[Senate Hearing 109-1106]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 109-1106
 
                      THE NATIONAL POLAR-ORBITING 
                  OPERATIONAL ENVIRONMENTAL SATELLITE 
                SYSTEM: OVER BUDGET AND BEHIND SCHEDULE, 
                        OPTIONS TO MOVE FORWARD 

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON DISASTER PREVENTION 
                             AND PREDICTION

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 30, 2006

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
             Kenneth R. Nahigian, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director
                                 ------                                

           SUBCOMMITTEE ON DISASTER PREVENTION AND PREDICTION

JIM DeMINT, South Carolina,          E. BENJAMIN NELSON, Nebraska, 
    Chairman                             Ranking
TED STEVENS, Alaska                  MARIA CANTWELL, Washington
GORDON H. SMITH, Oregon              BILL NELSON, Florida
DAVID VITTER, Louisiana

























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 30, 2006...................................     1
Statement of Senator DeMint......................................     1
Statement of Senator Stevens.....................................     2
    Prepared statement...........................................     2

                               Witnesses

Payton, Hon. Gary E., Deputy Under Secretary of the Air Force for 
  Space Programs, U.S. Air Force.................................     8
    Prepared statement...........................................     9
Powner, David A., Director, Information Technology Management 
  Issues, U.S. Government Accountability Office..................    15
    Prepared statement...........................................    17
Ryan, David L., Vice President/NPOESS Program Director, Northrop 
  Grumman Space Technology.......................................    11
    Prepared statement...........................................    13
Withee, Gregory W., Assistant Administrator for Satellite and 
  Information Services, National Environmental Satellite, Data, 
  and Information Service, National Oceanic and Atmospheric 
  Administration, Department of Commerce.........................     3
    Prepared statement...........................................     5

                                Appendix

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared 
  statement......................................................    35
Response to written questions submitted by Hon. Daniel K. Inouye 
  to:
    Hon. Gary E. Payton..........................................    35
    David A. Powner..............................................    37
    Gregory W. Withee............................................    39


                      THE NATIONAL POLAR-ORBITING
                  OPERATIONAL ENVIRONMENTAL SATELLITE
                     SYSTEM: OVER BUDGET AND BEHIND
                   SCHEDULE, OPTIONS TO MOVE FORWARD

                              ----------                              


                        THURSDAY, MARCH 30, 2006

                               U.S. Senate,
        Subcommittee on Disaster Prevention and Prediction,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 11:15 a.m. in 
room SD-562, Dirksen Senate Office Building, Hon. Jim DeMint, 
Chairman of the Subcommittee, presiding.

                 STATEMENT OF HON. JIM DeMINT, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator DeMint. Good morning. I want to thank the witnesses 
and everyone who's here.
    I'm Jim DeMint. And I think, like most Americans, and 
probably most Members of Congress, I have never heard of the 
National Polar-orbiting Operational Environmental Satellite 
System until I started working with this committee. But, 
clearly, the more I learn about it, the more important I 
realize that it is. It will provide a better forecast for our 
coastal communities for hurricanes and other weather events, 
and, because of the collaboration with the military, could 
provide crucial information to warfighters with new 
environmental awareness.
    But, unfortunately, as all of you know, the reason we're 
here today, is that the program is at least 25 percent over 
budget, 3.5 million over the initial cost estimates at this 
point. We're months behind schedule. And, perhaps most 
importantly, in the middle of this delay, a satellite failure 
could lead to a 3-year gap in weather observations. So, what do 
we tell our coastal communities when, and if, this happens? And 
what do we tell soldiers, if we don't have a complete picture 
of the battlefield.
    I came to Washington to fight excessive spending while 
ensuring essential services were provided. Weather prediction 
is a crucial government service, but cost overruns like this 
one reaffirm my conviction that Washington doesn't have 
sufficient respect for the Federal taxpayer.
    It's my understanding, at this point, NOAA has refused to 
discuss how they'll handle the cost growth. And it appears that 
the delay is being blamed on the military Nunn-McCurdy process. 
Actually, it's getting very confusing and cloudy to me as to 
exactly where we are. If NOAA doesn't come up with a plan that 
doesn't put the taxpayer on the hook for even more errors and 
delays, you know, we have some decisions we need to make in 
this committee.
    South Carolina, particularly, has a number of military 
personnel, and we also have a lot of coastal area vulnerable to 
hurricanes, so it's an important issue for us. I know it is for 
Alaska, as well.
    Before I introduce our witnesses, I would ask the Chairman 
if he'd like to make an opening statement.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. Well, thank you very much, Senator DeMint. 
Jim, I thank you for holding this hearing.
    And I've got to tell the witnesses, I've got too many 
conflicts here this morning. I want to stay and listen to part 
of the discussion. So, I ask you to put my statement in the 
record. It's not very long.
    [The prepared statement of Senator Stevens follows:]

    Prepared Statement of Hon. Ted Stevens, U.S. Senator from Alaska
    Thanks, Jim, for holding this hearing. I am very concerned about 
the NPOESS program. Costs have almost doubled and the Government 
Accountability Office now estimates a total price tag for this project 
at almost $10 billion.
    I am sure all of you know that budgets are tight this year, 
especially NOAAs, and polar-orbiting satellites are absolutely critical 
to weather forecasting and monitoring in Alaska. The way I see it now, 
Alaska is in a lose/lose situation. NOAA's wet programs are also 
critical to Alaska, and if budgeted money gets redirected from NOAA's 
wet programs into satellites, we will take the biggest hit.
    Both the government and contractors need to work on getting this 
program on track. I look forward to your testimony.

    The Chairman. But I'm sure you know that Alaska is, sort 
of, the weather factory, with the prevailing winds we get. What 
happens up our way is absolutely important to the rest of the 
world, and particularly to the United States. But this concept, 
now, it's critical to Alaska. Jim's heard me say it, and 
everybody's heard me say it too many times--75 percent of our 
communities can be reached only by air. We're absolutely 
totally dependent upon weather prediction for safety and 
survival. So, I really think this is a necessary project for 
us. But I join Senator DeMint in saying, I don't understand how 
this price tag of this system has gone up to $10 billion.
    So, I look forward to hearing your testimony. I'll have to 
run when I have to run, but I thank you very much.
    Senator DeMint. Thank you, Mr. Chairman. We will make sure 
your testimony is part of the record.
    And, while other members are not here at this point, we 
will make it important, because that type of price tag becomes 
very important to all Members of Congress.
    We have one panel appearing before the Subcommittee this 
morning, including the government agencies responsible for 
overseeing the program, the program's prime contractor, and the 
Government Accountability Office.
    Appearing for the Air Force is Deputy Under Secretary of 
the Air Force for Space Programs, Gary Payton. Mr. Payton will 
discuss the importance of satellite observations to the 
warfighter as well as summarize the Air Force's work to control 
the costs on these programs, and their plan for proceeding 
after the Nunn-McCurdy review.
    Appearing for NOAA is Mr. Greg Withee, Assistant 
Administrator of NOAA for Satellite and Information Services. 
He will be discussing the agency's efforts to manage the cost 
of the program. Mr. Withee will hopefully also discuss how his 
agency plans to absorb any additional costs of the program that 
may result out of the Nunn-McCurdy review.
    Appearing on behalf of Northrop Grumman, the program's 
prime contractor, is Mr. David Ryan, Vice President and Program 
Manager. Mr. Ryan will present an overview of the prime 
contractor's management of the program, discuss what problems 
they have encountered in the past, detail what lessons they 
have learned from previous problems, and measures they have 
implemented to ensure that they do not experience similar 
problems in the future.
    Finally, appearing for GAO is Mr. David Powner, Director of 
Information Technology Management Issues at the office. Mr. 
Powner will provide a review of the office's oversight of the 
program. Additionally, he will discuss the concerns he has with 
the measures implemented by the contractor and the government 
to contain costs and to ensure timely completion of the 
project. He will also hopefully discuss any concerns he has in 
the partnership between the two agencies, going forward.
    So, we will begin with you, Mr. Withee, and just proceed 
across the panel. And if we can keep our statements to 5 
minutes, I would greatly appreciate it.
    Mr. Withee?

           STATEMENT OF GREGORY W. WITHEE, ASSISTANT 
          ADMINISTRATOR FOR SATELLITE AND INFORMATION 
     SERVICES, NATIONAL ENVIRONMENTAL SATELLITE, DATA, AND 
           INFORMATION SERVICE, NATIONAL OCEANIC AND 
           ATMOSPHERIC ADMINISTRATION, DEPARTMENT OF 
                            COMMERCE

    Mr. Withee. Thank you. Good morning, Chairman DeMint, 
Senator Stevens.
    I'm Greg Withee, the Assistant Administrator for NOAA's 
Satellite and Information Service. I appreciate the opportunity 
to discuss--and it's a mouthful--the NOAA National Polar-
orbiting Operational Environmental Satellite System, commonly 
referred to as NPOESS, with you today. We appreciate the 
Committee's interest and support of NOAA's programs.
    Satellites provide an unparalleled capability to take 
images and precise measurements of land, sea, and air. Although 
their payoff is great, developing satellites is an inherently 
challenging and risky endeavor. Not only is rocket science 
involved, but its instruments must be sensitive enough to 
measure very small environmental differences, and yet strong 
enough to withstand the extreme vibrations of launch and the 
harsh space environment.
    Since the 1960s, the United States has operated two 
separate environmental polar-orbiting programs, a military 
system managed by the Air Force, and a civil satellite system 
managed by NOAA. In 1994, President Clinton directed the merger 
of these military and civil polar satellite programs.
    The program was designed as series--the new program--excuse 
me--NPOESS, is to be the next generation of polar satellites. 
The program was designed as a series of 6 satellites, each 
having up to 13 instruments, several of which represent 
significant advances over current technology. The new NPOESS 
sensors will provide higher-quality data to both civilian and 
military users, and support such missions as improved 
forecasting and warnings.
    NPOESS is a unique program in the Federal Government. It is 
jointly managed by NOAA, Air Force, and NASA. NOAA is 
responsible for the operations after launch. The Air Force is 
responsible for systems acquisition. And NASA provides 
technology infusion. Direct funding for the program is jointly 
provided, and equally provided, by NOAA and the Air Force.
    The program is overseen by an executive committee, so-
called EXCOM, of senior leaders of the three agencies. And an 
integrated Program Office staffed by the three agencies is 
responsible for managing the NPOESS program.
    In 2002, Northrop Grumman was selected as the NPOESS prime 
contractor, and they are responsible for the development, 
production, and operation of the NPOESS program.
    NPOESS is a complex environmental satellite program, which 
has numerous technical, developmental, integration, and 
management challenges. In the mid-2004, during the initial 
testing phase, Northrop Grumman encountered significant 
problems that showed potential design deficiencies and 
manufacturing-process shortfalls, with the visible--here's 
another long phrase--visible infrared imager radiometer suite. 
The short name is VIIRS. It's an instrument on the NPOESS 
program.
    On March 31, 2005, Northrop Grumman communicated to the 
Program Office that it would not be able to meet the overall 
NPOESS cost and schedule baselines due to problems encountered 
with the development of sensors--specifically, this instrument, 
VIIRS. The early technical challenges, which are typical for 
complex developmental efforts, have been resolved for most of 
the sensors. However, this instrument, VIIRS, and another 
instrument, called the conical microwave imager sounder, CMIS, 
continued to require close management and oversight, and 
continued to threaten increases in cost and schedule.
    The challenges facing the NPOESS are serious, and the tri-
agency team is working to contain cost growth, limit schedule 
delays, and reduce risk. As a result of an extensive review 
process, significant changes have been made in the overall 
management of the NPOESS program.
    The Program Office team has been realigned to strengthen 
its management of the NPOESS acquisition. The government is 
also in the process of approving a permanent independent 
management oversight office, which would be led by Brigadier 
General (select) Sue Mashiko, a proven program director. 
Colonel Dan Stockton was also approved as a new NPOESS Program 
Office Director. They're both with me, sitting behind me, 
today.
    Northrop Grumman has assigned a new NPOESS program manager, 
Dave Ryan, who's testifying today. And Raytheon has brought in 
a new team for their senior management of the instrument.
    DOD is now chairing a Nunn-McCurdy certification process 
for the NPOESS program, based on the analysis that the program 
is likely to exceed the 25-percent threshold. NOAA and NASA are 
active participants in all aspects of this complex 
certification process, which includes careful examination of 
program requirements, alternatives, costs, and management.
    In conclusion, Mr. Chairman, NOAA and its partners are 
committed to overcoming the technical and management 
challenges, and to continue to provide uninterrupted satellite 
data to support mission-critical activities. And we know, 
Senator Stevens, how important these satellites are to Alaska.
    To fulfill this commitment, NOAA will reevaluate its fiscal 
and programmatic priorities at the completion of the Nunn-
McCurdy process in June. Once these priorities are established, 
we will work with Congress to ensure we have your support of 
NOAA's plan for moving forward.
    Thank you for the opportunity to speak with you today, and 
I'm prepared to take any questions you may have.
    [The prepared statement of Mr. Withee follows:]

