orion. While NASA is engaging all of its centers in the 
development projects within Constellation, the Agency says it does not 
have sufficient personnel in critical areas to complete the designs in-
house.
    GAO recommended that NASA could mitigate its contract risk without 
delaying the project by moving forward with a contract to carry the 
program only through its design phase to the Preliminary Design Review 
(PDR) milestone, scheduled for summer 2008. During the PDR, NASA will 
verify that the designs for Orion meet all of the requirements for the 
system. At PDR, NASA (and industry) will have a much better 
understanding of the program and be in a stronger position to make firm 
commitments to cost and schedule for the development. NASA, however, 
has chosen to include the entire design and development of Orion into 
one contract with the expectation that this will help control total 
life cycle costs because, among other reasons, it removes the incentive 
to push off expenses to later stages of the contract.

What are the technical challenges that face the Constellation Program?
    NASA believes that there are no areas in the Orion concept where 
the technology is immature and poses significant development risks. 
When pressed, NASA officials have said the hardest aspect of the 
project will be ``systems integration''--enabling elements that were 
originally designed for other vehicles to work together. In addition, 
NASA has begun focused efforts on technology areas that are currently 
perceived to hold the most risk, including efforts to address early 
risks in the thermal protection and landing systems. However, given the 
early stage of development of the project, the risks for the overall 
program are not clear. For the next year, NASA and Lockheed Martin will 
work to complete a set of well-defined requirements, a preliminary 
design, and firm cost estimates.

What is the likelihood of further technical changes to Orion?
    As GAO notes in its report, NASA has made a number of significant 
changes to the Exploration Systems architecture since its announcement 
in September 2005. These include decreasing the diameter of Orion from 
5.5 meters to five meters, moving from use of the Space Shuttle Main 
Engine (SSME) to an Apollo-derived engine, the J-2X, on the Ares I, and 
moving to the Delta IV engine on the Ares V. Further changes are 
expected, particularly as engine testing determines exactly how much 
weight the engines are capable of lifting.

What is the development timeframe for Orion and Ares I?
    The NASA Authorization Act of 2005 directs NASA to launch Orion as 
close to 2010 as possible to minimize the time between the last Shuttle 
launch and the first launch of Orion. NASA had hoped to have Orion 
launch by 2012--two years earlier than initially planned--but has not 
concluded that it will not have the funding to accomplish that.
    Orion and Ares I are currently in the early stages of development. 
Significant design and development activities remain for both projects, 
including finalizing top-level requirements and drafting detailed 
engineering designs. This fall, both vehicles will begin System 
Requirement Reviews that will finalize the basic parameters of the 
system. Preliminary design work will be reviewed during the summer of 
2008, with final reviews before commencing production occurring during 
the spring of 2010. NASA expects to complete a preliminary test of the 
first stage of Ares I in late 2009. Operational tests of the full 
system will not occur until fall of 2013.




What are the projected costs for Constellation development?
    Due to the uncertainty inherent in estimating costs for development 
of new products, NASA develops a cost range based on past performance 
and cost models. Traditionally NASA has budgeted for new developments 
at a confidence of 50 percent, meaning that the project stood an equal 
chance of having an actual cost above or below the estimate. A higher 
confidence levels reflects a greater chance of the actual cost of a 
project coming in under the estimate. There is an ongoing debate within 
the space community about the appropriate confidence level for space 
acquisitions, with many critics suggesting the need for higher 
confidence levels. The Air Force has recently switched to a policy of 
requiring estimates at the 80 percent level.
    NASA predicts the Orion development effort will cost $18.3 billion 
from 2006 to 2020 at 65 percent confidence including both contractor 
and government costs. In the near-term, NASA predicts that the cost of 
the Constellation program through 2011, when NASA would begin testing 
Orion and Ares I, is $32.1 billion with 80 percent confidence. Finally, 
NASA believes that the cost of returning to the Moon by 2018 may be 
around $104 billion, but NASA has not yet performed a detailed analysis 
of this cost. GAO estimates the total Constellation costs through 2018 
total $122 billion. For Constellation, most of the development risk 
lies beyond the 2012 timeframe, when NASA begins work on the various 
craft needed to support a lunar mission.
    GAO notes that the FY 2007 budget does not fully support the costs 
laid out in the original Exploration Systems Architecture Study (ESAS), 
completed last summer. GAO estimates that NASA does not have sufficient 
funding budgeted to support the architecture during FY 2008, 2009, and 
2010. However, NASA's approach to implementing the exploration 
architecture has evolved significantly since the ESAS report making it 
difficult to determine what shortfall may occur. NASA has continued to 
refine its cost estimates internally, but has embargoed that 
information pending the release of the FY 2008 budget.

What implications would cost growth in Constellation have for other 
        programs at NASA?
    As noted by GAO, it is unclear if NASA has the budget to support 
the Vision as laid out in ESAS. NASA has announced its intention to 
carry over funds in the Exploration Systems Mission Directorate from 
fiscal years 2006, 2007, and 2008 to cover the expected large costs in 
2009 and 2010. NASA expects to shift resources away from the Shuttle 
program after its retirement to Constellation. Despite these resources, 
the Agency remains challenged to support development of Orion by 2014. 
NASA has stated that it will pursue a lunar return program under a 
philosophy of ``go-as-you-can-afford-to-pay.'' Specifically:

         NASA's plan is to contain [CEV] costs within the human space 
        flight budget, thereby, impacting the content of other projects 
        and programs within that budget. Thus, a higher than expected 
        CEV cost would simply delay CEV development or production or 
        impact other programs and projects within that human space 
        flight budget category. NASA continues its `go-as-you-can-
        afford-to-pay' strategy toward all of our missions of space 
        exploration, scientific discovery, and aeronautics research.

    The Authorization Act requires NASA to balance its human space 
flight, space science, Earth science, and aeronautics programs.

Witness Questions

    The witnesses were asked to address the following questions in 
their testimony:
Dr. Scott Horowitz

        1.  What is NASA's strategy for reducing the total cost for 
        production and operation of the CEV?

        2.  What actions has NASA taken to address the concerns raised 
        in the GAO report entitled ``NASA: Long-Term Commitment to and 
        Investment in Space Exploration Program Requires More 
        Knowledge''?

Mr. Allen Li

        1.  To what degree does NASA's approach deviate from ``best 
        practices'' for large system acquisitions?

        2.  NASA has claimed that implementing the GAO's 
        recommendations would delay the delivery of the CEV and 
        increase costs. Please explain why you agree or disagree with 
        NASA's claim.

        3.  Does NASA have the financial resources necessary to 
        complete the adopted acquisition strategy? What particular 
        areas have the potential for significant cost growth?

        4.  What indicators would the GAO identify in order to gauge 
        the progress of CEV development?

Appendix A

           Excerpts of NASA Authorization Act of 2005 on CEV

TITLE I--GENERAL PRINCIPLES AND REPORTS

SEC. 101. RESPONSIBILITIES, POLICIES, AND PLANS.

         (b) Vision for Space Exploration--

                 (1) IN GENERAL--The Administrator shall establish a 
                program to develop a sustained human presence on the 
                Moon, including a robust precursor program, to promote 
                exploration, science, commerce, and United States 
                preeminence in space, and as a stepping-stone to future 
                exploration of Mars and other destinations. The 
                Administrator is further authorized to develop and 
                conduct appropriate international collaborations in 
                pursuit of these goals.

                 (2) MILESTONES--The Administrator shall manage human 
                space flight programs to strive to achieve the 
                following milestones (in conformity with section 503)--

                         (A) Returning Americans to the Moon no later 
                        than 2020.

                         (B) Launching the Crew Exploration Vehicle as 
                        close to 2010 as possible.

                         (C) Increasing knowledge of the impacts of 
                        long duration stays in space on the human body 
                        using the most appropriate facilities 
                        available, including the ISS.

                         (D) Enabling humans to land on and return from 
                        Mars and other destinations on a timetable that 
                        is technically and fiscally possible.

SEC. 102. REPORTS.

         (b) Budget Information--Not later than April 30, 2006, the 
        Administrator shall transmit to the Committee on Science of the 
        House of Representatives and the Committee on Commerce, 
        Science, and Transportation of the Senate a report describing--

                 (1) the expected cost of the Crew Exploration Vehicle 
                through fiscal year 2020, based on the public 
                specifications for that development contract; and

                 (2) the expected budgets for each fiscal year through 
                2020 for human space flight, aeronautics, space 
                science, and Earth science--

                         (A) first assuming inflationary growth for the 
                        budget of NASA as a whole and including costs 
                        for the Crew Exploration Vehicle as projected 
                        under paragraph (1); and

                         (B) then assuming inflationary growth for the 
                        budget of NASA as a whole and including at 
                        least two cost estimates for the Crew 
                        Exploration Vehicle that are higher than those 
                        projected under paragraph (1), based on NASA's 
                        past experience with cost increases for similar 
                        programs, along with a description of the 
                        reasons for selecting the cost estimates used 
                        for the calculations under this subparagraph 
                        and the confidence level for each of the cost 
                        estimates used in this section.

SEC. 103. BASELINES AND COST CONTROLS.

         (a) Conditions for Development--

                 (1) IN GENERAL--NASA shall not enter into a contract 
                for the development of a major program unless the 
                Administrator determines that--

                         (A) the technical, cost, and schedule risks of 
                        the program are clearly identified and the 
                        program has developed a plan to manage those 
                        risks;

                         (B) the technologies required for the program 
                        have been demonstrated in a relevant laboratory 
                        or test environment; and

                         (C) the program complies with all relevant 
                        policies, regulations, and directives of NASA.

                 (2) REPORT--The Administrator shall transmit a report 
                describing the basis for the determination required 
                under paragraph (1) to the Committee on Science of the 
                House of Representatives and the Committee on Commerce, 
                Science, and Transportation of the Senate at least 30 
                days before entering into a contract for development 
                under a major program.

                 (3) NONDELEGATION--The Administrator may not delegate 
                the determination requirement under this subsection, 
                except in cases in which the Administrator has a 
                conflict of interest.

TITLE V--HUMAN SPACE FLIGHT

SEC. 501. SPACE SHUTTLE FOLLOW-ON.

         (a) Policy Statement--It is the policy of the United States to 
        possess the capability for human access to space on a 
        continuous basis.

         (b) Progress Report--Not later than 180 days after the date of 
        enactment of this Act and annually thereafter, the 
        Administrator shall transmit a report to the Committee on 
        Science of the House of Representatives and the Committee on 
        Commerce, Science, and Transportation of the Senate describing 
        the progress being made toward developing the Crew Exploration 
        Vehicle and the Crew Launch Vehicle and the estimated time 
        before they will demonstrate crewed, orbital space flight.

         (c) Compliance Report--If, one year before the final planned 
        flight of the Space Shuttle orbiter, the United States has not 
        demonstrated a replacement human space flight system, and the 
        United States cannot uphold the policy described in subsection 
        (a), the Administrator shall transmit a report to the Committee 
        on Science of the House of Representatives and the Committee on 
        Commerce, Science, and Transportation of the Senate 
        describing--

                 (1) strategic risks to the United States associated 
                with the failure to uphold the policy described in 
                subsection (a);

                 (2) the estimated length of time during which the 
                United States will not have its own human access to 
                space;

                 (3) what steps will be taken to shorten that length of 
                time; and

                 (4) what other means will be used to allow human 
                access to space during that time.

SEC. 502. TRANSITION.

         (a) In General--The Administrator shall, to the fullest extent 
        possible consistent with a successful development program, use 
        the personnel, capabilities, assets, and infrastructure of the 
        Space Shuttle program in developing the Crew Exploration 
        Vehicle, Crew Launch Vehicle, and a heavy-lift launch vehicle.

         (b) Plan--Not later than 180 days after the date of enactment 
        of this Act, the Administrator shall transmit to the Committee 
        on Science of the House of Representatives and the Committee on 
        Commerce, Science, and Transportation of the Senate a plan 
        describing how NASA will proceed with its human space flight 
        programs, which, at a minimum, shall describe--

                 (1) how NASA will deploy personnel from, and use the 
                facilities of, the Space Shuttle program to ensure that 
                the Space Shuttle operates as safely as possible 
                through its final flight and to ensure that personnel 
                and facilities from the Space Shuttle program are used 
                in NASA's exploration programs in accordance with 
                subsection (a);

                 (2) the planned number of flights the Space Shuttle 
                will make before its retirement;

                 (3) the means, other than the Space Shuttle and the 
                Crew Exploration Vehicle, including commercial 
                vehicles, that may be used to ferry crew and cargo to 
                and from the ISS;

                 (4) the intended purpose of lunar missions and the 
                architecture for those missions; and

                 (5) the extent to which the Crew Exploration Vehicle 
                will allow for the escape of the crew in an emergency.

SEC. 504. GROUND-BASED ANALOG CAPABILITIES.

         (a) Policy--It is the policy of the United States to achieve 
        diverse and growing utilization of, and benefits from, the ISS.

         (b) Elements, Capabilities, and Configuration Criteria--The 
        Administrator shall ensure that the ISS will--

                 (1) be assembled and operated in a manner that 
                fulfills international partner agreements, as long as 
                the Administrator determines that the Shuttle can 
                safely enable the United States to do so;

                 (2) be used for a diverse range of microgravity 
                research, including fundamental, applied, and 
                commercial research, consistent with section 305;

                 (3) have an ability to support a crew size of at least 
                six persons, unless the Administrator transmits to the 
                Committee on Science of the House of Representatives 
                and the Committee on Commerce, Science, and 
                Transportation of the Senate not later than 60 days 
                after the date of enactment of this Act, a report 
                explaining why such a requirement should not be met, 
                the impact of not meeting the requirement on the ISS 
                research agenda and operations and international 
                partner agreements, and what additional funding or 
                other steps would be required to have an ability to 
                support crew size of at least six persons;

                 (4) support Crew Exploration Vehicle docking and 
                automated docking of cargo vehicles or modules launched 
                by either heavy-lift or commercially-developed launch 
                vehicles;

                 (5) support any diagnostic human research, on-orbit 
                characterization of molecular crystal growth, cellular 
                research, and other research that NASA believes is 
                necessary to conduct, but for which NASA lacks the 
                capacity to return the materials that need to be 
                analyzed to Earth; and

                 (6) be operated at an appropriate risk level.

Appendix B:



                 NASA Report on Cost Estimates for the

                Crew Exploration Vehicle (CEV) and Other

                  Agency Program Budgets through 2020

                               June 2006
    This report responds to the requirements of Section 102 of the NASA 
Authorization Act of 2005 (P.L. 109-155) to provide cost and budget 
information for the Crew Exploration Vehicle (CEV), as well as other 
Agency programs through 2020.
    The current estimate of total nonrecurring cost for the Crew 
Exploration Vehicle from fiscal year 2006 through 2020 is $18.3 
billion. There are many assumptions behind this estimate, which require 
a fill explanation. First, this assumes that the first CEV test flights 
would begin no later than 2012, and the first operational demonstration 
flight of the CEV to the International Space Station (ISS) would be no 
later than 2014. This estimated total cost includes design, 
development, test, and evaluation (DDT&E) and production costs for the 
CEV through 2020; but does not include the recurring cost of 
operations. This total nonrecurring cost includes not only expected 
contract costs, but also all Government costs associated with the CEV. 
This preliminary estimate is based on the exploration architecture NASA 
developed during last year's Exploration System Architecture Study and 
forms the basis for NASA's FY 2007 budget. Given that the requirements 
and acquisition processes are still under way, NASA performed cost risk 
analyses to develop the cost estimate with a 65 percent cost confidence 
level to arrive at the total budget. This confidence level is 
appropriate for this phase of the CEV project.
    NASA considers the confidence level of 65 percent to be appropriate 
for two reasons. First, the CEV definition is not complete, and the 
distribution on CEV cost is still fairly wide, reflective of the 
uncertainty in definition. A wide cost distribution requires more cost 
reserve to achieve 65 percent confidence than will be the case once the 
CEV definition has matured and some cost risk has been retired, leading 
to a narrower cost distribution. Once NASA retires risk and the CEV 
cost distribution narrows, the Agency could find that the CEV cost 
estimate of $18.3 billion is greater than 65 percent confidence. But to 
be prudent at this point, NASA is carrying enough reserve to achieve a 
65 percent confidence level even on the wide cost distribution that now 
exists on CEV. Secondly, carrying 65 percent confidence level cost 
estimates on individual projects such as CEV results in about an 80 
percent cost confidence for the total Constellation Program. In 
investing, this is called the ``portfolio effect.'' In the case of the 
Constellation portfolio, since the CEV Program is at the 65 percent 
confidence level on each individual project, the probability is that 
only a few of the individual projects will overrun. At 65 percent 
confidence, more projects will underrun than overrun, and the total 
reserve at the Constellation level should be more than sufficient.
    The NASA Authorization Act also asks NASA to report at least two 
cost estimates for the CEV that are higher than those NASA had 
projected, but based on NASA's past experience. To arrive at two higher 
CEV cost estimates, NASA would add additional program cost reserves to 
its estimates for the work to be done. Thus, while our current estimate 
of total costs for the CEV is $18.3 billion at 65 percent confidence 
for fiscal years 2006-2020, NASA's cost estimates at higher confidence 
levels are $20.3 billion for 70 percent cost confidence and $23.8 
billion for 80 percent cost confidence. The higher cost estimates 
provide additional reserve to address technical and schedule 
uncertainties. However, for the level of maturity in the designs and 
plans NASA has at this time, NASA firmly believes that a 65 percent 
confidence level is the appropriate level of confidence for our cost 
estimates at this early phase (Phase A) of the CEV project. NASA will 
also be employing a rigorous Continuous Cost-Risk Management (CCRM) 
approach to retire risks as we progress from Phase A through Phase B 
(Preliminary Design). By effectively managing our risks in this 
fashion, the cost confidence for the $18.3 billion estimate is expected 
to increase as NASA proceeds with Final Design and Fabrication (Phases 
C and D, respectively) of the CEV.
    The NASA Authorization Act further asks NASA for the expected 
budgets for each fiscal year through 2020 for human space flight, 
aeronautics, space science, and Earth science. NASA's five-year budget 
run-out assumptions for fiscal years 2006-2011 are presented as part of 
NASA's FY 2007 budget request. The budget figures for the years after 
2011 must be considered notional at best.
    See the enclosed charts for this information, which requires 
further explanation. The Act asks NASA to assume inflationary growth 
for its' top-line budget, so in the attached charts we show notional 
growth at this level for NASA's programs, based on the 2011 budget. 
NASA assumes an inflationary growth rate of 2.4 percent per year. For 
the purpose of this report, the human space flight budget is treated as 
NASA's budget categories of Space Operations, except for the Space and 
Flight Support theme and Exploration Systems. The Act then asks NASA to 
assume the higher cost estimates for the CEV provided above in its 
report of expected budgets for each fiscal year. However, we should not 
confuse costs with budget in this analysis. These are our cost 
estimates for the CEV with different confidence levels to that expected 
cost. If there is a change in the cost estimates, NASA will not 
necessarily change the budget plans. Instead, NASA's plan is to contain 
those costs within the human space flight budget, thereby, impacting 
the content of other projects and programs within that budget. Thus, a 
higher than expected CEV cost would simply delay CEV development or 
production or impact other programs and projects within that human 
space flight budget category. NASA continues its ``go-as-you-can-
afford-to-pay'' strategy toward all of our missions of space 
exploration, scientific discovery, and aeronautics research.



Appendix C:

                Notification Concerning the Award of the

             Crew Exploration Vehicle Development Contract

Preface

    The National Aeronautics and Space Administration intends to award 
a design, development, production, and support contract for the Crew 
Exploration Vehicle (CEV) not sooner than August 31, 2006. The 
following report has been prepared pursuant to direction in Section 
103(a) of the National Aeronautics and Space Administration 
Authorization Act of 2005 (P.L. 109-155) to support the Administrator's 
determination.

1.0 Introduction

    The Vision for Space Exploration has specific goals and objectives 
of retiring the Shuttle by no later than 2010, providing CEV 
operational availability no later than 2014, and returning humans to 
the Moon by 2020. During the summer of 2005, NASA conducted the 
Exploration Systems Architecture Study (ESAS) to define the system 
architecture and concepts for the CEV. The architecture recommended by 
the ESAS defines the CEV as a crew module, service module, and launch 
abort system arrangement similar to that of Apollo. This architecture 
was determined to be the least costly, most rapid, and safest approach 
for bringing the lunar missions to fruition in a timely manner.

2.0 Business Case, Acquisition Strategy, and Status

    NASA requires the development of a sound business case prior to 
committing the Government to a long-term product development effort. In 
establishing the acquisition strategy for the CEV, NASA utilized a 
knowledge-based and performance-based acquisition framework, as 
outlined in this report, which defines how the Agency implemented these 
provisions for the planned development, production, and fielding of 
this new human space vehicle. Additionally, NASA is maximizing 
competition by soliciting from industry their development, production, 
and management approach with an emphasis on Life Cycle Cost (LCC) for 
the CEV. The foundation of the CEV acquisition strategy is to seek 
commitment from industry for a design solution and to control LCC 
through competition and incentives. While in this competitive 
environment, NASA will receive firm competitive prices from industry to 
complete development of the CEV and demonstrate a crewed vehicle and an 
uncrewed cargo vehicle. Under this competition, NASA will also 
establish ``not-to-exceed'' prices for the production of the required 
vehicles to support the current flight manifest through 2019.
    The CEV acquisition utilizes a phased approach. Lockheed Martin and 
Northrop Grumman were selected and awarded Phase 1 contracts in July of 
2005. These two vendors will remain under contract until one is 
selected for Phase 2 of the acquisition. To minimize the Government's 
obligation during design and development, NASA's acquisition for Phase 
2 divides the CEV contract into three different schedules:

          Schedule A, for design, development, test, and 
        evaluation (DDT&E) and production of the first certified flight 
        units of the crewed and uncrewed vehicle. Schedule A also 
        includes the units necessary to perform the flight tests 
        required to certify the CEV.

          Schedule B, for production of flight units beyond the 
        first certified flight units produced in Schedule A.

          Schedule C, for sustaining activities during 
        production and operation.

    Schedule A is authorized at contract award and runs through the 
first flight demonstration of each design variant of the CEV. Schedule 
A aids the formulation phase of the project by allowing NASA to utilize 
the contractor's knowledge to develop a set of validated requirements 
including component specifications by the project's Preliminary Design 
Review (PDR). The CEV acquisition strategy will allow NASA and the 
contractor to jointly attain knowledge about the project and required 
resources that will enable the generation of firm cost, schedule, and 
risk elements. Shortly after PDR, the Non-Advocacy Review (NAR) will be 
held to establish the firm project baseline and provide assurances to 
our stakeholders that NASA has the necessary knowledge to move the 
project forward into development.
    Schedule B is a contract option planned to be authorized post-PDR, 
NAR, and after the Critical Design Review (CDR). Schedule B will be 
used to produce all the flight units other than the first two units 
produced under Schedule A. Schedule C is an additional contract option 
and is planned to be authorized at approximately the same time as 
Schedule B. The CEV strategy does not commit the Agency to production 
until the NAR milestone is met. First production orders are planned for 
the fall of 2009, nine months after the official acceptance by NASA of 
the baseline of the CEV's design at CDR.
    The acquisition strategy being utilized for CEV provides an 
effective knowledge- and performance-based approach for NASA. This 
strategy is designed to coincide with the GAO-defined Knowledge Points 
and minimizes the Government's obligation accordingly. Use of Delivery 
Orders provides NASA the ability to order only the units and sustaining 
engineering necessary, with appropriate incentives, at a time when the 
requirement and costs are better understood by NASA and industry. 
Inherent in this strategy is the ability for the Government to 
terminate these efforts if performance does not meet expectations.

3.0 CEV Policy, Regulation, and Directive Compliance

    These acquisitions, as well as the project plan, have been built in 
compliance with all NASA's defined policies, regulations, and 
directives and, in particular, the following key documents:

          A Renewed Spirit of Discovery: The President's Vision 
        for U.S. Space Exploration.

          The National Aeronautics and Space Administration 
        Authorization Act of 2005 (Public Law 109-155).

          NASA Policy Directive 7120AC--Program/Project 
        Management.

          NASA Procedural Requirement 7120.5C--NASA Program and 
        Project Management Processes and Requirements.

          NASA Procedural Requirement 7123.1--Systems 
        Engineering Procedural Requirements.

          NASA Procedural Requirement 8000.4--Risk Management 
        Procedural Requirements.

          NASA Policy Directive 8700.1 C--NASA Policy for 
        Safety and Mission Success.

          48 CFR 1800-1899--Federal Acquisition Regulation 
        Supplement (NASA/FAR Supplement).

4.0 Technology Maturation

    NASA has not identified any areas in the CEV concept where the 
technology is immature. To further improve and characterize NASA's 
knowledge, the Agency has in-house advanced development plans (ADP) to 
mitigate cost and schedule risk for those areas that are deemed to have 
the most risk for CEV development. The architecture design chosen by 
NASA, informed by the ESAS study, and requirements maturation through 
the Phase 1 trades and analysis, permits the use of mature technology 
and high-pedigree heritage hardware with space flight experience.
    The Phase 2 proposals have been evaluated for technology risks. 
Specifically, the CEV Phase 1 contractors provided a priority list of 
all risks with a narrative of their mitigations, mitigation costs and 
schedules, and projected mitigation action result. In addition, the CEV 
Phase 1 contractors' narratives included fall-back options for 
technologies and their impact to cost and schedule, if used.
    With these ADP efforts, Phase 2 proposals are being evaluated for 
technical risk and risk-reduction testing. NASA has confidence that the 
technologies have been effectively demonstrated to proceed with design 
and development of the CEV.

5.0 Risk Management

    The CEV project, in compliance with NPR 8000.4, Risk Management 
Procedural Requirements, practices a Continuous Risk Management process 
that provides structured. management of all risks facing the project 
regardless whether they are based in safety, cost, schedule, or 
technical risk areas. Each CEV team member is actively engaged in 
identifying and logging all project risks in the risk database so that 
they can be coordinated and pro-actively resolved. Subsystem managers 
define the top risks associated with their subsystem and allocate 
mitigation resources as required. Risk Mitigation Plans are developed 
for each risk, and progress in carrying out those plans is reported, 
monitored, and controlled on a continuous basis. The monthly CEV 
Project-level Risk Board (comprised of the senior project leadership) 
reviews, integrates, and controls the risks from each subsystem and 
determines if these risks and mitigation strategies should be elevated 
to the top CEV project risk list and coordinated with the Constellation 
Program office. Named after the patterns that stars form in the night 
sky, the Constellation Program is responsible for developing the CEV, 
CLV, and related exploration architecture systems that will provide 
humans the capabilities necessary to travel and explore the solar 
system.
    NASA has expended considerable time and resources in the 
formulation phase of the CEV project to best define requirements and 
risk factors to mission success. In May 2005, the ESAS was initiated, 
with one task, among others, to provide an assessment of the top-level 
CEV requirements. Further, the. ESAS laid the groundwork by defining 
the baseline technical content, cost, schedule, and principal risk 
factors. Since that time, a rigorous Constellation Program systems 
engineering and integration process has been established to control 
changes to missions, requirements, cost, schedule, and risk as these 
occur normally through the project formulation and development 
processes.
    NASA has spent a year continuing to refine and mitigate concept 
risks through the combination of trades and analysis performed by NASA 
in-house teams and both CEV Phase 1 contractors. As a result of the 
ESAS and the ensuing work, the architecture and the top-level 
requirements for the CEV were chosen and made part of the Phase 2 
competition. Additionally, NASA established an infra-agency CEV Smart 
Buyer Team which performed trade studies and design analyses that were 
used by the CEV Project Office to understand and verify the 
appropriateness of the requirements incorporated into the CEV Phase 2 
solicitation and evaluation of proposals. The evolution of the 
Constellation systems, along with more clear definition of the CEV, 
allows NASA to select a single contractor at this time. Detailed design 
decisions are necessary to continue the development of the CEV, 
including contractor-specific design solutions and definitions of 
development risks.
    Key aspects for managing contractual and schedule risks are 
incentives and control devices such as the use of Earned Value 
Management, which NASA has adopted into its contracting strategy. 
During DDT&E, NASA will use an end-item award fee. This makes all award 
fees subject to final determination that the product has been 
demonstrated to meet all requirements. The contractor will have 
incentives to identify risks early and to quickly and pro-actively 
mitigate them. This is a powerful tool for NASA and provides incentives 
to be successful on all elements of the project: cost (including life 
cycle costs), schedule, technical, and quality. There will be inherent 
motivation toward schedule performance by means of concluding each 
project milestone with an award fee determination. Since no provisional 
payments will be made, industry will not receive interim payments until 
the completion of an established project milestone. A slip in schedule 
will be reflected both in a delay in receipt of the interim payment and 
a lower evaluation score in the associated NASA evaluation.
    In summary, the CEV project utilizes a structured process for 
managing all risks which encompasses safety, cost, schedule, or 
technical risk areas. Risk Mitigation Plans are developed for each 
risk, and progress of these risk mitigation plans is reported, 
monitored, and controlled on a continuous basis by project management. 
Risk integration is performed at all levels to ensure efficient, 
effective risk mitigation within the CEV Project and across the 
Constellation Program. Further, considerable work was done in the 
formulation phase to understand and characterize the risk trade space 
with various requirements and development options.

6.0 Summary

    In accordance with Section 103 (a) of the NASA Authorization Act of 
2005, NASA has clearly identified technical, cost, schedule, and safety 
risks and has plans to manage them. NASA has baselined an architecture 
that has mature technologies. Finally, the NASA CEV Project has 
complied with all relevant policies, regulations, and directives of the 
Agency.
    The CEV design, development, and acquisition efforts are on track 
for the identified Agency milestones. Selection of a CEV Prime 
Contractor is a major step forward in the implementation of the Vision 
for Space Exploration. NASA has demonstrated a sound acquisition 
strategy that seeks commitment from industry for a design solution and 
to control LCC through competition and incentives. NASA is ready to 
execute its next step, ``down-select'' to a single Prime and award a 
contract in order to:

          Finalize NASA and contractor design solutions.

          Allow open communications with the contractor that is 
        going to design and develop the CEV. Communication between 
        Government and the Phase 1 industry teams is currently limited 
        due to source selection constraints.

          Proceed to the design review milestones with a single 
        contractor.

    To date, NASA has received firm competitive prices from industry to 
complete development of the CEV. NASA has identified no technology 
issues. NASA has demonstrated its technical, cost, and schedule risk 
management planning and has mitigations, budget, controls, and 
assessments in place. Earned value and other cost controls and 
reporting requirements are in place on all Government and contract 
deliverables.
    The combination of the knowledge gained from the ESAS, the Smart 
Buyer team, the work in the CEV Phase 1 contracts and Phase 2 proposals 
and processes for risk control and integration enables NASA to ``down 
select'' a single Prime contractor. Hence, NASA will be able to 
baseline an industry approach and commitment to meet the desired 
outcomes of the CEV project.
                  Letter from GAO to Chairman Boehlert

                             July 17, 2006

The Honorable Sherwood Boehlert
Chairman
The Honorable Bart Gordon
Ranking Minority Member
Committee on Science
House of Representatives

Subject: NASA: Long-Term Commitment to and Investment in Space 
Exploration Program Requires More Knowledge

    The National Aeronautics and Space Administration (NASA) plans to 
spend nearly $230 billion over the next two decades implementing the 
Vision for Space Exploration. In January 2006, NASA publicly released 
its Exploration Systems Architecture Study (ESAS), which is an effort 
to identify the best architecture and strategy to implement the 
President's 2004 Vision for Space Exploration (Vision).\1\ The cost 
estimate for implementing the ESAS through fiscal year 2011 exceeds $31 
billion. The estimate through fiscal year 2018 is over $122 billion, 
and the estimate through fiscal year 2025 is nearly $230 billion.\2\ 
These estimates include the architecture, robotic precursor missions, 
supporting technologies, and funding needed to service the 
International Space Station (ISS).\3\ NASA plans to implement this 
architecture through a ``go as you can afford to pay'' approach, 
wherein lower-priority efforts would be deferred, descoped, or 
discontinued to allow NASA to stay within its available budget profile. 
This approach assumes NASA's budget will increase moderately to keep 
pace with inflation. Given the long-term fiscal imbalances that will 
challenge the entire Federal Government now and in the future, it would 
be prudent for NASA to establish a program that reduces the risk that 
significant additional funding, beyond moderate increases for 
inflation, will be required to execute the program.\4\ Government 
leaders will have to make difficult decisions to resolve such 
challenges, and the debate over the potential cost and the Federal 
Government's role in implementing the Vision are emblematic of the 
challenges the Nation will need to resolve in the years ahead.
---------------------------------------------------------------------------
    \1\ The ESAS architecture supports the development of a new Crew 
Exploration Vehicle (CEV), Crew Launch Vehicle (CLV), a Cargo Launch 
Vehicle (CaLV), and other supporting systems. The architecture also 
calls for various Research and Technology (R&T) and Robotic Lunar 
Exploration Program (RLEP) projects.
    \2\ All cost estimates related to the Vision are reported as 
inflated (``real year'') dollars.
    \3\  NASA's cost estimate through 2011--$31.2 billion--included the 
costs of the R&T and RLEP projects needed to support the architecture. 
Its estimate for the first lunar landing--$104 billion--did not include 
$18 billion in funding for R&T and RLEP projects. To ensure 
consistency, the estimates for 2018 and 2025 are presented with R&T and 
RLEP funding included.
    \4\ GAO, 21st Century Challenges: Re-examining the Base of the 
Federal Government, GAO-05-325SP (Washington, D.C.: Feb. 2005); 21st 
Century: Addressing Long-Term Fiscal Challenges Must Include a Re-
examination of Mandatory Spending, GAO-06-456T (Washington, D.C.: Feb. 
15, 2006); and Highlights of a GAO Forum: The Long-Term Fiscal 
Challenge, GAO-05-282SP (Washington, D.C.: Feb. 1, 2005).
---------------------------------------------------------------------------
    Because of the significance of this investment, competing demands 
on the federal discretionary budget, and the importance of the success 
of NASA's exploration program to the future of U.S. human space flight, 
you requested that we assess (1) the extent to which NASA has 
identified the architecture and costs necessary to implement the 
Vision, (2) whether NASA's exploration architecture cost estimates fit 
within the Agency's projected available budgets, and (3) the risks 
associated with NASA's acquisition strategy for the CEV project.
    We presented our preliminary findings to your staff in May 2006. 
Because of your committee's interest in how NASA is implementing the 
Vision for Space Exploration, we are enclosing the full briefing that 
supported that May presentation with this report (see Encl. II), along 
with a summary of our findings and conclusions. We are recommending 
that the NASA Administrator modify the current CEV acquisition strategy 
to ensure that the Agency does not commit itself, and in turn the 
Federal Government, to a long-term contractual obligation prior to 
establishing a sound business case at the project's preliminary design 
review. In written comments, NASA non-concurred with our recommendation 
and stated that it has the appropriate level of knowledge to proceed 
with its current acquisition strategy. As a result of its 
nonconcurrence, we are including as a matter for congressional 
consideration that the Congress should consider restricting NASA's 
appropriations and obligations for the CEV project to only the amount 
of funding necessary to successfully complete the project's preliminary 
design review.

