[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
COST MANAGEMENT ISSUES IN NASA'S
ACQUISITIONS AND PROGRAMS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 5, 2009
__________
Serial No. 111-7
__________
Printed for the use of the Committee on Science and Technology
Available via the World Wide Web: http://www.science.house.gov
______
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COMMITTEE ON SCIENCE AND TECHNOLOGY
HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas F. JAMES SENSENBRENNER JR.,
LYNN C. WOOLSEY, California Wisconsin
DAVID WU, Oregon LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington DANA ROHRABACHER, California
BRAD MILLER, North Carolina ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York BOB INGLIS, South Carolina
PARKER GRIFFITH, Alabama MICHAEL T. MCCAUL, Texas
STEVEN R. ROTHMAN, New Jersey MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY
------
Subcommittee on Space and Aeronautics
HON. GABRIELLE GIFFORDS, Arizona, Chair
DAVID WU, Oregon PETE OLSON, Texas
DONNA F. EDWARDS, Maryland F. JAMES SENSENBRENNER JR.,
MARCIA L. FUDGE, Ohio Wisconsin
PARKER GRIFFITH, Alabama DANA ROHRABACHER, California
STEVEN R. ROTHMAN, New Jersey FRANK D. LUCAS, Oklahoma
BARON P. HILL, Indiana MICHAEL T. MCCAUL, Texas
CHARLES A. WILSON, Ohio
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
BART GORDON, Tennessee RALPH M. HALL, Texas
RICHARD OBERMANN Subcommittee Staff Director
PAM WHITNEY Democratic Professional Staff Member
ALLEN LI Democratic Professional Staff Member
KEN MONROE Republican Professional Staff Member
ED FEDDEMAN Republican Professional Staff Member
DEVIN BRYANT Research Assistant
C O N T E N T S
March 5, 2009
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Gabrielle Giffords, Chairwoman,
Subcommittee on Space and Aeronautics, Committee on Science and
Technology, U.S. House of Representatives...................... 17
Written Statement............................................ 18
Statement by Representative Pete Olson, Minority Ranking Member,
Subcommittee on Space and Aeronautics, Committee on Science and
Technology, U.S. House of Representatives...................... 19
Written Statement............................................ 20
Witnesses:
Mr. Christopher J. Scolese, Acting Administrator, National
Aeronautics and Space Administration (NASA)
Oral Statement............................................... 21
Written Statement............................................ 23
Biography.................................................... 27
Ms. Cristina T. Chaplain, Director, Acquisition and Sourcing
Management, Government Accountability Office (GAO)
Oral Statement............................................... 28
Written Statement............................................ 29
Biography.................................................... 33
Mr. Gary P. Pulliam, Vice President, Civil and Commercial
Operations, The Aerospace Corporation
Oral Statement............................................... 33
Written Statement............................................ 35
Biography.................................................... 40
Discussion
Impediments to Performance in NASA Projects.................... 40
NASA Implements Incentive and Punitive Measures to Increase
Accountability............................................... 41
NASA's Problems Could Be Fixed With a Small Fraction of
Stimulus..................................................... 43
Cost Management of Human Flight Missions Compared to Robotic
Missions..................................................... 43
Should NASA Freeze Cost Estimate Design?....................... 44
Long-duration Human Space Flight and Its Effect on Cost........ 45
Shrinking Industrial Base Adds to Cost......................... 45
Growing American Industrial Base Means Changes to ITAR......... 46
External Factors in NASA's Cost Growth......................... 46
NASA Success Has Led to Heightened Public Expectations......... 47
GAO Recommendations for NASA's Future Human Space Flight....... 48
Cost Overruns in Climate Change Missions....................... 49
Contractor Performance Contributes to Cost Overruns............ 50
NASA's Civil Servant Capacity to Provide Technological
Expertise.................................................... 51
NASA Life Cycle Performance.................................... 51
Firm-fixed Contracts Incentive to Avoid Cost Overruns.......... 52
More Cost Overruns Flexibility in Human Space Flight........... 54
A Fixed Date to End the Space Shuttle Increase Cost Stability.. 55
How New Contracting Procedures Will Effect NASA................ 56
NASA Addresses Launch Conflicts and Increased Cost............. 56
Comparison Between NASA and DOD on Cost Estimating, Budgeting,
and Programmatic Control..................................... 58
MSL Dramatic Cost Estimate Change.............................. 59
Bad Judgment and Irrational Optimism Affects Cost Estimates.... 59
Appendix: Answers to Post-Hearing Questions
Mr. Christopher J. Scolese, Acting Administrator, National
Aeronautics and Space Administration (NASA).................... 64
Ms. Cristina T. Chaplain, Director, Acquisition and Sourcing
Management, Government Accountability Office (GAO)............. 69
Mr. Gary P. Pulliam, Vice President, Civil and Commercial
Operations, The Aerospace Corporation.......................... 72
COST MANAGEMENT ISSUES IN NASA'S ACQUISITIONS AND PROGRAMS
----------
THURSDAY, MARCH 5, 2009
House of Representatives,
Subcommittee on Space and Aeronautics,
Committee on Science and Technology,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Gabrielle
Giffords [Chairwoman of the Subcommittee] presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
hearing charter
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
Cost Management Issues in NASA's
Acquisitions and Programs
thursday, march 5, 2009
10:00 a.m.-12:00 p.m.