 Prepared Statement of Gregory W. Withee, Assistant Administrator for 
 Satellite and Information Services, National Environmental Satellite, 
    Data, and Information Service, National Oceanic and Atmospheric 
                 Administration, Department of Commerce
    Chairman DeMint, Senator Nelson, and committee members, I 
appreciate the opportunity to discuss with you the National Polar-
orbiting Operational Environmental Satellite System (NPOESS). I am 
Gregory W. Withee, Assistant Administrator for Satellite and 
Information Services, within the National Oceanic and Atmospheric 
Administration's (NOAA's) National Environmental Satellite, Data, and 
Information Service (NESDIS).
NOAA's Satellite Programs
    Satellites provide an unparalleled capability to take images and 
precise measurements of many aspects of vast areas of the land, sea, 
and air in very rapid succession. Data obtained from these observing 
systems are essential to our ability to understand and predict changes 
in the Earth's environment, and to conserve and manage coastal and 
marine resources. These data are key enablers to NOAA in meeting its 
public safety, economic, and environmental mission requirements.
    NOAA currently manages two major satellite programs: the 
Geostationary Operational Environmental Satellite (GOES) and Polar-
orbiting Operational Environmental Satellite (POES) programs. GOES 
satellites provide the kind of continuous monitoring critical to our 
short-range weather forecasts and increase our ability to monitor and 
predict extreme weather events, including tropical and severe storms. 
GOES satellites orbit the Earth in a geosynchronous orbit, which means 
they orbit the Earth at a speed matching the Earth's rotation. This 
orbit allows them to provide continuous coverage over the western 
hemisphere. POES satellites orbit over the poles of the Earth, 
providing global imagery and atmospheric measurements several times a 
day. Polar data are used around the world for weather monitoring and 
prediction and are the foundation for global weather models needed for 
longer-range forecasts. Data and information products from both the 
GOES and POES programs have many applications contributing to societal 
benefits, including disaster prevention, prediction, and monitoring, 
global vegetation analysis, and climate and ocean research. Both types 
of satellites also help to save lives by receiving and relaying search 
and rescue beacon signals to appropriate emergency and search and 
rescue officials.
What is the National Polar-orbiting Operational Environmental Satellite 
        System (NPOESS)?
    Since the early 1960s, the United States has maintained two 
distinct polar satellite programs, one for military use and one for 
civilian use. While data from both programs were exchanged, each 
program operated independently. In 1994, after a multi-year review 
concluded that civilian and military requirements could be satisfied by 
a single polar satellite program, President Clinton directed the merger 
of the two programs into one--NPOESS. This program was designed as a 
series of six satellites, with a maximum of three operating at any 
given time (one in an early morning orbit, one in a mid morning orbit, 
and one in an early afternoon orbit). Under the NPOESS program, 13 
different instruments will be placed in various configurations 
depending on the satellite's designated orbit. Several of these sensors 
represent significant advances when compared to current technology.
    The new NPOESS sensors will provide higher quality data, increase 
our ability to see through clouds, and beam the information back more 
often than current polar satellites. Satellites provide over 90 percent 
of the data used in weather forecasting models. The new NPOESS sensors 
will translate into more sophisticated weather models, which will lead 
to better forecasts and warnings. NPOESS will also enhance the data and 
products used for climate and ocean research and operations as well as 
monitoring space weather.
    The program also includes a risk reduction component--the NPOESS 
Preparatory Project (NPP). The NPP was designed to test several of the 
new sensors in space and to ensure that the ground control systems work 
properly before launch of the first operational NPOESS satellite. 
Additionally, the NPP should allow us time to assimilate the new data 
sets into the computer weather models and other applications before 
NOAA needs to use them operationally. Finally, the NPP should ensure 
continuity of certain climate records as some of the satellites 
maintained by the National Aeronautics and Space Administration (NASA) 
reach the end of their end of lives. As planned, NASA acquires and 
builds the NPP spacecraft, launch vehicle and one of the four sensors. 
The NPOESS program provides the other three sensors, the ground system, 
and the data archive capability.
How is NPOESS Managed?
    Per a Presidential Decision Directive and the resultant Memorandum 
of Agreement among DOC, Department of Defense (DOD), and NASA, NPOESS 
is managed jointly by these three agencies, with direct funding 
provided by DOC and DOD. At the senior level, this program is overseen 
by an Executive Committee (EXCOM). On this committee, Vice Admiral 
Conrad C. Lautenbacher, Jr., Under Secretary of Commerce for Oceans and 
Atmosphere and NOAA Administrator represents DOC; Dr. Ronald Sega, 
Under Secretary of the Air Force, represents DOD; and Dr. Michael 
Griffin, NASA Administrator, represents NASA. The EXCOM meets several 
times a year to review progress toward achieving cost, schedule, and 
performance baselines. The EXCOM also approves program plans, budgets, 
and policies and ensures agency funding commitments are equitable and 
sustained.
    To assist the EXCOM, a Tri-agency Steering Committee consisting of 
individuals from the three agencies, meets monthly. This group acts on 
our behalf as a senior level management review body, recommends actions 
to the EXCOM, and provides guidance to the Integrated Program Office 
(IPO). A Senior Users Advisory Group (SUAG), comprised of primary U.S. 
Government users, operates independently of the IPO and reviews, 
adjudicates, and recommends NPOESS requirements for agency validation 
and subsequent Joint Agency Requirements Council (JARC) approval.
    The IPO, under the direction of a System Program Director, is 
responsible for the planning, budgeting, development, acquisition, 
launch operation and management of the NPOESS program. NPOESS is 
principally being acquired using DOD acquisition authorities, and the 
main U.S. Air Force contract is managed by the IPO. In 2002 Northrop 
Grumman Space Technology (NGST) was selected as the NPOESS prime 
contractor for spacecraft development, ground systems, sensor 
integration, and operations. Contracts for some sensors were awarded 
before the prime contract but were subsequently transitioned to 
Northrop Grumman.
Recent History of NPOESS
    NPOESS likely is the most complex environmental satellite program 
ever developed. The NPOESS program presents numerous technical, 
developmental, integration, and management challenges.
    The ground system is on budget and on schedule.
    Technical challenges have occurred in several of the sensor 
development efforts. Of the sensors, the two that have experienced the 
most serious development and manufacturing problems are the Conical 
Microwave Imager/Sounder (CMIS) and the Visible Infrared Imager 
Radiometer Suite (VIIRS).
    CMIS will provide all-weather sounding and imaging capability to 
see through the clouds. While work continues on CMIS, it is still in 
its initial design phase. Early problems included meeting design 
performance within weight constraints. We believe these technical 
issues are being resolved. Furthermore, we are incorporating the 
lessons learned from the VIIRS experience into our management approach 
to CMIS.
    VIIRS will provide the information used in many of the critical 
environmental data records and is the key imaging sensor delivering 
most of the atmospheric cloud and surface information products needed 
by weather forecasters. In mid-2004 during the initial testing phases, 
we encountered significant problems that showed potential design 
deficiencies and manufacturing process shortfalls. In late 2004, a 
cooling unit on the sensor, which is critical to its operation, failed 
during testing. These problems prompted a complete review of the sensor 
design, development, and management. At the time, we believed the cost 
and schedule delays would be limited to NPP.
    On March 31, 2005, however, NGST communicated to the IPO that it 
would not be able to meet overall NPOESS cost and schedule baselines 
due to the problems encountered with the development of VIIRS. NGST 
formally notified the government by letter on May 19, 2005.
Actions the Government Has Taken to Address the Problems
    The problems facing NPOESS are serious and we are working to 
contain cost growth, limit schedule delays, and reduce risk. 
Significant changes have been made in the overall management of the 
NPOESS program to improve the effectiveness of both government and 
contractor oversight.
    Since the resignation of the NPOESS System Program Director in 
September 2005, Brigadier General (select) Sue Mashiko served as 
interim System Program Director. She has been reviewing the IPO 
staffing to ensure that it matches the program's needs for management 
and engineering oversight of the program and NPOESS contractors. 
Additionally, she developed an Interim Program Plan for FY 2006 which 
included changing the development cycle of the VIIRS Engineering Data 
Unit and Flight Unit from concurrent to serial and rebaselined 
milestones. Funding has been allocated among key development efforts 
(VIIRS, Conical Scanning Microwave Imager/Sounder, Spacecraft, etc.), 
in accordance with the new milestones. Colonel Dan Stockton was 
approved by the EXCOM as permanent System Program Director on March 14, 
2006.
    The IPO has maintained an on-site presence at the contractor's 
facilities and at Raytheon (the subcontractor for VIIRS) since the 
VIIRS problems were discovered. In terms of personnel, NGST has 
assigned a new NPOESS Program Manager, and Raytheon has brought in a 
new senior team for sensor management.
    The EXCOM initiated two independent reviews of the program, one to 
look at the problems of VIIRS impacting NPP and another, the 
Independent Program Assessment (IPA), to examine the overall NPOESS 
program. These review teams helped us to better understand what has 
gone wrong with the program and more fully explore the various options 
for moving forward. The review teams explored reducing sensor 
requirements, reducing the number of NPOESS satellites and relying on 
other satellite systems to provide some of the requirements. At the 
same time, the EXCOM worked with the SUAG to understand how any changes 
made to capabilities might impact users.
    In addition to the independent program reviews, the EXCOM asked the 
DOD's Cost Analysis and Improvement Group (CAIG) to provide an 
independent analysis of several IPA cost and schedule estimates. This 
group is made up of acquisition and technical experts who can help 
provide further confidence in the cost estimates that are being 
discussed for both the current NPOESS program and other options.
Nunn-McCurdy Process
    In September, reviews and preliminary cost estimates led the 
Administration to conclude that there was a reasonable expectation that 
the cost to produce each satellite unit was likely to rise at least 15 
percent. This triggered the notification requirement in the Nunn-
McCurdy Amendment. Then Acting Secretary of the Air Force, Pete Geren, 
notified Congress on September 28, that the 15 percent threshold had 
been breached. Subsequent to that notification, the Administration 
continued to work to bring the program and cost growth under control.
    In accordance with Title 10 U.S.C. Sec. 2433 (Nunn-McCurdy) and 
based upon information received from the interim NPOESS System Program 
Director, Secretary of the Air Force Michael Wynne notified Congress on 
January 11, 2006, that he had reasonable cause to believe the NPOESS 
Program Acquisition Cost (PAUC) and Acquisition Procurement Unit Cost 
(APUC) will exceed the 25 percent certification threshold against its 
Acquisition Program Baseline.
    The Under Secretary of Defense for Acquisition, Technology and 
Logistics (USD (AT&L)) has directed a full Nunn-McCurdy review 
requiring the NPOESS program to receive a written certification to be 
presented to Congress. The certification must answer positively to the 
following questions:

        1. Is the acquisition program essential to national security?

        2. Are there no alternatives to such acquisition program which 
        will provide equal or greater military capability at less cost?

        3. Are the new estimates of the program acquisition unit cost 
        or procurement unit cost reasonable?

        4. Is the management structure for the acquisition program 
        adequate to manage and control the program, acquisition unit 
        cost, and procurement unit cost?

    Under the leadership of USD (AT&L), DOD has convened four working 
groups to address these criteria. NOAA and NASA have accepted the 
invitation to participate as full partners in all four working groups. 
All of the previous products and program reviews have been made 
available to the Nunn-McCurdy working groups for their consideration. 
NOAA, NASA, and DOD have all made staff available to assist in the 
expeditious conclusion of this process, which can be no later than June 
2006.
Conclusion
    NPOESS is a very complex acquisition program that will greatly 
enhance and increase our Nation's capabilities in weather forecasting 
and in other important environmental research areas. We are working 
very hard to overcome the technical and management challenges that have 
occurred, and we believe that viable options to rationalize the program 
and move forward exist. Before we make any major decisions, however, we 
expect to have the information from the ongoing Nunn-McCurdy process no 
later than June 2006.
    Thank you for the opportunity to speak with you today. I am 
prepared to answer any questions you have.

    Senator DeMint. Thank you, Mr. Withee.
    Mr. Payton?

        STATEMENT OF HON. GARY E. PAYTON, DEPUTY UNDER 
 SECRETARY OF THE AIR FORCE FOR SPACE PROGRAMS, U.S. AIR FORCE

    Mr. Payton. Mr. Chairman, Senator Stevens, I'm honored to 
appear before you today to address the state of the NPOESS 
program. I'll shorten it.
    Since 1994, the program has experienced setbacks, most 
recently culminating in a Nunn-McCurdy notification to 
Congress, back on the 11th of January. Per the Nunn-McCurdy 
statute that governs DOD acquisition programs, when a program 
director has reasonable cause to believe that the cost of the 
program has gone up by 25 percent, then a service Secretary 
must notify Congress, and a certification process must begin.
    Mr. Ken Krieg, the Under Secretary of Defense for 
Acquisition, Technology, and Logistics, is leading an 
interagency evaluation of NPOESS that will evaluate the program 
against four questions. And these four questions are in the 
legislation, the Nunn-McCurdy legislation: Is NPOESS essential 
to national security? Is there an alternative to the current 
program that can do as good, or better, job for less, or the 
same, cost? Are the new cost estimates for the program 
reasonable? And, finally, is the management structure of the 
program adequate to control future cost growth?
    Mr. Krieg, from the start of the Nunn-McCurdy process, has 
demanded a very inclusive process. We have integrated product 
teams that are working against all four of those questions. And 
NASA and NOAA are full participants in each of those four IPTs 
to address those four questions.
    At each of the interim meetings, reviews that Mr. Krieg has 
chaired, he has invited Dr. Griffin, from NASA, and Admiral 
Lautenbacher, from NOAA, to participate alongside him during 
his interim progress reviews of the IPT work that's been going 
against those four questions.
    On or before the 6th of June, the interagency process will 
report back to Congress with the results of the Nunn-McCurdy 
analyses and the answers to those four questions.
    I have to emphasize the importance of polar-orbiting 
weather satellites. Polar-orbiting platforms provide over 90 
percent of the raw data that is used in both civil and military 
digital models that we use to predict the weather. Any gap in 
coverage has serious consequences for the Department of 
Defense. We are dedicated to eliminating any gap in continuity. 
Data continuity is our top priority.
    The DOD is responsible for weather forecasting on a global 
basis, helping our military operations and the intelligence 
community. We have to predict weather even in areas that are 
denied to us, where there is unavailable data, or where, even 
if there is data, it might be inaccurate. We need data on cloud 
cover, temperature, and water vapor profiles, soil conditions, 
sea conditions, sea ice coverage, and even the extent of the 
aurora. All of this has to have the necessary spatial 
resolution to support our critical military operations.
    I appreciate the continued support of Congress and this 
committee to deliver vital capabilities to our warfighters and 
to support our global mission. I look forward to working with 
you as we refine the requirements of this polar-orbiting 
environmental satellite, and ensure that we have the 
forecasting and remote sensing capabilities our fighting forces 
need.
    [The prepared statement of Mr. Payton follows:]

 Prepared Statement of Hon. Gary E. Payton, Deputy Under Secretary of 
            the Air Force for Space Programs, U.S. Air Force
Introduction
    Mr. Chairman and members of the Committee, I am honored to appear 
before you today to address the state of the National Polar-Orbiting 
Operational Environmental Satellite System (NPOESS). In my role of 
assisting the Under Secretary of the Air Force in his roles of 
oversight of National Security Space activities and as the Department 
of Defense (DOD) Executive Agent for Space, I can confidently say that 
the Air Force is committed to preserving the space capabilities that 
our commanders, forces, and the Intelligence Community depend on to 
conduct their missions. I am pleased that this committee shares that 
commitment, and I'm confident that we will be able to work together to 
provide space-based solutions to our national security needs.
NPOESS Status
    The NPOESS Integrated Program Office (IPO), made up of DOD, 
Department of Commerce (DOC), and National Aeronautics and Space 
Administration (NASA) personnel, was formed in December 1994, in 
response to the President's direction to converge the DOD and DOC polar 
satellite systems: the Defense Meteorological Satellite Program (DMSP) 
and the Polar-orbiting Operational Environmental Satellite (POES), 
respectively. Per the 1995 Memorandum of Agreement that established the 
agency roles and responsibilities regarding the execution of the NPOESS 
program, an Executive Committee (EXCOM) was established as the 
management body that establishes policy guidance, ensures agency 
staffing, approves the program budget, approves the acquisition program 
baseline and any changes that occur to that baseline. The ability of 
our agencies to meet the intent of the Presidential directive rests 
heavily on the interagency partnership that exists within the EXCOM 
structure and its successful management of the NPOESS program.
    Since inception in 1994, the program has experienced several 
setbacks, culminating in the Nunn-McCurdy notification to Congress on 
11 January 2006. We notified Congress that the NPOESS cost has grown at 
least 25 percent. Per the Nunn-McCurdy statute that governs DOD 
acquisition programs, when the program director has reasonable cause to 
believe the cost of the program has grown 25 percent or greater, then a 
service secretary must notify Congress of the cost growth and a 
certification of the program must take place. The OSD Office of 
Acquisition, Technology and Logistics headed by Mr. Ken Krieg is 
leading an interagency evaluation of the NPOESS program that will 
evaluate the program against the following four questions. Is NPOESS 
essential to national security? Is there an alternative that will 
provide capability equal or greater than NPOESS at less cost? Are the 
new cost estimates of Program Acquisition Unit Cost (PAUC) and Average 
Procurement Unit Cost (APUC) reasonable? Is the management structure in 
place adequate to control PAUC and APUC? Mr. Krieg, in consultation 
with the NPOESS Executive Committee (EXCOM), will report back to 
Congress no later than 6 June 2006 with the results of the Nunn-McCurdy 
analysis. As DOD, NOAA and NASA execute this rigorous process we are 
being extremely thorough in examining how to provide the weather 
phenomenology of today's low earth polar orbiting satellites and the 
improved sensing the NPOESS program can offer in the future.
Avoiding Coverage Gaps
    I must emphasize the importance of the POES and Geostationary 
Operational Environmental Satellite (GOES) data to the missions of the 
Department of Defense and Intelligence Community. The atmospheric 
sounding and imagery data provided by these systems are critical to the 
accuracy of the U.S.'s numerical weather prediction models. Polar 
orbiting platforms provide over 90 percent of the data used in DOC and 
DOD prediction models, and building a follow-on program like NPOESS is 
critical for our Nation's weather forecasting capabilities. Any gap in 
coverage will have strong repercussions; the DOD is dedicated to 
provide, at a minimum, the current capabilities afforded to us today by 
the DMSP satellite constellation, albeit these capabilities of 
yesterday do not fulfill our future needs. As OSD executes the Nunn-
McCurdy certification process, the requirements trade space will be 
thoroughly analyzed to ensure that the current capabilities provided to 
our operational military users, civil weather forecasters, the 
Intelligence Community and NASA climate scientist will be carried 
through to the restructured NPOESS program.
Conclusion
    It would be hard to overstate the importance of environmental 
monitoring and weather prediction to the future of DOD and Intelligence 
Community weather forecasting. The DOD is responsible for weather 
forecasting for global military operations and the Intelligence 
Community, even in areas from which data are unavailable, denied, or 
purposely inaccurate. Presently, DMSP is the only assured source of 
data to accomplish that mission. It provides data on cloud cover, 
temperature and water vapor profiles, soil conditions, sea conditions, 
sea ice coverage, auroral extent, and provides the necessary spatial 
resolution to support critical military operations. It has the 
capability to register and report dust storms, valley fog, snow cover, 
smoke and volcanic plumes. Polar-orbiting satellites such as DMSP are 
critical because geostationary data offers lower spatial resolution and 
cannot cover latitudes higher than 50 degrees. Our current baseline 
requires the DMSP capabilities plus the ability to collect high-
resolution precipitation measurements.
    I appreciate the continued support of the Congress and this 
committee to deliver vital capabilities to our warfighters and to 
support the Global War on Terrorism. I look forward to working with you 
as we refine the requirements for our polar-orbiting platforms and 
ensure that we have the forecasting and remote sensing capabilities we 
need.