Background

    The Vision includes plans to explore the Moon, Mars, and beyond.\5\ 
The first step in implementing the Vision is to retire the Space 
Shuttle after completing assembly of the ISS by the end of the decade. 
NASA currently plans to retire the Space Shuttle in 2010, creating a 
potential gap in U.S. human space flight of up to four years before 
development of the CEV and the CLV is complete. Congress has voiced 
concern over the United States not having continuous access to space, 
and NASA has made it a priority to minimize the gap by accelerating the 
CEV project to have it in service as close to 2010 as possible. NASA's 
Exploration Systems Mission Directorate's (ESMD) Constellation program 
is responsible for the development of both the CEV and the CLV. NASA 
awarded concept development contracts for the CEV project to both 
Lockheed Martin and Northrop Grumman in July 2005 and plans to award a 
contract for design, development, production and sustainment in 
September 2006. That contract could extend through 2019. For the CLV, 
NASA plans to award a sole-source contract for the first stage of the 
CLV to ATK-Thiokol, the manufacturer of the Shuttle's Reusable Solid 
Rocket Motor, in October 2006. Also, the Agency plans to award Pratt & 
Whitney Rocketdyne, the developer of the Space Shuttle Main Engine 
(SSME) and J-2 engines, a sole-source contract for development of the 
J-2X engine in November 2006. These contractors are currently planning 
their respective efforts under interim contract arrangements. NASA has 
started in-house preliminary design work on the CLV upper stage 
structures and avionics and plans to begin awarding competitive 
contracts for production of these items in May 2007.
---------------------------------------------------------------------------
    \5\ The Vision includes a return to the Moon that is intended 
ultimately to enable future exploration of Mars and other destinations. 
To accomplish this, NASA initially plans to (1) complete its work on 
the International Space Station by 2010, fulfilling its commitment to 
15 international partner countries; (2) begin developing a new manned 
exploration vehicle to replace the Space Shuttle; and (3) return to the 
Moon no later than 2020 in preparation for future, more ambitious 
missions.
---------------------------------------------------------------------------
    Despite many successes in the exploration of space, such as landing 
the Pathfinder and Exploration Rovers on Mars, the loss of life, 
unsuccessful missions, and unforeseen cost overruns have recently 
increased the level of concern over the benefits of such exploration, 
particularly with regard to human space flight activities. NASA has had 
difficulty bringing a number of projects to completion, including 
several efforts to build a second generation of reusable human space 
flight vehicle to replace the Space Shuttle. NASA has attempted several 
expensive endeavors such as the National Aero-Space Plane, the X-33 and 
X-34, and the Space Launch Initiative, among others. While these 
endeavors have helped to advance scientific and technical knowledge, 
none have completed their objective of fielding a new reusable space 
vehicle. We estimate that these unsuccessful development efforts have 
cost approximately $4.8 billion since the 1980s. The high cost of these 
unsuccessful efforts and the potential costs of implementing the Vision 
make it important that NASA achieve success in its new exploration 
program.
    Our past work has shown that developing a sound business case, 
based on matching requirements to available and reasonably expected 
resources before committing to a new product development effort, 
reduces risk and increases the likelihood of successful outcomes.\6\ At 
the heart of a business case is a knowledge-based approach to product 
development that is a best practice among leading commercial firms and 
successful government system developers. For a program to increase its 
chances of delivering a successful product, high levels of knowledge 
should be demonstrated before managers make significant program 
commitments. In essence, knowledge supplants risk over time. This 
building of knowledge can be described as three levels that should be 
attained over the course of the program:
---------------------------------------------------------------------------
    \6\ Examples of our best practices reports include GAO, Best 
Practices: Using a Knowledge-Based Approach to Improve Weapon 
Acquisition, GAO-04-386SP (Washington, DC.: Jan. 2004); Space 
Acquisitions: Committing Prematurely to the Transformational Satellite 
Program Elevates Risks for Poor Cost, Schedule, and Performance 
Outcomes, GAO-04-71R (Washington, D.C.: Dec. 4, 2003); Best Practices: 
Capturing Design and Manufacturing Knowledge Early Improves Acquisition 
Outcomes, GAO-02-701 (Washington, D.C.: Jul. 15, 2002); and Best 
Practices: Better Matching of Needs and Resources Will Lead to Better 
Weapon System Outcomes, GAO-01-288 (Washington, DC.: Mar. 8, 2001).

        (1)  At program start, the customer's needs should match the 
        developer's available resources in terms of availability of 
---------------------------------------------------------------------------
        mature technologies, time, human capital, and funding.

        (2)  Midway through development, the product's design should be 
        stable and demonstrate that it is capable of meeting 
        performance requirements.

        (3)  By the time of the production decision, the product must 
        be shown to be producible within cost, schedule, and quality 
        targets, and have demonstrated its reliability.

    Our work has shown that programs that have not attained the level 
of knowledge needed to support a sound business case have been plagued 
by cost overruns, schedule delays, decreased capability, and overall 
poor performance. With regard to NASA, we have reported that in some 
cases the Agency's failure to define requirements adequately and 
develop realistic cost estimates--two key elements of a business case--
resulted in projects costing more, taking longer, and achieving less 
than originally planned.

Summary

    Although NASA is continuing to refine its exploration architecture 
cost estimates, the Agency cannot at this time provide a firm estimate 
of what it will take to implement the architecture. The absence of firm 
cost estimates is mainly due to the fact that the program is in the 
early stages of its life cycle. According to NASA cost-estimating 
guidance, early life cycle phase estimates are generally based upon 
parametric models, which use data from projects with similar attributes 
to predict cost because there are usually many unknowns and actual cost 
or performance data are not available. NASA preliminarily identified 
the resources needed to implement the architecture as outlined in the 
architecture study primarily through the use of such models. NASA 
conducted a cost risk analysis of its preliminary estimates through 
fiscal year 2011. On the basis of this analysis and through the 
addition of programmatic reserves (20 percent on all development and 10 
percent on all production costs), NASA is 65 percent confident that the 
actual cost of the program will either meet or be less than its 
estimate of $31.2 billion through fiscal year 2011. For the cost 
estimates for beyond 2011, when most of the cost risk for implementing 
the architecture will be realized, NASA has not applied a confidence 
level distinction. Since NASA released its preliminary estimates, the 
Agency has continued to make architecture changes. For example, 
following the issuance of the architecture study, NASA conducted 
several analysis cycles during which various aspects of the 
architecture have evolved, such as the diameter of the CEV, the engine 
used to support the upper stage of the CLV, and the size of the 
Reusable Solid Rocket Booster on the CLV. While these changes, and 
others, are appropriate for this phase of the program, when concepts 
are still being developed, they leave the Agency in the position of 
being unable to firmly identify program requirements and needed 
resources, which can also be expected at this phase of the program. 
According to NASA officials, once they receive more detailed contractor 
inputs, the Agency will be able to produce higher-fidelity estimates of 
program cost. NASA plans to commit to a firm cost estimate at the 
preliminary design review (PDR) in 2008, when the program's 
requirements, design, and schedule will all be baselined.
    NASA will be challenged to implement the architecture recommended 
in the study within its projected budget. Whether using the 
architecture study estimates of funds available or NASA's Fiscal Year 
2007 Budget Submission for ESMD that was based on the architecture 
study cost estimates, there are years when NASA does not have 
sufficient funding to implement the architecture. Some yearly 
shortfalls exceed $1 billion, while in other years the funding 
available exceeds needed resources. NASA maintains that the 
architecture could be implemented within the projected available 
budgets through fiscal year 2011 when funding is considered 
cumulatively. In addition, NASA preliminarily projects multibillion-
dollar shortfalls for ESMD in all fiscal years from 2014 to 2020, with 
an overall deficit through 2025 of over $18 billion. In the short-term, 
NASA is attempting to address this problem within the Constellation 
program by redirecting funds to that program from other ESMD activities 
to provide a significant surplus for fiscal years 2006 and 2007 to 
cover projected shortfalls beginning in fiscal year 2009. In addition, 
the Constellation program has requested more funds than required for 
its projects in several early years to cover shortfalls in later years. 
For example, the Exploration Communication and Navigation Systems 
project within the Constellation program plans to roll over $56.2 
million from the fiscal year 2007 budget to make up for budget 
shortfalls in fiscal years 2008, 2009, and 2010. NASA officials stated 
the identified budget phasing problem could worsen given that changes 
made to the exploration architecture following issuance of the study 
will likely add to the near-term development costs, where the funding 
is already constrained. In addition, NASA's estimates beyond 2010 are 
based upon a surplus of well over $1 billion in fiscal year 2011 due to 
the retirement of the Space Shuttle fleet in 2010. However, NASA 
officials said the costs for retiring the Space Shuttle and 
transitioning to the new program are not fully understood, and thus the 
expected surplus could be less than anticipated.
    NASA's current acquisition strategy for the CEV places the project 
at risk of significant cost overruns, schedule delays, and performance 
shortfalls because it commits the government to a long-term product 
development effort before establishing a sound business case. NASA 
plans to award a contract for the design, development, production, and 
sustainment of the CEV in September 2006--before it has developed key 
elements of a sound business case, including well-defined requirements, 
a preliminary design, mature technology, and firm cost estimates. The 
period of performance for the contract scheduled for award in September 
2006 will extend through at least 2014, with the possibility of 
extending through 2019. This contract will comprise all design, 
development, and test and evaluation activities, including production 
of ground and flight test articles and at least four operational CEVs. 
Although NASA is committing to a long-term contract, it will not have 
the elements of a sound business case in place until the project level 
PDR in fiscal year 2008. Awarding a contract for design, development, 
production, and sustainment of the project as NASA has planned places 
the CEV project at increased risk of cost growth, schedule delays, and 
performance shortfalls. At PDR, NASA will likely (a) have the increased 
knowledge necessary to develop a sound business case that includes 
high-fidelity, engineering-based estimates of life cycle cost for the 
CEV project, (b) be in a better position to commit the government to a 
long-term effort, and (c) have more certainty in advising Congress on 
required resources.
    Implementing the Vision over the coming decades will require 
hundreds of billions of dollars and a sustained commitment from 
multiple Administrations and Congresses over the length of the program. 
The realistic identification of the resources needed to achieve the 
Agency's short-term goals would provide support for such a sustained 
commitment over the long-term. With a range of federal commitments 
binding the fiscal future of the United States, competition for 
resources within the Federal Government will only increase over the 
next several decades. Consequently, it is incumbent upon NASA to ensure 
that it is wisely investing its existing resources. As NASA begins to 
implement the Vision with several key acquisition decisions planned to 
occur this fall, it will be essential that the Agency ensure that the 
investment decisions it is making are sound and are based upon high 
levels of knowledge. NASA should make the prudent decision now to 
ensure that it has attained the appropriate level of knowledge to 
support a sound business case before it commits to the project. 
However, under the current acquisition strategy for CEV, key 
knowledge--including well-defined requirements, a preliminary design, 
mature technology, and firm cost estimates--will not be known until 
over a year after the expected contract award date. Nevertheless, NASA 
plans to commit the government to a long-term contract. This approach 
increases the risk that the project will encounter significant cost 
overruns, schedule delays, and decreased capability. Given the Nation's 
fiscal challenges and those that exist within NASA, the availability of 
significant additional resources to address such issues, should they 
occur, is unlikely. With the impending decisions pertaining to the CEV, 
NASA has the opportunity to establish a firm foundation for the entire 
Constellation program by ensuring that the appropriate level of 
knowledge is available before proceeding with its acquisition strategy 
and committing the government to a long-term design, development, and 
production effort.

Recommendation for Executive Action

    Because of the importance of the CEV project to NASA's overall 
implementation of the Vision, NASA should focus on ensuring that its 
acquisition approach for the CEV project does not place the government 
at risk by committing to a long-term design and development effort 
without the knowledge needed to make wise investment decisions. We 
therefore recommend that the NASA Administrator modify the current CEV 
acquisition strategy to ensure that the Agency does not commit itself, 
and in turn the Federal Government, to a long-term contractual 
obligation prior to demonstrating, through the establishment of a sound 
business case at the project's preliminary design review, that the 
project is affordable and executable.

Matter for Congressional Consideration

    Based on its response to our report, it appears that NASA plans to 
proceed with its acquisition strategy for the CEV and award a long-term 
contract for the project, although it continues to lack sufficient 
knowledge and a sound business case for doing so. Congress is currently 
being asked to approve NASA's fiscal year 2007 funding request and will 
be asked to approve fiscal year 2008 and perhaps the fiscal year 2009 
funding requests for the CEV project before NASA has demonstrated such 
knowledge and has provided evidence, based on that knowledge, that the 
project will be executable within existing and expected resources. In 
light of the fact that NASA plans to award the contract for the CEV in 
September 2006, Congress should consider restricting annual 
appropriations and limiting NASA's obligations for the CEV project to 
only the amount of funding necessary to support activities needed to 
successfully complete the project's preliminary design review.

Agency Comments and Our Evaluation

    In written comments on a draft of this report (see Encl. I), NASA 
non-concurred with our recommendation that it modify the current CEV 
acquisition strategy to ensure that the Agency does not commit itself, 
and in turn the Federal Government, to a long-term contractual 
commitment prior to establishing a sound business case at the project's 
preliminary design review. NASA stated that it has the appropriate 
level of knowledge to proceed with its acquisition plan to ``down 
select'' to a single Crew Exploration Vehicle prime contractor in 
September 2006. NASA added that it is maximizing competition by 
soliciting from industry a development, production, and management 
approach with an emphasis on life cycle cost. In the area of technology 
maturity, NASA stated that it has a plan and process in place to 
address the Thermal Protection and Landing subsystems technology risks 
through in-house development work and collaboration with the prime 
contractor. NASA also noted that during its design, development, and 
test and evaluation effort, the Agency will be using an end-item award 
fee, which would make all award fees subject to a final evaluation to 
determine how well the product met requirements, including cost and 
schedule.
    The CEV acquisition strategy is not knowledge-based in that it 
calls for maturing technologies, designing systems, and preparing for 
initial production concurrently--an approach that our work has shown 
carries the increased risk of cost and schedule overruns and decreased 
technical capability. Therefore, we disagree with NASA's statement that 
it has the appropriate level of knowledge to proceed with its current 
acquisition strategy and award a long-term contract for the project 
prior to obtaining sufficient knowledge. Specifically:

          In its response, NASA suggests that there would be no 
        benefit in retaining two prime contractors for the CEV project 
        through the preliminary design review and that the best return 
        on its investment would be gained by down-selecting to one 
        contractor and awarding the contract in September 2006. 
        Contrary to NASA's response, addressing our recommendation 
        would not preclude the Agency from down-selecting to one 
        contractor. The thrust of our recommendation is that NASA 
        should lessen the government's obligation to the project at 
        such an early stage when realistic cost estimates have yet to 
        be established and requirements are not fully defined, and 
        therefore limit the scope of the contract to activities needed 
        to successfully complete the preliminary design review. At that 
        point the project should have in place a sound business case 
        for proceeding and hence be in a better position to justify 
        continued investment. Implementation of the recommendation 
        could be accomplished through various means, including by 
        retaining two contractors through the preliminary design review 
        and awarding a contract at that time or by down-selecting as 
        planned in September 2006 and limiting the scope of the 
        contract as described above.

          NASA's suggestion that it is maximizing competition 
        by soliciting from industry its development, production, and 
        management approach and that it will receive firm competitive 
        prices from industry for completion of development and 
        demonstration of two vehicles has little basis. First, while 
        the current structure will allow for competition in the short-
        term, the benefits of such competition will be short-lived. 
        Without well-defined requirements, mature technologies, an 
        approved preliminary design, and realistic cost estimates, NASA 
        has insufficient information to ensure that it is obtaining 
        firm competitive prices for the work conducted for the entirety 
        of Schedule A--especially for activities beyond the project's 
        preliminary design review.

           Because NASA continues to refine the project's requirements, 
        as demonstrated by the numerous changes to the exploration 
        architecture as discussed in our report, it cannot provide a 
        firm estimate of project cost. Without such information, it 
        will likely be difficult for NASA to establish realistic ``not-
        to-exceed'' prices for Schedule B activities. Under the current 
        strategy, NASA will not have high-fidelity, engineering-based 
        estimates of life cycle costs for the CEV until the preliminary 
        design review. As outlined in this report, projects with cost 
        estimates based on early, evolving designs and top-level 
        requirements are at increased risk of cost growth relative to 
        estimates based on mature designs and detailed requirements--
        which could be achieved at the preliminary design review. 
        According to NASA, it plans to obtain this and further 
        knowledge about program cost, schedule, and risk elements 
        following the contract award and in conjunction with the 
        contractor. In the absence of such information, it is not clear 
        how NASA can substantiate its statement that it has the 
        knowledge necessary to commit to activities beyond the 
        project's preliminary design review. Further, it cannot provide 
        Congress with assurance of the appropriateness of requested 
        funding for the project.

          NASA stated that its current acquisition strategy for 
        the CEV minimizes the government's obligation during 
        development by dividing the CEV contract into three separate 
        schedules. All three schedules, however, will be awarded in 
        September 2006 as part of one contract. Although NASA plans to 
        include language in the negotiated CEV contract to state that 
        the minimum quantity under Schedule B will not be applicable 
        until that schedule's period of performance begins in 2009--a 
        step that would lessen the government's obligation during 
        production--it will continue to be responsible for all Schedule 
        A activities at the time of contract award. These activities 
        include all design, development, and test and evaluation 
        activities, as well as the production of two operational 
        vehicles. Contractually obligating the government to even these 
        Schedule A activities, before it has established a sound 
        business case to support such a commitment, is not in line with 
        our knowledge-based approach and is ultimately not in the best 
        interest of the government.

          NASA's investment in identifying and maturing the 
        Thermal Protection and Landing Subsystems is a step in the 
        right direction to ensure that these technologies are mature 
        and available when needed. NASA has no guarantee, however, that 
        these critical technologies will be mature by the time of the 
        project's preliminary design review--the point at which our 
        work has shown that technologies should be mature in order to 
        decrease the risk of cost and schedule growth. NASA's proposed 
        commitment to the project for activities beyond the preliminary 
        design review before retiring these technology risks increases 
        the likelihood that the project will experience schedule delays 
        and cost overruns.

          NASA maintains that program risks have been 
        marginalized and that the Agency will utilize incentives, 
        including end-item award fees, to ensure contractor 
        performance. NASA suggests that the incentives it plans to use 
        in the form of end-item award fees will be a powerful tool for 
        meeting cost schedule, technical, and quality goals. The use of 
        these tools, however, does not compensate for proceeding with a 
        risky acquisition, nor do they lessen NASA's responsibility to 
        implement an executable program from the start. For them to 
        function as intended, NASA needs to address the more 
        fundamental issues related to its acquisition strategy, 
        including its lack of a sound business case for the CEV 
        project.

          Finally, the use of cost-reimbursable contracting, 
        while appropriate for early development and design efforts, 
        places most of the cost risk for the project on the government. 
        Given the nature of this effort, it is likely that the project 
        will change significantly as it moves forward. Therefore, any 
        scope changes or schedule slips could translate into additional 
        contract cost for NASA. Such cost impacts could be minimized if 
        NASA limited its contractual obligation to those activities 
        needed to achieve a successful preliminary design review, as we 
        recommended. In addition, limiting the scope of the CEV 
        contract would allow both NASA and Congress to assess the 
        project's progress at the preliminary design review and to 
        decide if continued investment in the project is prudent and in 
        the best interest of the government.

    It is important to note that Congress will continue to be asked to 
make funding commitments in advance of CEV project events that would 
demonstrate that the project has the knowledge necessary to support a 
sound business case. Specifically, NASA's funding request for fiscal 
years 2007 and 2008 are scheduled to be approved before the CEV holds 
its preliminary design review. Since the preliminary design review is 
currently scheduled for March 2008, this may also be the case for 
fiscal year 2009. Congress should safeguard against a situation in 
which contractual and budget decisions could hinder its ability to tie 
further investments in the CEV project to demonstrated progress at the 
preliminary design review. As such, we have included a matter for 
congressional consideration.
    We also received technical comments from NASA, which have been 
addressed in the report, as appropriate.

Scope and Methodology

    To assess the extent to which NASA has identified the architecture 
and costs necessary to implement the Vision and whether NASA's 
exploration architecture cost estimates fit within the Agency's 
projected available budgets, we reviewed and analyzed NASA's 
Exploration Systems Architecture Study, fiscal year 2007 budget 
request, ground rules and assumptions provided from the Constellation 
program to project level management estimators to perform the bottom up 
review, guidance for use in preparing the fiscal year 2008 budget 
request, NASA cost-estimating guidance in the NASA Cost Estimating 
Handbook, and congressional hearings and testimonies pertaining to NASA 
and the Vision. We also conducted interviews with NASA headquarters 
officials from the Cost Analysis Division, the Exploration Systems 
Mission Directorate, and Constellation program officials, Constellation 
program and CEV project officials at Johnson Space Center; CLV project 
officials at Marshall Space Flight Center; and cost analysts from the 
Kennedy Space Center. During these interviews, we discussed the 
methodologies used in preparing the ESAS and subsequent cost estimates, 
architecture changes after the ESAS and the trades being considered, 
budgeting issues, and procurement strategies and activities.
    To assess the risks associated with NASA's acquisition strategy for 
the CEV project, we reviewed and analyzed CEV project documentation, 
including draft project plans, draft requirements documents, technology 
development plans, documentation included in the contract request for 
proposals, and past NASA human space flight acquisition programs. We 
compared NASA's plans for the CEV with criteria contained in GAO best 
practices work on systems acquisition. We also conducted interviews 
with NASA headquarters officials from the Exploration Systems Mission 
Directorate and Constellation Systems officials, Constellation program 
and CEV project officials at Johnson Space Center, and CLV project 
officials at Marshall Space Flight Center.
    We conducted our work from January 2006 to May 2006 in accordance 
with generally accepted government auditing standards.
    As agreed with your offices, unless you announce its contents 
earlier, we will not distribute this report further until 10 days from 
its date. At that time, we will send copies of the report to NASA's 
Administrator and interested congressional committees. We will also 
make copies available to others upon request. In addition, the report 
will be available at no charge on GAO's web site at http://www.gao.gov.
    Should you or your staff have any questions on matters discussed in 
this report, please contact me at (202) 512-4841 or [email protected]. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. Principal 
contributors to this report were James L. Morrison, Assistant Director; 
Rick Cederholm; Shelby S. Oakley; Guisseli Reyes; Sylvia Schatz; and 
John S. Warren, Jr.



Allen Li
Director
Acquisition and Sourcing Management

Enclosures

Enclosure I





    Chairman Boehlert. The hearing will come to order. I want 
to welcome everyone to today's important hearing: the 
Committee's first public discussion of the Crew Exploration 
Vehicle, or Orion, project since we had the Administrator 
before us in March, and the first review in Congress since 
Lockheed Martin was awarded the contract for Orion at the end 
of August.
    Let me start by reiterating my support for the President's 
Vision for Space Exploration, which I think is an important 
national undertaking. Let me also reiterate my determination 
that NASA not become a single-mission agency. Human space 
flight can't succeed at the expense of Earth science, space 
science, and aeronautics.
    So NASA has to move ahead with Orion deliberately, but also 
cautiously, and Congress has to keep a keen and constant eye on 
the project. Neither the Agency nor the Nation can afford 
another space station, a project that for all its technical 
magnificence has seen its costs balloon while its capabilities 
shrank to near the vanishing point.
    This may very well be the last hearing on NASA. Some people 
will breathe a sigh of relief. But I hope we will have set a 
pattern of friendly, but rigorous vigilance that will be 
continued as the Nation moves ahead with work on returning to 
the Moon.
    I am pleased to say that NASA itself also seems to be 
operating at a high level of vigilance. The agency is trying to 
base Orion on technologies that have already been used 
successfully in other programs; and I am also very glad to see 
that NASA modified the Lockheed Martin contract for Orion as a 
result of the General Accountability Office study this 
committee requested. That is a great example of how sensible 
oversight can work to the advantage of the Agency being 
reviewed, and frankly, it is a credit to this committee, to 
GAO, and to NASA that the contract was modified.
    But that hardly closes the issue before us. GAO correctly 
points out that NASA does not yet have a final design or cost 
estimate for Orion. That is not a criticism of NASA, that is 
just where we are in the process, and Congress has to recognize 
how fluid the situation is, although far less fluid than it was 
at this time last year.
    GAO believes that NASA should not have let as an extensive 
contract as it did, given the uncertainties, and they make a 
plausible case. NASA has made reasonable arguments in response, 
and the contract has been let so we don't have to rehash that 
issue here. What we do have to do is learn what should Congress 
be doing, and what information should it be seeking to exercise 
strict oversight as the project moves forward. And what 
additional steps should NASA take to make sure that project 
costs do not escalate?
    I look forward to getting answers to those questions. We 
have the right folks before us to get those answers, and I want 
to welcome Dr. Scott Horowitz from NASA for his first public 
appearance before the Committee. I think you will see, after 
you hear and are exposed more to Dr. Horowitz, he is a 
congenial, knowledgeable guy, and it is a pleasure to work with 
him. He meets with staff all the time, and that is a productive 
time use, and hopefully, we won't be as hard on him today as 
they are.
    With that, let me turn to my co-partner here, Mr. Gordon of 
Tennessee.
    [The prepared statement of Chairman Boehlert follows:]
          Prepared Statement of Chairman Sherwood L. Boehlert
    I want to welcome everyone to today's important hearing, this 
committee's first public discussion of the Crew Exploration Vehicle, or 
Orion, project since we had the Administrator before us in March, and 
the first review in Congress since Lockheed Martin was awarded the 
contract for Orion at the end of August.
    Let me start by reiterating my support for the President's Vision 
for Space Exploration, which I think is an important national 
undertaking. And let me also reiterate my determination that NASA not 
become a single-mission agency; human space flight can't succeed at the 
expense of Earth science, space science and aeronautics.
    So NASA has to move ahead with Orion deliberately, but also 
cautiously, and Congress has to keep a keen and constant eye on the 
project. Neither the Agency nor the Nation can afford another Space 
Station--a project that, for all its technical magnificence, has seen 
its costs balloon while its capabilities shrank to near the vanishing 
point.
    This may very well be my last hearing on NASA, but I hope we will 
have set a pattern of friendly, but rigorous vigilance that will be 
continued as the Nation moves ahead with work on returning to the Moon.
    I am pleased to say that NASA itself also seems to be operating at 
a high level of vigilance. The agency is trying to base Orion on 
technologies that have already been used successfully in other 
programs. And I am very glad to see that NASA modified the Lockheed 
Martin contract for Orion as a result of the Government Accountability 
Office (GAO) study this committee requested.
    That is a great example of how sensible oversight can work to the 
advantage of the Agency being reviewed, and frankly it's a credit to 
this committee, to GAO and to NASA that the contract was modified.
    But that hardly closes the issues before us. GAO correctly points 
out that NASA does not yet have a final design or cost estimate for 
Orion. That's not a criticism of NASA; that's just where we are in the 
process, and Congress has to recognize how fluid the situation is--
although far less fluid than at this time last year.
    GAO believes that NASA should not have let as extensive a contract 
as it did, given the uncertainties, and they make a plausible case. 
NASA has made reasonable arguments in response, and the contract has 
been let, so we don't have to rehash that issue here.
    What we do have to learn at this hearing is: what should Congress 
be doing and what information we should be seeking to exercise strict 
oversight as this project moves forward? And, what additional steps 
should NASA be taking to make sure that project costs do not escalate?
    I look forward to getting answers to those key questions. We have 
the right folks before us to get those answers, and I want to welcome 
Dr. Scott (Doc) Horowitz from NASA for his first public appearance 
before the Committee. He meets with the staff all the time, and 
hopefully we won't be as hard on him today as they are.
    Mr. Gordon.

