[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
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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
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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
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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.
---------------------------------------------------------------------------
\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.