    The Chairman. Mr. Chairman, again, I have to go, I'd like 
to ask just one question. What's the earliest time the gap 
could occur?
    Mr. Payton. Sir, there are several satellites that NOAA and 
the Air Force have that have not yet been launched. We have the 
ability to choose which orbits those can go into. And so, 
depending on which orbit which satellite goes into, it is--it's 
very difficult to predict when the earliest possible gap might 
be.
    The Chairman. Let me turn it around, then. The other side 
of the question is, What's the life of the existing system we 
rely on today?
    Mr. Payton. The anticipated mission duration of a DMSP 
spacecraft is 4 years. Now, we--again, between NOAA and the Air 
Force, we need to fill three different orbits. And so----
    The Chairman. They're filled now, right?
    Mr. Payton. Yes, sir. Yes, sir.
    The Chairman. I'm looking for the expiration date of those 
that are up there now.
    Mr. Withee. Senator Stevens, if I may address that for 
NOAA's satellites, we have one remaining satellite on the 
ground. The satellite that's in that orbit now, nominal 
lifetime, should last until 2009, which would mean the one on 
the ground could last until 2013, roughly.
    The Chairman. Thank you.
    Thank you, Mr. Chairman.
    Senator DeMint. Thank you, Mr. Chairman.
    Mr. Ryan, it seems that they're laying the blame of all 
this at your feet. So, I'm very interested in your testimony.

                  STATEMENT OF DAVID L. RYAN,

            VICE PRESIDENT/NPOESS PROGRAM DIRECTOR,

               NORTHROP GRUMMAN SPACE TECHNOLOGY

    Mr. Ryan. Chairman DeMint, thank you for this opportunity 
to discuss the NPOESS program with you today.
    My name is Dave Ryan. I'm the Vice President and NPOESS 
Program Director for Northrop Grumman Space Technology.
    As you just heard from the Deputy Under Secretary of the 
Air Force for Space Programs, NPOESS will be critical to the 
safety of our men and women in uniform as they conduct their 
mission. On the civil side, our Nation is typically hit by ten 
tropical storms and three to four hurricanes a year. And, as 
you know, last year it was much, much worse than that, causing 
great loss of life to the country and well over $100 billion in 
damages.
    When operational, NPOESS will significantly improve both 
weather forecasting and environmental monitoring, far 
surpassing any of the capabilities we have today. And it'll 
play a pivotal role in our ability to predict hurricanes and 
severe weather, such as tornados and drought. As an example, 
our analysis shows that for some hurricanes the data from the 
NPOESS system could actually decrease the probable landfall 
area of a hurricane by sometimes a factor of two; thus, 
avoiding unnecessary evacuations. The 5- to 7-day weather 
forecasts could be as accurate as today's 3-day forecasts, thus 
greatly helping fishing, farming, forestry, and many other 
industries. Its advanced systems will be able to tell the 
difference between frozen and just water-soaked soils in the 
higher latitudes, which will give us much greater insight into 
issues like climate-change impacts. Its unique communications 
architecture will be able to get the data down in just 15 
minutes, typically, from when it has been sensed onboard the 
satellites. This is a five to tenfold improvement over what we 
have today. This capability will truly be a lifesaving 
capability once it's on orbit.
    Northrop Grumman is the prime contractor for NPOESS, so we 
are responsible for overall system design, integration, and 
performance. We're supported by a broad range of the Nation's 
aerospace industry. Some 70 percent of the program is 
subcontracted, with approximately 1,400 people supporting the 
program in 15 States.
    The program is currently in the Nunn-McCurdy certification 
process, as you have heard. And, as the prime contractor, we 
stand accountable for moving this program forward in a cost-
effective manner. We're supporting the multi-agency teams 
assembled by the Department of Defense to define the optimum 
path forward. And during this certification, we are actually 
making very good progress on the development of the system 
right now. We are currently on budget and ahead of schedule to 
the 2006 interim plan that has now been put in place.
    The current program situation can be traced to four 
significant causes that have both increased cost and schedule. 
Number one is sensor development. Design, manufacturing, and 
quality problems at some of the sensor suppliers has caused 
more than 80 percent of the growth on the program to date. Some 
of those sensors also grew in weight and power, which impacted 
the spacecraft design. And, number three, as these costs 
increased, they then bumped up against the fiscal year 
constraints on the program and caused other work to be delayed. 
And, finally, number four, this past fall we were asked to 
estimate the program at what's called a high-confidence level, 
consistent with the Nunn-McCurdy process. In forecasting a 
high-confidence-level program, additional risk-reduction 
activities were put in, along with additional schedule.
    Northrop Grumman and our contractor team have responded to 
these issues, and have incorporated the lessons learned over 
the last couple of years, and a document of these lessons 
learned has actually been provided to your committee, sir. Now 
I'll summarize a few of those points.
    We've made significant changes on the program organization 
and staffing. I was brought on to lead the program in October. 
I have 29 years of experience in this industry and have built 
and managed over 64 satellites and satellite systems. 
Similarly, I have a very strong NPOESS leadership team that 
reports to me, with an average of 28 years of experience each, 
doing similar kinds of programs. My deputy is the vice 
president, who, before he took the job on the program, was 
responsible for all subcontract management at Northrop Grumman 
Space Technology. And now on the program he's responsible for 
supplier performance.
    Both in our space segment payload and also our leads in the 
payload area, we have better aligned talents for this critical 
phase of the program. And we have done very similar 
organizational changes at some of the subcontractors.
    Specifically, we have intervened at the VIIRS subcontractor 
by placing specialists onsite to resolve significant technical, 
cost, and schedule issues. We have also placed additional staff 
at other sensor subcontractors to do the same thing. And 
they've--consistently have done extensive process and design 
audits to make sure that those subcontractors are on track. One 
example is, we worked with the CMIS subcontractor to make sure 
that we stabilized the weight and power of that sensor. And 
now, the weight and power has been stable for well over a year, 
which has allowed the spacecraft design to move forward 
efficiently.
    We have also performed independent executability reviews, 
both internally and at our subcontractors, and are applying 
those findings throughout the program. As a result, the program 
performance in this plan for 2006 is now on track, and key 
milestones are being completed on, or ahead of, schedule. The 
performance at our suppliers has significantly improved. And, 
specifically, significant technical progress has been made at 
the VIIRS subcontractor.
    Northrop Grumman, sir, takes this responsibility very 
seriously. Once deployed, NPOESS will save lives and greatly 
improve natural-disaster prediction. You have my personal 
commitment, and the commitment of Northrop Grumman, that we 
will do everything possible to make sure that this important 
mission is delivered to the Nation.
    Thank you.
    [The prepared statement of Mr. Ryan follows:]

  Prepared Statement of David L. Ryan, Vice President/NPOESS Program 
              Director, Northrop Grumman Space Technology
    Chairman DeMint, Ranking Member Nelson and distinguished members of 
the Committee, thank you for the opportunity to discuss NPOESS, the 
National Polar-orbiting Operational Environmental Satellite System, 
with you today. My name is Dave Ryan, and I am Vice President and 
NPOESS Program Director for Northrop Grumman Space Technology.
    As you know, the Nation is typically hit by over 10 tropical storms 
and 3 or 4 major hurricanes a year. Last year it was much worse-costing 
the country great loss of life and well over $100 billion.
    NPOESS will be the Nation's space-based, low Earth orbiting weather 
and environmental monitoring system, serving both civilian and military 
needs in the next decades. The Nation currently obtains over 95 percent 
of its numerical weather forecasting data from satellite systems, and 
NPOESS will significantly improve our weather forecasting, far 
surpassing current capabilities. Weather predictions will typically be 
available within just 15 minutes of the satellite observation--a five 
to ten-fold improvement over current comparable systems.
    NPOESS will be the system the Nation relies on for measuring 
atmospheric conditions, ocean waves, and will play a pivotal role in 
providing more precise advance warning of hurricanes and other adverse 
weather conditions. NPOESS will empower our armed forces with real-time 
environmental information essential for their mission success and 
personal safety. Significantly improved imagery will improve mission 
planning and weapons deployment. NPOESS will monitor climate and 
environmental changes and will be the system that we rely on to measure 
ozone in the atmosphere, the sun's irradiance, and the earth's 
radiation balance. NPOESS also will monitor space weather--a mission 
essential for support to commercial and military communications.
    Disaster prevention and relief will benefit significantly from 
NPOESS. The system will provide targeted mapping of fire sources, even 
at night; more detailed data on floods to help rescue crews and relief 
planning efforts. NPOESS will carry search and rescue receivers to aid 
rescue workers in their ability to locate and rescue stranded hikers, 
hunters, and boaters. And in hurricane season, NPOESS will be able to 
much more accurately pinpoint the areas of severest weather, track wind 
direction and speed, and indicate safety zones for hurricane hunter 
aircraft. Lives and property will be saved, thus reducing the financial 
impacts of these disasters on the American people and industries such 
as fishing, farming, coastal commerce, and insurance, just to name a 
few.
    Northrop Grumman is the prime contractor for NPOESS, and we are 
responsible for overall system design, integration, and for performance 
of the system. We are supported by a broad range of the Nation's 
aerospace industry. More than 70 percent of the NPOESS program is 
subcontracted and a big part of our effort is managing those 
subcontracts. We and our subcontractors have approximately 1,400 people 
working on the program in 15 states.
    The program is currently in the Nunn-McCurdy certification process, 
and as prime contractor, we stand accountable for moving the program 
forward in a cost-effective manner. We are supporting multi-agency 
teams assembled by the Department of Defense to help define the optimum 
path forward, and during this certification process, we are also making 
very good progress on development of the system. We are currently ahead 
of schedule and on budget to the FY 2006 plan.
    Following the outcome of the Nunn-McCurdy process, we expect to 
receive specific instructions from our customer on how to restructure 
this very large and complex program. In the meantime, we are working to 
a detailed 2006 Interim Program Plan that provides a firm foundation 
for forward progress.
    The current program situation can be traced to four causes. (1) 
After being awarded the contract in August 2002, Northrop Grumman 
observed hardware design, manufacturing, and quality problems at some 
of the sensor suppliers. These problems led to significant cost and 
schedule overruns. Sensor cost growth accounts for approximately 80 
percent of the current program cost growth. (2) Some sensors also grew 
significantly in weight and power. This growth in turn impacted our 
spacecraft design, and its cost and schedule. (3) In addition to the 
delays caused by the sensor issues, the program schedule was further 
lengthened when the increased costs bumped up against fiscal year 
funding constraints. This caused work to be delayed and further 
increased forecast cost. (4) Finally, this Fall we were asked to 
forecast program costs, assuming a high confidence program. Typically 
in the past, space development programs have forecasted costs at the 
equally likely probability. In forecasting a high confidence program, 
additional cost was forecasted to cover unknown problems that might 
arise in the future.
    Northrop Grumman and our contractor team have responded to resolve 
the underlying issues that led to the requirement for Nunn-McCurdy 
certification. Northrop Grumman has intervened at the Visible Infrared 
Imaging Radiometer Suite (VIIRS) subcontractor by placing our 
specialists onsite to resolve significant technical, cost and schedule 
problems. We have also placed additional staff at other subcontractors, 
and have performed extensive audits. For example, we worked with the 
CMIS subcontractor to stabilize weight and power. This sensor's weight 
and power have now been stable for over a year, allowing the spacecraft 
design to move forward efficiently.
    Significant changes have also been made in the program organization 
and staffing. We have a very senior NPOESS leadership team with an 
average of 28 years experience on similar programs. A Northrop Grumman 
Vice President, responsible for supplier performance, has been assigned 
as my deputy. Both our space segment and payload leads have been 
changed to better align talents with the current phase of the program. 
We have also performed independent executability reviews both 
internally and at our subcontractors and are applying the findings of 
those reviews throughout the program.
    Let me give you a specific example from the VIIRS program, a sensor 
that has experienced significant technical, cost and schedule problems. 
Northrop Grumman intervened and re-located 10 specialists to be onsite 
at the subcontractor's facility to proactively assist them through the 
design and development process. The team has comprehensively reviewed 
their processes and their detailed design and has implemented 
corrective action across the subcontractor's engineering, 
manufacturing, quality, and management disciplines.
    This intervention is paying off. The VIIRS subcontractor is 
currently ahead of the FY 2006 schedule and has recently successfully 
completed some very important development unit environmental tests. The 
unit is meeting all of its key performance requirements and passed its 
vibration testing, a key test for this instrument. The sensor's passive 
cooling system, which consists of a cryo-radiator and other passive 
cooling elements, demonstrated better than required performance during 
recent thermal vacuum testing.
    The development unit is now being readied for sensor-level thermal 
vacuum testing. Success in these thermal vacuum tests will further 
increase our confidence in this sensor.
    Lessons learned from our experience with problematic sensor 
developments are now being applied across the program and are as 
follows:

        1. The Nation's supply base for sophisticated, operational, 
        environmental sensors is fragile, and prime contractors must 
        understand the capabilities of the supply base and proactively 
        apply their own expertise to support the sensor provider.

        2. Dependence on heritage is often overstated and primes must 
        challenge and verify such claims.

        3. Northrop Grumman has now instituted the practice of 
        performing subcontractor capability assessments of any 
        development activity transferred to NGST. NGST now also audits 
        the criteria, analysis, products, and action closure of the 
        last major design review of any development subcontract 
        transferred to NGST. If the review process and products are 
        inadequate, the review will be repeated.

        4. Northrop Grumman's subcontract management practice is being 
        further strengthened. Managing the development and production 
        of sophisticated, high-reliability hardware at a subcontractor 
        is challenging. In addition to the technical and logistic 
        demands inherent in such hardware, managing through contract 
        language, across corporate cultures and differing corporate 
        motivations, and over geography adds significantly to the 
        challenge. Although the processes employed by NGST's 
        subcontract teams are now very good, they did not prevent or 
        rapidly resolve issues inherent in several of the sensor 
        subcontracts transferred to NGST. NGST had believed the sensor 
        suppliers were capable of solving development issues primarily 
        by themselves and did not immediately intervene when problems 
        arose. Although NGST did provide significant technical 
        assistance both to the subcontractors and to their suppliers, 
        this assistance did not initially address the underlying 
        systemic issues quickly enough. Now a proactive team of experts 
        intervene at the first sign of trouble.