    Mr. Gordon. Thank you, Mr. Chairman.
    I once tried out for my church choir, and I was quickly 
told that I had such a bad voice that I was not even able to 
make a joyful Lord--noise to the Lord, so my birthday present 
to you today is not to sing. Unfortunately, I can't say that 
for Dana Rohrabacher. I am not sure what he will do, but we do 
wish you a happy birthday, and we welcome our witnesses today.
    First, let me make clear what this hearing is not. It is 
not a hearing about whether or not the Nation should build a 
Crew Exploration Vehicle. It is not a hearing about whether or 
not the right contractor team won the CEV contract. And it is 
not a hearing about whether or not the U.S. should return to 
the Moon. Instead, this hearing is an examination of whether or 
not NASA is pursuing the right acquisition strategy for the 
CEV, whether it has adequately planned for the challenges 
inherent in the program, and whether it has budgeted sufficient 
funds to complete the CEV. The last question is particularly 
important because if there is cost growth in the CEV program, 
it has the potential to do serious damage to NASA's other 
programs, as well as other parts of the exploration initiative.
    I don't want to see that happen. I want to see the CEV 
program succeed, and that is why I was very concerned when the 
GAO reported to Chairman Boehlert and I in late July that, and 
I quote ``NASA's current acquisition strategy for the CEV 
places the project at risk of significant cost overruns, 
schedule delays, and performance shortfalls.''
    Equally troubling were GAO's findings on the issues of 
whether NASA's overall exploration architectural costs 
estimates fit within the Agency's projected available budget. 
Once again, to quote GAO, ``There are years when NASA does not 
have sufficient funding to--funds to implement the 
architecture. Some yearly shortfalls exceed $1 billion, while 
in other years the funding available exceeds needed 
resources.'' And ``NASA's preliminary projections--projects 
multi-billion dollar shortfalls for the Exploration System 
Mission Directorate in all fiscal years 2014 through 2020.'' In 
other words, we may be seeing another example of lofty goals 
being set without those proposals--without those proposing them 
identifying where resources needed to achieve these goals will 
be coming from in future years.
    I want to note, of course, that NASA non-concurred with 
GAO's findings and believes that it has a good plan for both 
the CEV acquisition and the overall exploration program. I 
would caution, however, that those are words we have heard 
before. I would remind my colleagues that some 18 months ago, 
NASA testified before this committee about its plans for 
acquiring a CEV, indicating that it had a well thought out 
approach to the CEV program.
    Let me offer a quote from NASA's February 16, 2005, 
testimony. ``The CEV will be developed in a spiral approach 
wherein early demonstrations and prototypes are used to 
demonstrate capabilities, validate technologies, and mitigate 
risk, all along an evolutionary path toward a mature design. 
The first spiral development plan will provide the capacity to 
deliver humans to orbit in a CEV by the year 2014.''
    Now, as you recall, last year's approach was going to 
maintain a competition between two contractor teams until 2008 
when there would a competitive ``fly-off'' prior to the award 
of the CEV development contract. NASA also assured Congress 
last year that CEV and the CLV acquisition plan would be within 
budget that would meet the 2014 timeframe.
    It is now 2006. NASA has eliminated the spiral development 
approach, has decided not to maintain the competitive fly-off, 
and has added almost $7 billion to the CEV and CLV program 
relative to what last year's five-year funding plan said would 
be needed. And after all of that, NASA is indicating that CEV 
still will not enter operational service until 2014, due to 
budgetary constraints.
    My intent in reciting this history is not to embarrass 
NASA; it is simply to make the point that we have received 
assurances from this agency in the past that everything is 
under control, and we have had other painful reminders in 
recent months of large-scale acquisition programs in other 
agencies under our jurisdiction going off course. We cannot 
afford to have that happen again.
    Today's hearing will provide an opportunity for the 
Committee to hear from both GAO and NASA on these issues. And 
once again, as my friend Chairman Boehlert has pointed out, our 
concern here is that if things get out of kilter even with the 
best intentions, it is going to result in potentially 
cannibalizing other programs within NASA, which makes us lose 
support within Congress for NASA, which then can lead to 
appropriations battles where they could take some of this out 
of our hands. That is not where we want to be. We want to work 
with you as good partners to try to alleviate that, because we 
are all going to suffer if that is not the case.
    And again, I welcome you here.
    [The prepared statement of Mr. Gordon follows:]
            Prepared Statement of Representative Bart Gordon
    Good afternoon. I'd like to join the Chairman in welcoming the 
witnesses to today's hearing.
    First, let me be clear about what this hearing is not. It is not a 
hearing about whether or not the Nation should build a Crew Exploration 
Vehicle. It is not a hearing about whether or not the right contractor 
team won the CEV contract. And it is not a hearing about whether or not 
the U.S. should return to the Moon.
    Instead, this hearing is to examine whether or not NASA is pursuing 
the right acquisition strategy for the CEV, whether it has adequately 
planned for the challenges inherent in the program, and whether it has 
budgeted sufficient funds to complete the CEV.
    The last question is particularly important, because if there is 
cost growth in the CEV program, it has the potential to do serious 
damage to NASA's other programs as well as to other parts of the 
exploration initiative.
    I don't want to see that happen. I want to see the CEV program 
succeed. That is why I was very concerned when the GAO reported to 
Chairman Boehlert and me in late July that: ``NASA's current 
acquisition strategy for the CEV places the project at risk of 
significant cost overruns, schedule delays, and performance shortfalls. 
. .''
    Equally troubling were GAO's findings on the issue of whether 
NASA's overall exploration architecture cost estimates fit within the 
Agency's projected available budgets. To again quote GAO: ``. . .there 
are years when NASA does not have sufficient funding to implement the 
architecture. Some yearly shortfalls exceed $1 billion, while in other 
years the funding available exceeds needed resources. . .''
    And, ``NASA preliminarily projects multi-billion-dollar shortfalls 
for [NASA's] Exploration System Mission Directorate in all fiscal years 
from 2014 to 2020.''
    In other words, we may be seeing another example of lofty goals 
being set without those proposing them identifying where the resources 
needed to achieve those goals will be coming from in future years.
    I want to note, of course, that NASA ``non-concurred'' with the 
GAO's findings and believes that it has a good plan for both the CEV 
acquisition and the overall exploration program. I would caution, 
however, that those are words we have heard before.
    I would remind my colleagues that some 18 months ago, NASA 
testified before this committee about its plans for acquiring the CEV, 
indicating that it had a well-thought-out approach to the CEV program.
    Let me offer a quote from NASA's February 16, 2005 testimony: 
``[The CEV] will be developed in a `spiral' approach, wherein early 
demonstrations and prototypes are used to demonstrate capabilities, 
validate technologies, and mitigate risk, all along an evolutionary 
path toward a mature design. The first spiral development planned will 
provide the capability to deliver humans to orbit in a CEV by 2014.''
    As you will recall, last year's approach was going to maintain a 
competition between two contractor teams until 2008 when there would be 
a competitive ``fly-off'' prior to award of the CEV development 
contract.
    NASA also assured the Congress last year that its CEV and CLV 
acquisition plan came with a budget that would meet its 2014 timetable.
    It's now 2006. NASA has eliminated the spiral development approach, 
has decided not to maintain the competitive fly-off, and has added 
almost $7 billion to the CEV and CLV program relative to what last 
year's five-year funding plan said would be needed. And after all of 
that, NASA is indicating that the CEV still will not enter operational 
service until 2014 due to budgetary constraints.
    My intent in reciting this history is not to embarrass NASA--it is 
simply to make the point that we have received assurances from this 
agency in the past that ``everything is under control'' and we have had 
other painful reminders in recent months of large-scale acquisition 
programs in other agencies under our jurisdiction going off course. We 
cannot afford to have that happen again.
    Today's hearing will provide an opportunity for the Committee to 
hear from both GAO and NASA on these issues. I look forward to their 
testimony

    Chairman Boehlert. Thank you very much, Mr. Gordon.
    Now, for the distinguished Chairman of the Subcommittee, 
Mr. Calvert.
    Mr. Calvert. I thank the gentleman, and I, too, want to 
share with my colleague on the other side, bid you birthday 
wishes. Happy birthday. Happy 70th birthday. My goodness, that 
is great. I want to say from the bottom of my heart, surely----
    Chairman Boehlert. I should note parenthetically that Mr. 
Gordon, on the side, said, ``I wasn't going to mention that.''
    Mr. Calvert. Hey, we all want to make it. I don't know if I 
will ever make it. But it has been a great six years with you 
here as Chairman. This institution will be less of a place when 
you retire. I think that you have done a fantastic job here. It 
has really been a pleasure serving with you, and I want you to 
know that.
    NASA, as you know, has undertaken the first steps of an 
exploration program that will continue over the next several 
decades. It will inspire the next generation of scientists and 
engineers, just as Apollo inspired an earlier generation in the 
1960s. Two major contracts recently awarded are moving us, I 
think, in the right direction. The Space Shuttle has completed 
its third flight since the Columbia disaster, and we are now on 
a path to complete the International Space Station. The 
Commercial Orbital Transportation Services Award recently had 
been awarded to Space X and Rocketplane Kistler. Both of these 
entrepreneurial companies are developing logistics systems to 
service the International Space Station, while on a parallel 
plane, the Lockheed Martin company will be developing a Crew 
Exploration Vehicle, or Orion, to explore the Moon, Mars, and 
beyond.
    I want to applaud NASA for their timely schedule of 
procurement for this major undertaking. The two procurement 
announcement, or the first of several major procurement award 
announcements, were made in order to achieve the Vision for 
Space Exploration. I am certainly pleased that the Committee 
was the first to endorse the Vision when we unanimously passed 
the NASA Authorization of 2005 last July. The Congress 
overwhelmingly passed the Authorization last year, and now NASA 
is carrying out the will of the Congress. Many of the overall 
decisions for the Vision have been made: a capsule approach for 
the Crew Vehicle to minimize a technical risk and maximize crew 
safety; a launch vehicle that builds on the Space Shuttle 
technology of upper stage engine derive that was used on Saturn 
V, and a main engine currently used on Delta IV.
    It seems that all of these programs contribute to the 
knowledge-based approach that is laid out by the GAO. I believe 
NASA has a more advanced state of knowledge than the Agency has 
had for many of their earlier procurements. In addition, the 
NASA acquisition strategy for the Vision is more flexible and 
has built in incentives, options, and provisions for 
termination if necessary. The aim is to improve contractor 
performance.
    I know how tight the development budgets will be for this 
program. I am concerned that some of these recommendations 
could impose delays, resulting in substantial cost increases. 
Congress will continue to exercise its oversight responsibility 
on this program, just as we are today. However, we cannot 
analyze the program to death. We must move forward, stabilize 
requirements, maintain a tight design and development schedule 
to minimize the gap between the Shuttle retirement and the 
operational Crew Exploration Vehicle, and bring Orion online 
within the allowed or allocated budget.
    I know that NASA and these contractors have brought in the 
best minds to work on this program. We now have an exciting 
program for NASA to carry out, and for the next generation to 
aspire to to be a part. The decision has been made to move 
forward, and we need to let NASA and the United States lead the 
world in our exploration of space.
    Thank you, Mr. Chairman.
    [The prepared statement of Chairman Calvert follows:]
               Prepared Statement of Chairman Ken Calvert
    NASA is undertaking the first steps of an exploration program that 
will continue over several decades. It will inspire the next generation 
of scientists and engineers just as Apollo inspired an earlier 
generation in the '60s. Two major contracts recently awarded are moving 
us in the right direction. The Space Shuttle has completed its third 
flight since the Columbia disaster and we are now on the path to 
complete the International Space Station.
    The Commercial Orbital Transportation Services awards recently have 
been awarded to SpaceX and to Rocketplane/Kistler. Both entrepreneurial 
companies are developing a logistics system to service the 
International Space Station, while on a parallel plane, the Lockheed 
Martin Company will be developing the Crew Exploration Vehicle, or 
Orion, to explore the Moon, Mars and beyond.
    I applaud NASA for their timely schedule of procurement for this 
major undertaking. The two procurement announcements are the first of 
several major procurement award announcements that will be made in 
order to achieve the Vision for Space Exploration. I am pleased the 
Committee was the first to endorse the Vision when we unanimously 
passed the NASA Authorization of 2005 last July. The Congress 
overwhelmingly passed the Authorization late last year and now NASA is 
carrying out the will of the Congress.
    Many of the overall decisions for the Vision have been made--a 
capsule approach for the crew vehicle to minimize technical risk and to 
maximize crew safety; a launch vehicle that builds on the Space Shuttle 
technology; an upper stage engine derived from that used on the Saturn 
V; and a main engine currently used on the Delta IV. It seems that all 
of these programs contribute to a ``knowledge-based'' approach, as laid 
out by the GAO. I believe NASA has a more advanced state of knowledge 
than the Agency has had for many of their earlier procurements. In 
addition, the NASA acquisition strategy for the Vision is more flexible 
and has built in incentives, options, and provisions for termination if 
necessary. The aim is to improve contractor performance.
    I know how tight the development budgets will be for this program 
and am concerned that some of these recommendations could impose delays 
resulting in substantial cost increases. Congress will continue to 
exercise its oversight responsibilities on this program, just as we are 
today. However, we cannot analyze the program to death. We must move 
forward and stabilize the requirements; maintain a tight design and 
development schedule to minimize the gap between the Shuttle retirement 
and an operational Crew Exploration Vehicle; and bring Orion online 
within the allocated budget.
    I know that NASA and its contractors have brought in their best 
minds to work on this program. We now have an exciting program for NASA 
to carry out and for our next generation to aspire to be a part of. The 
decision has been made to move forward and we need to let NASA and the 
United States lead the world in our exploration of space.

    Chairman Boehlert. Thank you very much, Chairman Calvert.
    Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman. In the spirit of Mr. 
Gordon and Mr. Calvert's remarks, I would also like to make a 
brief comment about your tenure and your friendship and your 
leadership. It has been said that a statesman is a dead 
politician, and somebody said that, yeah, we need more 
statesmen. I think you are in a quasi-statesman category today, 
and soon after you leave the House, you will be known as a full 
statesman for the way you conducted yourself, the leadership 
particularly on this committee. I am particularly indebted to 
you for your hard work on behalf of energy independence, doing 
something about climate change, I think looms as one of the 
biggest challenges facing not only our country, but the world, 
and you will be sorely missed.
    I, too, want to welcome all--the two witnesses today here. 
We have got a lot to cover so I will be very brief.
    I want to mention that I am encouraged that the recent CEV 
contract was by all accounts the result of a hard-fought 
competition between the two high-quality contractor teams, and 
I did want to congratulate Lockheed Martin, which 
coincidentally is based in my home State of Colorado, on 
winning that competition.
    I would also like to echo the comments made by Ranking 
Member Gordon, and I am, of course, troubled by the issues 
raised by the GAO in their July 17 report. I look forward to 
hearing both from the GAO and NASA today.
    Given the importance of the CEV program to the future of 
the Nation's human space flight activities, I think it is 
imperative that this committee engage in sustained, serious 
oversight of it, as well as the other parts of NASA's 
exploration initiative to ensure that they are carried out in 
an efficient and responsible manner. I say this not because I 
have any concerns about the dedication and commitment of NASA 
and the contractor team to the success of the program; rather, 
it is because from my vantage point on the Armed Services 
Committee, I have seen that dedication and commitment are by 
themselves are not sufficient to keep major systems 
acquisitions from sometimes running into trouble. We all know 
examples of important programs that have gotten off track and 
suffered significant cost growth and schedule delays.
    As the GAO has pointed out other occasions ``Good 
intentions aren't enough.'' There also needs to be a clear 
understanding of requirements, credible costs, and scheduled 
estimates and a disciplined approach to program management. All 
of us want NASA's CEV program to succeed, and in that spirit, I 
believe that today's hearing can provide a forum for a 
constructive review of NASA's plans.
    And again, I look forward to hearing from our two esteemed 
witnesses. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Udall follows:]
            Prepared Statement of Representative Mark Udall
    Good afternoon. I'd like to join my colleagues in welcoming our 
witnesses to today's hearing. We have a lot of issues to cover today, 
so I will just make a few observations.
    First, I am encouraged that the recent CEV contract award was by 
all accounts the result of a hard-fought competition between two high-
quality contractor teams.
    And I want to take this opportunity to congratulate the Lockheed 
Martin team--which coincidentally is based in my home State of 
Colorado--on winning that competition.
    Second, I want to echo the comments made by Ranking Member Gordon. 
I am, of course, troubled by the issues raised by the GAO in their July 
17th report, and I look forward to hearing from both GAO and NASA today 
about what has been done to address those issues.
    Given the importance of the CEV program to the future of the 
Nation's human space flight activities, I think it's imperative that 
this committee engage in sustained, serious oversight of it, as well as 
the other parts of NASA's exploration initiative, to ensure that they 
are carried out in an efficient and responsible manner.
    I say this not because I have any concerns about the dedication and 
commitment of NASA and the contractor team to the success of the 
exploration program.
    Rather, it's because from my vantage point on the Armed Services 
Committee, I have seen that dedication and commitment are by themselves 
not sufficient to keep major systems acquisitions from sometimes 
running into trouble.
    We all know of examples of important programs that have gotten off 
track and suffered significant cost growth and schedule delays.
    As the GAO has pointed out on other occasions, ``good intentions'' 
aren't enough. . .
    There also needs to be a clear understanding of requirements, 
credible cost and schedule estimates, and a disciplined approach to 
program management.
    We all want NASA's CEV program to succeed. I hope that today's 
hearing can provide a forum for a constructive review of NASA's plans, 
and I look forward to hearing from our witnesses.

    Chairman Boehlert. Thank you very much.
    The Chair, as a point of personal request, recognizes Mr. 
Rohrabacher.
    Mr. Rohrabacher. Before you get away, I want to thank you 
for all the great times we have had here and the intellectual, 
I might say, stimulation that we have had on so many--exploring 
so many areas that they themselves are interesting, but it is 
also interesting how different approaches can be an exciting 
way to actually look at our potential. So happy birthday to the 
Chairman. Also, I want to note that in the future, and as you 
move on and you are not here, every time I start talking about 
global warming I will look in front of me and I will see your 
skeptical face there on that painting and it will remind me of 
some of these great discussions that we have had.
    Finally, on our issue for today, let me just say that we 
have behind us--your face is in front of us, but behind us we 
still have this slogan that says ``Where there is no vision, 
the people will perish.'' There is an actual--that is not the 
end of the quote, interestingly enough. The other part of the 
quote goes ``Where there is no prioritization, there is only 
failure.'' I would hope people know that you can fail by not 
trying to do enough, but most of the time we fail--and my 
experience is that we have failed because we have tried to do 
everything for everybody. And the President laid down a plan, a 
game plan, a priority of this--of a lunar approach first, a 
lunar goal, and I think we--that we now have in front of us the 
first manifestation of that prioritization of goals, and I am 
very pleased that the Administration is doing this in a cost 
effective way by trying to use older technology, meaning 
technology that is already proven, and putting it together in 
new sources of rockets, et cetera.
    And with that said, thank you, Mr. Chairman, for all of 
your leadership. We will miss you and I will miss some of our 
back and forths.
    Chairman Boehlert. Can I tell them about the secret gift 
you gave me? He gave me a birthday card and said, ``You know, I 
think maybe we ought to look at global warming.'' It is for 
real, but thank you very much. I thank all my colleagues. You 
have been very kind and it is a pleasure to work with all of 
you.
    I would remind one and all we have another hearing 
tomorrow, so polish up your rhetoric. We will have another 
opportunity.
    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good afternoon. I want to thank the witnesses for appearing before 
the Committee to examine National Aeronautics and Space 
Administration's (NASA) development strategy for the Crew Exploration 
Vehicle (CEV) in light of the recent report issued by the Government 
Accountability Office (GAO) expressing concerns over NASA's ability to 
budget for the CEV program.
    In January 2004, President Bush announced his Vision for Space 
Exploration (VSE) which include key human space flight milestones, such 
as retirement of the Space Shuttle in 2010, completion of the 
International Space Station (ISS), and development of a new CEV, known 
as Orion. According to NASA, Orion will help further our understanding 
of Earth, the solar system, the universe, and the origins of life 
itself.
    On July 17, 2006 GAO issued a report expressing their serious 
concerns over NASA's acquisition of Orion. The report examines whether 
NASA's exploration initiative estimated costs fit within the Agency's 
projected available budgets and determined that NASA will be 
significantly challenged to meet their intended goal. The 
recommendations submitted by GAO suggest Congress should consider 
restricting annual appropriations and limit NASA's obligations for 
Orion to only the amount of funding necessary to support activities 
needed to successfully complete the project's preliminary design 
review. I look forward to hearing from Dr. Horowitz from NASA and Mr. 
Allen from GAO on the exploration program.

    [The prepared statement of Ms. Johnson follows:]
       Prepared Statement of Representative Eddie Bernice Johnson
    Thank you, Mr. Chairman and Ranking Member.
    NASA is especially important to Texas. Space travel has sparked the 
minds of generations of Americans. In Texas, it has meant jobs and 
strong local economies.
    I recently hosted an astronaut, Ms. Stephanie D. Wilson, at an 
event in Washington. Just watching footage from Ms. Wilson's time in a 
zero gravity environment was incredible and inspiring.
    We understand that NASA has had a challenging task to plan out the 
short- and long-term details for the Orion project. It is in our 
interest as policy-makers and the interest of our constituents to stay 
engaged in the process.
    As the Agency prepares to embark on a new journey with the Orion 
Crew Exploration Vehicle, this committee wants to do all it can to 
provide support so that the initiative succeeds.
    Since this is the first time the Full Committee on Science has 
interacted officially with NASA since the last successful space launch, 
I extend warmest congratulations on its success.
    It is my hope that this strong record of achievement speak for the 
public's confidence in future endeavors such as Orion.
    Thank you, Mr. Chairman. I yield back the balance of my time.

    Chairman Boehlert. Let us go to our two witnesses, and very 
distinguished witnesses they are.
    Dr. Scott Horowitz, Associate Administrator, Exploration 
Systems Mission Directorate, National Aeronautics and Space 
Administration. Doctor, it is good to have you here. And Mr. 
Allen Li, Director, Acquisition and Sourcing Management for the 
highly regarded and respected General Accountability Office. 
Not only is the office highly regarded and respected, so too 
are you, sir. Thank you.
    Dr. Horowitz, you are up.

 STATEMENT OF DR. SCOTT J. HOROWITZ, ASSOCIATE ADMINISTRATOR, 
 EXPLORATION SYSTEMS MISSION DIRECTORATE, NATIONAL AERONAUTICS 
                AND SPACE ADMINISTRATION (NASA)

    Dr. Horowitz. Thank you, sir.
    Good afternoon, Chairman Boehlert, Ranking Member Gordon, 
and Members of the Committee. Thank you for inviting me here 
today to testify how we at NASA are taking the first step in 
turning the Vision for Space Exploration into reality with the 
Crew Exploration Vehicle called Orion.
    First of all, sir, I would like to thank this committee, 
especially you, sir, for--and Member Gordon as well as 
Congressmen Calvert and Udall for your vision and your 
leadership that brought us the NASA Authorization Act of 2005. 
Chairman, I couldn't help but notice your new picture here on 
the wall, and I know it is a great honor, only second to if it 
was hanging in the Hall of Fame. I know that this Act is going 
to be an important part of your legacy.
    For years, NASA struggled with a lack of clear guidance. 
Through your efforts, we now have a clear set goals and 
objectives to focus the great talents of our NASA team. This 
law provides clear guidance for Aeronautics, Science, Space 
Ops, and Exploration. For human space flight, we now have 
clear, concise direction: finish the International Space 
Station, retire the Space Shuttle, develop a Shuttle-derived 
transportation system that will be operational by 2014, and 
give us the capability to go back to the Moon by 2020. These 
are the first steps to creating a sustained human presence on 
the Moon in preparations for journeys to Mars and beyond.
    Mr. Chairman, NASA engineers have done too much view graph 
engineering in the all too recent past. As a rocket scientist, 
astronaut, test pilot, and experimental aircraft builder, I can 
tell you there's nothing better than hands-on experience. Sir, 
it is time for NASA to put down the view graphs and get our 
hands dirty. It is time to start designing, building, and 
testing real flight hardware, and we are.
    Let me share with you some of the accomplishments so far 
this year. We have successfully accomplished two Space Shuttle 
missions to the ISS and are finishing its assembly. We said at 
the beginning of the year that we would complete the 
competition for the Crew Exploration Vehicle, and also enter 
into funded Space Act Agreements to demonstrate commercial crew 
and cargo services for the ISS. On August 18, we signed two 
Space Act Agreements with Space X and Rocketplane Kistler to 
demonstrate the commercially operated transportation services. 
On August 31, we awarded a major contract to Lockheed Martin 
for the design and development of Orion. We are well on our way 
to developing the Ares I launch vehicle, with development of 
the first stage underway, and the J-2X second stage engine 
program off and running. We have constructed and conducted 
Orion body mass drop tests at Langley, thermal protection 
systems arc jet tests at Ames, wind tunnel tests and engine 
tests at Marshall. This week at Kennedy Space Center, we 
completed industry and global assessments on launch and 
operations to reduce future infrastructure and ops costs.
    Some major milestones for you to keep your eyes open for in 
the future are in 2008. We will launch the lunar robotic 
orbiter being developed at Goddard, and it will have its 
secondary payload, Lunar CRater Observation and Sensing 
Satellite (LCROSS), being developed at Ames. We are 30 months 
away from the first launch of a full-scale test article of the 
Ares I, scheduled for early 2009.
    Mr. Chairman, in your invitation letter, you asked me to 
specifically address two questions. One, how will NASA strategy 
reduce the total cost for production and operations of the 
Orion Crew Exploration Vehicle, and two, what actions have we 
taken to address concerns raised by the GAO?
    First, the most important factor that will reduce the total 
cost for production in operations of Orion is its simplicity. 
The Ares I launch vehicle and Orion spacecraft are far simpler 
designs than the Space Shuttle, and thus will need few 
engineers and technicians to design, develop, test, and 
operate. There are no exotic technologies or evolutionary 
designs required to accomplish our mission.
    We take the GAO concerns quite seriously, and have had our 
team meet with GAO, and Mr. Li and I have personally met. We 
are implementing our management approach dictated by NASA 
program guidance 7120.5, which incorporates the GAO 
recommendations on implementing a knowledge-based acquisition 
framework. Also, based on our discussions, we have made some 
modifications to our contract with Lockheed Martin, the most 
notable being the use of options which preserve NASA's 
flexibility in case of any unforeseen trouble. We have the 
knowledge and technical framework to move forward. The 
consolation program, our NASA Smart Buyer team, Lockheed 
Martin, and Northrop Grumman Boeing teams all completed initial 
designs based on our requirements. If you were to place a model 
of each of these designs on the table, except for the shape of 
the solar rays, you couldn't tell the difference. The largest 
change in a year we have made to the vehicle is we shrunk it 
from five and a half meters to five meters, about this much. 
That is the largest change we have made.
    We know what we need to do; it is time to execute.
    In closing, Mr. Chairman, I would like to share with you 
how important this challenge is to me personally, because it 
reflects how many of us at NASA feel. February 1, 2003, was the 
darkest day of my NASA career. When the Space Shuttle Columbia 
didn't come home, I lost seven friends. I spent the next 
several months in Eastern Texas helping with the recovery 
efforts, and in the back room of our control center, myself and 
several of my fellow astronauts wondered if the United States 
might stop exploring space altogether, and what would that mean 
to our nation's future.
    It was there that the initial design concepts were born 
that would allow us to send astronauts to space with more 
reliability and safety. The risks are worth the rewards. Every 
person that has ever strapped themselves to the top of a rocket 
understands this. We need to learn from our past and not become 
complacent about the costs and risks involved in human space 
flight. Fortunately, our nation's leaders recognize this as 
well and understand the importance of worthy goals for our 
space program. Mr. Chairman, we have a lot of work ahead of us, 
and we have the team in place who remembers the lessons from 
that dark day and have dedicated themselves to this most noble 
of causes.
    Again, thank you for your leadership and support of our 
nation's space program, and I look forward to your questions.
    [The prepared statement of Dr. Horowitz follows:]
                Prepared Statement of Scott J. Horowitz
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to appear before you today to outline NASA's progress in 
developing Orion, the Nation's next-generation piloted spacecraft.
    In the NASA Authorization Act of 2005 (P.L. 109-155), the Congress 
provided a national framework that supports and expands upon the 
Administration's Vision for Space Exploration. These policy pillars are 
helping to shape, align, and focus NASA's human exploration and robotic 
activities. With this foundation, NASA now has a broad, future-focused 
context for its low-Earth orbit activities. These include flying the 
Space Shuttle safely until its 2010 retirement and completing the 
International Space Station (ISS) in order to advance science, 
exploration, and international collaboration. NASA is also now taking 
the initial steps to extend humanity's presence across the solar system 
by moving beyond our beachhead in space on the ISS. We will return to 
the Moon by the end of the next decade to live and work on a sustained 
basis to meet a range of objectives, including the preparation for 
journeys to Mars and beyond.
    A sustained presence on the Moon will advance U.S. preeminence, 
commerce and science, and prepare us for future expeditions outside 
Earth's immediate neighborhood. I am honored and humbled to represent 
such a noble, important, and far-reaching effort. It taps into a 
natural curiosity about space, stirs our imagination, and stimulates 
creativity and productivity. It is a program that will make a 
difference in our lives, on our planet, and to our children's 
children's future.

Time to Put the Viewgraphs Down and Get Going

    In August of this year, NASA took a major step to maintain the 
Nation's leadership position in space when it awarded to Lockheed 
Martin Corporation a contract to design and develop the Crew 
Exploration Vehicle, now dubbed Orion. The contract took effect on 
September eighth. Named for one of the brightest and most recognizable 
star formations in the sky, Orion is the central member of a family of 
spacecraft and launchers that NASA's Constellation Program is 
developing for the next generation of explorers. Two industry teams, 
Lockheed Martin and a consortium of Northrop Grumman and Boeing, spent 
13 months refining concepts, analyzing requirements, and refining the 
design for Orion.
    Orion represents the culmination of literally decades of hardware 
heritage, design, and trades. We now have the opportunity to develop a 
system with greater safety, reliability, capability, and affordability 
than the Space Shuttle. The Columbia tragedy and the earlier Challenger 
tragedy clarified the need to address these issues and form a national 
context where our human space flight capabilities can be openly 
addressed. Thank you for providing a national framework in which to 
begin to implement our dreams and build upon the sacrifice of our 
colleagues. We already are working hard on this transition from our 
current capabilities into the capabilities of the future.
    Astronauts will have a less risky ride to and from space aboard 
Orion. While all space flight involves risk, if we are to explore, we 
must reduce the risk of launching below the current level. This new 
crew module is inherently safer than the Shuttle because it will be 
placed on top of its booster. This will protect it from potentially 
deadly launch system debris during ascent, and allows the addition of 
an abort system that can separate capsule and crew from the booster in 
an emergency.
    Orion is the next-generation piloted spacecraft. For missions to 
the Moon, Orion will carry up to four astronauts to low-Earth orbit 
and, once there, link up with a lunar surface access module for the 
trip to lunar orbit. The access module will descend to the Moon's 
surface for up to a week for sortie missions and up to six months for 
outpost missions, while Orion orbits, awaiting its return. The two 
vehicles will link up again at the end of the surface mission, and the 
astronauts will ride back to Earth in Orion. The capsule will re-enter 
the atmosphere and descend on parachutes back to Earth. Orion also has 
the capability to service the ISS as a backup to commercial crew and 
cargo delivery services now in development for the ISS. Orion will be 
capable of transporting crew to and from the ISS and staying for six 
months as a rescue vehicle.

Knowledge-Based Acquisition for a Path from the Past to the Future

    Unlike NASA's past space vehicle efforts, such as the National 
Aero-Space Plane, X-33, and Orbital Space Plane, which focused on 
pushing technology and relied on numerous advances and breakthroughs, 
Orion is designed and focused on achieving clear national goals based 
on known technology and using an integrated management approach.
    Our approach to Orion mirrors NASA's overall focus on technical 
competence and excellence in our workforce and in project development 
and oversight. NASA is placing greater emphasis on reliability in its 
systems and increasing the amount of up-front analysis that goes into 
concept definition to ensure that top-level requirements are known and 
achievable. We recognize that our systems like Orion will operate over 
decades and in different flight regimes. Therefore, we have decided to 
insert low-risk and mature technologies into the process but also allow 
for the introduction of new technology that can mature quickly. Orion 
resembles Apollo for good reason. Relying on proven technology for our 
lunar return increases the likelihood of success. Although Orion 
borrows its shape and aerodynamic performance from Apollo, the new 
capsule's updated computers, electronics, life support, propulsion, and 
heat protection systems represent a marked improvement over legacy 
systems. Our technology program is tightly coupled with the 
Constellation Program and it is essential to keeping our long-term risk 
and life cycle costs within bounds. Because of its importance to 
overall exploration program risk and our ability to meet national 
goals, we ask that you support full funding for our technology 
program's budget. We are working on a range of technologies, such as 
cryogenic storage and hydrogen fuel cells, that will make a big impact 
on our programs and may have valuable applications outside of the space 
program.
    NASA is working to ensure that initial investments lead to an Orion 
system that supports multiple applications with low recurring 
operations and life cycle costs. Since recurring infrastructure costs 
have a substantial effect on life cycle costs, selection of the Orion 
launch vehicle, the Ares I, was influenced greatly by the contractor's 
ability to minimize infrastructure and associated manpower 
requirements.
    Technology maturation activities by our research and technology 
development programs will further improve reliability, reduce life 
cycle costs, and increase the anticipated effectiveness of future 
exploration systems. Also critical to cost control will be the 
development of a versatile human-rated launch system. The Orion/Ares 
design will serve as an anchor for NASA's transportation architecture, 
which itself is intended to enable exploration involving multiple 
destinations and diverse objectives. The architecture will be able to 
grow so that it can perform multiple functions. The overall crew 
transportation system that will evolve from the basic design will 
enable ascent and entry in Earth's atmosphere, transit in Earth orbit 
and through deep space, and operations at multiple locations including 
the Moon and Mars.
    Orion embodies a new generation of systems but it will be built 
upon the tried-and-true engineering of the past. We evaluated literally 
thousands of configurations and transportation options before settling 
on Orion's design. The Orion contract is a continuation of these 
analyses, requirements, architecture, and conceptual design work. Orion 
will enable space operations by U.S. astronauts on the Moon and 
elsewhere in the solar system. As the NASA Authorization Act of 2005 
also directed, we now have a very capable transportation architecture 
that infuses Shuttle-derived hardware and capabilities where 
appropriate. As a four-time space flyer, personal aircraft builder and 
flyer, and holder of a Ph.D. in aerospace engineering from the Georgia 
Institute of Technology, I am confident in the design we have chosen. 
This is not a technology dependent program. This is still rocket 
science--but rocket science we know and understand.