2318 rayburn house office building
I. Purpose
The House Committee on Science and Technology's Subcommittee on
Space and Aeronautics will convene a hearing to review the status of
the National Aeronautics and Space Administration's (NASA) efforts to
improve the cost management of its acquisitions and programs. The
hearing will focus on (1) the results of the Government Accountability
Office's (GAO) just-completed assessments of selected large-scale NASA
projects and its designation of NASA acquisition management as a
``high-risk'' area, (2) the causes of cost growth and schedule delays
in NASA acquisitions and (3) the Agency's progress in addressing them.
II. Witnesses
Christopher Scolese
Acting Administrator
National Aeronautics and Space Administration
Cristina T. Chaplain
Director
Acquisition and Sourcing Management
U.S. Government Accountability Office
Gary P. Pulliam
Vice President
Civil and Commercial Operations
The Aerospace Corporation
III. Overview
When programs cost more to build and take longer than planned, NASA
is able to accomplish less with the resources it is allocated.
Confronted with specific instances of cost growth and schedule delay,
the Agency is forced to either seek additional funds or make difficult
trade-offs among its portfolio of projects such as shortening missions
or removing instruments. An important factor in mitigating cost growth
and schedule delay is accurate information with which to make decisions
and cost projections. For more than a decade, GAO has identified NASA's
contract management as a high-risk area--in part because of NASA's
inability to collect, maintain, and report the full cost of its
programs and projects. GAO has said that in the absence of such
information, NASA would be challenged to manage its programs and
control program costs. GAO has also underlined the importance of sound
cost management in other reports. For example, in reporting on NASA's
initial efforts to implement President Bush's 2004 Vision for Space
Exploration, GAO said that in the past, NASA has had difficulty meeting
cost, schedule, and performance objectives for some of its projects
because it failed to adequately define project requirements and
quantify resources.
It is important to note that while essential to ensuring timely,
effective and efficient acquisition of goods and services, integrating
sound cost management in program management is not enough. For example,
there must be transparency and clarity in the decision about whether
design and development is appropriately performed internally or
acquired from external sources. In addition, an emerging issue
requiring NASA's focused attention is the impact of the growing number
of bid protests lodged by vendors not selected in response to several
of its procurements, such as those for new space suits (since resolved)
and Commercial Resupply Services for the International Space Station.
Awaiting the outcome of such bid protests can have adverse impacts on
the Agency's planned schedules and program budgets. Potential means of
minimizing the impact of protests range from ensuring proposal
evaluations are defensible to guarding against any appearances of
conflict of interest in evaluation panelists and advisory review group
members chosen. Finally, successful acquisition outcomes require a
skilled and motivated acquisition work force. The NASA Project
Management Study completed in 1981 concluded that
``Good people are the key to good project management. Sound
project planning, management practices, and source evaluation
approaches are all important. However, they cannot substitute
for having high quality, and highly-motivated people
responsible for project management; both inside and outside of
government.''
As GAO has indicated, NASA's need to effectively manage its
programs will gain even more importance as the Agency seeks to manage
its wide-ranging portfolio in an increasingly constrained fiscal
environment. While today's hearing will focus specifically on cost
management, the Committee on Science and Technology will continue to
monitor and review a range of issues that impact NASA's ability to
acquire needed goods and services in a timely, cost effective and
efficient manner.
IV. Potential Hearing Issues
The following are some of the potential issues that might be raised
at the hearing:
What are the main causes of cost growth and schedule
delays in NASA programs and projects? Is there a consensus on
what causes cost growth and schedule delay? Are there any
similarities with those experienced by the Department of
Defense and other federal agencies in their acquisition of
space systems?
What has NASA done to mitigate cost growth and
schedule delay? Can other federal agencies benefit from NASA's
corrective actions?