        5. The Young Panel's recommendation that space program costs be 
        determined at a high confidence level from the beginning, 
        rather than at a lower ``most likely'' level should be adopted 
        across the industry, given the risks inherent in new, large 
        development space programs and in the development of new state-
        of-the-art technologies that comprise these space systems.

    As a result, NPOESS has achieved success in many fronts. The ground 
data-processing segment, terrestrial communications network, and much 
of the spacecraft design are moving smoothly through development, as 
are 10 out of the 13 sensors and communication payloads. Of the three 
sensors that we have had cost and schedule issues with in the past, 
currently all three are either on or ahead of the 2006 schedule plan. 
In June of 2005, we successfully completed the System delta Preliminary 
Design Review. This review confirmed the soundness of the overall 
technical design and confirmed that the system would achieve the 
required technical performance.
    Northrop Grumman takes our responsibility very seriously as the 
prime contractor for this critical national asset. Once deployed, 
NPOESS will save lives and other precious national resources through 
greatly improved natural disaster prediction. You have my personal 
commitment and the commitment of Northrop Grumman that we will do 
everything possible to deliver this important mission to the Nation. 
Thank you.

    Senator DeMint. Thank you.
    Mr. Powner?

STATEMENT OF DAVID A. POWNER, DIRECTOR, INFORMATION TECHNOLOGY 
              MANAGEMENT ISSUES, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. Powner. Chairman DeMint, we appreciate the opportunity 
to testify on NPOESS, a planned satellite system whose life-
cycle costs will now exceed $10 billion.
    NPOESS is critical to our Nation's ability to monitor 
changes in weather and the environment, and will play a key 
role in disaster prediction by forecasting hurricane direction 
and intensity.
    Over the past several years, NPOESS has experienced 
significant cost overruns and delays, due, in part, to sensor 
development problems and poor contractor performance and 
program management. The future direction for the program is at 
a standstill, since cost growth exceeded a legislatively 
mandated threshold that now requires a thorough review by the 
Department of Defense.
    This morning, as requested, I will summarize NPOESS's cost 
overruns and schedule delays, primary reasons for these 
problems, current status, proposed management changes, and our 
recommendations for additional action.
    First, cost and schedule. Since 2004, we have seen NPOESS 
costs rise from about $7 to $10 billion. For the past 2 years, 
our analysis of contractor data consistently showed these 
worsening trends. The schedule for the launch of the first 
satellite has also been delayed further, and a potential gap in 
coverage continues to grow that now appears to be at least 3 
years. We also noted last fall in testimony, Mr. Chairman, that 
key program risks, particularly the development of critical 
sensors, could further increase costs and delay schedules.
    The reasons for NPOESS's problems are many, but primarily 
include issues with subcontractor and contractor performance, 
program management, and executive-level oversight. Expanding on 
each of these:
    The VIIRS sensor development issues were attributed, in 
part, to the subcontractor's inadequate project management. In 
addition, the prime contractor was not effectively overseeing 
subcontractors. Independent reviews revealed that the program 
management office did not have technical systems engineering 
support to manage the contractor, and we have also faulted 
NPOESS executive-level leadership, because of inconsistent 
oversight that resulted in few decisions.
    NPOESS's current status is on hold, pending a decision from 
the Nunn-McCurdy certification. The certification was 
legislatively required, because NPOESS overran its cost 
baseline by 25 percent. DOD has expanded the certification 
process to include input from NOAA and NASA, given the joint 
nature of the program.
    Currently, this process includes evaluating options for the 
future of the program. These options include: reducing the 
number or function of NPOESS satellites, relying on European 
satellites, increasing costs, delaying planned launch dates, 
and canceling the program. A decision is expected to be 
announced in early June. If NPOESS proceeds forward, creating a 
new baseline and renegotiating contracts could take another 
year to complete.
    As we await the decision of the certification process, 
development continues on two sensors. In addition, the NPOESS 
Program Office has initiated several key efforts to improve 
program management. These include increased staffing to improve 
contract and subcontractor oversight, increased presence of 
systems engineers on the development of the sensors, and a 
restructured Program Office to allow for clear decision-making 
and improved contractor oversight. These initiatives are steps 
in the right direction and will have to be effectively 
implemented if they are ultimately to result in better program 
performance.
    In addition, our other key recommendations are:
    One, NOAA and NASA representation in the Nunn-McCurdy 
process is imperative. Because this is a DOD process and 
decision, and because requirements differ across agencies, 
there is great risk that the chosen alternative could sacrifice 
NOAA and NASA requirements. Both agencies must remain active 
participants in the decision-making process.
    Two, NOAA and DOD need to seriously consider contingency 
plans, since it is very clear that the Nunn-McCurdy review 
could result in canceling the program.
    Three, if a decision is made to proceed forward with 
NPOESS, this program needs more frequent and more critical 
executive-level involvement over the Program Office.
    And, four, NPOESS's management team needs to hold 
contractors accountable, which should include managing 
performance using financial incentives.
    In summary, Mr. Chairman, we look forward to the June 
decision, so that our Nation's ability to monitor critical 
weather and environmental data for both civilian safety and key 
military operations has clear direction. A timely decision is 
critical, since any deviations from an NPOESS-like approach to 
fulfill the Nation's environmental data needs will have to 
occur quickly to avoid wasting taxpayers' dollars.
    This concludes my statement, Mr. Chairman. Thank you for 
your leadership and oversight of this important acquisition.
    [The prepared statement of Mr. Powner follows:]

Prepared Statement of David A. Powner, Director, Information Technology 
        Management Issues, U.S. Government Accountability Office
    Mr. Chairman and members of the Subcommittee:
    We appreciate the opportunity to participate in today's hearing to 
discuss our work on the planned National Polar-orbiting Operational 
Environmental Satellite System (NPOESS) program. NPOESS is expected to 
be a state-of-the-art environment-monitoring satellite system that will 
replace two existing polar-orbiting environment satellite systems. 
Polar-orbiting satellites provide data and imagery that are used by 
weather forecasters, climatologists, and the military to map and 
monitor changes in weather, climate, the oceans, and the environment. 
The NPOESS program is considered critical to the United States' ability 
to maintain the continuity of data required for weather forecasting 
(including severe weather events such as hurricanes) and global climate 
monitoring through the year 2020. Three agencies share responsibility 
for NPOESS: the National Oceanic and Atmospheric Administration (NOAA), 
the Department of Defense (DOD), and the National Aeronautics and Space 
Administration (NASA). To manage the program, these agencies 
established a tri-agency integrated program office. At your request, we 
will discuss the program's current status and plans, as well as 
considerations in moving the program forward.
    This statement builds on other work we have done on environmental 
satellite programs over the last several years.\1\ An overview of the 
approach we used to perform this work (our objectives, scope, and 
methodology) is provided in appendix I.
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    \1\ GAO, Polar-orbiting Operational Environmental Satellites: 
Technical Problems, Cost Increases, and Schedule Delays Trigger Need 
for Difficult Trade-off Decisions, GAO-06-249T (Washington, D.C.: Nov. 
16, 2005); Polar-orbiting Environmental Satellites: Information on 
Program Cost and Schedule Changes, GAO-04-1054 (Washington, D.C.: Sept. 
30, 2004); Polar-orbiting Environmental Satellites: Project Risks Could 
Affect Weather Data Needed by Civilian and Military Users, GAO-03-987T 
(Washington, D.C.: July 15, 2003); Polar-orbiting Environmental 
Satellites: Status, Plans, and Future Data Management Challenges, GAO-
02-684T (Washington, D.C.: July 24, 2002); National Oceanic and 
Atmospheric Administration: National Weather Service Modernization and 
Weather Satellite Program, GAO/T-AIMD-00-86 (Washington, D.C.: Mar. 29, 
2000); and Weather Satellites: Planning for the Geostationary Satellite 
Program Needs More Attention, GAO-AIMD-97-37 (Washington, D.C.: Mar. 
13, 1997).
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Results in Brief
    The future direction of the NPOESS program--what will be delivered, 
at what cost, and by when--is currently on hold pending a decision on 
how to proceed. In recent years, the program has experienced 
significant cost increases and schedule delays, with cost estimates 
increasing to about $10 billion and launch delays approaching 3 years. 
These factors triggered the need for difficult decisions about the 
program's direction and capabilities. In mid-November 2005, we reported 
that the NPOESS executive committee expected to make a decision by 
December 2005 on the direction of the program. We noted the importance 
of making a decision quickly so that the program could proceed. 
However, in late November 2005, NPOESS cost growth exceeded a 
legislatively mandated threshold that requires DOD to certify the 
program to Congress. This placed any decision about future direction on 
hold until certification takes place in June 2006. In the meantime, the 
program office has implemented an interim plan to continue work on key 
sensors and other program elements using Fiscal Year 2006 funding. 
Following certification, a decision on future direction should be 
clear. That will require a new program baseline \2\ and renegotiated 
contracts--efforts that could take up to a year.
---------------------------------------------------------------------------
    \2\ A program baseline is a plan for what will be delivered, when 
it will be delivered, and at what cost over the life of the program.
---------------------------------------------------------------------------
    As NPOESS undergoes the Defense certification process and important 
decisions are made on how the program is to proceed, there are several 
important considerations. First, NOAA and NASA representation in the 
DOD certification process is imperative. It will be important for these 
agencies to remain active players in the deliberation of options and 
the final decision on how to move the program forward. Second, 
continued indecision increases the risk of a gap in satellite coverage. 
NPOESS is the backup satellite for the final satellite in the 
predecessor satellite series. If this predecessor satellite were to 
fail, there could be a significant data gap until NPOESS is launched 
and operational. Thus, once a program direction is decided, it will be 
important to move quickly to adjust agency budgets and contracts. 
Third, continuing oversight of program and executive management is 
essential to avoid repeating past problems.
Background
    Since the 1960s, the United States has operated two separate 
operational polar-orbiting meteorological satellite systems: the Polar-
orbiting Operational Environmental Satellite (POES) series, managed by 
the National Oceanic and Atmospheric Administration (NOAA) and the 
Defense Meteorological Satellite Program (DMSP), managed by the 
Department of Defense (DOD). The satellites obtain environmental data 
that are processed to provide graphical weather images and specialized 
weather products and are the predominant input to numerical weather 
prediction models. These models are a primary tool for forecasting 
weather 3 or more days in advance, including forecasting the path and 
intensity of hurricanes. The models are used to predict the potential 
impact of severe weather so that communities and emergency managers can 
help prevent and mitigate their effects. Polar satellites also provide 
data used to monitor environmental phenomena, such as ozone depletion 
and drought conditions, as well as data sets that are used by 
researchers for a variety of studies, such as climate monitoring.
    Unlike geostationary satellites, which maintain a fixed position 
above the earth, polar-orbiting satellites constantly circle the earth 
in an almost north-south orbit, providing global coverage of conditions 
that affect the weather and climate. Each satellite makes about 14 
orbits a day. As the earth rotates beneath it, each satellite views the 
entire earth's surface twice a day. Currently, there are two 
operational POES satellites and two operational DMSP satellites that 
are positioned so that they can observe the earth in early morning, 
mid-morning, and early afternoon polar orbits. Together, they ensure 
that, for any region of the earth, the data provided to users are 
generally no more than 6 hours old. Figure 1 illustrates the current 
operational polar satellite configuration. Besides the four operational 
satellites, six older satellites are in orbit that still collect some 
data and are available to provide some limited backup to the 
operational satellites should they degrade or fail. In the future, both 
NOAA and DOD plan to continue to launch additional POES and DMSP 
satellites every few years, with final launches scheduled for 2007 and 
2011, respectively.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Each of the polar satellites carries a suite of sensors designed to 
detect environmental data that are either reflected or emitted from the 
earth, the atmosphere, and space. The satellites store these data and 
then transmit them to NOAA and Air Force ground stations when the 
satellites pass overhead. The ground stations then relay the data via 
communications satellites to the appropriate meteorological centers for 
processing. The satellites also broadcast a subset of these data in 
real time to tactical receivers all over the world.
    Under a shared processing agreement among four satellite data 
processing centers--NOAA's National Environmental Satellite Data and 
Information Service (NESDIS), the Air Force Weather Agency, the Navy's 
Fleet Numerical Meteorology and Oceanography Center, and the Naval 
Oceanographic Office--different centers are responsible for producing 
and distributing, via a shared network, different environmental data 
sets, specialized weather and oceanographic products, and weather 
prediction model outputs.\3\ Each of the four processing centers is 
also responsible for distributing the data to its respective users. For 
the DOD centers, the users include regional meteorology and 
oceanography centers, as well as meteorology and oceanography staff on 
military bases. NESDIS forwards the data to NOAA's National Weather 
Service for distribution and use by government and commercial 
forecasters. The processing centers also use the Internet to distribute 
data to the general public. NESDIS is responsible for the long-term 
archiving of data and derived products from POES and DMSP.
---------------------------------------------------------------------------
    \3\ These environmental data sets, specialized weather and 
oceanographic products, and weather prediction model outputs are 
produced through algorithmic processing. An algorithm is a precise set 
of procedures that enable a desired end result, such as a measurement 
of natural phenomena.
---------------------------------------------------------------------------
    In addition to the infrastructure supporting satellite data 
processing noted above, properly equipped field terminals that are 
within a direct line of sight of the satellites can receive real-time 
data directly from the polar-orbiting satellites. There are an 
estimated 150 such field terminals operated by U.S. and foreign 
governments and academia. Field terminals can be taken into areas with 
little or no data communications infrastructure--such as on a 
battlefield or a ship--and enable the receipt of weather data directly 
from the polar-orbiting satellites. These terminals have their own 
software and processing capability to decode and display a subset of 
the satellite data to the user. Figure 2 depicts a generic data relay 
pattern from the polar-orbiting satellites to the data processing 
centers and field terminals.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

NPOESS Overview
    With the expectation that combining the POES and DMSP programs 
would reduce duplication and result in sizable cost savings, a May 1994 
Presidential Decision Directive \4\ required NOAA and DOD to converge 
the two satellite programs into a single satellite program capable of 
satisfying both civilian and military requirements. The converged 
program, NPOESS, is considered critical to the United States' ability 
to maintain the continuity of data required for weather forecasting and 
global climate monitoring through the year 2020. To manage this 
program, DOD, NOAA, and NASA formed a tri-agency Integrated Program 
Office, located within NOAA.
---------------------------------------------------------------------------
    \4\ NSTC-2, May 5, 1994.
---------------------------------------------------------------------------
    Within the program office, each agency has the lead on certain 
activities. NOAA has overall program management responsibility for the 
converged system and for satellite operations; DOD has the lead on the 
acquisition; and NASA has primary responsibility for facilitating the 
development and incorporation of new technologies into the converged 
system. NOAA and DOD share the costs of funding NPOESS, while NASA 
funds specific technology projects and studies. Figure 3 depicts the 
organizations that make up the Integrated Program Office and lists 
their responsibilities.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Current program acquisition plans call for the procurement and 
launch of six NPOESS satellites over the life of the program, as well 
as the integration of 13 instruments, consisting of 10 environmental 
sensors and 3 sub-systems. Together, the sensors are to receive and 
transmit data on atmospheric, cloud cover, environmental, climate, 
oceanographic, and solar-geophysical observations. The sub-systems are 
to support nonenvironmental search and rescue efforts, sensor 
survivability, and environmental data collection activities.
    According to the program office, 7 of the 13 planned NPOESS 
instruments involve new technology development, whereas 6 others are 
based on existing technologies. In addition, the program office 
considers 4 of the sensors involving new technologies critical, because 
they provide data for key weather products; these sensors are shown in 
bold in table 1, which lists the planned instruments and the state of 
technology on each.