Orion Contract Approach and Strategy

    The acquisition strategy for Orion and other projects within 
Exploration Systems need to match the bold and forward-thinking Vision 
for Space Exploration. Within Exploration Systems we have laid out 
acquisition strategy tenets that were followed for the Orion contract. 
One of these tenets is to maximize competition. From our recent down-
select we received innovative and credible approaches with financial 
commitments from the Lockheed Martin team that will reap benefits for 
NASA through the entire life cycle of the Orion project. Another tenet 
that we are using for Orion and other elements of the Constellation 
Program is to utilize current, proven technologies that will lead to a 
safer, more reliable and affordable solution. Because NASA defined the 
design concepts for development by both Phase One contractors, both 
Prime Contractor teams were able to construct credible proposal 
estimates. Lockheed Martin will take these concepts to the next stage 
of development. For the Schedule A contract for the Design, 
Development, and Test and Evaluation phase for Orion, NASA chose a 
cost-type contract, in which it accepts all of the cost risks. We chose 
this type of contract in order for the contractor team to fully refine 
the design and test the vehicle so that NASA can receive a reliable and 
affordable space vehicle. What makes this cost risk acceptable is the 
fact that the NASA's two independent efforts--one performed by the 
Constellation Program Office and the other by the Smart Buyer team--
included detailed preparatory work in its strategy for establishing 
firm requirements at the beginning of the contract. The ``not to 
exceed'' prices for the Schedule B option establishes the upper level 
of the contract value for the Agency for the production of the Orion 
vehicles to meet the current planned manifest. I would like to 
acknowledge Allen Li and his team at the Government Accountability 
Office for pointing out the potential long-term commitment in our 
solicitation which resulted in NASA making options of both Schedule B 
and C in the final contract.
    NASA's acquisition strategy and plan for selecting a Project Orion 
prime contractor was based on a thorough business case and the efforts 
of our two NASA teams that developed independent designs. We were 
intimately familiar with both proposal teams, having worked side-by-
side with each of them for over a year under Phase 1 contracts. The 
Orion Project will establish a firm foundation for the Constellation 
Program. The Orion acquisition strategy and plan focuses on gaining 
industry's commitment for a design solution and controlling life cycle 
cost through competition and incentives. NASA invested more than $140 
million in the formulation phase and we had an appropriate level of 
knowledge to down-select a single Project Orion prime contractor.
    From a contract oversight perspective, we will employ a number of 
measures to further guard against cost overruns. NASA based 25 percent 
of the award fee evaluation pool on project cost management. The 
project will employ earned value management, with cost and schedule 
performance measured against tasks. Progress will be measured through 
milestones and tests on a schedule determined by the program. We will 
demonstrate hardware and progress on Orion through an exacting test and 
demonstration schedule. Additionally, the Orion contract has an ``end 
item'' award fee feature that will be milestone based and focused on 
successful completion of all elements of the design and initial 
production of the Orion vehicle. We believe this award fee feature 
presents an opportunity to maximize the return on investment for both 
NASA and the Lockheed Martin team.
    NASA's contract with Lockheed Martin maintains the longstanding 
development schedule for Orion. The initial flight test of an Orion 
prototype is targeted for 2008. The first unpiloted flight of an actual 
capsule will follow in 2011, and the first flight with humans aboard is 
to occur no later than 2014. Orion's first Moon mission with a crew 
will take place between 2015 and 2020.
    The Orion Project organization was approved June 1, 2006, as a 
multi-center ``virtual'' organization that leverages the Agency's 
technical strengths. Staffing of key positions is complete. A 
Constellation tasks ``roll out'' to nine NASA Centers and the Jet 
Propulsion Laboratory occurred on June 6, 2006. The NASA centers 
included Ames, Glenn, Goddard, Langley, Kennedy, Marshall, Stennis, 
Johnson and Dryden. Management processes are maturing, with integrated 
reporting and scheduling processes instituted and maturing; boards, 
panels, and working groups identified; and configuration and risk 
management processes operating.

NASA Has Addressed the Findings of the GAO Report

    NASA has reviewed the findings in the GAO Report entitled ``NASA: 
Long-Term Commitment to and Investment in Space Exploration Program 
Requires More Knowledge.'' We have non-concurred with a key finding in 
the report since we feel we are meeting the concerns stipulated through 
our management framework, acquisition approach, and our incentives to 
Lockheed Martin to meet performance, schedule, and life cycle cost 
requirements. Also, as stated earlier, we are not seeking technological 
miracles. We are not trying to violate the laws of physics--we are 
ready to build a spaceship that can meet our current national needs and 
evolve to meet our future needs. However, although we non-concurred 
with the overall report, we have implemented a number of the GAO's 
recommendations.
    NASA has learned and applied the best lessons from its past 
efforts. More importantly, we have adopted an implementation approach 
that is technically solid and well-managed. On the contract side, we 
have, after discussions with GAO, made the Schedule B and Schedule C 
portions of the contract into options. Phase Two preserves NASA's 
flexibility to terminate the contract at Orion's preliminary design 
review if cost projections are determined to be unaffordable and non-
executable.

Progress Report--Meeting Commitments and Transitioning Access to Low-
                    Earth Orbit

    NASA is making good progress on the national objectives Congress 
has laid out for the Agency. Space Shuttle missions STS-121 in July and 
STS-115 this month brought us two steps closer to finishing assembly of 
the International Space Station and meeting our partner commitments. We 
also are two steps closer to retiring the Shuttle in 2010. The 
Exploration Systems Mission Directorate is working to create greater 
service-based access to low-Earth orbit, to utilize the ISS for 
exploration research and development, and to foster the capabilities 
necessary to sustain human presence on the lunar surface. In August, we 
entered into two unprecedented agreements with Space X and Rocketplane 
Kistler to demonstrate, based on milestone performance, cargo and crew 
services to support the ISS. We are very hopeful that these and other 
nascent commercial space efforts will succeed so that NASA can 
increasingly shift its focus and resources beyond low-Earth orbit. Once 
the commercial sector demonstrates this capability, then we will enter 
into Phase Two of the Commercial Crew and Cargo program and procure 
these services from the commercial sector via the competitive 
procurement process.
    Meanwhile, much work on Orion already has been accomplished. In 
May, six vertical drop tests of a body mass simulator, in support of 
landing systems development, took place at Langley Research Center, and 
all Phase One arc jet testing for thermal projection systems was 
completed at Ames Research Center. In June, Ames and the Jet Propulsion 
Laboratory completed the first phase of a real-time operating trade 
study evaluation and delivered an interim report, and Orion thermal 
protection system material was arc jet tested at Johnson Space Center. 
In July, the Orion cockpit team conducted crew evaluations of proposed 
window designs and the flight test article System Requirements Review 
(SRR) was completed. This month we kicked off the Orion SRR and made 
the Phase Two contract award for the Thermal Protection System Advanced 
Development Project. In October, NASA will hold a Preliminary Design 
Review for the Orion flight test article. We are moving forward. On the 
Ares front, we now have models being tested in wind tunnels. We are 
firing engine components and will be conducting a launch abort test in 
2008 and a full-scale Ares I-1 test launch in April 2009. The Lunar 
Reconnaissance Orbiter (LRO)/Lunar Crater Observation and Sensing 
Satellite (LCROSS) mission is on track for launch in 2008.

Conclusion

    The Space Shuttle is the world's most versatile spacecraft to date. 
The Constellation program's Orion and Ares will be even more so. They 
are designed to fly to the Moon, but they also may be used to service 
the International Space Station. We are looking at ways that 
Constellation will support expeditions to other bodies in the solar 
system after we are finished exploring Mars. The possibilities seem 
limitless. Most importantly, the Constellation Program and our 
Commercial Orbital Transportation Services (COTS) efforts will assure 
America's access to space after the Space Shuttle is retired in 2010.
    Orion is the focus of America's 21st century crewed space transport 
strategy, designed to continue the evolution of exploration experience 
and cutting-edge technology that began with the Apollo Program. Orion 
will help further our understanding of Earth, the solar system, the 
universe, and the origins of life itself. It will support our 
exploration missions by providing crew ascent and entry into Earth's 
atmosphere, orbital and deep-space transit, transfer capabilities, and 
operations at the Moon, Mars, and elsewhere.
    Mr. Chairman, thank you for the opportunity to testify before you 
today. I look forward to working closely with the Congress to ensure 
American leadership on the frontier of the future. I would be pleased 
to respond to any questions you or the other Members of the Committee 
may have.

                    Biography for Scott J. Horowitz
    Scott J. Horowitz is the Associate Administrator for the 
Exploration Systems Mission Directorate. A former NASA astronaut and a 
retired U.S. Air Force Colonel, he will lead the Agency in the 
development of the Nation's new spacecraft that will return astronauts 
to the Moon and travel to Mars and other destinations in the solar 
system.
    After retiring from NASA and the Air Force in 2004, Horowitz joined 
ATK Thiokol, Inc., as Director of Space Transportation and Exploration. 
At ATK, he was responsible for developing the company's strategy to 
support NASA's Vision for Space Exploration.
    Horowitz joined the Air Force after graduating with a Master's and 
doctorate in aerospace engineering from the Georgia Institute of 
Technology. He received his undergraduate degree in engineering from 
California State University at Northridge.
    During his military career, he was an instructor pilot, F-15 
fighter pilot and, after attending the Air Force Test Pilot School, 
served an assignment as a test pilot. He has logged more than 5,000 
hours in more than 50 different aircraft. Horowitz also served as an 
adjunct professor at Embry Riddle University and later as a Professor 
at California State University at Fresno.
    NASA selected him as an astronaut pilot in 1992. A veteran of four 
Space Shuttle missions, Horowitz made his first flight in 1996 on a 
microgravity science mission. His other missions included servicing the 
Hubble Space Telescope and two flights to the International Space 
Station. He has logged more than 1,138 hours in space.
    His decorations include the Distinguished Flying Cross, Defense 
Meritorious Service Medal, Defense Superior Service Medal, two Air 
Force Commendation Medals, two NASA Exceptional Service Medals and four 
NASA Space Flight Medals.

    Chairman Boehlert. Thank you, Dr. Horowitz.
    Mr. Li.

 STATEMENT OF MR. ALLEN LI, DIRECTOR, ACQUISITION AND SOURCING 
          MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Li. Before I begin, allow me to congratulate NASA, its 
employees, and contractors on its latest two achievements: 
Atlantis' successful mission, marking the long-awaited return 
to space station assembly, and Opportunity's breathtaking look 
at Victoria Crater. They are reminders of the excitement and 
challenges associated with space exploration, and the 
importance dedication and teamwork play in achieving mission 
success.
    Chairman Boehlert, Ranking Member Gordon, and Members of 
the Committee, thank you for inviting me here today to discuss 
our work on NASA's efforts to implement its space exploration 
plans and the Crew Exploration Vehicle specifically. As 
requested, I will highlight my statement.
    At the request of this committee, GAO initiated several 
reviews over the past year that have implications for 
implementation of the President's Vision for Space Exploration. 
In our December 2005 report regarding NASA's acquisition 
policies, we made several recommendations to help ensure NASA 
uses a knowledge-based acquisition approach to make informed 
investment decisions. More recently, in July of 2006, we issued 
a report that questioned the affordability of NASA's 
exploration program, and in particular, NASA's acquisition 
approach for the CEV, now known as Orion. Based on those 
reports, I will raise four issues.
    Issue number one. NASA cannot develop a firm cost estimate 
for the exploration program at this time because the program is 
in its early stages. The current estimate is $230 billion over 
the next two decades. Changes that have occurred to the program 
over the past year illustrate its evolving nature. True, 
changes are appropriate and understandable at this early stage, 
but changes do not allow the Agency to firmly identify program 
requirements and needed resources, a key element of knowledge-
based acquisition approach. Thus, we concluded that NASA was 
not in a position to make a long-term commitment to the 
program.
    Issue number two. NASA will likely be challenged to 
implement the program as laid out in its exploration systems 
architecture study because of the high costs associated with 
the program in some years. Despite initial surpluses, the 
sustainability of the program is questionable, given its long-
term funding outlook. NASA's preliminary projections show 
multi-billion dollar shortfalls for its Exploration Directorate 
in all fiscal years from 2014 to 2020, with an overall deficit 
through 2025 exceeding $18 billion. Furthermore, funds NASA is 
planning to have after 2010 made possible by the retirement of 
the Shuttle may not be available to the extent projected. This 
is because Shuttle transition needs are still being quantified.
    Issue number three. NASA's acquisition strategy for the CEV 
was not based on obtaining an adequate level of knowledge to 
make an informed investment decision. NASA planned to commit 
the government to a long-term product development effort 
without a sound business case. This entails having well-defined 
requirements, mature technology, a preliminary design, and firm 
cost estimates that realistic budget projections can handle. 
Without such knowledge, it is difficult to predict with any 
confidence how much the program will cost, what technologies 
will or will not be available to meet performance expectations, 
and when the vehicle will be ready for use.
    As you know, we recommended in our July 2006 report that 
NASA alter its strategy to reduce these risks by securing 
additional knowledge. NASA disagreed. However, as Dr. 
Horowitz's statement indicates, NASA subsequently adjusted its 
acquisition approach and now production and sustainment 
portions of the contract are options, a move that is consistent 
with our recommendation, since it lessens the government's 
financial obligation at this early stage. However, risks 
persist with NASA's approach. NASA still has no assurance that 
the project will have a sound business case in place at 
preliminary design review. Therefore, commitment to efforts 
beyond that point, even when limited to design and development 
activities, is a risky approach.
    My final issue. NASA's current acquisition policies and 
project guidance do not include major decision reviews beyond 
the initial project approval gate, nor a standard set of 
criteria with which to measure projects at crucial phases. As 
we pointed out in our December 2000 report--2005 report, these 
decision reviews and development measures are key markers 
needed to ensure that project progress and decisions are based 
on the appropriate levels of knowledge. These markers can help 
lessen project risks.
    In response to our recommendations, NASA stated that it 
would make several changes to bring its policies more in line 
with a knowledge-based approach. For example, NASA plans to add 
requirements for success at key junctures and require 
additional project decision reviews. While these changes are 
not yet implemented, recent briefings and discussion with NASA 
officials indicate that the Agency plans to do so in revised 
project program management policies.
    NASA would be well-served by fully implementing our 
recommendations, thereby placing itself in a better position to 
lessen risks, obtain good program outcomes, and achieve mission 
success.
    So where do we go from here? Orion is only one piece of the 
pie. Implementing the Vision over the coming decades will 
require hundreds of billions of dollars and a sustained 
commitment from multiple Administrations and Congresses. With a 
range of federal commitments binging the fiscal future of the 
United States, competition for resources within the Federal 
Government will be fierce. Consequently, as it proceeds with 
its acquisition strategy for Orion and other key projects, it 
will be important for NASA to ensure that its investment 
decisions are sound and based on high levels of knowledge. This 
will allow decision-makers to make informed decisions about 
where continued investments are justified.
    From the perspective of the Congress, tools have recently 
been instilled for more effective oversight. Indeed, cost 
growth in excess of stated thresholds as well as information on 
technology and schedule risks must now be reported as required 
by the NASA Authorization Act of 2005. GAO stands ready to 
assist this committee in its oversight responsibilities.
    Mr. Chairman, this concludes my oral statement. I will be 
pleased to answer any questions you or other Members may have.
    [The prepared statement of Mr. Li follows:]
                     Prepared Statement of Allen Li
Mr. Chairman and Members of the Committee:

    I am pleased to be here today to discuss the National Aeronautics 
and Space Administration's (NASA) plans for implementing the 
President's Vision for Space Exploration (Vision).\1\ NASA plans to 
spend nearly $230 billion over the next two decades--more than $31 
billion of which will be spent in the next five years--to bring the 
Vision to reality.\2\ In July 2006, we issued a report that questioned 
the program's affordability, and in particular, NASA's acquisition 
approach for one of the program's major projects--the Crew Exploration 
Vehicle (CEV).\3\ My statement today, which is based upon that report 
and another report evaluating NASA's acquisition policies,\4\ 
highlights our continuing concerns with the affordability of the 
exploration program and the acquisition approach for the CEV project, 
as well as the absence of firm requirements in NASA's acquisition 
policies for projects to proceed with development with the appropriate 
level of knowledge. Given the competing demands facing the Federal 
Government and an already troubling funding profile for the program, it 
is imperative that NASA implement the various aspects of the Vision in 
a fiscally prudent and competent manner. Our work was performed in 
accordance with generally accepted government auditing standards.
---------------------------------------------------------------------------
    \1\ The Vision includes a return to the Moon that is intended 
ultimately to enable exploration of Mars and other destinations. To 
accomplish this, NASA initially plans to (1) complete its work on the 
International Space Station by 2010, fulfilling its commitment to 15 
international partner countries; (2) begin developing a new manned 
exploration vehicle to replace the Space Shuttle; and (3) return to the 
Moon no later than 2020 in preparation for future, more ambitious 
missions.
    \2\ All cost estimates related to the Vision are reported as 
inflated (``real year'') dollars.
    \3\ GAO, NASA: Long-Term Commitment to and Investment in Space 
Exploration Program Requires More Knowledge, GAO-06-817R (Washington, 
D.C.: July 17, 2006).
    \4\ GAO, NASA: Implementing a Knowledge-Based Acquisition Framework 
Could Lead to Better Investment Decisions and Project Outcomes, GAO-06-
218 (Washington, D.C.: Dec. 21, 2005).
---------------------------------------------------------------------------

Summary

    In summary, we found that because NASA's exploration program is in 
its early stages, the Agency cannot develop a firm cost estimate for 
the program at this time. The changes that have occurred to the program 
over the past year and the resulting refinement of its associated cost 
estimates are indicative of the evolving nature of the program. 
Furthermore, we found that it will likely be a challenge for NASA to 
implement the program, as laid out in its Exploration Systems 
Architecture study (ESAS)\5\ due to the high costs associated with the 
program in some years and the long-term sustainability of the program 
relative to anticipated funding. Finally, we found that NASA's 
acquisition strategy for the CEV was not based upon obtaining an 
adequate level of knowledge when making key resources decisions, 
placing the program at risk for cost overruns, schedule delays, and 
performance shortfalls. These risks were evident in NASA's plan to 
commit to a long-term product development effort before establishing a 
sound business case for the project that includes well-defined 
requirements, mature technology, a preliminary design, and firm cost 
estimates. Furthermore, in our 2005 report on NASA's acquisition 
policies, we found that NASA's policies lacked major decision reviews 
beyond the initial project approval gate and lacked a standard set of 
criteria with which to measure projects at crucial phases in the 
development life cycle. These decision reviews and development measures 
are key markers needed to ensure that projects are proceeding with and 
decisions are being based upon the appropriate level of knowledge and 
can help to lessen project risks.
---------------------------------------------------------------------------
    \5\ The ESAS was an effort to identify the best architecture and 
strategy to implement the Vision. The architecture supports the 
development of a new CEV, Crew Launch Vehicle (CLV), a Cargo Launch 
Vehicle (CaLV), and other supporting systems. The architecture also 
calls for various Research and Technology (R&T) and Robotic Lunar 
Exploration Program (RLEP) projects. NASA's Exploration Systems Mission 
Directorate's Constellation program is responsible for the development 
of the CEV, CLV, and CaLV.
---------------------------------------------------------------------------
    In our July 2006 report, we recommended that NASA adjust its 
acquisition strategy to ensure that sufficient program knowledge--to 
include well-defined requirements, mature technologies, a stable 
design, and realistic cost estimates--be attained prior to committing 
the government to a long-term contract. NASA did not concur with our 
recommendation and in late August awarded a contract for the design, 
development, production, and sustainment of the CEV to Lockheed Martin. 
However, prior to awarding the contract, NASA adjusted its acquisition 
approach and the Agency included the production and sustainment 
portions of the contract as options--a move that is consistent with the 
recommendation in our report because it lessens the government's 
financial obligation at this early stage. While these changes are 
positive steps, the Agency's acquisition strategy needs further 
refinement to conform to acquisition best practices. Given the approach 
that NASA has chosen, continued congressional oversight will be 
critical for ensuring that the program stays within cost and schedule 
goals. This is especially true given NASA's ``go as you can afford to 
pay'' approach, wherein lower priority efforts will be deferred, 
descoped, or discontinued to allow NASA stay within its budget profile. 
Competing demands within the Agency, coupled with a declining supply of 
federal discretionary funding requires due diligence on the part the 
Agency and Congress to ensure successful program outcomes. As our work 
has found, all too often, programs are allowed to proceed without 
adequate knowledge being attained at key phases of development. Without 
such knowledge, it is difficult to predict with any confidence how much 
the program will cost, what technologies will or will not be available 
to meet performance expectations, and when the vehicle will be ready 
for use.

Background

    Despite many successes in the exploration of space, such as landing 
the Pathfinder and Exploration Rovers on Mars, NASA has had difficulty 
bringing a number of projects to completion, including several efforts 
to build a second generation reusable human space flight vehicle to 
replace the Space Shuttle. NASA has attempted several costly endeavors, 
such as the National Aero-Space Plane, the X-33 and X-34, and the Space 
Launch Initiative. While these endeavors have helped to advance 
scientific and technical knowledge, none have completed their objective 
of fielding a new reusable space vehicle. We estimate that these 
unsuccessful development efforts have cost approximately $4.8 billion 
since the 1980s. The high cost of these unsuccessful efforts and the 
potential costs of implementing the Vision make it important that NASA 
achieve success in its new exploration program beginning with the CEV 
project.
    Our past work has shown that developing a sound business case, 
based on matching requirements to available and reasonably expected 
resources before committing to a new product development effort, 
reduces risk and increases the likelihood of success. High levels of 
knowledge should be demonstrated before managers make significant 
program commitments, specifically: (1) At program start, the customer's 
needs should match the developer's available resources in terms of 
availability of mature technologies, time, human capital, and funding; 
(2) Midway through development, the product's design should be stable 
and demonstrate that it is capable of meeting performance requirements; 
(3) By the time of the production decision, the product must be shown 
to be producible within cost, schedule, and quality targets, and have 
demonstrated its reliability. Our work has shown that programs that 
have not attained the level of knowledge needed to support a sound 
business case have been plagued by cost overruns, schedule delays, 
decreased capability, and overall poor performance. With regard to 
NASA, we have reported that in some cases the Agency's failure to 
define requirements adequately and develop realistic cost estimates-two 
key elements of a business case-resulted in projects costing more, 
taking longer, and achieving less than originally planned.\6\
---------------------------------------------------------------------------
    \6\ GAO, NASA: Lack of Disciplined Cost-Estimating Processes 
Hinders Effective Program Management, GAO-04-642 (Washington, D.C.: May 
28, 2004).
---------------------------------------------------------------------------

Firm Cost Estimates Cannot Be Developed at This Time

    Although NASA is continuing to refine its exploration architecture 
cost estimates, the Agency cannot at this time provide a firm estimate 
of what it will take to implement the architecture. The absence of firm 
cost estimates is mainly due to the fact that the program is in the 
early stages of its life cycle. NASA conducted a cost risk analysis of 
its preliminary estimates through fiscal year 2011. On the basis of 
this analysis and through the addition of programmatic reserves (20 
percent on all development and 10 percent on all production costs), 
NASA is 65 percent confident that the actual cost of the program will 
either meet or be less than its estimate of $31.2 billion through 
fiscal year 2011. For cost estimates beyond 2011, when most of the cost 
risk for implementing the architecture will be realized, NASA has not 
applied a confidence level distinction. Since NASA released its 
preliminary estimates, the Agency has continued to make architecture 
changes and refine its estimates in an effort to establish a program 
that will be sustainable within projected resources. While changes to 
the program are appropriate at this stage when concepts are still being 
developed, they leave the Agency in the position of being unable to 
firmly identify program requirements and needed resources. NASA plans 
to commit to a firm cost estimate for the Constellation program at the 
preliminary design review in 2008, when requirements, design, and 
schedule will all be base-lined. It is at this point where we advocate 
program commitments should be made on the basis of the knowledge 
secured.
    Expected Budget and Competing Demands Will Challenge Architecture 
Implementation
    NASA will be challenged to implement the ESAS recommended 
architecture within its projected budget, particularly in the longer-
term. As we reported in July 2006, there are years when NASA has 
projected insufficient funding to implement the architecture with some 
yearly shortfalls exceeding $1 billion; while in other years the 
funding available exceeds needed resources. Per NASA's approach, it 
plans to use almost $1 billion in appropriated funds from fiscal years 
2006 and 2007 in order to address the short-term funding shortfalls. 
NASA, using a ``go as you can afford to pay'' approach, maintains that 
in the short-term the architecture could be implemented within the 
projected available budgets through fiscal year 2011 when funding is 
considered cumulatively. However, despite initial surpluses, the long-
term sustainability of the program is questionable given the long-term 
funding outlook for the program. NASA's preliminary projections show 
multi-billion-dollar shortfalls for its Exploration Systems Mission 
Directorate in all fiscal years from 2014 to 2020, with an overall 
deficit through 2025 in excess of $18 billion. According to NASA 
officials, the Agency will have to keep the program compelling for both 
Congress and potential international partners, in terms of the 
activities that will be conducted as part of the lunar program, in 
order for the program to be sustainable over the long run.
    NASA is attempting to address funding shortfalls within the 
Constellation program by redirecting funds to that program from other 
Exploration Systems Mission Directorate activities to provide a 
significant surplus in fiscal years 2006 and 2007 to cover projected 
shortfalls beginning in fiscal year 2009. Several Research and 
Technology programs and missions were discontinued, descoped, or 
deferred and that funding was shifted to the Constellation Program to 
accelerate development of the CEV and CLV. In addition, the 
Constellation program has requested more funds than required for its 
projects in several early years to cover shortfalls in later years. 
NASA officials stated the identified budget phasing problem could 
worsen given the changes that were made to the exploration architecture 
following issuance of the study. For example, while life cycle costs 
may be lower in the long run, acceleration of development for the five 
segment Reusable Solid Rocket Booster and J-2X engine will likely add 
to the near-term development costs, where the funding is already 
constrained. NASA has yet to provide cost estimates associated with 
program changes.
    NASA must also contend with competing budgetary demands within the 
Agency as implementation of the exploration program continues. NASA's 
estimates beyond 2010 are based upon a surplus of well over $1 billion 
in fiscal year 2011 due to the retirement of the Space Shuttle fleet in 
2010. However, NASA officials said the costs for retiring the Space 
Shuttle and transitioning to the new program are not fully understood; 
thus, the expected surplus could be less than anticipated. This year, 
NASA plans to spend over 39 percent of its annual budget for Space 
Shuttle and International Space Station (ISS) operations--dollars that 
will continue to be obligated each year as NASA completes construction 
of the ISS by the end of fiscal year 2010. This does not include the 
resources necessary to develop ISS crew rotation or logistics servicing 
support capabilities for the ISS during the period between when the 
Space Shuttle program retires and the CEV makes its first mission to 
the ISS. While, generally, the budget for the Space Shuttle is 
scheduled to decrease as the program moves closer to retirement, a 
question mark remains concerning the dollars required to retire the 
Space Shuttle fleet as well as transition portions of the 
infrastructure and workforce to support implementation of the 
exploration architecture. In addition, there is support within Congress 
and the scientific community to restore money to the Science Mission 
Directorate that was transferred to the Space Shuttle program to ensure 
its viability through its planned retirement in 2010. Such a change 
could have an impact on future exploration funding.

Lack of Sound Business Case Puts CEV Acquisition at Risk

    In July 2006, we reported that NASA's acquisition strategy for the 
CEV placed the project at risk of significant cost overruns, schedule 
delays, and performance shortfalls because it committed the government 
to a long-term contract before establishing a sound business case. We 
found that the CEV contract, as structured, committed the government to 
pay for design, development, production and sustainment upon contract 
award--with a period of performance through at least 2014 with the 
possibility of extending through 2019.
    Our report highlighted that NASA had yet to develop key elements of 
a sound business case, including well-defined requirements, mature 
technology, a preliminary design, and firm cost estimates that would 
support such a long-term commitment. Without such knowledge, NASA 
cannot predict with any confidence how much the program will cost, what 
technologies will or will not be available to meet performance 
expectations, and when the vehicle will be ready for use. NASA has 
acknowledged that it will not have these elements in place until the 
project's preliminary design review scheduled for fiscal year 2008. As 
a result, we recommended that the NASA Administrator modify the current 
CEV acquisition strategy to ensure that the Agency does not commit 
itself, and in turn the Federal Government, to a long-term contractual 
obligation prior to establishing a sound business case at the project's 
preliminary design review. In response to our recommendation, NASA 
disagreed and stated that it had the appropriate level of knowledge to 
proceed with its current acquisition strategy. NASA also indicated that 
knowledge from the contractor is required in order to develop a 
validated set of requirements and, therefore, it was important to get 
the contractor on to the project as soon as possible. In addition, 
according to NASA officials, selection of a contractor for the CEV 
would enable the Agency to work with the contractor to attain knowledge 
about the project's required resources and, therefore, be better able 
to produce firm estimates of project cost. In our report, we 
highlighted that this is the type of information that should be 
obtained prior to committing to a long-term contract. To our knowledge, 
NASA did not explore the possibility of utilizing the contractor, 
through a shorter-term contract, to conduct work needed to develop 
valid requirements and establish higher-fidelity cost estimates--a far 
less risky and costly strategy.
    Subsequent to our report, NASA did, however, take steps to address 
some of the concerns we raised. Specifically, NASA modified its 
acquisition strategy for the CEV and made the production and 
sustainment schedules of the contract--known as Schedules B and C--
contract options that the Agency will decide whether to exercise after 
project's critical design review in 2009. Therefore, NASA will only be 
liable for the minimum quantities under Schedules B and C when and if 
it chooses to exercise those options. These changes to the acquisition 
strategy lessen the government's financial obligation at this early 
stage. Table 1 outlines the information related to the CEV acquisition 
strategy found in the request for proposal and changes that were made 
to that strategy prior to contract award. While we view these changes 
as in line with our recommendation and as a positive step to address 
some of the risks we raised in our report, NASA still has no assurance 
that the project will have the elements of a sound business case in 
place at the preliminary design review. Therefore, NASA's commitment to 
efforts beyond the project's preliminary design review--even when this 
commitment is limited to design, development, test and evaluation 
activities (DDT&E)--is a risky approach. It is at this point that NASA 
should (a) have the increased knowledge necessary to develop a sound 
business case that includes high-fidelity, engineering-based estimates 
of life cycle cost for the CEV project, (b) be in a better position to 
commit the government to a long-term effort, and (c) have more 
certainty in advising Congress on required resources.




Sound Management and Oversight Key to Addressing CEV Project Risks

    Sound project management and oversight will be key to addressing 
risks that remain for the CEV project as it proceeds with its 
acquisition approach. To help mitigate these risks, NASA should have in 
place the markers necessary to help decision-makers monitor the CEV 
project and ensure that is following a knowledge based approach to its 
development. However, in our 2005 report that assessed NASA's 
acquisition policies, we found that NASA's policies lacked major 
decision reviews beyond the initial project approval gate and a 
standard set of criteria with which to measure projects at crucial 
phases in the development life cycle--key markers for monitoring such 
progress. In our review of the individual center policies, we found 
that the Johnson Space Center project management policy, which is the 
policy that the CEV project will be required to follow, also lacked 
such key criteria. We concluded that without such requirements in 
place, decision-makers have little knowledge about the progress of the 
Agency's projects and, therefore, cannot be assured that they are 
making informed decisions about whether continued investment in a 
program or project is warranted.
    We recommended that NASA incorporate requirements in its new 
systems engineering policy to capture specific product knowledge at key 
junctures in project development. The demonstration of such knowledge 
could then be used as exit criteria for decision-making at the 
following key junctures:

          Before projects are approved to transition in to 
        implementation, we suggested that projects be required to 
        demonstrate that key technologies have reached a high maturity 
        level.

          Before projects are approved to transition from final 
        design to fabrication, assembly, and test, we suggested that 
        projects be required to demonstrate that the design is stable.

          Before projects are approved to transition to 
        production, we suggested that projects be required to 
        demonstrate that the design can be manufactured within cost, 
        schedule, and quality targets.

    In addition, we recommended that NASA institute additional major 
decision reviews that are tied to these key junctures to allow 
decision-makers to reassess the project based upon demonstrated 
knowledge.
    While NASA concurred with our recommendations, the Agency has yet 
to take significant actions to implement them. With regard to our first 
recommendation, NASA stated that the Agency would establish 
requirements for success at the key junctures mentioned above. NASA 
planned to include these requirements in the systems engineering policy 
it issued in March 2006. Unfortunately, NASA did not include these 
criteria as requirements in the new policy, but included them in an 
appendix to the policy as recommended best practices criteria. In 
response to our second recommendation, NASA stated it would revise its 
program and project management policy for flight systems and ground 
support projects, due to be completed in fall 2006. In the revised 
policy, NASA indicated that it would require the results of the 
critical design review and, for projects that enter a large-scale 
production phase, the results of the production readiness review to be 
reported to the appropriate decision authority in a timely manner so 
that a decision about whether to proceed with the project can be made. 
NASA has yet to issue its revised policy; therefore, it remains to be 
seen as to whether the CEV project decision authorities will have the 
opportunity to reassess and make decisions about the project using the 
markers recommended above after the project has initially been 
approved. Briefings that we have recently received indicate that NASA 
plans to implement our recommendation in the revised policy.
    The risks that NASA has accepted by moving ahead with awarding the 
contract for DDT&E for CEV could be mitigated by implementing our 
recommendations as it earlier agreed. Doing so would provide both NASA 
and Congress with markers of the project's progress at key points. For 
example, at the preliminary design review, decision-makers would be 
able to assess the status of the project by using the marker of 
technology maturity. In addition, at the critical design review, the 
Agency could assess the status of the project using design stability 
(i.e., a high percentage of engineering drawings completed). If NASA 
has not demonstrated technology maturity at the preliminary design 
review or design stability at the critical design review, decision-
makers would have an indication that the project will likely be headed 
for trouble. Without such knowledge, NASA cannot be confident that its 
decisions about continued investments in projects are based upon the 
appropriate knowledge. Furthermore, NASA's oversight committees could 
also use the information when debating the Agency's yearly budget and 
authorizing funds not only for the CEV project, but also for making 
choices among NASA's many competing programs. If provided this type of 
information from NASA about its key projects, Congress will be in a 
better position to make informed decisions about how to invest the 
Nation's limited discretionary funds.
    NASA's ability to address a number of long-standing financial 
management challenges could also impact management of NASA's key 
projects. The lack of reliable, day-to-day information continues to 
threaten NASA's ability to manage its programs, oversee its 
contractors, and effectively allocate its budget across numerous 
projects and programs. To its credit, NASA has recognized the need to 
enhance the capabilities and improve the functioning of its core 
financial management system, however, progress has been slow. NASA 
contract management has been on GAO's high-risk list since 1990 because 
of such concerns.