In light of continued instances of cost growth and
schedule delay in key programs such as Mars Science Lander and
Glory, how effective have NASA latest efforts been?
What more needs to be done to mitigate cost growth
and schedule delay in NASA programs?
Why is NASA acquisition management still
characterized by GAO as a high-risk area after 18 years?
What has NASA done in response to GAO's
characterization that NASA's acquisition management is a high-
risk area?
What must NASA do to warrant removal from GAO's high-
risk list?
V. Background
To effectively use public funds in carrying out its activities, the
Federal Government is expected to employ sound management practices and
processes, including the measurement of program performance. The
Congress, Executive Branch officials, and the public want to know
whether federal programs are achieving stated goals and what their
costs are.
The Importance of Developing Reliable Cost Estimates
As stated in GAO's ``Cost Estimating and Assessment Guide: Best
Practices for Developing and Managing Capital Program Costs'' [GAO-09-
3SP], cost estimates are necessary for government programs for many
reasons: supporting decisions about whether to fund one program over
another, developing annual budget requests, and evaluating resource
requirements at key decision points. Moreover, as stated in GAO's
guide, having a realistic estimate of projected costs makes for
effective resource allocation, and increases the probability of a
program's success.
GAO's guide defines a cost estimate as the summation of individual
cost elements, using established methods and valid data to estimate the
future costs of a program, based on what is known today. The management
of a cost estimate involves continually updating the estimate with
actual data as they become available, revising the estimate to reflect
program changes, and analyzing differences between estimated and actual
costs.
The guide further states that the ability to generate reliable cost
estimates is a critical function. Without this ability, agencies are at
risk of experiencing cost overruns, missed deadlines, and performance
shortfalls--all recurring problems that GAO's program assessments have
revealed. Furthermore, cost increases often mean that the government
cannot fund as many activities as planned or deliver them when
promised.
Cost Growth and Schedule Delays in NASA Programs
The need to mitigate cost growth and schedule delay in NASA
programs is not a new concern. As early as 1981, it was identified by
the NASA Project Management Study. In an article featured in NASA's ASK
project management publication, Dr. C. Howard Robins, former Deputy
Associate Administrator for Space, said that the study, colloquially
referred to as the ``Hearth Study,'' would ``come to be viewed within
NASA as a landmark.'' Both the House Committee on Science and
Technology and House Committee on Appropriations requested the study
due to congressional concerns about cost and schedule performance
problems. The House Science and Technology Committee letter dated
September 19, 1980 to NASA stated:
``A number of large projects, for example Galileo, LANDSAT-D,
space telescope, and ISPM, are experiencing cost and schedule
problems.''
``The Committee encourages NASA to take the necessary steps to
minimize the cost and schedule impact of the problems
associated with these ongoing programs. Further, the Committee
has authorized new starts in the space and applications area
and is anxious that sound project management principles be
applied from the beginning of these new programs.''
The 1981 study was the first multi-project study of program/project
management by NASA and also the first study of the topic by an agency-
wide NASA team. Langley Research Center Director Donald P. Hearth led a
team that studied thirteen robotic projects, including projects such as
Viking and Voyager, undertaken over a twenty-two-year period.
The study found significant problems, including inadequate project
definition and over-optimism during advocacy. Several recommendations
were made, such as requiring a formal definition review prior to the
NASA decision to include the project in its budget request. A more
detailed list of conclusions and summary recommendations made in the
Hearth Study are included in Appendix A. More importantly, the study
said that its conclusions and recommendations should be viewed with the
following comments in mind:
``During recent years, several projects have experienced major
cost increases without apparent forewarning. This has damaged
NASA's credibility and reputation for successful project
management. Actions by NASA management are, therefore,
necessary; particularly, in light of NASA's external
environment and the pressures on government budgets.
The Study Team verified, from its examination of a group of
representative projects that the cost performance of a project
is closely related to the application of sound project
management principles and/or the use of available management
tools. Therefore, the Study Team's Conclusions and
Recommendations are not intended to suggest the superposition
of either an additional hierarchy of management, or the
addition of new management tools within the current NASA
system. Rather they stress the need for continuing application
of the basic principles of sound project management by NASA,
refinement of existing management tools, and the continuing
verification, by NASA's top management, that the principles are
being followed and available tools are being used.''
In ensuing years, NASA cost growth and schedule issues were
conducted in its robotic and human space flight mission areas,
including the International Space Station. More recently, the issues of
cost growth and schedule delays in NASA programs have been addressed in
legislation and analyzed in studies by GAO, the National Research
Council (NRC), and NASA itself.