                  Table 1: Expected NPOESS Instruments
                     Note: Critical sensors in bold.
------------------------------------------------------------------------
   Instrument name             Description          State of  technology
------------------------------------------------------------------------
Advanced technology   Measures microwave energy     New
 microwave sounder     released and scattered by
                       the atmosphere and is to be
                       used with infrared sounding
                       data from NPOESS's cross-
                       track infrared sounder to
                       produce daily global
                       atmospheric temperature,
                       humidity, and pressure
                       profiles.
Aerosol polarimetry   Retrieves specific            New
 sensor                measurements of clouds and
                       aerosols (liquid droplets
                       or solid particles
                       suspended in the
                       atmosphere, such as sea
                       spray, smog, and smoke).
Conical-scanned       Collects microwave images     New
 microwave imager/     and data needed to measure
 sounder (CMIS)        rain rate, ocean surface
                       wind speed and direction,
                       amount of water in the
                       clouds, and soil moisture,
                       as well as temperature and
                       humidity at different
                       atmospheric levels.
Cross-track infrared  Collects measurements of the  New
 sounder               earth's radiation to
                       determine the vertical
                       distribution of
                       temperature, moisture, and
                       pressure in the atmosphere.
Data collection       Collects environmental data   Existing
 system                from platforms around the
                       world and delivers them to
                       users worldwide.
Earth radiation       Measures solar short-wave     Existing
 budget sensor         radiation and long-wave
                       radiation released by the
                       earth back into space on a
                       worldwide scale to enhance
                       long-term climate studies.
Ozone mapper/         Collects data needed to       New
 profiler suite        measure the amount and
                       distribution of ozone in
                       the earth's atmosphere.
Radar altimeter       Measures variances in sea     Existing
                       surface height/topography
                       and ocean surface
                       roughness, which are used
                       to determine sea surface
                       height, significant wave
                       height, and ocean surface
                       wind speed and to provide
                       critical inputs to ocean
                       forecasting and climate
                       prediction models.
Search and rescue     Detects and locates           Existing
 satellite aided       aviators, mariners, and
 tracking system       land-based users in
                       distress.
Space environmental   Collects data to identify,    New
 sensor suite          reduce, and predict the
                       effects of space weather on
                       technological systems,
                       including satellites and
                       radio links.
Survivability sensor  Monitors for attacks on the   Existing
                       satellite and notifies
                       other instruments in case
                       of an attack.
Total solar           Monitors and captures total   Existing
 irradiance sensor     and spectral solar
                       irradiance data.
Visible/infrared      Collects images and           New
 imager radiometer     radiometric data used to
 suite (VIIRS)         provide information on the
                       earth's clouds, atmosphere,
                       ocean, and land surfaces.
------------------------------------------------------------------------
Source: GAO, based on NPOESS Integrated Program Office data.

    In addition, the NPOESS Preparatory Project (NPP), which is being 
developed as a major risk reduction and climate data continuity 
initiative, is a planned demonstration satellite to be launched several 
years before the first NPOESS satellite is to be launched. It is 
planned to host three of the four critical NPOESS sensors (the visible/
infrared imager radiometer suite (VIIRS), the cross-track infrared 
sounder, and the advanced technology microwave sounder), as well as a 
noncritical sensor (the ozone mapper/profiler suite). NPP will provide 
the program office and the processing centers an early opportunity to 
work with the sensors, ground control, and data processing systems. 
Specifically, this satellite is expected to demonstrate the validity of 
about half of the NPOESS environmental data records \5\ and about 93 
percent of its data processing load.
---------------------------------------------------------------------------
    \5\ Environmental data records are weather products derived from 
sensor data records and temperature data records.
---------------------------------------------------------------------------
NPOESS Acquisition Strategy
    NPOESS is a major system acquisition that consists of three key 
phases: the concept and technology development phase, which lasted from 
roughly 1995 to early 1997; the program definition and risk reduction 
phase, which began in early 1997 and ended in August 2002; and the 
engineering and manufacturing development and production phase, which 
began with the award of the development and production contract in 
August 2002 and will continue through the end of the program. Before 
the contract was awarded in 2002, the life cycle cost for the program 
was estimated to be $6.5 billion over the 24-year period from the 
inception of the program in 1995 through 2018. Shortly after the 
contract was awarded, the life cycle cost estimate was estimated to be 
$7 billion.
    When the NPOESS development contract was awarded, program officials 
identified an anticipated schedule and funding stream for the program. 
The schedule for launching the satellites was driven by a requirement 
that the satellites be available to back up the final POES and DMSP 
satellites should anything go wrong during the planned launches of 
these satellites. In general, program officials anticipate that roughly 
1 out of every 10 satellites will fail either during launch or during 
early operations after launch.
    Early program milestones included: (1) launching NPP by May 2006, 
(2) having the first NPOESS satellite available to back up the final 
POES satellite launch in March 2008, and (3) having the second NPOESS 
satellite available to back up the final DMSP satellite launch in 
October 2009. If the NPOESS satellites were not needed to back up the 
final predecessor satellites, their anticipated launch dates would have 
been April 2009 and June 2011, respectively.
NPOESS Has Experienced Continued Cost Increases and Schedule Delays
    Over the past several years, the NPOESS program has experienced a 
series of cost increases and schedule delays. In 2003, we reported that 
changes in the NPOESS funding stream caused a delay in the program's 
schedule.\6\ Specifically, a DOD program official reported that between 
2001 and 2002 the agency experienced delays in launching a DMSP 
satellite, causing delays in the expected launch dates of another 
satellite. In late 2002, DOD shifted the expected launch date for the 
final satellite from 2009 to 2010. As a result, the Department reduced 
funding for NPOESS by about $65 million between Fiscal Years 2004 and 
2007. According to program officials, because NOAA is required to 
provide the same level of funding that DOD provides, this change 
triggered a corresponding reduction in funding by NOAA for those years. 
As a result of the reduced funding, program officials were forced to 
make difficult decisions about what to focus on first. The program 
office decided to keep NPP as close to its original schedule as 
possible, because of its importance to the eventual NPOESS development, 
and to shift some of the NPOESS deliverables to later years. This shift 
affected the NPOESS deployment schedule. To plan for this shift, the 
program office developed a new program cost and schedule baseline.
---------------------------------------------------------------------------
    \6\ GAO-03-987T.
---------------------------------------------------------------------------
    After this new baseline was completed in 2004, we reported that the 
program office increased the NPOESS cost estimate from about $7 billion 
to $8.1 billion, and delayed key milestones, including the planned 
launch of the first NPOESS satellite--which was delayed by 7 months.\7\ 
The cost increases reflected changes to the NPOESS contract as well as 
increased program management funds. According to the program office, 
contract changes included extension of the development schedule, 
increased sensor costs, and additional funds needed for mitigating 
risks. Increased program management funds were added for noncontract 
costs and management reserves.
---------------------------------------------------------------------------
    \7\ GAO-04-1054.
---------------------------------------------------------------------------
    At that time, we also noted that other factors could further affect 
the revised cost and schedule estimates. Specifically, the contractor 
was not meeting expected cost and schedule targets on the new baseline 
because of technical issues in the development of key sensors, 
including the critical VIIRS sensor. Based on its performance through 
May 2004, we estimated that the contractor would most likely overrun 
its contract at completion in September 2011 by $500 million. In 
addition, we reported that risks associated with the development of the 
critical sensors, integrated data processing system, and algorithms, 
among other things, could contribute to further cost increases and 
schedule slips.
    Most recently, in our November 2005 testimony, we noted that NPOESS 
schedules, costs, and trends had continued to worsen.\8\ We reported 
that over the past year, NPOESS cost increases and schedule delays 
demonstrated worsening trends, and that there were continuing problems 
in the development of a key sensor, resulting in schedule delays and 
anticipated cost increases. We further noted that contractor data 
showed that costs and schedules were likely to continue to increase in 
the future. Our trend analysis at the time showed that the contractor 
would most likely overrun costs by $1.4 billion, resulting in a life 
cycle cost of about $9.7 billion, unless critical changes were made. We 
also noted that program risks, particularly with the development of 
critical sensors, could further increase NPOESS costs and delay 
schedules. At the November hearing, program officials confirmed that 
the program's life cycle cost estimate would likely grow to $10 billion 
unless critical changes were made to the program. Table 2 provides a 
summary of recent growth in program cost estimates.
---------------------------------------------------------------------------
    \8\ GAO-06-249T.
---------------------------------------------------------------------------
    As for schedule changes, in November 2005, we noted that the 
program office anticipated at least a 10-month delay in the launch of 
the first satellite (totaling at least a 17-month delay from the time 
the contract was awarded) and a 6-month delay in the launch of the 
second satellite. A summary of those schedule changes is shown in table 
3. The effect of these delays is evident in the widening gap between 
when the last POES satellite is expected to launch and when the first 
NPOESS satellite could be available if needed as a backup. This is 
significant because if the last POES satellite fails on launch, it will 
be at least 3 years before the first NPOESS satellite could be 
launched. During that time, critical weather and environmental 
observations would be unavailable--and military and civilian weather 
products and forecasts could be significantly degraded.

  Table 2: Changes in NPOESS Life Cycle Cost Estimates through November
                                  2005
------------------------------------------------------------------------
                             Life cycle cost
         As of                   estimate            Life cycle range
------------------------------------------------------------------------
July 2002                $6.5 billion             1995-2018
July 2003                $7.0 billion             1995-2018
September 2004           $8.1 billion             1995-2020
November 2005            $10 billion*             To be determined
------------------------------------------------------------------------
Source: GAO analysis, based on Integrated Program Office data.
* Anticipated decisions on program direction are likely to affect this
  estimate.


                        Table 3: Changes in NPOESS Schedule Estimates as of November 2005
----------------------------------------------------------------------------------------------------------------
                  As of August                                      Net change
   Milestones    2002 contract    As of February    As of August  from contract   Minimum change  Potential data
                     award      2004 (rebaseline)       2005          award      from rebaseline        gap
----------------------------------------------------------------------------------------------------------------
NPP launch       May 2006       October 2006       April 2008     23-month       18-month delay   Not applicable
                                                                   delay
Final POES       March 2008     March 2008         December 2007  4-month                         Not applicable
 launcha                                                           advance
First NPOESS     April 2009     November 2009      September      17-month       10-month delay   Not applicable
 satellite                                          2010           delay
 planned for
 launch
First NPOESS     March 2008     February 2010b     December       33-month                        3-year data
 satellite                                          2010c          delay                           gap if final
 launch if                                                                                         POES fails on
 needed to back                                                                                    launch
 up the final
 POES
Final DMSP       October 2009   May 2010           October 2011   24-month                        Not applicable
 launcha                                                           delay
Second NPOESS    June 2011      June 2011          December 2011  6-month delay  6-month delay    Not applicable
 satellite
 planned for
 launch
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis, based on NPOESS Integrated Program Office data.
a POES and DMSP are not part of the NPOESS program. Their launch dates are provided because of their relevance
  to the NPOESS satellite schedules.
b A program official reported that if the first NPOESS satellite is needed to back up the final POES satellite,
  the contractor will prepare the satellite to be launched in a different orbit with a different suite of
  sensors. These factors will prevent launch from taking place until February 2010.
c If the first NPOESS satellite is needed to back up the final POES satellite, the contractor will prepare the
  satellite to be launched in a different orbit with a different suite of sensors, adding 3 months to the
  September 2010 launch date.

    Problems involving multiple levels of management--including 
subcontractor, contractor, program office, and executive leadership--
played a role in bringing the NPOESS program to its current state. For 
example, the VIIRS sensor development issues were attributed, in part, 
to the subcontractor's inadequate project management. Specifically, 
after a series of technical problems, internal review teams sent by the 
prime contractor and the program office found that the subcontractor 
had deviated from a number of contract, management, and policy 
directives set out by the main office and that both management and 
process engineering were inadequate. Neither the contractor nor the 
program office had recognized the underlying problems in time to fix 
them. After these issues were identified, the subcontractor's 
management team was replaced. Further, in January 2005, the NPOESS 
Executive Committee (EXCOM) called for an independent review of the 
VIIRS problems. This independent review, delivered in August 2005, 
reported that the program management office did not have the technical 
system engineering support it needed to effectively manage the 
contractor, among other things. We also reported that the involvement 
of NPOESS executive leadership had wavered from frequent heavy 
involvement to occasional meetings with few resulting decisions. 
Specifically, the EXCOM had met 5 times over the preceding 2 years. 
Most of these meetings did not result in major decisions, but rather 
triggered further analysis and review.
    Sound management is critical to program success. In our reviews of 
major acquisitions throughout the government, we have reported that key 
factors determining a project's ability to be delivered on time, within 
budget, and with promised functionality include sound program 
management, contractor oversight, risk identification and escalation, 
and effective and timely executive level oversight.\9\ Given the 
history of large cost increases and the factors that could further 
affect NPOESS costs and schedules, we reported that continued 
oversight, strong leadership, and timely decisionmaking are more 
critical than ever.
---------------------------------------------------------------------------
    \9\ For example, GAO, High-Risk Series: An Update, GAO-05-207 
(Washington, D.C.: January 2005) and Major Management Challenges and 
Program Risks: Department of Transportation, GAO-03-108 (Washington, 
D.C.: January 2003).
---------------------------------------------------------------------------
NPOESS Status and Plans: Decision on Program's Future Direction on 
        Hold, Interim Efforts Under Way
    The future direction of the NPOESS program--what will be delivered, 
at what cost, and by when--is currently on hold pending a decision on 
how to proceed. Over the last few years, NPOESS has experienced 
continued cost increases and schedule delays, requiring difficult 
decisions about the program's direction and capabilities.
    In mid-November 2005, we reported that the NPOESS executive 
committee expected to make a decision in December 2005 on the direction 
of the program. This involved deciding among options involving 
increased costs, delayed schedules, and reduced functionality. We urged 
the Committee to make a decision quickly so that the program could 
proceed. However, in late November 2005, NPOESS cost growth exceeded a 
legislatively mandated threshold that requires the Department of 
Defense to certify the program to Congress. This placed any decision 
about the future direction of the program on hold until the 
certification takes place in June 2006.
    In the meantime, the program office has implemented an interim plan 
to continue work on key sensors and other program elements using Fiscal 
Year 2006 funding. Following certification, a decision on future 
direction should be clear. That will require developing a new program 
baseline and renegotiating contracts--efforts that could take up to a 
year.
Nunn-McCurdy Process Puts Program Direction on Hold
    The Nunn-McCurdy Act \10\ requires DOD to take specific actions 
when a major system acquisition exceeds certain cost thresholds. Key 
provisions require the Secretary of Defense to notify Congress when a 
major defense acquisition is expected to overrun its project baseline 
by 15 percent or more, and to certify the program to Congress when it 
is expected to overrun its baseline by 25 percent or more. 
Certification is an assurance that:
---------------------------------------------------------------------------
    \10\ 10 U.S.C. section 2433, as amended by Pub. Law No. 109-163, 
Div. A, section 802.

---------------------------------------------------------------------------
   the program is essential to national security;

   there are no alternatives to the program that will provide 
        equal or greater military capability at less cost;

   the new estimates of the program's cost are reasonable; and

   the management structure for the program is adequate to 
        manage and control cost.