Conclusions

    In conclusion, implementing the Vision over the coming decades will 
require hundreds of billions of dollars and a sustained commitment from 
multiple administrations and Congresses. The realistic identification 
of the resources needed to achieve the Agency's short-term goals would 
provide support for such a sustained commitment over the long-term. 
With a range of federal commitments binding the fiscal future of the 
United States, competition for resources within the Federal Government 
will only increase over the next several decades. Consequently, it is 
incumbent upon NASA to ensure that it is wisely investing its existing 
resources. As NASA proceeds with its acquisition strategy for the CEV 
project and other key projects, it will be essential that the Agency 
ensure that the investment decisions it is making are sound and based 
upon high levels of knowledge. NASA should require that the progress of 
its projects are evaluated and reevaluated using knowledge based 
criteria, thereby improving the quality of decisions that will be made 
about which program warrant further investment. Furthermore, it will be 
critical that NASA's financial management organization delivers the 
kind of analysis and forward-looking information needed to effectively 
manage its programs and projects. Clear, strong executive leadership 
will be needed to ensure that these actions are carried out. Given the 
Nation's fiscal challenges and those that exist within NASA, the 
availability of significant additional resources is unlikely. NASA has 
the opportunity to establish a firm foundation for its entire 
exploration program by ensuring that the level of knowledge necessary 
to allow decision-makers to make informed decisions about where 
continued investment is justified. Doing so will enhance confidence in 
the Agency's ability to finally deliver a replacement vehicle for 
future human space flight.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to respond to any questions that you or other Members of the 
Committee may have.

                         Biography for Allen Li
    As Director of the Acquisition and Sourcing Management Team, Mr. Li 
is responsible for leading GAO's work at the National Aeronautics and 
Space Administration (NASA) and for reviewing defense acquisition 
programs. He also serves as the Team's Director for Operations, 
managing day-to-day activities of a geographically dispersed group. 
Examples of recent work include NASA's efforts to develop and build the 
International Space Station (ISS), Crew Exploration Vehicle (CEV), the 
James Webb Telescope, and Shuttle alternatives for supplying the ISS; 
the Agency's management of its Deep Space Network (DSN); and NASA's 
implementation of its Integrated Enterprise Management Program. Defense 
work recently completed include identification of the risks associated 
with the development of the Navy's EA-18G electronic attack aircraft.
    Prior to assuming his current duties, Mr. Li was an Associate 
Director in GAO's Energy, Resources, and Science Issue Area where he 
directed work on research and development, nuclear safety, and 
Department of Energy management issues. Over the past twenty-seven 
years at GAO, he has worked in several other units, including GAO's 
Transportation Issue Area where he specialized in aviation safety and 
air traffic control modernization. Mr. Li has frequently testified 
before Senate and House Committee and Subcommittees on civil and 
military issues. He also testified before the Columbia Accident 
Investigation Board following the tragic loss of the Shuttle Columbia 
and its crew.
    Mr. Li has received several awards at GAO: the Comptroller 
General's Distinguished Service Award, two Comptroller General's 
Meritorious Service Awards, and Director and Outstanding Achievement 
Awards from several GAO units. He was selected for GAO's Senior 
Executive Service in February 1993 and designated Associate Director of 
Transportation Issues. Mr. Li has a B.S. degree in Aerospace 
Engineering from the University of Maryland. Mr. Li is married to the 
former Ellen Dziuszko and lives in Oak Hill, VA. They have two adult 
children, Christopher and Allison.

                               Discussion

                        Congressional Oversight

    Chairman Boehlert. Thank you very much, Mr. Li.
    Let me start by asking you some of the questions I 
addressed in my opening statement, and when you respond, I 
would like Dr. Horowitz to respond to your response.
    The questions were what specifically should Congress be 
doing and what documentation should we be seeking to keep a 
watchful eye on Orion development?
    Secondly, and now that the contract has been awarded, what 
other steps should NASA be taking to avoid cost escalation?
    Mr. Li. Your first question has to do with exactly the 
point that I just ended with, which is the tools are there. The 
NASA Authorization Act will require NASA to report to this 
committee on the progress and all the technical risks 
associated with its program. Those are some things that this 
committee did not have before. I believe that your use of those 
particular tools will be very important, and I think that for 
them to provide you with honest answers in terms of where the 
status is, is going to be extremely important.
    The second question is one that I think we all have to be 
worried about. There are a lot of things that NASA can be 
doing. They have identified that they have reduced the risks. 
Obviously, in this particular case, I have indicated that I 
don't agree with them. I think that they have gone further than 
they should. Be that as it may, the contract is signed. Let us 
move on. I believe that at this point in time, what NASA needs 
to do is to abide and conform with the policies and management 
guidance that is going to be finalized, hopefully in the coming 
weeks, and that will provide for more knowledge-based decisions 
in the future.
    Chairman Boehlert. Thank you very much, and Dr. Horowitz, 
just before you respond to that, let me point out--and I think 
Chairman Calvert and Mr. Rohrabacher before him, and Mr. Udall 
will agree--that essentially we have got the Nunn-McCurdy 
language in the authorizing legislation, and that is a tribute 
to the Subcommittee and to the foresight of one of our most 
valuable members who is no longer a member of the professional 
staff, Mr. Adkins, Bill Adkins.
    Mr. Horowitz.
    Dr. Horowitz. Thank you, sir.
    The first question, what should we do, and we do have 
mandatory reports which we will provide to you on a timely 
basis. I believe we have been very good recently at providing 
all reports to this committee as requested, and we will 
continue to do so.
    But I think we are going to go above and beyond that, and 
the way we are going to do that is with open communications. We 
are going to come and visit you and let you know. You won't 
have to wait for a report to let you know what is going on. I 
have charged my staff to make sure that when things are 
happening, we keep you informed. It is our job to keep those 
lines of communication so you know what is going on. You have 
every right to know how your program is going, and we are very 
proud to share it with you.
    What should we do to avoid the cost of overruns? A day 
doesn't go by that I don't say this to my staff. This is all 
about performance, cost, and scheduling. Every day you need to 
ask yourself, whether you are working on a contract, whether 
you are working on a design idea, whether you are working on an 
integration issue, you always have to think about performance, 
cost, and schedule. Having that in the forefront of your mind 
will allow us to do things like implement some of the 
recommendations that GAO gave us on making our contracts more 
responsible and to give the government better value for its 
dollar.
    So that is basically the mantra and those are the ways that 
we are going to avoid the cost overruns.

                     GAO's Response to NASA Changes

    Chairman Boehlert. Let me commend you for the open 
dialogue--continuing openness and continuing dialogue with the 
Committee and the Members and the staff. That is essential.
    Mr. Li, if you had to give a mark, how would you grade 
NASA's response to the GAO report?
    Mr. Li. Well, I have to be honest with you. When I first 
got the written response to the draft report, I was 
disappointed since they non-concurred. But I do believe that 
the events that have occurred subsequent to that--and I believe 
that both Houses, both this particular Committee and the 
Senate, forced a better understanding and caused NASA and my 
team to get together, and we discussed our differences. And I 
believe that that was--as a result of that, as you indicated in 
your opening statement, I think that is what oversight is. That 
is what good government is. We were able to have them have a 
better understanding of what our concern was, and as a result, 
they modified the contract to have options. I think that was a 
step in the right direction.
    Chairman Boehlert. Thank you, sir, very much. This 
Committee believes very strongly in oversight.
    So often in the Congress we do good deeds with the best of 
intentions and pat ourselves on the back and say ``Boy, wasn't 
that great?'' Let us go on to the next thing, and don't pause 
to go back and see if what we did originally was the right 
thing and people are responding in the appropriate manner. So 
you have given us some good direction, and I want to thank you 
on behalf of the entire Committee.
    With that, Mr. Gordon.

                            Budget Concerns

    Mr. Gordon. Thank you, Mr. Chairman.
    I am afraid that there is not going to be much done about 
our spiraling budget deficits over the next two years, but I 
think in the election of 2008, both on the Presidential and 
Congressional, it is going to be a major issue. And with that, 
there is going to be needed budget pressure. I am concerned 
about NASA being able to survive and get the increases that we 
are talking about. And so we may have to deal with not only not 
getting those increases, but it could get worse.
    Now, let me--I want to--that is the context. I want to 
congratulate NASA in terms of the approach you took with the 
CEV in terms of not overreaching in terms of technology and 
trying to, you know, trying to do the job with reachable 
technology. I think that was a smart approach and I think it 
follows Mr. Griffin's overall approach to things. I compliment 
you for that.
    Now, in your non-concurrence letters, you were very 
confident about being able to complete on time and on budget, 
and in your testimony you have here today. And so since you 
have such confidence, would NASA be willing to accept a formal 
cost cap on the CEV program?
    Dr. Horowitz. Well, I believe, sir, to answer your 
question, we actually are operating under a cost cap. The--I 
have been given a budget. I have to make this program fit 
inside that budget or we cannot do any of the other things that 
we want to do. If I allow the CEV development to run over cost 
and schedule, we are not going to be able to do the goals of 
going on to the Moon and beyond because what you see here----
    Mr. Gordon. So then what are you going to do, then, if--
that is your job, so you are going to keep it within cost, you 
say.
    Dr. Horowitz. Right.
    Mr. Gordon. So will you take money from the rest of the 
exploration program or from other agency activities?
    Dr. Horowitz. Everything has to----
    Mr. Gordon. What will you do?
    Dr. Horowitz. Everything has to come out of my exploration 
budget due to the exploration. We are going to make our 
programs fit inside of exploration. You only have the three 
things I talked about before. You have performance, costs, and 
schedule, and you need a certain minimum performance, for 
example, getting the CEV to orbit and accomplishing that 
mission. You need more performance to get to the Moon----
    Mr. Gordon. So if you take it out of exploration, then what 
if you just wind up with a CEV and nothing else?
    Dr. Horowitz. Well, the other thing you have left is 
schedule. If you can't get the job done with minimum 
performance and you have only a certain number of resources----
    Mr. Gordon. But if you are going to have to get into 
resources and you are doing away with--so are you just saying 
you will just keep stretching the bounds?
    Dr. Horowitz. You have no choice. With a set number of 
resources to achieve a minimum performance, if you are falling 
behind, the only out you have to stay within your resources----
    Mr. Gordon. So then if you are--again, you are saying very 
competently you are going to do this, so why would it not be 
appropriate to have a formal cost cap?
    Dr. Horowitz. I can take that for the record. I don't know 
any reason why you wouldn't, but I can go back and discuss that 
with my staff.
    [The information follows:]

    Historically, cost caps have not proven effective in managing major 
NASA research and development (R&D) programs. Constraining the 
International Space Station (ISS) to $2.1 billion annually did little 
to control overall program costs. And while life cycle cost caps are 
regularly imposed on small, discrete projects (e.g., Explorer, 
Discovery) as part of the selection process, they are not easily 
adapted to major R&D efforts that extend far beyond the current budget 
horizon. In the case of large development programs such as 
Constellation, cost caps can be problematic as they depend on 
assumptions regarding outyear funding. The future priorities of the 
country are not known and can change over the life of the Constellation 
program.
    At its early formulation stage, the Constellation Program is 
certain to face ``unknown unknowns'' as we continue to refine 
requirements, develop advanced technologies, and begin to integrate the 
various systems into an operational infrastructure to enable long-term 
exploration of the Moon and Mars. When Constellation moves into the 
implementation phase, after Preliminary Design Review (PDR) in the 
spring of 2008, design, cost, and schedule baselines will be 
established, and Program performance will be measured against metrics 
established at the various key decision points throughout the life of 
the program. At this juncture, NASA will submit Constellation project 
life cycle cost commitments to Congress. Under Section 103 of the NASA 
Authorization Act of 2005 (P.L. 109-155), NASA is required to submit 
Major Program Annual Reports, the first of which shall include a 
Baseline Report that is to include an estimate of the life cycle cost 
for those programs. Under Section 103, NASA is required to report 
changes to the Baseline Report--including life cycle cost estimates--as 
part of the annual budget request. NASA will notify the Committee at 
other junctures, as necessary, if there are any adjustments to life 
cycle cost estimates. As such, NASA would advise against imposition of 
a formal statutory ``cost cap'' on CEV development.

    Mr. Gordon. Okay. It looks like somebody may have already 
discussed it for you there. Do they have anything you want to 
add to it?
    Dr. Horowitz. Well, the only other part is--which comes to 
my initial statement is one of the things that I will guarantee 
will drive the costs higher over time is if we have unstable 
funding for the program, and I can't provide stability to the 
project. Also----
    Mr. Gordon. You can guarantee it will get more expensive if 
you have to stretch it out a long time, too.
    Dr. Horowitz. Right, and the thing that usually happens is 
if you short fund a program in the near-term, you can guarantee 
that you will stretch it out and you will increase its costs in 
the long-term.
    Mr. Gordon. Which again goes back to the original problem.
    Mr. Li, GAO's July 17 report to us made the following 
recommendation. In light of the fact that--and I am quoting 
you--or the report, which is probably you. ``In light of the 
fact that NASA plans to award the contract for CEV in September 
of 2006, Congress should consider restricting annual 
appropriations and limiting NASA's obligations for CEV project 
to only the amount of funding necessary to support activities 
needed to successfully complete the project's preliminary 
design review.'' Do you still stand behind that recommendation, 
and if not, why not?
    Mr. Li. I do. I mean, the application of a knowledge-based 
acquisition strategy is one which within the body of work that 
we have conducted at GAO has proven and has shown that when you 
don't abide by those particular principles, which is not going 
beyond what your knowledge tells you, that you do run into 
trouble. I mean, the Committee has a great list of DOD programs 
and this particular committee is aware of one of them, being 
the NPOESS, that have great exceeded their costs and projected 
costs because of such things as faulty assumptions, and I will 
have to say, there are some programs that we have reviewed that 
have faulty assumptions associated with the use of heritage 
technology. That has happened. So I am cautious when I hear 
NASA indicate that this is low-risk technology.
    My recollection is that people that were telling me about 
the space station not being very high technology. They are just 
modules up in space, and yet, I seem to recall a $5 billion 
increase somewhere along the line.
    Mr. Gordon. Mr. Li, I want to give Dr. Horowitz a chance to 
respond. I guess what we are seeing here is this cloud of 
skepticism because of NPOESS and other things. We only want--we 
think--at least, I think that we have the best vets available 
at NASA now and they are doing the best job available, but 
there is this skepticism and the concern that you can't put 
1,000 pounds of canaries in a 500-pound box.
    And so what would be your response to Mr. Li's--or to that 
recommendation?
    Dr. Horowitz. Well, sir, the thing that I wanted to bring 
out in this program is we talk about the knowledge and 
technology. This is much different than, for example, NPOESS, 
in that we know exactly what we want here.
    One of the things--and to give the space station as an 
example, is the requirements kept changing, and guaranteed, if 
you keep changing your requirements: how big is it going to be, 
how many people are going to be on it, all that----
    Mr. Gordon. What about the recommendation that Congress 
should consider restricting annual appropriations and limiting 
NASA's obligations for CEV project to only the amount of 
funding necessary to support activities needed to successfully 
complete the project's preliminary design review?
    Dr. Horowitz. Well, this comes back to the point of the 
stable funding. We have a budget profile laid out to 
successfully execute this project, and if we short fund the 
project in the near-term when we are working our way to the 
preliminary design review, now with our contractor on board, we 
will guarantee to delay the execution of this project and not 
meet the milestones, and therefore actually the program will 
get more expensive, not less expensive.
    Mr. Gordon. Well, Mr.----
    Mr. Li. I disagree because there should not be a connection 
between funding and the different phases of an acquisition. You 
can still ensure that you have that funding in the future 
without breaking it at PDR, for example.
    Mr. Gordon. I need to stop, but I guess the premise that we 
are concerned about here is this. I don't think it is a 
foregone conclusion that we are going to do this no matter 
what, and to some extent, you are saying okay, it can always be 
stretched out but it will cost more. Well that means ultimately 
there has to be some money coming in.
    I don't know--you know, there is a point at which we might 
very well say this is too expensive, this is not working, let 
us stop, you know, cut our losses. And you seem to be working 
under the premise we are going to do it no matter what, and I 
am not sure that is what Congress is going to do. And so that 
is what we are trying to do is reach a point where if we can do 
it in a responsible way.
    Chairman Boehlert. Mr. Calvert.
    Mr. Calvert. Well, I guess I got a little more positive 
attitude, but I would like to point out, too, by the way, the 
deficit isn't spiraling out of control. It has actually come 
down $109 billion, based on the CBO estimate, but that is 
another subject. I just thought----
    Mr. Gordon. Are you satisfied?

                         Transition Challenges

    Mr. Calvert. We are making progress. We are happy to say--
like I said, I just have a different attitude.
    But I want to point out that there are some things that we 
do in this country that are extremely important, and I think 
this is one of them. One point that I want to make is that if 
we don't have this operational within the time constraints that 
you have set out, 2014--and this is, I guess, a question for 
Dr. Horowitz--what is going to happen to that labor force in 
Houston and in Florida?
    Dr. Horowitz. Sir, this is one of the biggest concerns and 
something we work on every day is the transition. One of the 
reasons the designs look the way they do before you is one of 
the key elements of design was how do we make the most value of 
all the investment we have, not just in our hardware and our 
technology, but in our workforce, because the workforce is the 
key. It is the people. People say what does it take to make a 
rocket fly, and they say you talk to engines and propulsion. It 
is not that; it is the thousands of people that we have 
working----
    Mr. Calvert. Okay----
    Dr. Horowitz. If we lose that support----
    Mr. Calvert. I remember, you know--we are about the same 
age, maybe you are a little bit younger, but the Apollo Gemini 
program, when we had that gap between the Apollo Gemini and the 
Shuttle program, what happened to the labor force then?
    Dr. Horowitz. Sir, that was a disastrous time for NASA. We 
lived through that----
    Mr. Calvert. Okay. So we can't allow----
    Dr. Horowitz. We lost all that capability----

                       International Competition

    Mr. Calvert. We cannot allow that to happen, and not only 
that, if we are not in outer space between that so-called gap 
period between 2010 and whenever we successfully launch these 
vehicles, does that mean nobody will be in outer space?
    Dr. Horowitz. Absolutely not, sir. We have had demonstrated 
to us that there are a lot of other countries very interested 
in going to space.
    Mr. Calvert. There is competition out there today, isn't 
there?
    Dr. Horowitz. Yes, sir. Anybody who understands what this 
is all about is out there going to space. There are many other 
people.
    Mr. Calvert. You know, I was looking at the--you know, I 
was commenting with my seatmate here about the Ares V and the 
lift capability of that, and of course, we go back and think of 
the old Saturn, but that has a lift capability of what, 
approximately 100 tons?
    Dr. Horowitz. This one can lift a little more than a Saturn 
V, about 125 metric tons.
    Mr. Calvert. One hundred twenty-five metric tons. What is 
the heaviest lift capability we have now?
    Dr. Horowitz. It is less than the small rocket you see to 
its left, which is on the order of 20 to 25 metric tons.
    Mr. Calvert. Now, is there potentially other revenue 
streams that could be utilized for Ares V in other parts of the 
government?
    Dr. Horowitz. Yes, sir, I am sure there are other people 
that might be interested.
    Mr. Calvert. You mean, there is no country in the world at 
this point that can launch 125 metric tons?
    Dr. Horowitz. Sir, there is nobody else who has this 
capability.

                       More Transition Challenges

    Mr. Calvert. Okay. Now, you put together a pretty good 
contractor team, and the people who put this together, like you 
are saying, we are kind of going back to the future, as I have 
heard the slogan before. That the technology that you are using 
is--you are not going to use risky technology that has not 
proven itself. Is that a correct statement?
    Dr. Horowitz. That is correct.
    Mr. Calvert. So you feel pretty comfortable that the budget 
you have set forth and the time constraints that you are under, 
you can meet?
    Dr. Horowitz. Yes, sir, absolutely.
    Mr. Calvert. How confident would you say are you at 
controlling overall cost development of the Orion Crew Vehicle 
and also the Ares V?
    Dr. Horowitz. Sir, we are very confident. We have all the 
technologies above what we call TRL [Technology Readiness 
Level] 6, so we don't see any issues there.
    Mr. Calvert. Okay.
    Mr. Li, I do believe--I am a former business guy, you know, 
and I--when I was in the restaurant business we worked on a 
three percent margin. So I woke up every morning and tried to 
figure out what I was going to sell and what the profit margin 
was going to be, and just try to come out alive at the end of 
the day.
    So obviously, we are dealing with larger numbers here, but 
when we are going through this process--and I think we are--I 
think Congress is committed to see this through. I think the 
country is committed to see this through. You know, from my 
perspective, I want to be on the Moon to greet the Chinese, not 
the other way around. That is just maybe a nationalistic 
statement on my part, but that is just the way I am.
    But what should we do as a Committee as we move forward on 
this--what points would you think are most important to make 
sure that we have oversight to make sure that we keep this 
moving in the right direction and we maintain reasonable cost 
control as we move forward? And recognizing when you are 
dealing with new technology--I am on the Armed Services 
Committee, you know, the F-22 we didn't do too good.
    Mr. Li. No.
    Mr. Calvert. And so--as a matter of fact, any--as you--and 
I know you work on DOD. We do a lousy job in the Department of 
Defense. I am hoping that NASA does a much better job than we 
do in the DOD on new weapons system procurement. As you know, 
on the new Joint Strike Fighter, I think that thing is out of 
control again, and my friends over here, I mean, we are going 
to have to get that brought in or we are not going to be 
developing that program.
    So what can we do to stay on this to make sure that we keep 
control on this process?
    Mr. Li. Thank you for your question. I think the issue 
here--and we touched on some of the points. You were raising 
the issue of the industrial base, I think is the way that I 
would characterize that in terms of with the Shuttle winding 
down, what happens to all those people. I am also worried, not 
only on those--of the people that they are using, but also 
their suppliers and also the various tiers of suppliers that go 
by. So I think that transition is extremely important.
    I think the big challenge, sir, is going to be integration. 
I think the issue here is not just talking about the CEV, 
talking about the CLV, talking about the CaLV, it is the whole 
ball of wax. And I am encouraged because in talking with Dr. 
Horowitz, I understand that he is trying to build people within 
his team that will do that integration, but I think that is 
going to be a big challenge.
    Chairman Boehlert. Thank you. The gentleman's time has 
expired.
    Mr. Udall.

                         Integration Challenges

    Mr. Udall. Thank you, Mr. Chairman.
    Mr. Li, Dr. Horowitz, as I mentioned in my opening 
statement, I also serve on the Armed Services Committee, as 
does my good friend from California, Mr. Calvert. And from that 
vantage point, I have seen some of the problems that have 
arisen when we have tried to acquire space systems. And I 
wonder whether the DoD experiences for some reason for caution 
as we assess NASA's plans.
    I wanted to read a couple of quotes this document, the 
Acquisition of National Security Space Programs Influential 
2003 Joint Task Force. First, ``Unrealistic estimates lead to 
unrealistic budgets and unexecutable programs. The space 
acquisition process is strongly biased to produce 
unrealistically low cost estimates throughout the process.'' 
And to another quote, ``The government acquisition environment 
has encouraged excessive optimism and a can-do spirit. Program 
managers have accepted programs with inadequate resources and 
excessive levels of risk.''
    The Task Force then goes on to recommend that when 
estimating cost of space acquisition programs, ``National 
security space programs should be budgeted at the 80/20 level, 
which the Task Force believes to be the most probable cost.'' 
As you know, NASA currently is using a lower competence level 
to estimate the cost of its CEV program, and the difference 
between NASA's cost estimate and the estimate we get when we 
follow the Task Force recommendation is $5.5 billion, not 
insignificant, which is also a significant increase in the 
estimated cost.
    Mr. Li, GAO has done a lot of oversight on national 
security space programs, and you have looked at NASA's 
Exploration program now. Are there any parallels that from your 
point of view that we need to be concerned about as we 
evaluate----
    Mr. Li. Thank you for your question, and I have had the 
opportunity to work on many of those programs. Mr. Calvert, 
actually for several years I monitored the F-22 program, well 
aware of the problems associated with Joint Strike Fighter 
(JSF).
    But on the space acquisition, the space program 
specifically has been a real thorn in DOD's side. To DOD's 
credit, they are making some changes right now, recognizing 
that the things that they have done in the past, which is 
buying something all at once doesn't work. They are going to be 
a lot more careful in making sure that those things that they 
have to discover are going to be in science and technology. 
Once they have those technologies mature, they will bring that 
forward to--in the systems development process.
    The things that NASA can learn from that is that there are 
some issues, as I indicated initially. They made some 
assumptions on programs like NPOESS and programs such as SBIRS 
High, programs that have identified the fact that technology, 
low-risk technology, that they were bringing from heritage type 
programs, actually did not pan out, and that is why I am 
cautioned--and I would like to think that some of these things 
that NASA are doing is going to be low-risk, but I think that 
from the standpoint of integration, when you are bringing--I 
recall when I had my old 1976 Dodge, I had the components for a 
car. The ones that I have right now on my 2000 Durango are 
quite different. They are the same components, but when they 
put them together, when I open that hood, I can't even figure 
out what hose is going to where. That is the issue. The 
components are probably basically the same, but once you 
integrate them, it is a completely different story.
    Mr. Udall. I think Chairman owns a '76 Dodge as well. But 
Dr. Horowitz, would you care to comment?
    Dr. Horowitz. Oh, sorry. I have a '70 TR-6 I put a Corvette 
engine in, so that was quite an integration challenge. You can 
come to my shop any time.
    No, absolutely. We have the same concerns. We worry about 
integration. This is a large integration task. We worry about 
doing it a piece at a time. These are the first two pieces. Our 
two pieces just happen to be a lot bigger. If you look at all 
of the things it is going to take for exploration, we are 
taking off bite-sized chunks at a time. They are just big bites 
because of the size of our vehicles that we fly.
    Technology, again, I shall come back to. We are using as 
much known technology, and we do have technology lines. We have 
identified the top 40 technologies and when they are urged to 
support future programs. In fact, one of the things we can use 
your help and support in is making sure we can protect our 
technology investments because we do realize that if we don't 
invest in those early that later they will come to bite us, so 
we are prioritizing every single one of our technologies, tying 
to every place we need it to make sure that we get the 
development on time and on schedule, and we are using and the 
new guidance, which was from the recommendations from the GAO 
on the decision points and the key decision points are all 
being identified, and we are putting proper oversight and 
insight at each of those points.
    Mr. Udall. Thank you.
    Chairman Boehlert. The gentleman's time has expired. Mr. 
Rohrabacher?

                          More Budget Concerns

    Mr. Rohrabacher. Well, let me admit that I don't know a 
darn thing about engines of cars, and I don't even know how to 
change the oil in my car, plus put parts in from other cars, et 
cetera, but one thing I do know about is getting the bill at 
the end of the month and trying to figure out how I am going to 
pay it. And what I am looking at here is I am trying to figure 
out what the bill is going to be at the end and how we are 
going to pay it.
    Let me see if I can get this straight. Dr. Horowitz, to 
develop the Orion, the Ares I is the first of the two rocket 
parts of the Orion project. So how much will it cost us to get 
one of those rockets so that they are ready to go and do into 
space?
    Dr. Horowitz. Okay, sir, the----
    Mr. Rohrabacher. The rocket? Now, you say you are going to 
use a lot of things that are coming from other rockets, so----
    Dr. Horowitz. Okay, sir. Thank you for that question.
    It is interesting in the development. We are developing a 
launch system, so what you will see is, you will see increase 
cost in the development of the Ares I and the reason that we 
are increasing the development is we have made some changes to 
make the parts more common between the Ares I and Ares V. We 
added the J-2. We had originally based it on a Space Shuttle 
Main Engine, and so in order to drive down the lifecycle cost 
of the program, it was worth investing and developing that 
engine earlier, which will then not be needed to be 
redeveloped.
    Mr. Rohrabacher. Well, how much is the price tag at when 
you put the thing up? The first one?
    Dr. Horowitz. Well, the whole development, I will have to 
take that for the record as the exact cost of the entire 
integrated development. The recurring cost that came of the 
estimates, including flying the capsule, was in the order of 
$200 million a flight.
    Mr. Rohrabacher. Okay, but how much is it going to cost us 
to get to the point to get to the recurring time period?
    Dr. Horowitz. Well, I have the breakdown by the whole 
Constellation Systems. I can get you the breakdown by 
components if you like. I can take that for the record.
    [The information follows:]

    Launch vehicle costs for the Ares I Crew Launch Vehicle through the 
first human launch, currently projected late in FY 2014, are 
approximately $10.8 billion. This number excludes the Orion Crew 
Exploration Vehicle, mission and ground operations and facility 
modifications, and program integration and other program-level costs. 
Orion Crew Exploration Vehicle project costs through first human flight 
are about $10.3 billion. Therefore, combined Ares I and Orion project 
costs through first human launch are about $21.1 billion. If related 
required programmatic and non-flight hardware costs are included in the 
estimate, it will cost about $33.5 billion to get to the point of first 
human launch projected in 2014.
    All of these numbers include reserves, but exclude Corporate G&A. 
These numbers include estimates for FYs 2012, 2013, and 2014, which lie 
beyond the budget horizon.