    In August 2005, the NPOESS program office determined that it could 
not execute its planned program within the constraints of its current 
baseline and notified its executive committee. In turn, Congress was 
notified that the program was expected to overrun its baseline by 15 
percent. Subsequently, in late November 2005, it was determined that at 
completion the final program cost would be greater than 25 percent over 
its baseline. At the beginning of January 2006, DOD notified Congress 
that NPOESS was expected to overrun its baseline by more than 25 
percent and began the process of certifying the program.
    The Nunn-McCurdy Act pertains to Defense acquisitions, but because 
NPOESS is a joint program, the certification process was expanded to 
include input from NOAA and NASA. Specifically, the Defense Acquisition 
Executive, who is responsible for the certification process, invited 
the NPOESS executive committee members to participate in the process, 
with principal stakeholders from each NPOESS partner agency serving as 
intermediaries between the executive committee members and working 
groups set up to address each of the four certification elements. 
Additionally, these working groups are made up of DOD, NOAA, and NASA 
personnel, as well as others (such as representatives of the NPOESS 
senior user advisory group) as warranted.
    As part of the certification process, DOD is evaluating options for 
the future of the program. These options could include reducing the 
number or function of NPOESS satellites, relying on European 
satellites, increasing costs, delaying planned launch dates, or 
canceling the program. According to Defense officials, a decision is 
expected to be announced during the first week of June 2006. However, 
the completion of the certification process does not end the 
negotiations on this program. Any major cost changes will need to be 
worked into the respective agencies' budgets, and any major program 
changes will need to be worked into a new baseline describing what will 
be delivered by when and then negotiated with the contractor. According 
to program office officials, a revised baseline will likely take 6 to 
12 months to develop and implement from the time a decision is made.
Program Office Has Interim Efforts Under Way
    The NPOESS Integrated Program Office has several initiatives under 
way--both to improve its management of the program and to keep NPOESS 
sensor development moving forward--as it waits for completion of the 
Nunn-McCurdy process. To address concerns about program management that 
we and others have raised, the program office has:

   increased staffing of cost analysts and earned value 
        management experts to improve contractor and subcontractor 
        oversight;

   increased the presence of system engineers on sensor 
        development initiatives;

   developed a proposal for restructuring the program office 
        and overall satellite program to allow for clearer decision-
        making authority and more timely decisions; and

   taken steps to improve communications among the program 
        office, tri-agency executives, and contractors.

    These initiatives should help improve program management, but they 
are not yet fully implemented--and will not guarantee success. The 
proposed management changes still need to be approved, funded, and 
implemented. Further, NPOESS development is technically challenging. 
Thus, stringent oversight and risk management will continue to be 
important throughout the life of the project.
    As for continuing sensor development, because any major changes to 
the program will not be known until the certification process is 
completed, the program office has implemented an interim plan to 
continue work on key sensors and other program elements within the 
Fiscal Year 2006 funding profile. Officials stated that they chose work 
activities that would be needed regardless of the option chosen for the 
future direction of the program.
    Based on contractor-provided data, our analysis indicates that 
NPOESS is making mixed progress against the Fiscal Year 2006 interim 
plan. Between October 2005 and January 2006, the contractor 
outperformed its program cost and schedule targets and completed some 
unplanned work. However, the contractor continued to experience cost 
overruns on the development of its critical sensors--VIIRS and CMIS. 
The primary cost drivers were the extensive manpower beyond what was 
planned to resolve technical issues.
    The development of VIIRS is of particular importance because it is 
to be demonstrated on the NPP satellite, which is currently scheduled 
for launch in April 2008. While CMIS is not part of NPP, its 
development is important because it is one of four critical sensors 
providing data for key weather products. Over the past year, work on 
CMIS was deferred in order to fund efforts to fix VIIRS and to keep NPP 
on schedule.
    In November, we reported that VIIRS was experiencing continued 
problems dealing with the technical complexity of the ground support 
equipment. VIIRS also experienced problems with the development of the 
cryoradiator,\11\ excessive vibration of sensor parts, and errors in 
the sensor's solar calibration. Since November, the program office has 
taken positive steps to contain these technical risks. In particular, 
VIIRS now has a baseline plan for serial development of the sensor 
design, an approach that is intended to minimize rework. The program 
office also added decision gates to provide management review and 
approval of progress.
---------------------------------------------------------------------------
    \11\ The cryoradiator is a key component of the VIIRS sensor. It is 
intended to cool down components of the sensor.
---------------------------------------------------------------------------
    We also reported in November on the problems experienced on CMIS. 
Specifically, CMIS continued to face technical challenges in the design 
of the receivers, the sensor structure, and the antenna calibration 
system. In addition, it experienced system reliability and thermal 
issues, among other things. Since November, work has been ongoing to 
simplify the CMIS design. These design changes are intended to reduce 
the weight of the CMIS structure by moving several subsystems from the 
instrument onto the spacecraft. Additionally, the program office 
reported that the contractor has demonstrated that a complex component 
of the CMIS receiver is feasible.
    While positive measures have been taken in the development of both 
of these sensors, the program office continues to consider VIIRS to be 
a high-risk initiative because of technical challenges that it is 
facing. VIIRS is fast approaching a critical developmental milestone 
that will determine the extent of progress made. Specifically, a 
prototype is expected to begin thermal vacuum testing in summer 2006. 
This testing will assess the stability of the current sensor design. If 
the current design fails to meet its performance metrics, VIIRS could 
be in danger of falling further behind in cost and schedule. Program 
officials acknowledge that CMIS requires a watchful eye, but note that 
there is more time available to meet its development requirements. To 
the program office's credit, however, it is aware of these risks and is 
using its risk management plans to help mitigate them.
Considerations in Moving the NPOESS Program Forward
    As NPOESS undergoes the Nunn-McCurdy certification process and 
important decisions are made on how the program is to proceed, there 
are several important considerations.

   NOAA and NASA representation in the DOD Nunn-McCurdy 
        certification process is imperative. As a joint program, NPOESS 
        is expected to fulfill many military, civilian, and research 
        requirements for environmental data. Thus, it is important that 
        all agency partners have a voice in the DOD proceedings. As 
        noted earlier, DOD has included NOAA and NASA in its process--
        both in an executive advisory capacity and on the teams working 
        to address each of the four certification requirements. 
        Further, NOAA and NASA officials reported that they believe 
        that they are being effectively involved in the certification 
        process. However, because this is a DOD process and decision, 
        and because Defense requirements differ from NOAA and NASA 
        requirements, there is risk that the chosen alternative could 
        sacrifice NOAA and NASA requirements. It will be important for 
        NOAA and NASA to remain active players in the deliberation of 
        options and the final decision on how to move the program 
        forward.

   Indecision increases the risk of a gap in satellite data. 
        The potential for a gap in polar-orbiting satellite data is 
        increasing with every day of delay on the NPOESS program. 
        Specifically, if the final satellite in the predecessor 
        satellite series (the Polar-orbiting Operational Environmental 
        Satellites or POES) were to fail, there would be a gap in 
        satellite coverage until the first NPOESS satellite was 
        launched and put into operation (see fig. 2). Such a gap could 
        have a devastating effect on our national ability to forecast 
        severe weather events, such as those associated with future 
        hurricane seasons. Since a decision on how the NPOESS program 
        is to proceed is not expected until June 2006, and there will 
        likely be at least another year while a new baseline is 
        established and the contract modified, it is important that the 
        departments move expeditiously to fund their chosen program 
        direction and to implement contract changes.

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        

   Continuing oversight of program and executive management is 
        warranted. Management problems at multiple levels--
        subcontractor, contractor, project office, and executive 
        oversight--led to NPOESS recent cost and schedule overruns. As 
        the program implements a new management structure and increased 
        contractor oversight, it will be important to measure and 
        report on the progress of these changes so as to not repeat 
        past problems.

    In summary, in November 2005, we reported that NPOESS was ``a 
program in crisis'' because of technical problems on critical sensors, 
escalating costs, poor management at multiple levels, and the lack of a 
decision on how to proceed with the program. Today, the program is 
still troubled, and its future direction is not yet known. The program 
office and contractor are addressing problems on the critical sensors 
and have adopted strategies that are expected to reduce risks on these 
sensors. Additionally, the program office is working to address 
management challenges by increasing program office skills and staffing, 
increasing contractor oversight, and restructuring the program office 
to allow for more timely and authoritative decisions. Further, the 
Nunn-McCurdy certification in June 2006 is expected to result in a firm 
decision on how to proceed with the program. Over the next few months, 
it will be important for all of the agency partners to have a voice in 
the final decision on how to proceed. Once this decision is made, it 
will be important to move quickly to implement the decision in agency 
budgets and contracts. Further, as the project continues, it will be 
critical to ensure that the management issues of the past will not be 
repeated.
    This concludes my statement. I would be pleased to respond to any 
questions that you or other members of the Subcommittee may have at 
this time.
             Appendix I. Objectives, Scope, and Methodology
    Our objectives were to determine the National Polar-orbiting 
Operational Environmental Satellite System's (NPOESS) current status 
and plans, and to discuss considerations in moving the program forward. 
To accomplish these objectives, we focused our review on the Integrated 
Program Office, the organization responsible for the overall NPOESS 
program. We also interviewed officials from the Department of Defense 
(DOD), the National Aeronautics and Space Administration (NASA), and 
NOAA's National Weather Service and National Environmental Satellite 
Data and Information Service to determine plans for the program.
    To identify schedule and cost changes related to NPOESS's status we 
reviewed program office data and interviewed program officials. We 
compared changes in NPOESS cost and schedule estimates to prior cost 
and schedule estimates as reported in our July 2002, July 2003, and 
November 2005 testimonies and in our September 2004 report.\12\
---------------------------------------------------------------------------
    \12\ GAO, Polar-orbiting Environmental Satellites: Status, Plans, 
and Future Data Management Challenges, GAO-02-684T (Washington, D.C.: 
July 24, 2002); Polar-orbiting Environmental Satellites: Project Risks 
Could Affect Weather Data Needed by Civilian and Military Users, GAO-
03-987T (Washington, D.C.: July 15, 2003); Polar-orbiting Environmental 
Satellites: Information on Program Cost and Schedule Changes, GAO-04-
1054 (Washington, D.C.: September 30, 2004); and Polar-orbiting 
Operational Environmental Satellites: Technical Problems, Cost 
Increases, and Schedule Delays Trigger Need for Difficult Trade-off 
Decisions, GAO-06-249T (Washington, D.C.: November 16, 2005).
---------------------------------------------------------------------------
    To further analyze trends that could affect the program in Fiscal 
Year 2006, we assessed the prime contractor's cost and schedule 
performance. To make these assessments, we applied earned value 
analysis techniques \13\ to data from the contractor earned value and 
variance analysis reports. We compared the cost of work completed with 
the budgeted costs for scheduled work during January 2006 to show 
trends in cost and schedule performance against the interim plan for 
Fiscal Year 2006.
---------------------------------------------------------------------------
    \13\ Earned value analysis is a means of placing a dollar value on 
a project's status in order to compare budget versus actual costs 
versus project status in dollar amounts. For our analysis, we used 
standard earned value formulas to calculate cost and schedule 
variances.
---------------------------------------------------------------------------
    NOAA and DOD officials generally agreed with the facts presented in 
this statement and provided some technical corrections, which we have 
incorporated. We performed our work at the Integrated Program Office, 
DOD, NASA, and NOAA offices in the Washington, D.C., metropolitan area, 
between February 2006 and March 2006, in accordance with generally 
accepted government auditing standards.

    Senator DeMint. Mr. Powner, you mentioned financial 
incentives. At this point, are there any penalties for delays 
or cost overrun, financial-related, for the contractors or 
subcontractors? Is there anything built into the system? Or do 
we just pay more money when it doesn't work out?
    Mr. Powner. There is an award fee structure built into the 
system for better performance. And I think if you look 
historically at this program, that award fee has been paid out 
pretty much in full. And the important thing is to use that 
award fee structure to hold the contractor more accountable on 
a going-forward basis.
    Senator DeMint. Are you saying it's already been paid out 
in full in--on this project, even though it's delayed and 
over----
    Mr. Powner. Historically on this project--our understanding 
is, historically, it has been paid out close to full--the full 
percentage on the award fees, correct.
    Senator DeMint. OK.
    Mr. Payton. Mr. Chairman, if I might add some amplification 
to that. Early in the program, there was a high award-fee 
awarded, but the last two award-fee periods, the award fee 
amounted to 82 percent of the maximum possible, and the most 
recent one was 48 percent of the maximum possible.
    Senator DeMint. Mr. Powner mentioned that NOAA needs to be 
involved in the Nunn-McCurdy process. Are you not involved now, 
Mr. Withee?
    Mr. Withee. Yes, sir. We have been welcomed by the 
Department of Defense and their components, into the process. 
We keep a diligent eye on it to keep our interests in the 
forefront. But, so far, so good. I'm one of the principals, and 
Conrad Lautenbacher, my boss, administrator of NOAA, is on the 
executive panel with Under Secretary Krieg.
    Senator DeMint. We're talking about this June review and 
the possibility of cancellation, is that even a possibility, or 
are we just throwing that out? Can we cancel the new program, 
when the old program is basically going to disappear? What is 
the real situation? What are our real options?
    Mr. Payton. Within the realm of the possible in any generic 
Nunn-McCurdy process, canceling the program is one extreme. I 
have seen Mr. Krieg at several of these Nunn-McCurdy meetings, 
and, because of the priority on data continuity, because the 
Nation needs this environmental data for realtime operations, 
both military and civil, Mr. Krieg understands, and the four 
interagency working groups understand, that going without a 
polar-orbiting environmental satellite is unacceptable. So, in 
the theory--if you look at the legislation, if you look at the 
implementing policies, canceling the program is possible within 
the realm of the possible, but, due to the priority and the 
necessity of these--of this data that we gather from these 
satellites, I--Mr. Krieg is not marching down that path.
    Senator DeMint. Yes, sir.
    Mr. Withee. If I may add, Mr. Chairman, NOAA is fully 
committed to having a certified outcome, as well. Both partners 
gain benefits by working together on this. We have a common set 
of requirements, and then a separate set, which, when you put 
together in one single system, derive mutual benefit from one 
another. And it would be against our--the basic program wishes 
to go separately, at this point. So, we're totally onboard with 
certification, working together.
    Senator DeMint. Well, it seems to make common sense that we 
combine the civilian and the military aspects of this, but has 
that, in effect, been one of the reasons that--trying to work 
together and bring two agencies together, that this has been 
delayed and over budget?
    Mr. Powner? They're looking at each other. Maybe you--what 
was--what would be your----
    Mr. Powner. Well, first of all, if I could also--before I 
get to that--just on the cancellation, we're just reporting the 
facts. It was DOD who made it very clear to us when we sent our 
written statement over to them for comment, that we should 
include that cancellation clause, because we wanted to talk, as 
Mr. Payton clearly mentioned, the extremes. There are also many 
discussions going on at lower levels within both organizations 
on contingency plans. So, we know that is going on. So, I just 
want to highlight that that is something we need to consider 
and at least have on the table.
    In terms of the partnership arrangement that has been set 
up for this joint program, several years ago, we testified--I 
believe it was in the 2003 time frame--that there were some 
indications--it's very important that both agencies are clearly 
dedicated and fund this program fully in the 2003-2004 time 
frame, there was some missteps where it wasn't fully funded by 
DOD. Then, because of the matching-fund arrangement, which is 
written into law, that did have an impact on costs and 
schedule, because there was a trickle-down effect that I know--
the prime contractor was involved with--that resulted in some 
work not getting done and schedules getting pushed out and 
costs increasing. So, that has been a--what I would consider a 
minor factor, not a major factor. But, overall, I think there 
has been cooperation among the three agencies, but there have 
been some missteps, Mr. Chairman.
    Senator DeMint. Can I assume that the principals of--
everyone represented here today are fully committed to this 
project, the way it started? Are we on track? I know we're 
going through this review, and some of what we're talking 
about, maybe, is not relevant, in that we'll get a report from 
the review process. But, is there a commitment, or are there 
now questions within the ranks that maybe this is not such a 
good idea?
    Mr. Payton. From what I've seen in the workings of the--
both at the Office of the Secretary of Defense, the Under 
Secretary for Acquisition, and within the Air Force, we all 
know that we have to have a polar-orbiting environmental 
satellite collecting the data that feeds our digital models for 
predicting the weather globally, around the world.
    Senator DeMint. I notice you said you're committed to 
something like this. But not necessarily the way it's set up 
now?
    Mr. Payton. Within the second question of the Nunn-McCurdy 
process, there is an analysis of alternatives. And, again, at 
the extreme--the two extremes are: you go ahead and fund the 
program as it's currently architected, or you cancel the 
program. Those are sort of the two extremes. There's a wealth 
of options in the middle that--where we would still have polar-
orbiting spacecraft, but it might not necessarily--it does not 
necessarily look like the design of NPOESS today, where you 
could have different mixes of different sensors on different 
spacecraft, perhaps launch smaller satellites more often, mix 
and match different satellites in different orbits. And so, 
those--that trade space is being analyzed and costed as we 
speak this week, today.
    Senator DeMint. Currently, you have your own satellites, 
NOAA has their own satellites.
    Mr. Payton. Yes, sir.
    Senator DeMint. Reading between the lines, I sense that you 
might prefer to go your own way at this point. Is that a 
sentiment within the DOD?
    Mr. Payton. We have not come up with that preference at 
all, truthfully. In the fundamental interagency working 
relationship amongst all three agencies, truthfully, when you 
include NASA, NOAA, and the Defense Department, we don't view 
that as an underlying problem of the program.
    Senator DeMint. Mr. Withee, did you want to make a comment?
    Mr. Withee. Just to confirm that statement for NOAA, that 
we are totally committed to the tri-agency program. Each one of 
us have committed separately--and we committed jointly, our 
highest priority is no gap in service. So, everything we do is 
focused on minimizing or having no gap at all. And so, we're in 
this together, and we're going to see it through.
    Senator DeMint. Let me focus on the gap, because that's 
probably our greatest interest here. As you mentioned, you've 
got a satellite on the ground that could fulfill the current 
function until, what, 2011? Was that----
    Mr. Withee. 2013, sir.
    Senator DeMint. 2013. And the military has separate 
satellites. What is the end date for what you have?
    Mr. Payton. Yes, sir. We've got four satellites on the 
ground right now. And again, depending on which orbit you put 
which spacecraft; and, again, how long they last on orbit--
we're confident that we could probably get to 2014 before a 
potential gap might open.
    Senator DeMint. What are possible delays? What are the 
scenarios, Mr. Ryan, if we decide to go ahead with this? Could 
we be delayed beyond the points that we're talking about here, 
2013-2014?
    Mr. Ryan. Mr. Chairman, first of all, I would like to say 
that Northrop Grumman is also extremely committed to this 
program and its success, and we will do everything in our power 
to make sure that it is successful.
    The current baseline that we have been operating under for 
2006 was put into place to be a baseline that we execute to 
that would not only fulfill the program of record and that 
architecture, but be flexible enough, if there are some other 
changes that come out of the Nunn-McCurdy process, that we will 
apply the work that we've been doing this year directly into 
those changes, too. So, no time has been wasted or lost while 
being--we've been going through this decision process.
    Senator DeMint. When can we finish? Can--when can we have--
--
    Mr. Ryan. Our projections--again, it depends on the fiscal 
funding that is put into the program over the next 5 years, but 
our current projections are on the 2012 time frame, that we 
would have the first satellite on orbit and operating. Again, 
it will depend on many factors coming out of the Nunn-McCurdy 
process.
    Senator DeMint. It seems there is--a lot of it depends on 
very close dates here. Mr. Powner----
    Mr. Powner. If I can just also clarify on this potential 
gap, there's a number of things that have to happen. When 
NPOESS was originally planned, the first NPOESS satellite was 
to be ready for launch when the final POES, which is the 
predecessor suite of satellites, was to be launched. OK? And 
the reason for that is, satellites do fail at launch. OK? I 
think at one time there were figures, one out of ten fail on 
launch. So, you want a backup ready to go. So, that's what 
drove the initial NPOESS schedule. That kept being moved out.
    Now, fortunately, the POES schedule is being moved out, 
too. So, there's a number of things that are factoring into 
play here. But there still is--if the final POES fails on 
launch, there are contingencies and options that these 
gentlemen are aware of, and they can work. But there is a 
potential for a gap in the continuity of polar-orbiting data.
    Now, fortunately, some of the satellites do outlive their 
useful lives. And that helps us. But we're still playing in a 
risky environment here, the more this gap widens.
    Senator DeMint. This satellite on the ground that NOAA has 
is--could fail at launch, and we could be back to 2011 or--
that's----
    Mr. Withee. Yes, sir. At the moment, that launch would not 
occur before the one in orbit now has--would have--shown signs 
of problems.
    Senator DeMint. Right.
    Mr. Withee. But, likely, 2009 is the date for that. And 
that is a--it's always a problem. When you launch, you have a 
2- or 3-percent chance of failure, and that's a possibility, 
and we are concerned with it. We do have backup in that same 
orbit, with a NASA program, which will have similar sensors 
flying about that same time. And there's also--the Europeans 
are flying U.S. instruments in another orbit, which will 
provide another backup capability for us.
    Senator DeMint. The Nunn-McCurdy review, does that, in 
addition to just looking at the cost and schedule, does it look 
at the potential problems of a gap in service, or is that 
something that we need to do separately?
    Mr. Payton. No, sir. Again, that's wrapped up into the 
schedule of the program that emerges from Nunn-McCurdy.
    One of the options that the Air Force is looking at, as 
part of the Nunn-McCurdy, is Service--something called a 
Service Life Extension Program on one or more of those four 
satellites that's sitting on the ground right now. The current 
experience with military weather satellites has been that their 
inertial measurement units, their gyroscopes, fail first. And 
so, there is more modern technology for gyroscopes that we 
could--if necessary, we could take apart those satellites that 
are sitting on the ground, insert the new inertial measurement 
units, and improve the expected on-orbit lifetime of those 
existing spacecraft that are on the ground. Again, but that 
doesn't come free. That would cost us money. And, therefore, 
that Service Life Extension Program is, again, part of the 
trade space that we are looking at inside the analysis of 
alternatives.
    Senator DeMint. Good.
    Well, this has been very helpful. Obviously, it's a big 
issue. It's not an issue American people are thinking about, 
and they won't think about it until there's an interruption in 
service, and then it becomes very serious. The costs and delays 
are significant. It's also, I think, an indication of how well, 
at the Federal level, we can manage projects, how well agencies 
can work together. There's a lot on trial here, and as well as 
our government oversight of what happened. So, we all look 
forward to the June outcome of this. And I suspect as soon as 
we have a new plan on the table, it will be important to bring 
that back to the members here to make sure there's a strong 
consensus.
    But, clearly, we're interested in it. And I think the more 
our members hear about it, the more they're going to want to 
know. And, as long as the Chairman is interested in it, which 
he is very interested, I'm sure you'll hear a lot from us.
    So, thank you all for being here. This has been very 
helpful.
    [Whereupon, at 12 p.m., the hearing was adjourned.]
                            A P P E N D I X

 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
    Mr. Chairman, it is very important for us to examine the National 
Polar-orbiting Operational Environmental Satellite System (NPOESS) 
Program and the history of our troubled, but incredibly vital, 
environmental satellite programs.
    The data collected by the polar satellites is especially important 
in the vast Pacific, where both land and ocean monitoring stations are 
few and far between. However, if this system continues to be plagued by 
mismanagement, schedule delays, and cost overruns, public safety will 
suffer. We cannot compromise or go backward on coverage needs in those 
and other vulnerable areas.
    Also, given tight budgets across the government, we cannot ask the 
National Oceanic and Atmospheric Administration (NOAA), with a budget 
of less than $4 billion, to absorb the potential $3 billion cost 
overrun facing NPOESS.
    I am particularly concerned with both the contractor's performance 
on this program and the structure of the contract. The contract places 
cost overrun risk squarely on the Federal Government, rather than on 
the contractor, and it also provides the contractor with an exceedingly 
lucrative 20 percent award fee, which deserves further examination.
    Today's hearing will help us determine the roles that each of the 
participants--including the contractors--played in the current 
situation, and how we can ensure that the costs and risks are spread 
fairly among the programs and contracting entities.
    I expect candid testimony from our panel today about how the NPOESS 
program got into this predicament, what is being done to fix the 
problems, and how we can be assured that we will neither lose polar 
satellite coverage nor endanger NOAA missions in getting the program 
back on track.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                          Hon. Gary E. Payton
Northrop Grumman's Contract Terms and Award Fees
    Question 1. At our March 30, 2006 Hearing, David Powner of the 
Government Accountability Office, stated that under the NPOESS 
contract, the award fees for Northrop Grumman have been ``paid out 
pretty much in full,'' even though the program is roughly $3 billion 
over budget and was, by most accounts, mismanaged. You also stated that 
in the last two award-fee periods Northrop Grumman received 82 percent 
and 48 percent of the possible maximum.
    Please provide us with the following information regarding payments 
to Northrop Grumman under the contract, as well as award fees:

        Summary of the current contract terms, budget, and schedule for 
        payment (including for award fee) for the entire length of the 
        NPOESS contract.

    Answer. The NPOESS Contract includes a Cost-Plus Award Fee (CPAF) 
type of contract for Engineering, Manufacturing and Development (EMD) 
which includes labor, materials, facilities, etc. to design, 
manufacture, field and test a complete satellite system comprised of 
sensors, satellite, NPOESS command, control, communications (C3) and 
Interface Data Processing System (IDPS), distribution of said data and 
system operations. Further, this portion of the contract requires the 
contractor to furnish 3 sensors for the NASA NPOESS Preparatory Project 
(NPP) satellite and 2 NPOESS satellites (on orbit) along with C3, IDPS 
data distribution and system operations. Also included in the contract, 
is the Fixed Price Incentive-Firm (FPIF) Production Options for an 
additional 4 NPOESS Satellites. And last, there are Fixed Price 
Incentive-Successive (FPIS) Target Options for the Operation and 
Support of NPOESS after completion of the EMD portion of the contract.
    A very important and unique aspect of the NPOESS System Contract is 
that this is a ``performance-based'' contract wherein the contractor is 
guaranteeing system performance. Most of the contract terms are 
standard to system contracts except for the Shared System Performance 
Responsibility, Shared Ownership, Fee Risk Covenant, Capital Facility 
Investment Agreement and Termination Costs, which are unique for the 
NPOESS Contract.

    Question 2. Description of award fees available under the contract, 
including amounts, schedule, conditions for issuance (or refusing 
payment) of the award fee, or portion thereof (e.g., for poor 
performance).
    Answer. The NPOESS contract contains an Award Fee Pool of 13 
percent, which totals $374,033,039. The Award Fee Pool is paid every 6 
months. The award is issued through a standard DOD) process in which an 
Award Fee Review Board (AFRB), composed of the leadership of the 
program, reviews contractor performance against criteria and provides 
their recommendation to a senior official called the Fee Determining 
Official (FDO). The FDO reviews the AFRB assessment and a self-
assessment by the contractor, and determines the amount to be issued. 
The criteria used for assessing contractor performance during the fee 
period is specified at the start of the award fee period and is covered 
by the general areas of Management, Technical and Cost. The award fee 
amount for any specific period is based upon the subjective assessment 
of the AFRB and FDO of the contractor performance in meeting the award 
fee criteria for that specific period.
    The award fee and the mission success fee are held at risk by the 
government until system performance has been clearly demonstrated. This 
unique contract provision allows the government to assess system 
performance on-orbit and require the contractor to return part or all 
of these two fees if performance is unsatisfactory.

    Question 3. Contract Payments made to date, by year, as well as 
payments likely through the end of calendar year 2006.
    Answer. Payment to date--$1,757,879,631.00
    Payments by year:

        FY 2002--$67,292,912.00
        FY 2003--$398,495,830.00
        FY 2004--$477,256,839.00
        FY 2005--$543,995,639.00
        FY 2006--$270,833,411.00

    Payments through end of calendar year 2006--$322,929,000.00

    Question 4. Award fees paid to date, including the date of payment, 
and percentage of the maximum available award fee for that period the 
payment represented.
    Answer.

        Period #1--$26,973,949, May 2003, 95 percent
        Period #2--$23,695,976, Dec. 2003, 89 percent
        Period #3--$21,206,973, May 2004, 94 percent
        Period #4--$20,755,760, Dec. 2004, 92 percent
        Period #5--$19,816,094, May 2005, 82 percent
        Period #6--$10,672,635, Dec. 2005, 48 percent

Adequacy of Contract Cost Controls
    Question 5. The Geostationary Operational Environmental Satellite 
(GOES), a joint program of the National Oceanic and Atmospheric 
Administration (NOAA) and the National Aeronautic and Space 
Administration (NASA), was developed through a cost-plus-award-fee 
contract awarded in 1985. This program experienced serve technical 
problems, cost overruns, and schedule delays.
    In August 2002, a cost-plus-award-fee contract was used again by 
the Air Force for the development and production phase of the National 
Polar-orbiting Operational Environmental Satellite System (NPOESS) 
program.
    ``Cost-plus'' contracts can leave the government in very vulnerable 
position, forcing an agency to absorb all of the costs. We learned with 
the GOES satellite problems fifteen years ago that this means we just 
send good money after bad. How can you instill any cost controls in a 
``cost-plus'' contract?
    Answer. The DOD has implemented a wide variety of cost controls on 
cost plus contracts and has even tried Fixed Price contracts for this 
type of development. Finding the right mix of cost, technical and 
schedule performance incentives or outcome-based criteria is the key to 
successful cost control in a cost type contract. While cost type 
contracts increase the government's share of risk in the endeavor they 
do offer advantages for advanced state-of-the-art R&D, which 
characterizes the NPOESS program.

        1. Unlike Fixed Price contracts, Cost Plus contracts give the 
        government complete insight into every cost element of work.

        2. When executed properly, the detailed cost insight coupled 
        with detailed schedule insight and earned value metrics can 
        provide early indicators of impending problems.

        3. If discovered early enough, work around plans, alternative 
        suppliers, alternative facilities, etc., can be found to 
        mitigate the impending problems.

        4. Fixed Price contracts do not mandate equivalent insight into 
        the details of a developments program.

    Question 6. What controls were in place in this contract?
    Answer. The NPOESS contract relies heavily on a combination of 
award fee and a milestone completion fee called the Mission Success Fee 
(MSF). These two subjective awards are also complimented by an 
extensive Earned Value Management System, which tracks all monthly 
expenditures by the contractor, and measures the program's progress.

    Question 7. Were sufficient contract controls in place to stop work 
when subcontractor or contractor performance was sub-standard?
    Answer. The NPOESS Contract includes the ability to stop work at 
any time should the government decide to do so due to contract or 
subcontractor performance being sub-standard. However, stopping work 
was not the appropriate mitigation here, because of the criticality of 
the NPOESS mission and the risk of operational gaps. The primary effort 
over the past 12 0915 months has been a concerted effort by the 
government and prime contractor to apply additional management, 
technical expertise, and oversight to some of the failing sensor 
subcontractor development work to remedy the problems. This has added 
to the cost problems in the near-term however, the longer term risks of 
technical surprises and schedule slips are greatly reduced.

    Question 8. What alternatives to Cost-Plus structure could be used 
for this type of development?
    Answer. As previously discussed, the only other type of contract 
available is Fixed Price. Government experience with Fixed Price 
developments has not been good. Fixed Price contracts place undue 
financial risk on industry during R&D, which they cannot adequately 
cover. In the 1990s, the industrial base of the DOD was being damaged 
by the practice. Only Cost Plus contracts are presently authorized by 
DOD policy for this type of research and development, at this time.