    Mr. Rohrabacher. Okay, so in other words, we are moving 
forward with both of these now----
    Dr. Horowitz. Right.
    Mr. Rohrabacher.--and that is part of the same budget 
figure----
    Dr. Horowitz. Yes.
    Mr. Rohrabacher.--so it is hard for you to break out what 
that first one is going to be?
    Dr. Horowitz. Yes, sir. And I can go get you actual 
breakdown.
    Mr. Rohrabacher. Okay, but you are telling me that it is 
going to be $200 million a flight, starting what year?
    Dr. Horowitz. The first human flights are scheduled--the 
operational flights will be in test in 2012.
    Mr. Rohrabacher. Right.
    Dr. Horowitz. We will have the first fight test in 2009, 
but the full-up operation are scheduled for 2014.
    Mr. Rohrabacher. Yes, and that is $200 million a flight 
from that point on?
    Dr. Horowitz. Right, and that is a functional flight rate, 
also.
    Mr. Rohrabacher. And you are guessing how much? Is it 30? 
Do I see the figure $31 billion here somewhere?
    Dr. Horowitz. The overall program is about $30 billion for 
the horizon forecast out into the 2011 timeframe if you add up 
all of the cost for the entire Constellation program, which 
includes the launch vehicles, the Orion spacecraft, the ground 
systems, the technology program, the human-research program, 
and the robotics precursor programs, which will fly a mission 
to the Moon in 2008, and impactor, and a lander.
    Mr. Rohrabacher. And that is how much, all together, then?
    Dr. Horowitz. All of that, integrated, to the 2011 
timeframe is approximately $30 billion, total.
    Mr. Rohrabacher. Thirty billion, and then somewhere along 
the line, when we are actually going to get back to the Moon, 
it is going to cost us about $110 billion or something?
    Dr. Horowitz. Sir, I don't know. I will take that for the 
record what the total is, but I just have the run out for the 
current budget out in front of me.
    Mr. Rohrabacher. Okay, so we are going to spend over $30 
billion before we see that rocket go up. Is that right?
    Dr. Horowitz. No, sir. You will see the first test flight 
of the Ares I----
    Mr. Rohrabacher. One----
    Dr. Horowitz.--in 2009, which is several years before----
    Mr. Rohrabacher. Right.
    Dr. Horowitz.--five years before years get to the end of 
that timeline.
    Mr. Rohrabacher. No, when I say go up, I mean actually be--
--
    Dr. Horowitz. On an operational mission.
    Mr. Rohrabacher. Operational basis.
    Dr. Horowitz. With people?
    Mr. Rohrabacher. Right.
    Dr. Horowitz. Ready to go? Full-up? That would be about the 
total cost of the program to that point.
    Mr. Rohrabacher. Thirty-one billion dollars up until that 
point?
    Dr. Horowitz. That is the number I have for the total run-
out of the current budget.
    Mr. Rohrabacher. Mr. Li, do you think that is a realistic 
figure?
    Mr. Li. Well, since I don't believe that the requirements 
have been fully established, I don't think that there is any 
confidence in what that number is, and we won't have a better 
idea of what that is until 2008.
    Mr. Rohrabacher. Okay. Until, 2008, all right. So let me 
ask you this: where is the money coming from in NASA for that 
money? Are we reducing spending elsewhere to make that money or 
is that coming out of a new type of potion that we have that 
creates wealth out of nothing?
    Dr. Horowitz. Sir, thanks for that question.
    The money needed to do this program is all of the money 
that has been allocated to the exploration line. And everything 
that we have laid out fits inside of the budget that we have 
been given. So we have put together a program that fits inside 
of the resources that have been allocated to us.
    Mr. Rohrabacher. You know, I would hope that some day 
someone who testifies somewhere before I leave would come and 
say, you know, we have just decided that a couple of these 
other projects have less value than the one we are talking 
about today, and we are going to get rid of two centers, two 
NASA centers. We have ten NASA centers. We are going to get rid 
of two of them in order to have a project to the Moon; and I 
have not heard that. I have been here 18 years, and I have 
never heard anybody talk that way.
    Chairman Boehlert. Mr. Rohrabacher, you know my affection 
for you, so I am going to make you feel better. They are 
getting rid of the Shuttle. That is a good example.
    Mr. Rohrabacher. Well, that is a----
    Chairman Boehlert. So do you feel a little bit better?
    Mr. Rohrabacher. I do feel better.
    Chairman Boehlert. All right. That is good. And the 
gentleman's time has expired.
    Mr. Rohrabacher. Well, thank you very much.
    Chairman Boehlert. Mr. Green?
    Mr. Green. Thank you, Mr. Chairman and Ranking Member. As 
we go back to the future, my fear is that we may come back to 
the past. We are talking about, as I understand it, $122 
billion through 2018, and let me just start by asking if that 
is a correct number for Constellation costs. Is that correct, 
$122 billion through 2018?
    Mr. Li. Yes.
    Mr. Green. Given that as correct, and understanding that 
sometimes we have persons who see very large coffers and they 
spend rather lavishly, what do we have contained within this to 
ensure us that we won't buy $500 hammers that we can go out to 
the hardware store and purchase for, shall we say, considerably 
less, or that we won't buy toilets seats for hundreds of 
dollars that we can purchase for considerably less. And I say 
this only because it has happened. This is not something that 
would be unique if it occurred as we go back to the future. So 
would one of you fine men care to elaborate, please?
    Mr. Li. Well, you know, I don't think that based upon the 
fact that, as I indicated, the requirement have been 
sufficiently identified. I cannot with confidence tell you that 
there won't be any cost grown. I think that a lot of the 
technologies that they have identified are things that do make 
sense. I have to hand them that much, but the fact of the 
matter is there are a lot of things that we don't know yet, and 
some of those things will happen during testing, during 
integration. And at that point in time, as we know more, then, 
we will be able to make some better projections. But I think 
NASA is the one that needs to answer you question.
    Dr. Horowitz. Yes, sir. And thank you for that.
    The idea of runaway costs on individual items, the way you 
control costs in a program is you design analysis cycles, we 
are in our second iteration of design analysis cycles. We have 
already designed this vehicle four times, so we are actually 
gaining knowledge and getting a higher confidence in our 
estimates.
    When you start the program and you just say I want to go 
the Moon, you have some initial concepts, and you make some 
estimate using the estimating tools. As you get further into 
the design, you get better a better cost estimates until 
eventually, when you finally build it, of course, you know you 
are at 100 percent. So we are improving our cost estimating 
every single design cycle, and in fact, we are in a cycle right 
now which will provide us an even higher confidence in our 
estimate. We actually have a signed contract for a vehicle----
    Mr. Green. If you would, Doctor, allow me to interrupt for 
just a moment. Give your guesstimate as to how sure you are of 
this. Let us assume you could be 100 percent or you could be 
something less than 100 percent. How sure are you that we could 
avoid the concerns that I have called to your attention?
    Dr. Horowitz. Well, sir, I am extremely certain that we can 
avoid these because we are going to implement a lot of the 
tools----
    Mr. Green. Is that 100 percent?
    Dr. Horowitz. I am 100 percent certain that we can avoid 
these problems with proper program management and proper 
oversight.

                       More Transition Challenges

    Mr. Green. Okay. Now, another question, quickly, and this 
one has to do with the integration of people as opposed to 
equipment. If we integrate as we assume we will, what 
percentage of person will be lost from the project, will 
actually lose their jobs?
    Dr. Horowitz. Sir, thank you for that question. It really 
comes to one of the hearts of why this transition is so 
important to all of us. Basically, the NASA budget is fairly 
flat. We know what it is; we know what percent we spend on the 
workforce inside of NASA and how much we spend on our 
contractor workforce. That number is not going to change; 
therefore, the number of jobs and the number of people aren't 
going to change. What we need to do is transition the workforce 
to do different things. We need the same number of people doing 
different things. Will there be some people displaced in the 
transition? Absolutely. Our goal is to keep as much and all of 
the talent we need to accomplish----
    Mr. Green. Reclaiming my time for just a moment. Will most 
of those people be at the upper level, lower level or mid-level 
that we will lose?
    Dr. Horowitz. Sir, I don't have an estimate at which level 
which people will be lost. There will be a transition at every 
level at every program.
    Mr. Green. My assumption is that you will need the 
engineers, so we won't lose a lot of engineers. Is that a fair 
statement?
    Dr. Horowitz. Well, we are going to need engineers, 
technicians, operators, production people, managers, program 
managers, project leaders at all levels.
    Mr. Green. But at this level, you have no ideas where you 
will suffer your losses in terms of personnel.
    Dr. Horowitz. I don't have any hard numbers to tell you 
exactly which positions at which level that are going to be 
lost. We are working on the transition plans at this time.
    Mr. Green. And when do you anticipate having that type of 
intelligence?
    Dr. Horowitz. Well, the estimates will get better all the 
time. I can take that for the record and get back to you with 
our current, rough estimate, and then as they improve, we can 
provide you as the transition plan progresses, more accurate 
estimates.
    Mr. Green. I would be honored if you would.
    Dr. Horowitz. It would be my pleasure, sir.
    [The information follows:]

    Civil servants currently supporting the Shuttle Program are 
generally either part of the operations infrastructure at Kennedy Space 
Center, or perform core human space flight functions (training, 
equipping humans to fly in space) at Johnson Space Center (JSC) and 
Marshall Space Flight Center (MSFC).
    Since the Constellation Program relies upon certain Shuttle-derived 
technologies, we expect to find some commonality in hardware and 
operations requirements as we transition from Shuttle to Orion. At the 
same time, we are aggressively pursuing systems and processes that will 
allow us to operate more efficiently and effectively as we develop the 
Nation's new space capabilities. This effort includes commercial and 
international partnerships that could lower operations costs and better 
position us to achieve the Vision for Space Exploration's goals.
    During FY 2006, the Exploration Directorate embarked on a joint 
workforce review with Space Operations and NASA's Program Analysis and 
Evaluation group to study these very issues. The team completed the 
first of its planned center assessments at JSC in July, and will be 
visiting MSFC in November. The results of this study will feed into the 
FY 2009 Budget process, which will focus on the Shuttle-Orion 
transition.

    Mr. Green. And I thank you. I yield back the balance of my 
time.
    Mr. Calvert. [Presiding] I thank the gentleman. Mr. Hall, 
you are recognized.

                               CEV Safety

    Mr. Hall. I thank you, and I thank the chairman for having 
this, another good meeting. And I am thankful, also, for Dr. 
Horowitz, his history, his present, and what he going to be 
doing for us in the future. Both of our witnesses have alluded 
in their testimony the next few years are critical for NASA and 
the vision for space exploration.
    The Committee in particular is going to need to really 
exercise its oversight power to make sure that the vision stays 
on track and that we meet our stated milestones, and you have 
indicated 100 percent sure if you do that, and there is always 
an allowance for when they don't do it exactly right; then that 
percentage would be affected, plus or minus, but getting a CEV 
going now is very critical to us if we are going to shorten the 
gap between the retirement of the Space Shuttle--we know we are 
going to do that--and the Orion mission.
    I just have a couple of questions relating to the design of 
the CEV and the overall contract. As the Committee knows, I am 
not the only strong proponent of astronaut safety. We are all 
up here, every one us have that deep down in our crawl, and 
that has affected us back through the years of setting budgets 
and knowing that we have had to set them with safety in mind 
and knowing the effect that had on the budget and the increased 
increment of the budge for that, but we couldn't take a chance 
on that. I got funding in this for a study of crew escape 
mechanism for the Shuttle a couple of years ago. I can't 
remember exactly what it was. It seems like it was $15 million, 
somewhere along there.
    And somewhere along the way we, during one of the 
discussion of the budgets here, we found out they had third-
based some of that money to send John Glenn--and I am for 
sending old people up into space; I am all for that--but we got 
that finally place back and the money spent, and NASA explained 
to us that a mechanism just wasn't feasible for the Shuttle, 
and that is disturbing to know, but understanding the nature of 
the thing and the context and the weight of it, but they 
assured us that it is going to be part of the design of the 
next space vehicle, so Dr. Horowitz, give us some 
encouragement, and explain how the Orion is going to 
incorporate this crew-escape system, its effect, and its 
estimate of cost, if you can.
    Dr. Horowitz. Yes, sir. Thank you very much.
    As I stated in my testimony, the drivers to the design you 
see before you were based on the most important point you bring 
up, which is the crew getting to and from orbit. That 
requirement drove the entire design, so from the outset, the 
design allows for safety. The Shuttle, as a magnificent vehicle 
as it is, its complexity, and the fact of its basic layout, 
doesn't allow for an effective escape system. This vehicle, the 
escape system is depicted here by the small tower on the top, 
and it is very similar to what you may remember in the Apollo 
era which was tested on a Little Joe rocket. In fact, we just 
had meeting today to go over the design of the system that will 
test that escape system, which will be the first major test.
    That system is called the launch abort system, and it is 
designed in the vehicle so that if you--first you design a very 
reliable vehicle you hope never has a bad day. That gets your 
chances up. Then if you have a bad day, you have a plan B. And 
we had some of the world's best safety and reliably experts 
looking at all of the design trades. We went through 20,000 to 
40,000 of those, and the prediction is that this vehicle will 
enjoy, at least, an order of magnitude improvement in crew 
safety compare to our current Shuttle system.
    And it is built into the cost estimate of the CEV. Part of 
what you get with the CEV contract is the capsule and its 
service module, its adapter, and the launch abort system; it is 
all part of that entire contract, so you get all of that with 
this contract.
    Mr. Hall. And the estimate of the cost of the safety 
equipment?
    Dr. Horowitz. Sir, I will have to take that for the record. 
I do not know the exact breakdown of the launch escape system, 
but I can get those numbers for you.
    [The information follows:]

    NASA does not currently track Orion CEV costs in a way that allows 
the determination of the cost of the Launch Abort System and other 
components. NASA is currently working with the Orion Prime Contractor 
on a contract modification that will, among other things, modify the 
Work Breakdown Structure (WBS) to allow collection of costs by Service 
Module, Crew Module and Launch Abort System. This work will be complete 
in the early spring 2007 to support the activities for the FY 2009 
budget cycle.

    Mr. Hall. Now, you are going to hear a lot from us about 
safety from this point forward, and I think you expect that, 
and I think you encourage it. And I do, once again, feel good 
with you where you are, and thank you for you service to this 
committee, to this Congress, and to this country. And I yield 
back.
    Dr. Horowitz. Thank you, sir.
    Mr. Calvert. Mr. Ehlers.

                           Performance Margin

    Mr. Ehlers. Thank you, Mr. Chairman. First of all in 
response to the question asked by Mr. Rohrabacher asked a bit 
earlier, I have a different perspective, but for the same 
question, basically.
    And I think a basic problem, Mr. Rohrabacher, is it is 
usual story of Congress wanting more than it is willing to pay 
for. And I think we have given NASA--put them in a horrible 
vise, saying yes, we want to finish the Space Station. Yes, we 
want to keep the Shuttle flying. Yes, we want the CEV. And we 
don't want you to cut anything else. But in fact, they can't do 
that. So we see Aeronautics being cut at a very crucial time 
when our air traffic control system, badly, over the next 
decade, is going to need huge revamping. The FAA simply cannot 
do it themselves; they were depending on NASA.
    And so that leaves us an unresolved issue. In addition, the 
lack of funding for the many science experiments we can do, the 
various robotic devices, which as you know, cost much less than 
human space exploration, this is not a criticism of you, Dr. 
Horowitz. It is a criticism of Congress for having a bigger 
wish list than their pocketbook. But I think that is left you 
in a bit of a conundrum. But I am concerned; I still remember 
the X-33.
    I made a trip to California on behalf of the Committee. 
Several of the Members here were along. I came home from that 
trip convinced it would never work. I talked to people about 
it. The project went on. Finally it was killed. I think your 
final net investment and loss was between $2 and $3 billion. I 
am very worried about making these great predictions on the 
basis of something that you are not very far along. And I 
realize that you are using a tried and true method, but there 
are still problems when you put it together, when you add an 
extra stage to the Ares I rocket, et cetera.
    One concern I have is it is my understanding--and I may be 
wrong. If so, I would be delighted to be corrected. My 
understanding is that you want a performance margin between the 
weight of the rocket and its thrust, about an excess thrust of 
20 percent for normal rockets and 30 percent for Human-Rated 
Rocket. Is that correct, or is there a different performance 
margin that you are current planning to achieve with the Orion 
plus the Ares rocket?
    Dr. Horowitz. Sir, thank you for that question. I also went 
out to California and visited the X-33 and had the very same 
feelings. It was trying to violate the laws of physics, and 
that is expensive.
    Mr. Ehlers. Well, that was interesting, and I got into an 
argument with the engineers there, and they just kept insisting 
I just didn't understand.
    Dr. Horowitz. I got the same response.
    Mr. Ehlers. And I asked them for a response in writing so 
they could take time to clarify it for a poor, ignorant 
physicist, and the letter made no sense either.
    Dr. Horowitz. And I was a poor, ignorant aerospace 
engineer, and they treated me the same way.
    Mr. Rohrabacher. Mr. Ehlers, just for the record, there was 
an alternative to that project in the DC-X, which was supposed 
to be manufactured in my district, and the last administration 
chose the riskier proposition instead, let me note.
    Mr. Ehlers. At any rate, back to the performance margin.
    Dr. Horowitz. Yes, sir. Let me discuss a little bit about 
performance margin. And I appreciate that question.
    The way we treat performance margin is several ways. The 
launch vehicle itself has margins, so we will ask the vehicle 
to lift, say, 50,000 to a certain orbit. The project manager 
for the launch vehicle is keeping performance margin for his 
launch vehicle, so the vehicle may be able to lift 50,000 
pounds, and his margin is on the order of about 15 percent or 
so for the launch vehicle. We also have margin that the CEV 
project manager has to hold on his side in case his vehicle 
gets large, also.
    The integrated margin, right now, is for the total Moon 
mission, not just the low Earth orbit. We have huge margins to 
get to low Earth orbit. But to be able to carry up to the lunar 
mission, approaching 20/20 at this point, we have about 25 
percent performance margin on the amount of lift this vehicle 
can provide. And the very first test we did of the first engine 
component showed that it is exceeding its performance spec, but 
we are still going to keep the margin because you don't know 
where else you are going to need that margin.
    Margin is very important in a program like this, and that 
is why you don't want to over promise and say you only have one 
percent of weight margin or something. That is not realistic in 
this program. We do have sufficient margins for working on the 
program.
    Mr. Ehlers. Let me just tell you my concern on this because 
I have seen this with project after project including 
experiments I have worked on.
    Dr. Horowitz. Right.
    Mr. Ehlers. You are going to want to do more things: you 
are going to want to have more in the launch vehicle. If you 
can increase the margin on your propulsion system, then you 
start losing margin as you lose more goodies, perhaps an escape 
mechanism, to the capsule. I just feel very nervous about the 
margin you are using because I feel that is what might 
disappear as you go thorough the project and get lessened.
    Dr. Horowitz. Well, sir, thank you. As I said, again, we 
guard the margins very closely.
    One of the nice things, for example, on the first stage, we 
have already fired that engine. We know what it can do; so 
therefore, you have margin on a piece of equipment you 
already--so there is no much risk you are not--that you are not 
going got meet your performance spec even though you have the 
extra margin. One of the things that will eat your margin is if 
you change your requirements. It comes back to the overall----
    Mr. Ehlers. That is what I am talking about. You are going 
to want more payload because you are going to think of extra 
things you are going to have to have for safety or other 
reasons.
    Dr. Horowitz. Yes, sir. And since we have already included 
the escape system, the key thing that I have to do is maintain 
stability for the program by not letting excess requirements 
creep in from the top to ask the program to do more than the 
have the margin to protect. It is absolutely critical.
    Mr. Ehlers. Actually, I think they will probably creep in 
the bottom as well.
    Dr. Horowitz. I shall work on that, too, sir.

                        Ares Rocket Development

    Mr. Ehlers. Just one last question: do you think that 
adding a fifth stage to the Ares rocket is a straightforward 
type of thing or do you anticipate some potential problems 
there?
    Dr. Horowitz. Sir, thanks, I appreciate that question. I 
believe you are referring to the fifth segment on the first 
stage.
    Mr. Ehlers. Yes, right.
    Dr. Horowitz. The five-segment rocket booster was 
originally designed for the Shuttle program years ago. It 
actually was developed, and a five-segment version of the motor 
was tested in October of 2003. So it is already been fired and 
tested, and even using components that were still the old four-
segment components that weren't upgraded, they still had plenty 
of margin to fire the motor and run it safely. So we believe 
that the risk to developing the five-segment is very low 
because we have already fired a full-scale motor.
    Mr. Ehlers. And what propellants are you talking about 
using? I understand you are not----
    Dr. Horowitz. We looked at that HT-type propellants and the 
P-ban, and for safety and manufacturability and cost, we stayed 
with the P-ban. If for some reason, you wanted to go to a 
higher performance motor, you could go to a higher performance 
propellant, but in the overall trade for the cost-effectiveness 
and the performance requirement and the manufacturability and 
the safety, we stayed with the P-ban, which is what we 
currently have in the Shuttle solid rocket motor.
    Mr. Ehlers. Okay, I have a multitude of other questions, 
but I have had more than enough time.
    Mr. Calvert. Okay. I thank the gentleman. Mr. Akin, you are 
recognized.

                            Payload Capacity

    Mr. Akin. Thank you. I apologize for coming in a little bit 
late, so I don't know if I may be asking something that has 
already been asked. You are talking about going with the 
smaller model than you have there, and that is 100 percent 
solid fuel type approach, right?
    Dr. Horowitz. Sir, the model that you see in front of you, 
the first stage is solid rocket propellant.
    Mr. Akin. Okay.
    Dr. Horowitz. The second stage is LOX hydrogen.
    Mr. Akin. Okay. But you are not using your hydrogen and 
oxygen until you get further up?
    Dr. Horowitz. That is correct, sir.
    Mr. Akin. And you are using, what was it? Ammonium 
perchlorate? Or aluminum or something?
    Dr. Horowitz. That is the basic constituent of the solid 
rocket propellant.
    Mr. Akin. Right. Yes.
    Dr. Horowitz. It is the same one we use in the Shuttle 
today.
    Mr. Akin. Right.
    Dr. Horowitz. It is referred to as a P-ban propellant.
    Mr. Akin. Now, does that mean that you are taking less 
payload on that first than what you are taking currently, or 
how does the actual size of these, scale-wise----
    Dr. Horowitz. Sir, to relate it, I can relate it to the 
Space Shuttle, if that is what you would like.
    Mr. Akin. Yes.
    Dr. Horowitz. The payload being the Space Shuttle will 
bring up about 30 to 40,000, but it also brings up 200,000-
pound Space Shuttle.
    Mr. Akin. Yes.
    Dr. Horowitz. This launch vehicle, which is a solid rocket 
booster, at its second stage, can lift about 50,000 pounds to 
orbit, which is more than the payload being the Space Shuttle. 
To be able to go to the Moon, the large vehicle that you see to 
your left, my right, that vehicle could lift about 260-, 
270,000 to orbit, about 125 metric tons, which is more than the 
Saturn 5 could lift to orbit.
    Mr. Akin. I am not that fast with the numbers. Compared to 
what we are lifting when we put a Shuttle up right now, the 
smaller model that you have, will that lift that amount or not?
    Dr. Horowitz. Sir, that will lift more payload than the 
Space Shuttle can lift in its payload bay today.
    Mr. Akin. Right today? Then the bigger one is going to be 
quite a number of times more?
    Dr. Horowitz. It is going to be approximately five times 
that much payload capacity.
    Mr. Akin. Five times more, okay. And the cost estimates and 
all, you have got that reasonably within projecting/including 
inflation and all in numbers, and you still think you are----
    Dr. Horowitz. Yes, sir. We do. We do the standard. We 
include the stationary, and we include all costs, full costs 
accounting for all of the NASA workforce and all of the 
infrastructure and all of the development costs and all of the 
operations costs.
    Mr. Akin. I guess one last thing. I think I have still got 
another nickel in the meter here time-wise. What is going to be 
the purpose of these vehicles? Is it mostly just getting 
payload up into orbit or are you staring to push more forward 
than that and does that change the design of what you are 
doing? Or mostly are we just trying to put mass up to where we 
can start using it?
    Dr. Horowitz. Sir, thanks for that question. That is the 
basic job of the launch vehicle, to get you to orbit. These 
vehicles were designed to get us to the Moon and then on to 
Mars, so the first vehicle is optimized to get the crew to 
lower Earth orbit. The large vehicle brings up all of the parts 
and pieces you need to, for example, bring a lander and extra 
fuel to get you to the Moon or to bring up the major parts you 
need when you eventually go to Mars some day.
    Mr. Akin. We use a jet-type technology to move the vehicle 
through space. Are we still using that? Would that be a 
hydrogen/oxygen type thing?
    Dr. Horowitz. Sir, we have several different types of 
engines. The propulsion system that will propel you to the 
Moon, the engine we will use is the same engine we will use on 
the second stage, so we will use the same engine on the large 
vehicle, which is an oxygen and hydrogen rocket engine that 
will propel the whole stack to the Moon. We also have some 
other fuels that we use for storability for long-term storage 
on the Moon or on the way to Mars.
    Mr. Akin. I see, and basically the oxygen/hydrogen, weight-
wise, gives you more performance than the solid does?
    Dr. Horowitz. Yes, sir. The most efficient chemical 
propellant is oxygen and hydrogen. The reason we don't use it 
on the lower stages as much is it is not as much thrust even 
though it is more fuel efficient. As you get further from the 
earth, you want a more efficient fuel.
    Mr. Akin. I got it. So there are benefits of both, 
depending where you are using it.
    Dr. Horowitz. Absolutely.
    Mr. Akin. Thank you very much. Thank you, Mr. Chairman.
    Mr. Calvert. I thank the gentleman. Mr. Udall.

                 More on GAO's Response to NASA Changes

    Mr. Udall. Thank you, Mr. Chairman. Mr. Li, NASA--and Dr. 
Horowitz, I tell you, I want to give you a chance to reply as 
well. NASA asserts that implementing GAO's acquisition approach 
would delay the delivery of the CEV and increase costs. Do you 
agree or disagree and why?
    Mr. Li. I think this goes back to our initial point. I 
think NASA chose to interpret our recommendation as necessarily 
taking two vendors and continuing with two. That is one way in 
which you can meet our recommendation. Now, obviously, if you 
have two vendors, it is going to cost more. But I, again, going 
back to my analogy of what my youth is with automobiles. The 
logo was pay me now or pay me later, and I think in this 
particular case, having more knowledge would have reduced those 
costs in the future years.
    Now, there are other options that NASA could have taken. 
They took one which they decided to make options Schedule B and 
Schedule C. But I still believe that they went further than we 
would have liked; they would have been better served to only go 
through what we call preliminary design review. So from that 
perspective, it is very difficult to say whether or not those 
costs would be greater.
    In terms of schedule, again, it goes back to that issue of 
are you going to have problems. I think that past history has 
shown, and with our experience looking at many DOD programs, 
the fact of the matter is if you don't have that knowledge, 
that is going to come back to bite you later on.
    Mr. Udall. Thank you. I am not sure Dr. Horowitz used Fram 
on this car. You remodeled it and you reengineered it. You are 
free to respond to the questions, but I also want to throw 
another one at you, which is can you provide your best 
quantitative estimates of the size of the delay and cost 
estimates if, in fact, the assertion you make is--were to hold 
fast?
    Dr. Horowitz. Well, sir, thanks for allowing me to respond 
to that question. The first issue that Mr. Li brings up was 
actually, in my opinion, was just a failure to communicate. You 
can see there was some misunderstanding of our interpretation 
of his report, and that is why it was important for us to sit 
down and get together and we did make some modifications, like 
he pointed out. We added the options B and C.
    The important thing for us is as we went through the design 
analysis cycles, a couple of things were happening. We had two 
contractor teams on board in a competitive environment, and 
that is always good to have competition to keep costs down. 
What we ran into was the designs had converged to the point 
that there was no new knowledge in the designs. We had got to 
the point that we weren't learning very much more about the 
designs, and in fact, because of the competitive enviroment, we 
couldn't even discuss things with our contractor team.
    There are only so many rocket scientists in this country, 
and they exist in a couple of big companies and NASA, so we 
wanted to get the team formed as soon as possible to help us 
work through all of the final design to get us to the 
preliminary design review which doesn't occur until 2008. So we 
wanted to get the contractor team on board in order to do that. 
Now, if we kept one contractor on and didn't award them the 
contract to go past the preliminary design review, then I would 
have been negotiating a contract in a noncompetitive 
environment, which I don't believe would have been in the best 
interest of the government. So those are the factors in our 
strategy of whom we approached this problem.
    Mr. Udall. Are you in a position to answer further, perhaps 
for the record, my questions about a quantitative estimate of 
the size and the delay and the cost estimates that might be a 
part of it?
    Dr. Horowitz. Sir, I don't have the exact--I can take that 
for the record and get back to you----
    [The information follows:]

    In May 2005, the Exploration Systems Architecture Study (ESAS) was 
initiated with one of its tasks to provide a complete assessment of the 
top-level Orion CEV requirements. As a result of ESAS, the architecture 
and the top level requirements for the Orion CEV were chosen, and made 
part of the Phase 2 competition. At that point, NASA saw no benefit of 
keeping two prime contractors through Preliminary Design Review (PDR) 
at an estimated cost of $1 billion each (as in a spiral approach). 
Rather, NASA saw a better return of its investment in competitively 
issuing two Phase 1 Orion CEV Prime Contracts for conceptual design and 
trade studies against the ESAS architecture for an estimated cost of 
$46 million each.

    Mr. Udall. You will take that for the record.
    Mr. Li. Mr. Udall, when we, specifically, asked NASA to be 
able to quantify that, they told us that they did not do that 
analysis; so therefore, I do not feel confident that they could 
have made that particular assertion.
    Mr. Udall. Do you think we ought to ask them to make that 
assertion?
    Mr. Li. Well, I think it is water over the dam at this 
point in time, but my point is that in order to make an 
assertion of delays and of extra costs, those should come from 
analysis, and I don't believe that that analysis was done.
    Mr. Udall. Perhaps the Committee ought to take that under 
review ourselves, and we may want to ask that NASA actually 
complete those analyses for us, but that is another day, 
another story at some point.
    Dr. Horowitz. Yes, sir.
    Mr. Udall. If I could, just for the record--I see my time 
is about to expire, and I could get another from Mr. Akin, 
perhaps--but I am curious why you decided to fundamentally 
change your acquisition approach, that is, for the CEV after 
doing a spiral development approach for the first year-and-a-
half. And what was wrong with the original acquisition 
approach?
    [The information follows:]

    NASA changed its acquisition approach from the previous ``spiral 
development'' approach to reduce technical, cost, and schedule risk. 
Spiral development is a process to achieve a desired capability where 
the end-state requirements are not known at program initiation. Spiral 
development was based on an undefined transportation architecture. 
Subsequent comprehensive requirements definition and independent 
assessments defined an architecture and showed that a continued spiral 
approach would no longer fit, as it would increase cost, schedule, and 
technical risk. NASA made a decision to spend its resources in 
developing its exploration transportation end-state requirements and 
architecture for Exploration through a number of parallel efforts for 
the formulation phase of the Orion Crew Exploration Vehicle (CEV) 
project. The NASA Authorization Act of 2005 (P.L. 109-155) also 
directed NASA to pursue a Shuttle-derived transportation system to 
support a sustained human presence on the Moon and ability to support 
future destinations. This approach was also the one chosen through 
doing trade studies.
    In May 2005, the Exploration Systems Architecture Study (ESAS) was 
initiated with one of its tasks to provide a complete assessment of the 
top-level Orion CEV requirements. As a result of ESAS, the architecture 
and the top level requirements for the Orion CEV were chosen, and made 
part of the Phase 2 competition. At that point, NASA saw no benefit of 
keeping two prime contractors through Preliminary Design Review (PDR) 
at an estimated cost of $1 billion each (as in a spiral approach). 
Rather, NASA saw a better return of its investment in competitively 
issuing two Phase 1 Orion CEV Prime Contracts for conceptual design and 
trade studies against the ESAS architecture for an estimated cost of 
$46 million each.
    Additionally, NASA established an intra-agency Orion CEV Smart 
Buyer team which performed trade studies and design analysis that was 
used by the Orion CEV Project Office to understand and verify the 
appropriateness of the requirements incorporated into the Orion CEV 
Phase 2 solicitation and evaluation of proposals. With knowledge gained 
from ESAS, the Smart Buyer team, and Orion CEV Phase 1 contracts, NASA 
was in a position to ``down select'' to a single Prime contractor and 
initiate the Design, Development, and Test and Evaluation (DDT&E) 
contract for the Orion CEV in order to baseline an industry approach 
and commitment to meet the desired outcomes of the Orion CEV project. 
This new acquisition approach provides NASA with the capability to 
shorten the gap in human space flight capability with the retirement of 
the Space Shuttle in 2010. The original ``spiral development'' 
acquisition approach contained significant risk that this nation would 
not have a human space flight capability by 2014 with a higher 
development cost of close to $1 billion.

    And maybe, Mr. Li, you could comment later for the record 
as well. Do you have any view regarding the relative merits of 
those two approaches? And when I say for the record, I don't 
know if maybe the Chairman wants to cut me off and you could do 
it writing later or whether he is willing to have you do it 
here, now.
    Dr. Horowitz. Certainly.

                     More on Integration Challenges

    Mr. Calvert. I thank the gentleman. Also, just for the 
record, Dr. Horowitz, the capsule, itself, would that capsule 
be capable to have interaction with the Space Station if 
necessary?
    Dr. Horowitz. Yes, sir, absolutely. The capsule can dock 
with vehicle that has a compatible docking station, so it can 
go to the Space Station.
    Mr. Calvert. Let us talk about what the long pole on the 
tent is in this whole program. You know, moving this thing 
along, even though we are using existing technology, obviously, 
it is a complex engineering problem. If you had to take one 
element to this that you consider the long pole in the ten, 
what would it be?
    Dr. Horowitz. Sir, right now, the long pole the critical 
path, would be the J-2X engine on the second stage; it is 
leading the pack.
    Mr. Calvert. And why is that the case?
    Dr. Horowitz. The J-2X engine, while the engine is a 
derivate of the J-2 that flew in the Apollo mission, we have to 
redo the tooling and the manufacturing and bring the engine up 
to today's standards. The lead time for components, for 
example, valves, if you want to order just abilitative metal to 
make these cryogenic valves, there is at least a three-year 
lead time on some of those components, so the development and 
the amount of testing to get it to our standards make that 
engine unavailable until 2012.
    Mr. Calvert. Is there any way that that can work out any 
quicker than the 2012 timeline or is that a conservative 
estimate?
    Dr. Horowitz. Well, sir, we will have engines in the test 
stand before 2012, but just because of the amount of testing 
and the lead time on articles, you could put a lot of money in 
and accelerate the program a few months, but there is no way to 
accelerate that engine, say, one or two years earlier just 
because of the lead time required and the testing required to 
get it up to the standards we want.
    Mr. Calvert. Mr. Li, what would you identify from your 
perspective?
    Mr. Li. From my perspective, obviously, Dr. Horowitz has a 
lot more of the technical knowledge of the design. You know, 
NASA is designing them. From my perspective, from a management 
perspective, I am the most worried about them succumbing to, 
perhaps, of both money and time, and maybe bypassing and 
shortchanging what I would consider to be some basic, sound 
systems engineering practicing, and that is making sure that 
you do the testing, making sure that there are certain reviews 
that are done.
    In preparation for this hearing, I was going through some 
of my old papers of some of the things that have occurred at 
NASA, and I recollect things such as the unfortunate occurrence 
with Mars Polar Lander where, in that particular case, where 
because of the desire to cut costs, they did not do a full-up 
test, and as a result, there are some issues associated with 
spurious signals that made the spacecraft think that it was 
closer than what it was and it crashed. I think that that is, 
to me, the thing that I worry about the most, is allowing those 
pressures to make one to make some decision from a systems-
engineering perspective and short-change them.

                   More on International Competition

    Mr. Calvert. And we hope that that would not occur, but on 
one hand, if I look back on history, back when John F. Kennedy 
first made his speech that we will go to the Moon, and from the 
time that we had that speech to the time that we went to the 
Moon, it was probably less time than we are talking about 
between now and the launch in 2014, and this was something that 
was done a long time ago. Many people in the audience weren't 
even alive at the time. And in this country, some comments I 
hear when I go around the country, been there, done that. Why 
are we doing it again? And it is interesting that we forgot 
how. We cannot do that today. We do not have the technology 
today to do that kind of endeavor, and now we are striving to 
move back forward again. And unlike 1969, we are looking in the 
rearview mirror, and we have other people right on our 
tailpipe, using the car analogy again. Mr. Rohrabacher?
    Mr. Rohrabacher. Well, I think that in 1969, if you 
remember, we did have a race with the Russians at that time, 
and we were looking in the rearview mirror. And luckily for the 
Chinese, we have----
    Mr. Calvert. They weren't going to the Moon, though.
    Mr. Rohrabacher. And luckily for the Chinese, we have 
diverted enough technology to them over the last ten years in 
order to provide them excellent missile and rocket and 
technology so they are in our rearview mirror. Let us make 
sure, I would hope, as our NASA director visits the Chinese--as 
he is, I believe, right now, as I speak--I hope that he 
remember the last time we tried to cooperate with the Chinese. 
It wasn't to our benefit. In terms--I reminded Mr. Ehlers that 
the X-33 program that he was talking about that Mr. Horowitz 
and I talked about in my office the other day, that program 
spent, I think, $1 billion-and-a-half dollars, and that was, 
interestingly enough, being built by the same company that has 
been given the contract for this project. Let us hope that that 
is not repeated, and we are going to watch that very closely.

                        More CEV Budget Concerns

    I agree with Mr. Ehlers that, certainly, robotics is a 
cheaper method than building things that are capable of human 
space flight. But I understand, Mr. Horowitz, and you may 
correct me if I am wrong, that this overall project will 
include the use of robotics, and is designed to actually use 
robotics to facilitate some of the missions that we are going 
to then end up putting men, or should I say human beings, after 
the robots have led the way. That, itself, is, I am sure, cost-
saving a certain amount of money because of the expense of 
taking care of contingencies.
    I want to compliment NASA and Mike Griffin for the concept 
of using technology that is already tested and proven for 
significant parts of this new project, because as you say, that 
in it self has saved an enormous amount of money and time 
because you know there are large numbers of parts of these 
projects that work because they have already worked. 
Integrating them has not been tested yet, and that is part of 
it.
    So I think Mr. Chairman, we should be recognizing this 
strenuous effort to try to us that as a means of keeping down 
costs. But still, with all of that said, the cost does seem to 
be rather high, so I do not understand why it costs so much, 
especially if you have so many parts that have been already 
used and tested, why it costs $31 billion to get to the point 
where we are going to have one of those rockets. Thirty-one 
billion dollars is a lot of money, and here, just to get to 
that point, to get that rocket launched, it is $31 billion, is 
it not? That is as of today. That is if all of Mr. Li's fears 
don't come true, and the costs don't go up after that.
    Dr. Horowitz. Sir, if you like, I will take that question, 
and the $31 billion number that you mentioned in the integrated 
cost for all of exploration through our budget run-out. That 
includes all of the robotics----
    Mr. Rohrabacher. Okay, but that is not just that----
    Dr. Horowitz. That is not just this, sir----
    Mr. Rohrabacher. I am glad I asked that question.
    Dr. Horowitz. I am sorry.
    Mr. Rohrabacher. How much is it just for that rocket?
    Dr. Horowitz. Well, I can, like I said, I will take that 
for the record. I can get you a breakdown of every component 
that we have and the cost estimation of every single component 
and where the money is being spent.
    Mr. Rohrabacher. No, I just want to know basically. I don't 
need every component.
    Dr. Horowitz. Right.
    [The information follows:]

    Launch vehicle costs for the Ares I Crew Launch Vehicle through the 
first human launch, currently projected late in FY 2014, are 
approximately $10.8 billion. This number excludes the Orion Crew 
Exploration Vehicle, mission and ground operations and facility 
modifications, and program integration and other program-level costs. 
Orion Crew Exploration Vehicle project costs through first human flight 
are about $10.3 billion. Therefore, combined Ares I and Orion project 
costs through first human launch are about $21.1 billion. If related 
required programmatic and non-flight hardware costs are included in the 
estimate, it will cost about $33.5 billion to get to the point of first 
human launch projected in 2014.
    All of these numbers include reserves, but exclude Corporate G&A. 
These numbers include estimates for FYs 2012, 2013, and 2014, which lie 
beyond the budget horizon.

    Mr. Rohrabacher. When that rocket is launched, I want to 
know how much it is going to cost to get us from here to there. 
Is it $5 billion? Is it $10? I am glad you just straightened 
out the $31 billion number for me. That is what these hearings 
are all about.
    Dr. Horowitz. Yes, sir. And we will break it down any way 
you like. If you would like just the integrated stack, I can 
get you that cost or the launch cost to launch it or the total 
infrastructure.
    Mr. Rohrabacher. When we launch that first rocket, how much 
does it cost? That is what we want to know, how are we going to 
get from here to there. That will be very helpful.
    Dr. Horowitz. I will be more than happy to bring those 
numbers to you.

                      More Integration Challenges

    Mr. Rohrabacher. Well, thank you very much, and I want to 
thank Chairman Boehlert, and of course, Chairman Calvert for 
their leadership, and I am looking forward to working with you 
and following this project to make sure--Remember this: we are 
facing $3 billion right down the toilet because they based it 
on that system and taking, building, spending the money before 
they had a piece of technology that worked, and then it never 
did work. And you are telling us that that is not going to 
happen in this program because everything works. Is that right?
    Dr. Horowitz. Yes, sir.
    Mr. Rohrabacher. Okay, is that your reading, Mr. Li?
    Mr. Li. I still think I disagree somewhat, and I still 
think there are some technologies that are being developed. The 
landing system, it is my understanding, is still something that 
has not reached the technology readiness level that they would 
like at this point in time, so I still think there is some 
issue there.
    Mr. Rohrabacher. So you have got some worries. We are going 
to follow this. Thank you very much, Mr. Chairman.
    Mr. Calvert. I thank the gentleman. Mr. Udall, do you have 
any additional questions?

                          More Budget Concerns

    Mr. Udall. I don't know if you want to give me a third 
chance here, Mr. Chairman.
    One question, for the record, Mr. Li. I know we have talked 
quite a bit about whether you are being too conservative and 
not adequately accounting for the CEV and the CLV program's use 
of existing technology in their designs, which NASA says 
considerably reduces the risk. But what you know now of NASA's 
approach, do you accept NASA's assessment of these risks, and 
if now, why not. And I know you have talked of this quite a bit 
during the hearing, but if I could get it on the record.
    Mr. Li. Well, again, I understand that there are a lot of 
components that have been used before. But as NASA will say 
themselves, we are talking about new processes. It is new 
technology. It would be foolish to take technology that was 
used on the Apollo and put it in this particular vehicle. We 
are talking about smaller things that probably do the same 
things; but however, when you shrink things into a smaller 
size, that is when you run the risk of having some problems. So 
yes, I understand functionally that there are some things that 
we have proven when you bring it down to form, fit and 
function, that is when I worry.
    Mr. Udall. Thank you. If you have other thoughts as the 
weeks unfold, we would appreciate any additional comments in 
the record. Again, thanks to the witnesses.
    Mr. Calvert. Well, if we have no further questions, we 
are----
    Mr. Rohrabacher. Could I add one thing for the record, Mr. 
Chairman? And that is Mr. Li, over the years, has been a 
tremendous source of information and guidance for this, and we 
thank you very much, Mr. Li, for that.
    Mr. Calvert. We thank you for your service. Thank you very 
much. We are adjourned.
    [Whereupon, at 3:53 p.m., the Committee was adjourned.]















                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions



                   Answers to Post-Hearing Questions
Responses by Scott J. Horowitz, Associate Administrator, Exploration 
        Systems Mission Directorate, National Aeronautics and Space 
        Administration (NASA)

Questions submitted by Chairman Sherwood L. Boehlert

Q1.  During your testimony, you identified ``systems integration'' as a 
difficult part of Orion and Ares development. Are there particular 
areas that you can already identify as potentially problematic? Where 
might problems arise and when might those become apparent?

A1. NASA recognizes that systems integration will be critical to the 
success of Orion and Ares development. To help deal with the challenge, 
the Orion and Ares projects are structured based upon the formal NASA 
Procedural Requirements (NPR) of NPR 7120.5 (Program and Project 
Management Processes and Requirements) and NPR 7123.1 (Systems 
Engineering Procedural Requirements). These Agency technical procedures 
provide best practice guidance, including systems engineering, for all 
programs and projects to adhere to. NPR 7123 requires each program to 
maintain an approved System Engineering Management Plan (SEMP) to 
control the life cycle technical management process. The Constellation 
Program SEMP establishes the approaches for integrating and organizing 
People, Products/Orion/Ares, and Processes for successfully achieving 
the requirements.
    There are no known problematic systems engineering areas at this 
time. The Constellation Program has established and is executing a 
rigorous Risk Management process to identify, control, and mitigate 
risks at the earliest time possible. This Risk Management process is 
being used effectively by the Program on Orion and Ares development and 
integration efforts in the areas such as design, analysis, 
requirements, test & verification (T&V), and manufacturing. This Risk 
Management process identified two early development risks: performance 
of the integrated Launch Abort System and Command Module, and 
performance of the integrated CEV and CLV during ascent. These risk 
concerns are expected to decrease over time because they were 
identified early, and risk mitigation plans will be implemented to 
reduce these risks.
    Systems integration for a program of this caliber is challenging. 
To counter and manage any unexpected integration related challenges, 
the program is using the formal processes and procedures required by 
NPR 7120.5 and NPR 7123. As such, a challenge could become apparent 
during vigorous T&V, which is being designed by the Program to capture 
and resolve any unexpected development or integration related 
challenges at the earliest. For example, the Flight Test Strategy calls 
for early T&V of progressively mature test article configurations 
leading to the first planned flight test in 2009. Any challenges that 
arise during the T&V will be resolved before they become apparent risks 
to the overall success of Orion, Ares and the Constellation program.

Q2.  What are the most likely additional design changes that could be 
made to Orion in the future, and could they be absorbed in current 
budget estimates?

A2. Orion is currently in the formulation stage of the project. The 
specific details of the design will continue to mature until the design 
is finalized at the Critical Design Review (CDR). However, a number of 
major design areas have already been established, and, therefore, 
budget risk of future changes is low. Consequently, notwithstanding the 
maturity of the design, NASA currently believes that it has the budget 
to develop Orion.

Q3.  How many technology and cost threats are currently being carried 
by Orion? The Ares I upper-stage? The Ares I first stage? NASA's 
notification to Congress on its intent to begin development of Orion 
states that NASA has identified no ``areas in the CEV [Crew Exploration 
Vehicle] concept where the technology is immature.'' Would you assess 
the Ares vehicle similarly? Does this assessment suggest that the 
current technology and cost risks are very unlikely to occur?

A3. The Ares I has minimal technology development activities due to the 
extensive use of heritage hardware. However, there are certain 
components of the Upper Stage that may require advanced development, 
such as the Reaction Control System (RCS) thrusters, Thrust Vector 
Control (TVC) systems, and various main propulsion system (MPS) 
components. All are within acceptable technology readiness levels to be 
inserted into the project without risk.
    Cost threats associated with Ares I exist due to the transition 
between the Shuttle Program close-out and Constellation Program ramp-
up. Although synergy between the Shuttle program and Ares I helps the 
transition, it also presents a challenge. Budgets and schedules tend to 
be contingent on each other. The challenge comes as Orion ramps up and 
Shuttle is still operating at full strength in support of missions to 
ISS. Even with the best of transition planning, there may be issues 
related to Shuttle program close-out activities that may impact Ares I 
development activities.
    The Orion vehicle relies on proven technologies for its design 
implementation. However, there are two areas where NASA felt that it 
was appropriate to begin early advanced development work prior to the 
award of the Prime contract. These areas are the Thermal Protection 
System and the Landing System. As a part of this development work, NASA 
has performed analysis and testing on materials and subsystem 
components for these two systems.
    Orion is subject to the cost risks associated with the normal 
unknowns of any development project. However, NASA has put management 
tools in place to identify and address those risks.

Q4.  How many ``end item'' milestone awards are included in each 
schedule of the Orion contract and what is the approximate value of 
those awards?

A4. The base contract contains nine milestone periods where the 
contractor may receive award fee payments. The maximum fee available 
varies, depending on the milestone, and generally the later milestones 
have larger fee amounts. The first evaluation period ends at the 
Systems Design Review (SDR), and the maximum fee amount for this period 
is $19,438,745. The largest maximum fee amount is $149,515,277 for the 
period ending with the delivery of the first flight vehicle. [It should 
be noted that all fee's considered a provisional payment. The final 
award fee amount will be made based on the contractor's performance 
over the entire period of performance.]
    An ``End Item'' award fee contract is being used in the Orion 
contract in order to measure the true quality of contractor performance 
at the end of the contract. Therefore, the total contract award fee 
pool is available and the contractor's total performance is evaluated 
against the award fee plan to determine total earned award fee. In 
addition to the final evaluation, interim evaluations are done to 
monitor performance prior to contract completion in order to provide 
feedback to the contractor on the Government's assessment of the 
quality of the contractor's performance, and to establish the basis for 
making interim award fee payments. These interim award fee assessments 
are done at key milestone periods in the contract. Therefore all fee 
paid during the contract are considered interim payments. A final award 
fee determination will be made, based on the contractor's performance 
over the entire contract, which will determine the award fee amount 
earned by the contractor for the contract.

Q5.  Given that the Ares I is also in the very early stages of 
development, how can NASA be confident that the rocket will perform 
well enough to support the current design of Orion? In your testimony, 
you said that the program carried roughly 25 percent margin, combining 
the vehicle performance and payload mass margins for a lunar mission. 
Specifically, you said:

         The launch vehicle itself has margins, so we will ask the 
        vehicle to lift, say 50,000 pounds to a certain orbit. The 
        project manager for the launch vehicle is keeping performance 
        margin for his launch vehicle, so the vehicle may be able to 
        lift 55,000 pounds, and his margin is on the order of about 15 
        percent or so for the launch vehicle. We also have margin that 
        the CEV project manager has to hold on his side in case his 
        vehicle gets larger, also. The integrated margin, right now, 
        for the total moon mission, not just the low-Earth orbit. We 
        have huge margins to get to low-Earth orbit. But to be able to 
        carry up to the lunar mission, approaching 2020 at this point, 
        we have about 25 percent performance margin on the amount of 
        lift this vehicle can provide.

     What is the individual margin for Ares performance and Orion mass 
for a lunar mission? Furthermore, what is the current level of 
performance margin for Ares I to deliver Orion to an orbit equivalent 
to that of the International Space Station? What mass margin is 
currently held by Orion for an ISS rendezvous mission? How do these 
margins compare to margins held by previous launch vehicle designs?

A5. Performance margin is the usable performance capability reserved to 
protect mission injection conditions. The Ares I design team is using 
validated engineering tools that are used to set the allocations to the 
elements for initial planning. These tools are anchored in historical 
`as flown' capabilities and tend to envelope loads and weights. The 
Ares I Project currently has 15 percent margin reserved for 
uncertainties in nominal vehicle parameters or their dispersions and 
this margin is used to protect vehicle capability requirements for 
modifications or a new design. This margin will be maintained to 
minimize the risk of failure to deliver Orion to its required orbit, 
either ISS or for a lunar mission.
    The Orion project uses a historically based ``schedule'' to 
determine weight growth allowances for each subsystem. The weight 
growth allowance will vary depending on the historical risk of weight 
growth for each type of subsystem. The allowable weight growth will 
also reduce over time as the design matures. For the lunar mission 
Orion is carrying approximately 15 percent weight growth allowance. In 
addition, Orion has allocated another 10 percent margin that is carried 
as reserve. For Orion the lunar case is the most challenging from a 
weight growth perspective. Therefore, the margins for a potential 
mission to the Space Station are lower than those listed above for the 
lunar mission.

Q6.  In a letter responding to 102 of the NASA Authorization Act of 
2005, NASA stated that ``a higher than expected CEV cost would simply 
delay CEV development or production. . .'' Given that Orion and Ares I 
currently consume the bulk of Exploration funding and the current 
schedule supports operations no earlier than 2014, can NASA implement 
its go-as-you-can-afford-to-pay philosophy for the program while 
meeting the President's deadline of a 2014 launch?

A6. At its early formulation stage, the Constellation Program is 
certain to face ``unknown unknowns'' as we continue to refine 
requirements, develop advanced technologies, and begin to integrate the 
various systems into an operational infrastructure to enable long-term 
exploration of the Moon and Mars. When Constellation moves into the 
implementation phase, after Preliminary Design Review, currently 
scheduled for the spring of 2008, design, cost, and schedule baselines 
will be established, and Program performance will be measured against 
metrics established at the various key decision points throughout the 
life of the mission. It is at this juncture that NASA will provide 
Constellation project Life Cycle Cost commitments to Congress.
    Yet even before these baselines are established, the Constellation 
Program is operating under a ``go-as-you-can-afford-to-pay'' 
constraint; we are living within a set budget profile, and any growth 
beyond our capacity to perform trades, de-scope, or apply reserve will 
result in a slip to the baseline schedule. We are making every effort 
to avoid this through aggressive use of management tools at all phases 
of the Program: defining and controlling requirements, generating 
realistic cost estimates early on (ESAS), employing a ``smart buyer'' 
approach to major acquisitions, and monitoring performance by means of 
a rigorous earned value system. Thus far, we have been successful in 
achieving critical milestones within our budget profile.

Q7.  When would a decision to exercise Options B and C need to be made 
to support operations in 2014 and beyond? At the time NASA decides to 
exercise these options, will the Ares I launch vehicle have completed 
Preliminary Design Review? Will the Ares I have completed Critical 
Design Review?

A7. The Orion CEV flight units necessary for the first human launch and 
the first cargo launch are developed under Schedule A. The current 
contract states that Options B & C need to be exercised no later than 
July 2009. The Orion PDR is currently scheduled for March 2008 and the 
CDR is currently scheduled for April 2009. The Ares I PDR is currently 
scheduled for April 2008 with CDR currently scheduled for September 
2009.

Q8.  Has the Agency or its contractors identified the activities needed 
to support PDR? What post-PDR activities are currently being pursued by 
NASA or its contractors? What is the cost of these activities?

A8. The Orion PDR is currently scheduled for April 2008. The costs of 
PDR will include all expenses prior to this date--approximately $5.5 
billion. In a major development program, approximately 15 percent of 
programmatic dollars would be consumed by PDR. A successful PDR will 
require completed design specifications, the identification and 
acquisition of long-lead items, manufacturing plans, and firm life 
cycle cost estimates, a methodical process that effectively brings the 
design to 30 percent completion. The PDR will provide the basis for 
determining whether the baseline design is acceptable and if the 
process leading to Critical Design Review may proceed.

Questions submitted by Representative Bart Gordon

Q1.  In the letter from Deputy Administrator Dale that non-concurred 
with GAO's report, she stated that as part of the CEV contract 
competition that was just completed: ``NASA will receive firm 
competitive prices from industry to complete development of the CEV. . 
.NASA will also establish not-to-exceed prices for production of 
required CEVs to support the current flight manifest through 2019.''

Q1a.  Given NASA's stated confidence in having firm pricing data, is 
NASA willing to accept a formal cost cap on the CEV program? If so, at 
what level would NASA propose the cost cap be set?

Q1b.  If not now, at what point in the CEV development program would 
NASA be willing to accept a formal cost cap?

A1a, 1b. Historically, cost caps have not proven effective in managing 
major NASA research and development (R&D) programs. Constraining the 
International Space Station (ISS) to $2.1 billion annually did little 
to control overall program costs. And while life cycle cost caps are 
regularly imposed on small, discrete projects (e.g., Explorer, 
Discovery) as part of the selection process, they are not easily 
adapted to major R&D efforts that extend far beyond the current budget 
horizon. In the case of large development programs such as 
Constellation, cost caps can be problematic as they depend on 
assumptions regarding outyear funding. The future priorities of the 
country are not known and can change over the life of the Constellation 
program.
    At its early formulation stage, the Constellation Program is 
certain to face ``unknown unknowns'' as we continue to refine 
requirements, develop advanced technologies, and begin to integrate the 
various systems into an operational infrastructure to enable long-term 
exploration of the Moon and Mars. When Constellation moves into the 
implementation phase, after Preliminary Design Review (PDR) in the 
spring of 2008, design, cost, and schedule baselines will be 
established, and Program performance will be measured against metrics 
established at the various key decision points throughout the life of 
the program. At this juncture, NASA will submit Constellation project 
life cycle cost commitments to Congress. Under Section 103 of the NASA 
Authorization Act of 2005 (P.L. 109-155), NASA is required to submit 
Major Program Annual Reports, the first of which shall include a 
Baseline Report that is to include an estimate of the life cycle cost 
for those programs. Under Section 103, NASA is required to report 
changes to the Baseline Report--including life cycle cost estimates--as 
part of the annual budget request. NASA will notify the Committee at 
other junctures, as necessary, if there are any adjustments to life 
cycle cost estimates. As such, NASA would advise against imposition of 
a formal statutory ``cost cap'' on CEV development.

Q2a.  In your testimony, you stated that you have only three things you 
can vary in the CEV program: cost, schedule, and performance. If there 
is cost growth in the CEV program, what specifically will be your 
approach to dealing with it?

      What changes in performance or program content would be feasible 
to make in order to contain cost growth?

A2a. NASA is committed to the ``go-as-you-can-afford-to-pay'' approach. 
In this approach, the implementation of capabilities can be delayed 
until the budget is available. For example, the Orion CEV is being 
designed as a vehicle for the lunar mission, and development of some 
capabilities for that mission can be delayed until needed. For example, 
the Guidance, Navigation, and Control GN&C software required to get to 
lunar orbit and return is not necessary for the CEV's early flights.

Q2b.  Is there a date beyond which you would not slip the CEV schedule? 
If so, what is it?

A2b. The NASA Authorization Act of 2005 (P.L. 109-155) endorses the 
President's Vision for Space Exploration, which charged NASA to conduct 
the first manned mission no later than 2014.

Q2c.  Is it possible to slip CEV schedule without increasing the life 
cycle cost of the CEV program? If so, how?

A2c. Experience has shown that, if the completion of elements of major 
development programs is delayed significantly, the overall cost of a 
major development program will go up.

Q3a.  The GAO has pointed out that with respect to your budget plan, 
``. . .there are years when NASA does not have sufficient funding to 
implement the architecture. Some yearly shortfalls exceed $1 billion, 
while in other years the funding available exceeds needed resources.'' 
In fact, NASA is proposing to ``bank'' funds in its CEV and CLV account 
in FY 2006 and FY 2007 in excess of what it could spend in those years, 
with the intent of trying to make those funds available in later years 
when its planned funding is insufficient to meet the program's needs.

      Why, only two years into the President's multi-decade Vision for 
Space Exploration (VSE), is NASA having to resort to such budgetary 
maneuvers to fund its implementation of the Exploration initiative?

A3a. The President called for an affordable and sustainable program of 
exploration. Reflecting that direction, our budget profile is 
relatively level, though the natural funding curve for a major 
development program, such as Constellation, is not flat. When NASA 
retires the Space Shuttle, additional funds will become available for 
Constellation, but that will not occur until 2010. Long-lead 
procurements and early design effort will ramp up prior to 2010. 
Therefore, as NASA has outlined for the Committee in correspondence and 
testimony, funding carryover for Constellation will allow us to meet 
those requirements in FY 2008 and FY 2009.

Q3b.  Why shouldn't Congress insist that NASA only submit requests for 
funding that are consistent with the actual Exploration program funding 
needs in a given fiscal year--especially given the competing demands 
for funds in other parts of NASA? Wouldn't such an approach be more 
aligned to the way development programs historically have been funded?

A3b. One of the ways the ups and downs of development funding curves 
can be accommodated is by optimizing the use of two-year R&D funding, 
and phasing the program schedule to align with available funding.

Q4.  Why was it necessary to shift almost $7 billion into the 
Constellation program [which includes the CEV and CLV] for the years FY 
2006 to FY 2010 compared to what NASA had said would be needed over 
that period in last year's budget request?

Q4a.  Did NASA underestimate the cost of the CEV and CLV programs?

Q4b.  NASA has indicated that it will not be possible to launch an 
operational CEV until 2014--which was the original goal--despite the 
additional funds that have been transferred into the program to 
``accelerate'' it. Why is that?

A4a, 4b. NASA did not underestimate the life cycle costs. Funding for 
Constellation Systems has been increased from the FY 2006 President's 
Budget within overall Exploration Systems Mission Directorate funding. 
This budget increase reflects the Agency's position, based on the 
results of the ESAS, the President's continuing commitment to the 
priorities identified in the Vision for Space Exploration, and the NASA 
Authorization Act of 2005 (P.L. 109-155). Increased funds are 
specifically identified for the Orion CEV and Ares I CLV in order to 
ensure their ability to launch humans no later than 2014, but as close 
to 2010 as possible.
    Increased funding for the CEV supported a better defined, lower-
risk program with an earlier down-select to a single contractor for CEV 
design; a Preliminary Design Review in FY 2008; Critical Design Review 
in FY 2009; potential design verification tests in 2007 (to be 
determined after selection of a prime contractor); and initial tests of 
a Launch Abort System starting in FY 2009 (or sooner, depending on 
available funding).
    Increased funding for the Ares I CLV supports early design work 
with Space Shuttle contractors to prepare the solid rocket boosters for 
use as the first stage of the Ares I CLV; development of a propulsion 
system for the upper stage of the Ares I CLV; and early design work to 
modify the Space Shuttle main engine (SSME) for use as an expendable 
engine on the future Ares V Cargo Launch Vehicle (CaLV).
    A plan was put in place early in 2006 to effectively accelerate 
development activities by refocusing on developing Ares I hardware with 
greater extensibility to the Ares V system. Consistent with this new 
strategy, NASA made several launch vehicle architectural design 
adjustments such as changing the four-segment RSRM first stage to a 
five-segment RSRM first stage, and replacing the SSME upper stage 
engine with the J-2S-derived J-2X engine. These architectural changes 
reduced the number of distinct development cycles by capitalizing on 
design synergies between the Ares I and the Ares V: single upper stage 
development (J-2X) and increased first stage commonality between Ares I 
and Ares V. This will, in turn, reduce life cycle costs and major 
risks.
    Funding is also necessary to support initial design efforts to 
modify, or in some cases start from new, necessary ground systems to 
support the operational requirements of the Ares I and Ares V. This 
includes potential changes to the launch infrastructure at Kennedy 
Space Center, as well as NASA's ground-based and in-space 
communications infrastructure for space exploration missions.

Question submitted by Representative Ralph M. Hall

Q1.  What is the cost estimate for the major components of Orion: the 
Launch Abort System, Crew Module, Service Module, and inter-stage?

A1. NASA does not currently track Orion CEV costs in a way that allows 
the determination of the cost of the Launch Abort System and other 
components. NASA is currently working with the Orion Prime Contractor 
on a contract modification that will, among other things, modify the 
Work Breakdown Structure (WBS) to allow collection of costs by Service 
Module, Crew Module and Launch Abort System. This work will be complete 
in the early spring 2007 to support the activities for the FY 2009 
budget cycle.

Question submitted by Representative Dana Rohrabacher

Q1.  Please provide NASA's estimate for the total cost of the Orion and 
Ares I development programs through the test flights of Orion.

A1. Launch vehicle costs for the Ares I Crew Launch Vehicle through the 
first human launch, currently projected late in FY 2014, are 
approximately $10.8 billion. This number excludes the Orion Crew 
Exploration Vehicle, mission and ground operations and facility 
modifications, and program integration and other program-level costs. 
Orion Crew Exploration Vehicle project costs through first human flight 
are about $10.3 billion. Therefore, combined Ares I and Orion project 
costs through first human launch are about $21.1 billion. If related 
required programmatic and non-flight hardware costs are included in the 
estimate, it will cost about $33.5 billion to get to the point of first 
human launch projected in 2014.
    All of these numbers include reserves, but exclude Corporate G&A. 
These numbers include estimates for FYs 2012, 2013, and 2014, which lie 
beyond the budget horizon.

Questions submitted by Representative Jo Bonner

Q1.  Recent Shuttle missions have shown the importance of having a 
robotic arm and cameras to properly inspect the Shuttle. Do you feel a 
robotic arm might be beneficial when inspecting the CEV, either when 
it's not attached to the International Space Station, in a another 
orbit, or on a separate mission? Do you believe a robotic arm would be 
beneficial for future space missions?

A1. The Orion vehicle is designed to be inherently safer than the 
Shuttle in that the heat shield used to protect the capsule during re-
entry is protected from launch and on-orbit debris by Service Module 
for most of the mission. Just prior to the Crew Module return to Earth, 
the Service Module is jettisoned and this exposes the heat shield. The 
heat shield is designed to be replaced after each mission. Based on 
this improved overall technical concept of operation, the Orion does 
not include a robotic arm.

Q2.  Is there a robotic arm currently being considered on the CEV, and 
if so, is it included in the draft drawings of the CEV?

A2. The current Orion design concept does not include a robotic arm.

Questions submitted by Representative Mark Udall

Q1.  Why did NASA decide to fundamentally change its acquisition 
approach for the CEV after pursuing a ``spiral development'' approach 
for the first one and a half years of the Exploration initiative? What 
was wrong with the original acquisition approach?

A1. NASA changed its acquisition approach from the previous ``spiral 
development'' approach to reduce technical, cost, and schedule risk. 
Spiral development is a process to achieve a desired capability where 
the end-state requirements are not known at program initiation. Spiral 
development was based on an undefined transportation architecture. 
Subsequent comprehensive requirements definition and independent 
assessments defined an architecture and showed that a continued spiral 
approach would no longer fit, as it would increase cost, schedule, and 
technical risk. NASA made a decision to spend its resources in 
developing its exploration transportation end-state requirements and 
architecture for Exploration through a number of parallel efforts for 
the formulation phase of the Orion Crew Exploration Vehicle (CEV) 
project. The NASA Authorization Act of 2005 (P.L. 109-155) also 
directed NASA to pursue a Shuttle-derived transportation system to 
support a sustained human presence on the Moon and ability to support 
future destinations. This approach was also the one chosen through 
doing trade studies.
    In May 2005, the Exploration Systems Architecture Study (ESAS) was 
initiated with one of its tasks to provide a complete assessment of the 
top-level Orion CEV requirements. As a result of ESAS, the architecture 
and the top level requirements for the Orion CEV were chosen, and made 
part of the Phase 2 competition. At that point, NASA saw no benefit of 
keeping two prime contractors through Preliminary Design Review (PDR) 
at an estimated cost of $1 billion each (as in a spiral approach). 
Rather, NASA saw a better return of its investment in competitively 
issuing two Phase 1 Orion CEV Prime Contracts for conceptual design and 
trade studies against the ESAS architecture for an estimated cost of 
$46 million each.
    Additionally, NASA established an intra-agency Orion CEV Smart 
Buyer team which performed trade studies and design analysis that was 
used by the Orion CEV Project Office to understand and verify the 
appropriateness of the requirements incorporated into the Orion CEV 
Phase 2 solicitation and evaluation of proposals. With knowledge gained 
from ESAS, the Smart Buyer team, and Orion CEV Phase 1 contracts, NASA 
was in a position to ``down select'' to a single Prime contractor and 
initiate the Design, Development, and Test and Evaluation (DDT&E) 
contract for the Orion CEV in order to baseline an industry approach 
and commitment to meet the desired outcomes of the Orion CEV project. 
This new acquisition approach provides NASA with the capability to 
shorten the gap in human space flight capability with the retirement of 
the Space Shuttle in 2010. The original ``spiral development'' 
acquisition approach contained significant risk that this nation would 
not have a human space flight capability by 2014 with a higher 
development cost of close to $1 billion.

Q2.  In order to make your proposed CEV and CLV acquisition approaches 
work, NASA has had to shift significant amounts of funding from the 
exploration technology R&D and Space Station research accounts. Do you 
intend to restore all of the funding that was cut from those accounts? 
If so, when will that occur?