    Question 9.  We know what the cost to the taxpayer will be of this 
failure--what repercussions do the contractors face?
    Answer. The contractors face a double-edged problem with this type 
of performance. First, profit is forfeited through the award fee 
program and they have already lost profit on this program via the 
decrements to the award fee. Second, the contractors are also faced 
with the reduced ability to be considered competitive for future 
Government contracts of this nature. This is based upon the tracking of 
contractor past performance under a program called Contractor 
Performance Analysis Report (CPARs).

    Question 10. Do they absorb any of the cost for their management 
failures?
    Answer. The contractors have lost the fee through the award fee 
program.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            David A. Powner
    We are responding to two of your questions related to my statement 
that the award fees for Northrop Grumman had been ``paid out pretty 
much in full'' (questions 2 and 4, regarding Northrop Grumman's 
contract terms and award fees). However, as discussed with your 
offices, we are unable to answer your other eight questions involving 
contract cost controls and contract award fees because these questions 
are outside the scope of work we performed on the NPOESS acquisition. 
Specifically, contract cost controls were not part of our evaluation. 
Further, regarding contract award fees, we coordinated our efforts with 
the Department of Commerce Inspector General (IG) in order to avoid 
duplication, and agreed that the IG would evaluate NPOESS contract 
award fees while we focused on the options for moving the program 
forward.\1\ Your questions, along with our responses, follow.
---------------------------------------------------------------------------
    \1\ See Department of Commerce Office of Inspector General, Poor 
Management Oversight and Ineffective Incentives Leave NPOESS Program 
Well Over Budget and Behind Schedule, 0IG-17794-6-0001 (May 8, 2006).

    Question 2. Provide a description of award fees available under the 
contract, including amounts, schedule, and conditions for issuance (or 
refusing payment) of the award fee, or portion thereof (e.g., for poor 
performance).
    Answer. The NPOESS development contract includes three types of 
incentives totaling 20 percent of the total estimated contract cost--
about $563 million. Base fees constitute 2 percent of the contract 
costs (about $57 million). These are guaranteed fees and paid each 
billing cycle. Mission success fees are capped at 5 percent of the 
contract cost (about $137 million) and are tied to the contractor's 
performance at seven milestone events. Award fees are capped at 13 
percent of the contract cost (about $369 million) and are spread out 
over 18 separate payment periods between 2002 and 2011. The total 
amount available for award fees is divided unevenly among the 18 
payment periods, depending on the expected amount and complexity of the 
work during an individual pay period. The contract also offers a 
``rollover'' provision that allows the NPOESS program office to add 
unearned award amounts from one payment period to the subsequent 
payment period as an added incentive to the contractor. In addition, 
all award fees are earned ``at risk''--meaning that the government 
could recoup some of the fees if the completed system does not meet 
performance goals.
    The NPOESS program office determines actual award amounts based on 
three criteria: management performance, technical performance, and cost 
performance. These criteria are weighted at 40, 30, and 30 percent, 
respectively. Each of these criteria is supplemented by key elements 
that the contractor is to provide. Table 1 provides a summary of the 
criteria and key elements.

          Table 1: Criteria for NPOESS Award Fee Determination
------------------------------------------------------------------------
           Criteria                           Key elements
------------------------------------------------------------------------
Management (40 percent)        Performance baseline management--entails
                                having tracking tools, including an
                                earned value management system, that
                                provide accurate status information on
                                the program.
                               Subcontract management--entails providing
                                proactive leadership to resolve issues;
                                support subcontractor problem areas or
                                deficiencies; and provide timely,
                                accurate, and substantive direction to
                                subcontractors.
Technical (30 percent)         System performance--entails providing
                                system performance that meets or is
                                projected to meet specification.
                               Hardware, software, and algorithm design--
                                entails providing designs that are in
                                conformance with technical objectives.
                               Test and verification--entails providing
                                test and verification plans that are
                                sufficient and meet objectives.
Cost (30 percent)              Cost control--entails ensuring that
                                reasonable and prudent measures are
                                taken to control and reduce program
                                costs, and that cost estimates (when
                                requested) are accurate, timely, and
                                complete.
------------------------------------------------------------------------
Source: NPOESS program office.

    Question 4. Describe award fees paid to date, including the date of 
payment, and percentage of the maximum available award fee for that 
period the payment represented.
    Answer. During the first five of the seven award payment periods to 
date, the prime contractor earned an average of 90 percent of the 
potential award available. As discussed with your offices, we did not 
obtain data on the two most recent payment periods because it was not 
in the scope of our recent work.
    Table 2 provides the award fee earned as a percentage of the award 
fee available for each of the five payment periods. This calculation 
includes any rollover amount earned and available. This information is 
provided at a summary level, rather than in actual dollars, because the 
details we have on NPOESS award fees are considered sensitive and are 
marked for official use. Our policies require that we protect this 
information from public disclosure.

       Table 2: Award Percentage During the First 5 Award Periods
------------------------------------------------------------------------
                                             Award percentage (award fee
                                              earned + rollover earned)/
        Period                 Dates            (award fee available +
                                                 rollover available)
------------------------------------------------------------------------
1                      Sept. 2002-March                              95
                        2003
2                      April 2003-Sept.                              87
                        2003
3                      Oct. 2003-March 2004                          94
4                      April 2004-Sept.                              90
                        2004
5                      Oct. 2004-March 2005                          82
------------------------------------------------------------------------
    Average                                                          90
------------------------------------------------------------------------
Source: GAO analysis of NPOESS program office data.

    In responding to your questions, we relied on our previous audit 
work on the NPOESS program. We performed this prior audit work in 
accordance with generally accepted government auditing standards 
between June and November 2005, and between February and March 2006.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                           Gregory W. Withee
Impact of $3 Billion Cost Overrun on NOAA
    Question 1. In 2002, the National Polar-orbiting Operational 
Environmental Satellite System (NPOESS) program officials estimated the 
cost of the NPOESS program at $6.5 billion. In November 2005, the 
Government Accountability Office asserted the life-cycle cost estimate 
to be $10 billion, and estimates will likely climb further. While 
program costs are shared equally by the National Oceanic and 
Atmospheric Administration (NOAA) and the Department of Defense (DOD), 
NOAA's proposed FY 2007 budget was only $3.8 billion, compared to a 
$500 billion DOD budget.
    What would the payment schedule be for a $3 billion increase needed 
to cover the growing cost of the National Polar-orbiting Operational 
Environmental Satellite System (NPOESS) program?
    Answer. The increased costs will be allocated over the program life 
cycle through the annual budget process as required to achieve the 
recertified program's new mission milestones and schedules. DOD has 
prepared estimates of the costs to support a schedule that minimizes 
the possibility of a gap in coverage, but until the contract with 
Northrop Grumman Space Technology (NGST) is renegotiated to reflect the 
recertified program we will not have an accurate payment schedule. Once 
that is achieved, the multi-year funding profile will be included in 
the President's Budget requests to Congress as required in NOAA's 
statutory appropriations language.

    Question 2. When would the first payment be due and how much is the 
National Oceanic and Atmospheric Administration (NOAA) expected to 
shoulder? Is NOAA contractually bound to shoulder extra costs 
associated with cost overruns?
    Answer. Funding for the NPOESS Program is split evenly between NOAA 
and DOD. Both NOAA and the DOD will request the appropriate funding to 
support the restructured program in their future President's Budget 
requests.

    Question 3. The President's FY 2007 request for NOAA was $3.8 
billion, which is already 6 percent below the FY 2006 enacted level. 
How could NOAA possibly absorb even half of the $3 billion estimated 
cost overrun, and still perform its missions?
    Answer. The cost overrun is not for FY 2007 only, but represents an 
increase in the life cycle cost of the program (FY 2007 to FY 2026). 
The current funding requested for NPOESS in FY 2007 is adequate to fund 
the Nunn-McCurdy certified program in that year.

    Question 4. Can you pledge to us that these costs will not come out 
of other NOAA core missions and programs?
    Answer. NOAA has been working hard to balance its commitment to its 
core missions and programs today, with the need to ensure there is no 
gap in polar orbiting environmental satellite coverage in the future.
Adequacy of Contract Cost Controls
    Question 5. The Geostationary Operational Environmental Satellite 
(GOES), a joint program of the National Oceanic and Atmospheric 
Administration (NOAA) and the National Aeronautic and Space 
Administration (NASA), was developed through a Cost-Plus-award-fee 
contract awarded in 1985. This program experienced severe technical 
problems, cost overruns, and schedule delays.
    In August 2002, a Cost-Plus-award-fee contract was used again by 
the Air Force for the development and production phase of the National 
Polar-orbiting Operational Environmental Satellite System (NPOESS) 
program.
    ``Cost-Plus'' contracts can leave the government in a very 
vulnerable position, forcing an agency to absorb all of the costs. We 
learned with the GOES satellite problems fifteen years ago that this 
means we just send good money after bad. How can you instill any cost 
controls in a ``Cost-Plus'' contract?
    Answer. Cost controls can be instilled in a ``Cost-Plus'' contract 
by implementing the right mix of cost, technical, and schedule 
performance incentives with effective oversight and outcome-based 
criteria. The Nunn-McCurdy certification increased the management and 
cost controls for the certified NPOESS program by linking award fees 
with desired outcomes, ensuring award fees are commensurate with 
contractor performance, and ensuring appropriate justification for any 
use of rollover of unearned fee.

    Question 6. What controls were in place in this contract?
    Answer. All cost controls prescribed by the Federal Acquisition 
Regulations (FAR) are in place on this contract. This includes an 
Earned Value Management System, Limitation of Government Obligation and 
Termination clause. Additional oversight is conducted by the Defense 
Contracting Audit Agency and the Defense Contracting Management Agency 
to provide verification of compliance with existing acquisition 
regulations.

    Question 7. Were sufficient contract controls in place to stop work 
when subcontractor or contractor performance was sub-standard?
    Answer. Yes, the NPOESS Air Force contract includes the ability to 
stop work.

    Question 8. What alternatives to Cost-Plus structure could be used 
for this type of development?
    Answer. As a matter of policy, only cost type of contracts are now 
used by DOD for this type of developmental effort. The only other type 
of contract available is a fixed price, which was used by DOD for 
developmental programs in the 1980s. Significant problems arose with 
those fixed price developments. Consequently, DOD decided that a shared 
risk approach between government and industry was in the best interest 
of the country.

    Question 9. We know what the cost to the taxpayer will be of this 
failure--what repercussions do the contractors face?
    Answer. The contractor has to date lost $34 million in potential 
profit on this program by earning less than the allowable award fee. 
Additionally, $10 million of fee has been converted to cost, which 
reduces the contractors' ability to earn those fees in the future. The 
latest award fee was zero dollars, which translates to the loss of tens 
of millions of dollars. The contractor is also faced with the reduced 
ability to be considered competitive for future government contracts 
due to the tracking of contractor past performance through Contractor 
Performance Analysis Reports. Discussions with the contractor are 
ongoing concerning more stringent performance metrics under which the 
contractor will be evaluated.

    Question 10. Do they absorb any of the cost for their management 
failures?
    Answer. As mentioned above, the contractor has already lost profit 
($34 million in potential profit to date) by earning less than the 
allowable award fee. In the last two award fee periods, Northrop 
Grumman has only received 48 percent and zero percent of the available 
award fee. As the prime contractor, Northrop Grumman shares the award 
fee with its subcontractors. Discussions with the contractor are 
ongoing concerning more stringent performance metrics under which the 
contractor will be evaluated.
NOAA Oversight Process
    Question 11. The National Polar-orbiting Operational Environmental 
Satellite System (NPOESS) program is managed by the Integrated Program 
Office, which is located within NOAA and consists of personnel from the 
National Oceanic and Atmospheric Administration (NOAA), the National 
Aeronautic and Space Administration (NASA), and the Department of 
Defense (DOD). NOAA has overall program management and operating 
responsibility and DOD has the lead on the acquisition. NASA has 
primary responsibility for facilitating the development and 
incorporation of new technologies into the converged system.
    NPOESS is overseen by an Executive Committee (EXCOM) made up of:

        (1) Vice Admiral Conrad C. Lautenbacher, Jr., the Administrator 
        of NOAA;
        (2) Dr. Ronald M. Sega, Under Secretary of the Air Force; and
        (3) Dr. Michael Griffin, Administrator of NASA.

    Reading the Government Accountability Office (GAO) report seems 
like watching a disaster unfold in slow motion. Every failure is 
documented, yet it appears that the Integrated Program Office Director 
was not actually exercising adequate oversight, and nobody at the top 
was exercising any oversight on the Program Office. Who had direct 
supervision over the National Polar-orbiting Operational Environmental 
Satellite System (NPOESS) program contract and cost issues at the 
National Oceanic and Atmospheric Administration (NOAA)?
    Answer. The Integrated Program Office's (IPO) System Program 
Director (SPD) is responsible for the execution of the NPOESS Air Force 
contract. Pursuant to the 1994 Presidential Decision Directive which 
established NPOESS, DOD is the lead agency for major system 
acquisitions. The IPO SPD (i.e., the IPO Director) reports through 
NOAA's National Environmental Satellite, Data, and Information Service 
to the NPOESS Executive Committee (EXCOM). The EXCOM is comprised of 
the Administrator of NOAA, the Administrator of NASA, and the Under 
Secretary of the Air Force.

    Question 12. Was Admiral Lautenbacher, the Administrator of NOAA, 
actively involved in the oversight and fiscal control of the program?
    Answer. Admiral Lautenbacher is a member of the EXCOM and, as such, 
was actively involved in the oversight of the program. The EXCOM is the 
authority for the NPOESS program as established by Presidential 
Decision Directive. The EXCOM does not perform day-to-day management 
tasks or provide direct control of the Air Force NPOESS contract.

    Question 13. How was he kept informed of the financial risks posed 
by contractor failures, and what did he do to curb them?
    Answer. The EXCOM receives a monthly report from the NPOESS 
Integrated Program Office (IPO) as well as periodic program reviews. 
Until early 2006, an ad hoc Tri-Agency Steering Committee (TSC), 
comprised of key executives from the three agencies, reviewed the 
program monthly and reported to the EXCOM members. The EXCOM began a 
series of independent reviews of the NPOESS as soon as the government 
became aware of the severity of the cost and technical problems. As a 
function of these reviews, the EXCOM has supervised a restructuring of 
the NPOESS program management. The TSC has been replaced with a Program 
Executive Officer (PEO) and staff that can maintain much closer 
scrutiny and independent review of the program. The PEO is independent 
of the IPO and is funded to conduct government and independent reviews 
of the NPOESS program. The IPO changed the way it monitors earned value 
data, key milestones, dollars spent and contractor personnel. They 
track these metrics on a more regular basis, which will provide real-
time insight into the health and status of the program. These changes 
provide the PEO and the EXCOM with more meaningful data to understand 
the actual progress of the program, as well as the potential problems, 
so corrective actions can be taken sooner. In addition, the IPO has 
been reorganized and new personnel are being added to increase 
expertise in budget analysis, systems engineering, and program control. 
Additionally, significant changes have occurred within Northrop Grumman 
and its principal subcontractors.

    Question 14. What authority did NOAA have under the NPOESS program 
structure to raise a red flag on costs, or conduct a review, 
particularly if the Department of Defense (DOD), which has a much 
larger budget, was not concerned about costs?
    Answer. Regardless of budget size, NOAA, or any member of the 
EXCOM, has the authority to propose a review. As noted above, the EXCOM 
did initiate a series of independent reviews as the severity of the 
cost and technical problems became known.

    Question 15. Did the procurement contract establish penalties 
against the contractor for any of its own management or cost failures? 
Why or why not?
    Answer. The award fee is the primary method for establishing 
penalties. The amount of money awarded to contractors was based on 
cost, schedule and technical performance. For the last two award fee 
periods, Northrop Grumman received only 48 percent and zero percent of 
the available award fee. Discussions with the contractor are ongoing 
concerning more stringent performance metrics under which the 
contractor will be evaluated.

                                  
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