A2. Last year, the content of the ESMD Research and Technology 
Development program was prioritized, (Human Systems Research and 
Technology (HSRT) and Exploration Systems Research and Technology 
(ESRT) ), as part of the Exploration Systems Architecture Study (ESAS) 
review, to ensure that the R&T portfolio directly supports requirements 
of the Constellation Systems program. The Exploration Technology 
Development content was substantially reduced through this 
prioritization activity and retains only the high priority research and 
technology development projects that support exploration needs. Future 
research and technology development will be phased so that technologies 
are ready when they are needed to meet the Constellation program 
development schedules.
    Additionally, NASA is conducting research and developing new 
technologies for lunar and Mars exploration that will reduce mission 
risk, reduce logistics requirements, and reduce mission life cycle 
cost. In-situ resource utilization and non-toxic power and propulsion 
systems are examples of these kinds of technologies. These investments 
also have important connections to U.S. scientific, economic, and 
national security interests.

Q3.  If Congress followed GAO's recommendation to restrict annual 
appropriations and limit obligations for the CEV project ``to only the 
amount of funding necessary to support activities needed to 
successfully complete the project's preliminary design review,''

Q3a.  What impact would that have on NASA's schedule for developing and 
deploying the CEV, including the impact on procurement of long-lead 
items? What is your estimate based on?

Q3b.  What impact would that have on NASA's cost to develop and deploy 
the CEV? What is your estimate based on?

A3a, 3b. The impact of restricting appropriations for CEV to only 
support PDR, currently scheduled for April 2008, would be very 
negative. The Orion CEV benefits from a competitive down select process 
in which NASA received an innovative cost, technical, and management 
approach from Lockheed Martin. This effort relies upon continuity 
within the Development and Test phase of the Orion CEV contract. The 
PDR is a part of the engineering development process and not an end 
item for the development of the Orion CEV.
    The line between preliminary design and detailed design is a blurry 
one. PDR is a somewhat arbitrary construct that permits the customer to 
make a detailed assessment of progress to date, set at the time when 
most of the preliminary design is complete. Some will have been 
completed long ago, and, typically, some items will not be complete at 
PDR. DDT&E for differing phases of development is not set forth in a 
serial, end-to-beginning fashion. Rather, an efficient plan has 
different phases beginning and ending at different times for different 
components and subsystems. Using the PDR as a hard break in the 
activities of the prime contractor would prevent Orion CEV from being 
developed as efficiently as possible, and would affect cost and 
schedule accordingly.
    The delay in execution of a comprehensive development plan by 
industry would also cause a delay in the completion of that plan. This 
would add time to the schedule, and experience shows that extending the 
development schedule is one of the primary causes of increased costs to 
a development program. The ideal situation is to allow a contractor to 
make an efficient and effective plan through completion of development, 
and to reduce perturbations to that plan to an absolute minimum.
    In addition, division of DDT&E into two contracts, with the second 
contract awarded after PDR, would mandate that the second contract be a 
sole-source negotiation. The alternative to this is to change prime 
contractors, resulting in significant delay and rework. Under this 
scenario, negotiations regarding the largest expense of the development 
effort, the final hardware design and fabrication, would occur without 
the benefit of competition. Based on long, historical experience with 
large multi-year contracts, NASA is convinced that this approach would 
create great cost and/or schedule risk.
    Given the knowledge NASA has with regard to its end-state 
requirements, the most effective end-item to procure at this point is a 
fully funded DDT&E effort. There is no benefit for the Government to 
limit the funding and the contract to PDR of the development phase of 
the Orion CEV project.

Q4.  What are the major challenges facing NASA as it moves to implement 
its Constellation program [which includes both the CEV and its Crew 
Launch Vehicle (CLV) ]?

A4. From a technical perspective, the Ares I CLV has three top 
technical risks: launch vehicle operability; ability to meet Ares I 
performance requirements; and, the J-2X development schedule. The 
Constellation Program is carrying two risks for Orion, the risk of mass 
growth and the Launch Abort System development. NASA does have risk 
mitigation activities and plans in place.

Q5.  When NASA announced its Exploration architecture last fall, the 
Crew Launch Vehicle (CLV) was supposed to make use of flight-proven 
Space Shuttle components. To what extent is that still the case, and 
for those cases where Shuttle hardware will no longer be used or will 
be significantly modified, how will CLV costs and programmatic risk be 
affected? On what is your assessment based?

A5. Ares incorporates Space Shuttle components in addition to utilizing 
the infrastructure and workforce associated with the Space Shuttle. The 
human-rated Ares I that will deliver the CEV to low-Earth orbit (LEO) 
early next decade is an in-line configuration with a five-segment first 
stage Reusable Solid Rocket Booster (RSRB) based on the Space Shuttle 
Solid Rocket Booster (SRB).
    The heavy-lift Cargo Launch Vehicle (CaLV) also builds on heritage 
hardware from the Apollo and Space Shuttle vehicles, with a propulsion 
core consisting of a 33-foot diameter core tank with five expendable 
RS-68 engines and two modified Ares I First Stage RSRBs.
    Hardware commonality between the Ares I CLV and Ares V CaLV, such 
as the RSRB and the J-2X engine, will reduce the logistics footprint, 
as well as non-recurring and fixed operations costs, which will help 
sustain long-term space exploration, expanding humanity's reach to the 
Moon, Mars, and beyond. Where we are not using Shuttle hardware, we are 
using heritage J-2 engines used by the Apollo Saturn vehicles and for 
X-33 testing. We believe by using heritage hardware and having an 
active risk mitigation plan and approach will reduce life cycle costs 
and risks.
    NASA has spent the past year continuing to refine and mitigate 
concept risks through the combination of trades and analysis performed 
by NASA in-house teams. As a result of ESAS and the ensuing work, the 
architecture and the top-level requirements for the Ares I were 
established. The Constellation Program systems engineering and 
integration process has been established to control changes to 
missions, requirements, cost, schedule and risk as these occur normally 
through the project formulation and development processes. Monthly Ares 
I reviews of technical content, cost, schedule, and principle risk 
factors are performed to integrate and control the risks from each 
element and determine if these risks and mitigation strategies should 
be elevated to the top Ares I project risk list and coordinated with 
the Constellation Program office.

Questions submitted by Representative Eddie Bernice Johnson

Q1.  Does NASA have the financial resources necessary to complete the 
acquisition strategy that it has adopted for the CEV?

A1. At this time based on what we know--yes. In its early formulation 
stage, the Constellation Program is certain to face ``unknown 
unknowns'' as we continue to refine requirements, develop advanced 
technologies, and begin to integrate the various systems into an 
operational infrastructure to enable long-term exploration of the Moon 
and Mars. When Constellation moves into the implementation phase, after 
Preliminary Design Review in the spring of 2008, design, cost, and 
schedule baselines will be established, and program performance will be 
measured against metrics established at the various key decision points 
throughout the life of the mission. At this point NASA will declare 
Constellation project Life Cycle Cost commitments to Congress.
    We are making every effort to avoid cost growth and schedule slip, 
through aggressive use of management tools at all phases of the 
Program: defining and controlling requirements, generating realistic 
cost estimates early on (ESAS), employing a ``smart buyer'' approach to 
major acquisitions, and monitoring performance by means of a rigorous 
earned value management system. Thus far, we have been successful in 
achieving critical milestones within our budget profile.

Q1a.  What particular aspects of the acquisition activity have the 
potential for significant cost growth?

A1a. The Constellation Program is carrying two risks for the CEV. The 
first is a risk common to most development programs and that is the 
risk that the mass of the system will outgrow its control mass. The 
other risk carried for CEV is the challenging schedule to develop and 
test the Launch Abort System. As with any complex system, risks are 
present and trades option analysis/studies are performed to determine 
the best approach to mitigate these risks. The study results will 
provide the best mitigation strategy to buy down each risk.
                   Answers to Post-Hearing Questions
Responses by Allen Li, Director, Acquisition and Sourcing Management, 
        Government Accountability Office

Questions submitted by Chairman Sherwood L. Boehlert

Q1.  NASA's notification to Congress on its intent to begin development 
of Orion states that NASA has identified no ``areas in the CEV concept 
where the technology is immature.'' What is your view on NASA's 
assertions that risks on the Orion project are minimal due to the use 
of heritage hardware and low technology risk? What specific risks are 
you concerned about?

A1. While the assumption that the risks on the Orion project are 
minimal due to the use of heritage hardware and low risk technology 
seems logical on the surface, in practice, this has not always shown to 
be the case. GAO's work has shown that other space programs that have 
made similar optimistic assumptions about savings from the use of 
heritage hardware and the availability of mature technology, for 
example, have suffered unexpected cost increases and schedule delays. 
For instance, the Geostationary Operation Environmental Satellite I-M 
(GOES I-M) has experienced severe technical challenges, massive cost 
overruns, and risky schedule delays, despite optimistic assumptions 
including savings from heritage systems and readiness of technology 
maturity. GAO reported that these problems were caused by a number of 
factors including insufficient technical readiness of the satellite 
design prior to contract award and unrealistic cost and schedule 
estimates. In addition, we also found in reviewing the Advanced 
Extremely High Frequency Satellite System that optimistic or aggressive 
schedules, resulting from the pressure to minimize a gap between the 
existing and new program and unanticipated technical complexities, not 
only increased the schedule gap, but also led to cost increases.

Q2.  The GAO has recommended that NASA refrain from any development 
activities beyond the Preliminary Design Review. To what extent has the 
Agency started such work?

A2. GAO does not have information on development activities beyond 
those necessary to complete a successful preliminary design review that 
NASA may have begun at this point. NASA is in a better position to 
provide information to respond to this question. However, regardless of 
whether such activities have begun, GAO's concern is that the contract 
as it is structured gives NASA and the contractor the ability to begin 
such work prior to the preliminary design review. Undertaking this 
work, prior to demonstrating the appropriate levels of knowledge at the 
preliminary design review can result in extensive redesign because of 
the high number of unknowns on the project--technologies that have yet 
to be matured, requirements that have yet to be fully defined, a 
preliminary design that has yet to be approved, and a firm estimate of 
cost that has yet to be established.

Q3.  Does the Exploration Systems Mission Directorate have the 
financial resources necessary to complete the adopted acquisition 
strategy for Orion and Ares I by 2014?

A3. According to NASA, the fiscal year 2007 budget contained no serious 
unresolved budget issues for the CEV or the Constellation program. In 
addition, NASA has indicated that the fiscal year 2008 budget request 
will also contain no serious unresolved budget issues. However, NASA 
made several changes to the exploration architecture since the release 
of the fiscal year 2007 budget that will be accounted for in the fiscal 
year 2008 budget. As we reported, according to NASA officials some of 
these changes would increase near-term costs, but benefit overall life 
cycle costs of the program. NASA would not provide GAO with the cost 
data to support its claim about the impact of the changes to the 
architecture; therefore, based upon available information, we cannot 
verify that the Exploration Systems Mission Directorate has the 
financial resources necessary to complete the adopted acquisition 
strategy for Orion and Ares I by 2014.

Q4.  How does the Orion Acquisition strategy compare with that of the 
Ares I? Given that the Ares I is also in the very early stages of 
development, can NASA be confident that the rocket will perform well 
enough to support the current design of Orion?

A4. GAO is currently reviewing the acquisition strategy of the Ares I 
project. Our preliminary work indicates similar tendencies as found 
with the CEV in that NASA plans to execute at least two long-term 
contracts before the development of a sound business case for the 
project. In 2006, NASA initiated contract actions that will lead to a 
sole-source contract later this year (tentatively planned for December 
2006) for development of the first stage of the CLV. This first stage 
will use heritage hardware from the Shuttle program, namely an evolved 
five-segment Reusable Solid Rocket Booster. The acquisition strategy 
for the Upper Stage is a bit more involved. The agency plans to award a 
sole source contract for development of a derivative of the Saturn era 
J-2 engine toward the end of 2006. While this engine is based on legacy 
hardware, the development effort appears to be similar to a ``clean 
sheet'' design of the engine using modern manufacturing processes and 
redesigned internal components. The agency also plans to release draft 
requests for proposals in December 2006 leading to a competitively 
awarded contract for development of the main elements for the Upper 
Stage in August 2007. Preliminary briefings presented to GAO on Ares I 
acquisition strategy hold promise that the project will be following a 
knowledge-base acquisition approach. According to information provided 
by NASA, the Ares I acquisition strategy calls for the inclusion of key 
decision points (KDPs) to be held at each phase in the project life 
cycle. These KDPs appear to roughly correspond to GAO's knowledge 
points, but we have not been provided enough information to perform a 
comprehensive analysis. Our concern focuses on the effectiveness of 
these proposed key decision points for the Ares I project since they 
will occur well after the awarding of long-term developmental 
contracts, similar to what we reported with the CEV acquisition. GAO 
will provide updates to the Committee as this work progresses. NASA is 
in a better position to respond to the question of whether it is 
confident that the Ares I will perform well enough to support the 
current Orion design.

Ouestions submitted by Representative Bart Gordon

Q1.  How does NASA's current acquisition strategy for the CEV compare 
with its initial approach? Was the budget plan for the initial approach 
realistic or did it have similar mismatch between available funding and 
resource needs in given years?

A1. NASA's former acquisition strategy involved selecting two 
contractors to develop concepts for the CEV. Once these concepts were 
sufficiently designed, NASA planned to down select to one contractor 
for the remainder of the program. The timeframe for this down select 
was after the preliminary design review. In addition, NASA planned to 
use spiral development--a type of evolutionary development--for the 
program. Evolutionary development is an approach that enables 
organizations to achieve a match between needs and resources. Under 
this approach, basic requirements are achieved first, with additional 
capabilities planned for future generations of the product. Because 
product development is incremental, achieving knowledge is more 
manageable. This type of approach is especially worthwhile if the goal 
is to reduce development cycle times and get the system operational as 
quickly as possible. Our work has shown that evolutionary development 
is a best practice for system development that can help reduce risks at 
critical junctures and help ensure that decision makers get the most 
out of their investments. In 2005, NASA changed course and chose a 
different approach for the program. This approach entailed selecting 
and awarding a contract to one contractor over a year and a half before 
the preliminary design review. The result of NASA's chosen approach is 
that the Agency is committed to one concept, thereby removing their 
ability to leverage the most beneficial aspects of each design. NASA's 
administrator has testified that the earlier plans for the CEV, which 
called for operational deployment of the CEV not later than 2014, were 
abandoned in an effort to accelerate the development of the CEV and 
have it operational as soon as possible. NASA's planning for its 
exploration architecture was based on a 2011 operational capability of 
the CEV. However, NASA's approach has not resulted in a significant 
decrease in development time and current program documents continue to 
show an operational date for the CEV of 2014. GAO is unaware of NASA 
developing a similar cost estimate for its initial approach to the CEV 
project. However, given that that project was so early in the concept 
development stage when it was abandoned, it is unlikely that NASA had 
sufficient information to develop such an estimate. Therefore, we 
cannot project whether the budget plan for the initial approach was 
realistic or faced a similar mismatch between available funding and 
resource needs in given years.

Q2.  To what degree, if at all, does NASA's current approach deviate 
from ``best practices'' for large systems acquisitions?

A2. NASA approach deviates from best practices because it commits the 
government to a long-term effort prior to obtaining the knowledge 
necessary to support such a commitment. At the time of our July 2006 
report, the contract was intended to cover all design, development, 
test and evaluation, production, and sustaining engineering activities. 
As I mentioned in my statement, NASA modified its approach and made the 
production and sustainment activities contract options. This step 
brings NASA's approach more in line with best practices, but the Agency 
is still taking a risky approach with the project by committing to 
activities beyond PDR without a sound business case. Without such 
knowledge it is difficult for NASA to predict with any confidence how 
much the project will cost, what technologies will or will not be 
available to meet performance expectations, and when the vehicle will 
be ready for use. In addition, NASA's current acquisition policies do 
not support the attainment of such knowledge at key junctures in the 
development process. If NASA had in place controls to ensure that the 
progress of the CEV project would be measured against standardized 
knowledge base criteria, the risks associated with their current 
approach would be lessened. Briefings that we have seen on changes to 
NASA's program and project management policies look promising, but NASA 
has yet to issue its revised policy and consequently, we have yet to 
review the actual document.

Q3.  Has GAO recommended a similar type of approach on other 
acquisition programs to what it is recommending for NASA's CEV program? 
Has the government approached any past acquisitions with a similar 
long-term, life cycle cost strategy? What were the results?

A3. Most major acquisition programs within the Department of Defense 
are encouraged not to commit the government to production and 
sustainment activities prior to demonstrating that the system works as 
intended. Our prior recommendations have focused on the need to acquire 
knowledge at critical points in the development process, not 
specifically on the contract. However, we have recommended that 
programs delay the award of a contract due to a lack of adequate 
knowledge. The Joint Strike Fighter (JSF) is one notable example. The 
JSF program did not concur with our recommendation and awarded its 
contract without first gaining sufficient knowledge. Subsequently, the 
program has experienced over a 30 percent cost growth and almost a year 
delay in schedule. At issue with the CEV project is that NASA has no 
certainty what the status of the project will be at the PDR, in terms 
of cost estimates or technology maturity for example, but will be 
committed to proceed regardless or will be forced to terminate the 
contract and incur additional costs.

Q4.  What types of indicators should Congress ask NASA to provide in 
order to gauge the process of CEV development and ensure adequate 
oversight at key junctures during its development, including at the 
preliminary design review, the critical design review, and at the 
production review?

A4. Successful product developers ensure a high level of knowledge was 
achieved at key junctures in development, including the preliminary 
design review, the critical design review, and the production review. 
These junctures and associated indicators are defined as follows:

         Preliminary Design Review: Resources and needs match. This 
        level of knowledge occurs when a sound business case is made 
        for the product--that is, a match is made between the 
        customer's requirements and the product developer's available 
        resources in terms of knowledge, time, money, and capacity. 
        Achieving a high level of technology maturity at the start of 
        system development is an important indicator of whether this 
        match has been made. This means that the technologies needed to 
        meet essential product requirements have been demonstrated to 
        work in their intended environment. The Congress could ask NASA 
        to provide information on the following indicators to verify 
        that:

                  all technologies are demonstrated to a high 
                level of technology maturity--(Technology Readiness 
                Level 6 or 7);

                  project requirements are informed by the 
                systems engineering process;

                  cost and schedule estimates established for 
                the project are based on knowledge from the preliminary 
                design using systems engineering tools;

                  additional resources are in place including 
                needed workforce; and

                  a decision review is conducted following 
                completion of the preliminary design review.

         Critical Design Review: Product design is stable. This level 
        of knowledge occurs when a program determines that a product's 
        design is stable--that is, it will meet customer requirements 
        and cost and schedule targets. A best practice is to achieve 
        design stability at the system-level critical design review, 
        usually held midway through development. Completion of at least 
        90 percent of engineering drawings at the system design review 
        provides tangible evidence that the design is stable. The 
        Congress could ask NASA to provide information on the following 
        indicators at the critical design review to verify that:

                  at least 90 percent of engineering drawings 
                are complete;

                  all subsystem and system design reviews are 
                completed;

                  the design meets requirements demonstrated 
                through modeling, simulation, or prototypes;

                  stakeholders concurrence that drawings are 
                complete and producible is obtained;

                  failure modes and effects analysis are 
                completed;

                  key system characteristics are identified;

                  critical manufacturing processes are 
                identified;

                  reliability targets are established and a 
                growth plan based on demonstrated reliability rates of 
                components and subsystems is developed; and

                  a decision review is conducted following the 
                completion of the Critical Design Review.

         Production Review: Production processes are mature. This level 
        of knowledge is achieved when it has been demonstrated that the 
        product can be manufactured within cost, schedule, and quality 
        targets. A best practice is to ensure that all key 
        manufacturing processes are in statistical control--that is, 
        they are repeatable, sustainable, and capable of consistently 
        producing parts within the product's quality tolerances and 
        standards--at the start of production. The Congress could ask 
        NASA to provide information on the following indicators at the 
        production review to verify that:

                  manufacturing processes have been 
                demonstrated;

                  production representative prototypes have 
                been built;

                  production representative prototypes have 
                been tested and have achieved reliability goals;

                  production representative prototypes have 
                been demonstrated product in operational environment 
                through testing;

                  statistical process control data has been 
                collected;

                  critical processes have been demonstrated to 
                be capable and that they are in statistical control;

                  and a decision review is conducted following 
                completion of the production readiness review.

Q5.  Do you agree or disagree with NASA's view that risks on the CEV 
project are minimal due to the use of heritage hardware and a low 
technology risk approach?

A5. While the assumption that the risks on the Orion project are 
minimal due to the use of heritage hardware and low risk technology 
seems logical on the surface, in practice, this has not always shown to 
be the case. GAO's work has shown that other space programs that have 
made similar optimistic assumptions about savings from the use of 
heritage hardware and the availability of mature technology, for 
example, have suffered unexpected cost increases and schedule delays. 
For instance, the Geostationary Operation Environmental Satellite I-M 
(GOES I-M) has experiences severe technical challenges, massive cost 
overruns, and risky schedule delays, despite optimistic assumptions 
including savings from heritage systems and readiness of technology 
maturity. GAO reported that these problems were cause by a number of 
factors including insufficient technical readiness of the satellite 
design prior to contract award and unrealistic cost and schedule 
estimates. In addition, we also found in reviewing the Advanced 
Extremely High Frequency Satellite System that optimistic schedules, 
resulting from the pressure to minimize a gap between the existing and 
new program and unanticipated technical complexities, not only 
increased the schedule gap, but also led to cost increases and possible 
quality issues.

Q6.  Should Congress impose a formal cost cap on the CEV program? If 
so, at what point in the development program should the cap be imposed? 
If not, why not?

A6. While instituting a cost cap on the CEV project could help to 
encourage fiscal responsibility for the project, other factors need to 
be considered before using such an approach. As we reported, NASA lacks 
a firm estimate of project cost at this point and will not be able to 
produce such an estimate until the preliminary design review scheduled 
for 2008. Therefore, if Congress chooses to institute a cost cap for 
the project, it would be best to wait until at least the preliminary 
design review when NASA has a better understanding of project cost. In 
the interim, sound project management as discussed in GAO's written 
statement can help to ensure that the project is being managed in a 
fiscally responsible manner. Another consideration is the fact that 
instituting a cost cap on the project assumes a stable design. For 
example, as you know, Congress imposed a cost cap on the International 
Space Station program. In our 2001 report examining NASA's compliance 
with the cost cap, we found that while NASA projections for the 
International Space Station through 2004 fell within the cost cap, the 
projections were achieved mainly by reductions in space station 
content, not by prudent fiscal and project management.

Q7.  Why was it necessary to shift almost $7 billion into the 
Constellation program [which includes the CEV and CLV] for the years FY 
2006 to FY 2010 compared to what NASA had said would be needed over 
that period in last year's budget request?

Q7a.  Did NASA underestimate the cost of the CEV and CLV programs?

Q7b.  NASA has indicated that it will not be possible to launch an 
operational CEV until 2014--which was the original goal--despite the 
additional funds that have been transferred into the program to 
``accelerate'' it. What is that?

A7a, 7b. The following table presents changes to the Constellation 
Systems budget elements included in the President's FY 2007 budget 
request. The table shows how the changes in funding resulted in a net 
increase of nearly $7 billion for FY 2006 through 2010 when compared 
with the totals for FY 2006 to FY 2010 from the President's FY 2006 
budget request.




    According to the narrative in NASA's FY 2007 budget justification 
for CEV, ``Acceleration of the program has resulted in higher budget 
numbers then in the FY 2006 submittal.'' However, the budget numbers 
only show an $86 million dollar increase in FY 2006, with annual 
reductions ranging from $196 million to $410 million in FY 2007 to FY 
2010 funding. In total, funding requested for the CEV project decreased 
by about $1 billion for the FY 2006 to FY 2010 period when compared to 
the FY 2006 budget. Funding also decreased for ISS Cargo Crew Services 
by $364 million. These reductions in the Constellation Systems budget 
were more than offset by a $2.8 billion increase for the CLV project, 
an addition of $2.4 billion for the new Launch and Mission Systems 
project, an addition of $448 million for the new Exploration 
Communications and Navigation Systems project, and an additional $2.6 
billion in funding not tied to specific Constellation projects. NASA's 
FY 2007 budget justification did not break the funding out for specific 
projects but noted that the Constellation budget includes funding for 
initial planning for systems and vehicles necessary for lunar and Mars 
missions. The President's FY 2007 budget request for Constellation 
Systems in FY 2011 is $7.7 billion, which includes about $5.8 billion 
for the five specific projects in the table and about $1.9 billion for 
funding not directly tied with specific projects.

Questions submitted by Representative Mark Udall

Q1.  GAO has pointed out that with respect to NASA's budget plan ``. . 
.there are years when NASA does not have sufficient funding to 
implement the architecture. Some yearly shortfalls exceed $1 billion, 
while in other years the funding available exceeds needed reserves.''

Q1a.  Are you aware of any other major system acquisition programs in 
the government that have been funded using the approach being taken by 
NASA in the Constellation program?

Q1b.  If so, which ones, and how well has that funding approach worked?

Q1c.  Does GAO support such a funding approach?

A1a, 1b, 1c. As we noted in our July report and September testimony, 
there is a substantial mismatch between estimated costs and the amount 
and timing of the Exploration Systems Mission Directorate's five-year 
budget in NASA fiscal year 2007 request. GAO's past work has shown that 
matching requirements to available and reasonably expected resources 
reduces risk and increases the likelihood of success for major 
acquisitions. In what could be an effort to offset the years of 
projected funding shortfalls, NASA has been consistently accumulating a 
bow wave of unobligated balances that are carried over at the end of 
each year. We briefed the Committee that NASA's actual balance of FY 
2005 unobligated funds continued a trend of increasing both in terms of 
the dollar amount and the percentage increase of budget authority. For 
example, NASA's unobligated balance more than tripled from $616 million 
at the end of FY 2000 to $2.1 billion at the end of FY 2005--an 
increase from five percent of the budget to about 13 percent. While we 
have not looked at other agencies with major system acquisition 
programs that utilize a similar approach, it would appear that the 
ability to carryover large amounts of unobligated funds affords NASA a 
great deal of flexibility in attempting to address projected funding 
shortfalls in selected programs. However, it can reduce the 
transparency of the budget request and create difficulties for Congress 
in determining the amount and timing of budget authority it should 
provide to NASA.

Q2.  How confident are you that NASA will be able to restore the 
technology R&D and Space Station research funding that was shifted to 
the Constellation program? What will be the impact if those funds are 
not restored?

A2. None of GAO's current work provides it with the information 
necessary to comment on whether NASA will be able to restore these 
funds, nor on the impact to Exploration Systems Research and Technology 
(ESRT) or Human Systems Research and Technology (HSRT) if the funds are 
not restored. According to NASA, funding was shifted from ESRT and HSRT 
based on the results of the Exploration Systems Architecture Study 
(ESAS). NASA's budget indicates that ESAS provided NASA with 
information that has allowed the Agency to better align the programs' 
research and technology development with the Vision for Space 
Exploration while maintaining fundamental ISS efforts on ISS and to 
focus on technology priorities for lunar exploration. Furthermore, the 
overall funding for the ISS program per the FY 2007 budget submission 
totaled about $10.2 billion, a $200 million increase over the total for 
the same period in the FY 2006 budget submission.

Q3.  Are there any other areas of concern that GAO has about NASA's 
implementation of the President's exploration initiative that Congress 
should be aware of?

A3. NASA will undoubtedly be operating in a constrained fiscal 
environment, and it is imperative that NASA successfully manage its 
limited resources in order to achieve successful outcomes. Adhering to 
the principles of knowledge-based acquisition is a key step in this 
effort, but as their efforts move forward, the Agency must not let 
itself succumb to the pressures of meeting self-imposed schedules. The 
gap between retiring the Shuttle in 2010 and bringing the CEV on-line 
is a reality. Attempting to close that gap by pushing forward 
development of the CEV without first obtaining the requisite knowledge 
at key points could very well result in the production of a system that 
not only doesn't meet expectations but ends up costing more and 
actually increasing the gap. Competing demands within the Agency could 
also instill schedule pressure on CEV development efforts. For example, 
NASA plans to rely on commercial providers to make up the gap in ISS 
logistics left by the Shuttle retirement. We currently have work 
underway to assess whether ISS operations can be effectively supported 
in the interim. NASA must also effectively manage the transition of 
both its supplier base and workforce from the Shuttle program to 
planned exploration activities. The need to maintain and safely process 
the Shuttle through its final planned flight in 2010 and designing, 
developing and testing a CEV in 2014 presents a difficult challenge for 
NASA.

Q4.  If Congress followed GAO's recommendation to restrict annual 
appropriations and limit obligations for the CEV project ``to only the 
amount of funding necessary to support activities needed to 
successfully complete the project's preliminary design review,''

Q4a.  What impact would that have on NASA's schedule for developing and 
deploying the CEV, including the impact on procurement of long-lead 
items? What is your estimate based on?

Q4b.  What impact would that have on NASA's cost to develop and deploy 
the CEV? What is your estimate based on?

A4a, 4b. If NASA is approaching the development of the CEV using a 
knowledge-based approach, it would not be undertaking development 
activities at this point unless they are needed to successfully 
complete a preliminary design review. NASA's own program and project 
management policies call for a major decision review following the 
preliminary design review to ensure that the project is ready to move 
beyond preliminary design activities. A knowledge-based acquisition 
approach requires decision makers to ask themselves, at each decision 
point, whether they have gained the knowledge needed to progress into 
the next acquisition phase. For example, at the preliminary design 
review, all technologies needed to meet essential product requirements 
should have been demonstrated to work in their intended environment. If 
not, the program should not go forward. GAO has recommended that the 
procurement of long-lead items not be approved until the project can 
clearly demonstrate that technologies are mature and the design is 
stable. Our past work has shown that increased costs and schedule 
slippage may accrue to programs that are still maturing technologies 
well into system development when they should be focused on stabilizing 
system design and preparing for production.

Q5.  What are the major challenges facing NASA as it moves to implement 
its Constellation program [which includes both the CEV and its Crew 
Launch Vehicle (CLV) ]?

A5. NASA has embarked on an ambitious schedule to have two separate and 
distinct major acquisition programs in development concurrently. The 
coordination and timing of development efforts between the CEV and the 
CLV cannot be overstated, and the integration of these programs will be 
challenging for NASA. The functionality of the CEV is wholly dependent 
on the CLV. NASA plans to use heritage hardware for the CEV and CLV in 
hopes that it will simplify and shorten the development process. But, 
given NASA's planned upgrades to some components, technology and 
performance risks could increase. GAO has already identified an 
instance within the Constellation Program where the Agency has entered 
into a long-term commitment without having all the elements of a sound 
business case, including mature technologies and well defined 
requirements. Ensuring that both of these major acquisition programs 
are carried out in a prudent and cost-effective manner will not only be 
key to maintaining our country's human access to space but vital to 
instilling confidence that NASA can achieve mission success.

Q6.  When NASA announced its Exploration architecture last fall, the 
Crew Launch Vehicle (CLV) was supposed to make use of flight-proven 
Space Shuttle components. To what extent is that still the case, and 
for those cases where Shuttle hardware will no longer be used or will 
be significantly modified, how will CLV costs and programmatic risk be 
affected? On what is your assessment based?

A6. GAO is studying the CLV architecture as part of on-going work 
requested by this committee concerning the acquisition strategy of the 
project. We have not completed our analysis with regard the affect of 
CLV changes on costs and programmatic risk. The architecture has 
changed since the completion of the Exploration Systems Architecture 
Study last fall. In January 2006, NASA announced that the two 
components with direct ties to the Shuttle program--the four-segment 
Reusable Solid Rocket Booster (RSRB) and the Space Shuttle Main Engine 
(SSME)--would no longer be part of the CLV architecture. Instead, NASA 
now plans to utilize a newly developed five-segment RSRB for the CLV's 
first stage and a remanufactured Saturn era J-2X engine to power the 
Upper Stage.

Questions submitted by Representative Eddie Bernice Johnson

Q1.  Does NASA have the financial resources necessary to complete the 
acquisition strategy that it has adopted for the CEV?

Q1a.  What particular aspects of the acquisition activity have the 
potential for significant cost growth?

A1, 1a. Given the fact that NASA would not provide us with cost 
information beyond what was contained in the fiscal year 2007 budget 
request, we are not in a position to answer your question. NASA should 
provide you with an answer as whether it can afford the chosen 
acquisition approach for the CEV and the basis for its response. From 
our perspective, however, NASA has embarked on a long-term design and 
development effort without the requisite knowledge. By making a long-
term commitment prior to establishing a sound business case, NASA has 
accepted the risk for potential cost and schedule growth. It is unknown 
at this point whether NASA will have the financial resources necessary 
to complete the adopted acquisition strategy since realistic cost 
estimates are not currently available.
                              Appendix 2:

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                   Additional Material for the Record






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