NASA Authorization Act of 2005
Cost growth and schedule delay were addressed in the NASA
Authorization Act of 2005 (P.L. 109-155). Provisions were enacted to
help NASA and Congress spot potential cost growth and schedule problems
early in the development phase of a major program. Rather than
discouraging risk taking, these provisions were intended to encourage
NASA managers to identify risks as early as possible, when they are
more readily managed and solutions are more easily implemented.
Under the 2005 Act, a Baseline Report is required
whenever a major program completes required reviews and is
approved to proceed to implementation. NASA's policy defines a
project life cycle in two phases--the formulation and
implementation phases. During the formulation phase, projects
develop and define requirements and lead up to a preliminary
design review. Projects also complete development of mission-
critical or enabling technology with associated demonstrations.
The implementation phase begins after project confirmation.
After completing the Baseline Report, the Act requires NASA
to report periodically on a major program through an Annual
Report, which is provided as part of the annual agency budget
submittal to the Congress, until the program enters operation.
The provision defines a major program as an activity with a
life cycle cost estimate greater than $100 million. Having
established the baseline, the 2005 legislation sets thresholds
that, if exceeded, require agency action. Notification to
Congress and an internal evaluation are required in the event
that any major program exceeds its originally estimated
development cost by more than 15 percent or exceeds its
originally planned schedule by more than six months. The Act
also requires Congress to evaluate whether to continue the
major program in the event that it exceeds its originally
estimated development cost by more than 30 percent or $1
billion.
The NASA Authorization Act of 2000 was amended to
better reflect current mission cost categories by increasing
the cost threshold that could trigger an independent cost
analysis from $150,000,000 to $250,000,000 and by requiring the
Administrator, rather than the chief financial officer, to
conduct the independent cost analysis.
NASA Authorization Act of 2008
Concerns regarding the increasing number of Earth science missions
that were exceeding the 15 percent threshold established in the NASA
Authorization Act of 2005 prompted a requirement in the NASA
Authorization Act of 2008 for an independent review of the situation.
Specifically, the Act directs the NASA Administrator to arrange for an
independent external assessment to identify the primary causes of cost
growth in large, medium, and small space and Earth science spacecraft
mission classes. The external assessment is to also identify
recommendations and provide a report within 15 months of the enactment
of the Act. The National Research Council has been tasked by NASA to
perform this review.
In addition, the Glory program was reauthorized in the NASA
Authorization Act of 2008, responding to the requirement in the 2005
NASA Authorization Act that Congress evaluate whether to continue a
major program in the event that it exceeds its originally estimated
development cost by more than 30 percent.
GAO Reports
GAO has issued a number of reports dealing with cost and schedule
problems in NASA's programs and with NASA's acquisition process:
In its report of May 2004 on what it described as
NASA's lack of disciplined cost-estimating processes [GAO-04-
642], GAO stated that the considerable flux it found in NASA's
program cost estimates--both increases and decreases--was an
indication that NASA lacked a clear understanding of how much
its programs will cost and how long they will take to achieve
their objectives. GAO found that the development cost estimates
for more than half of the 27 programs it reviewed had
increased, and that for some programs, this increase was
significant--as much as 94 percent. GAO also reported that
NASA's basic cost-estimating processes--an important tool for
managing programs--lacked the discipline needed to ensure that
program estimates were reasonable. GAO recommended that NASA
take a number of actions to better ensure that the Agency's
initiatives result in sound cost-estimating practices and are
integrated into the project approval process. NASA concurred
with GAO's recommendations.
In March 2005, GAO reported [GAO-06-634] that the
James Webb Space Telescope (JWST) program increased its life
cycle cost estimate from $3.5 billion to $4.5 billion and
extended its schedule by almost two years. More than a third of
the cost increase was caused by requirement additions and other
changes. An increase in the program's contingency funding
[``reserves''] accounted for the remainder--about 12 percent--
of the growth. About half of the cost growth was due to
schedule slippage. A delay by the Administration in approving
the use of a European Space Agency-supplied Ariane 5 launch
vehicle resulted in a one-year delay; an additional 10-month
slip was caused by NASA's budget profile limitations in fiscal
years 2006 and 2007.
GAO reported that although the JWST program revised its
acquisition strategy to conform to NASA's acquisition policies,
the program still faced considerable challenges because it has
not fully implemented a ``knowledge-based'' approach to its
acquisition. For example, GAO noted that when program officials
initiated work and before the JWST program revised its
acquisition strategy, these officials had intended to have NASA
commit to program start with immature technologies and without
a preliminary design. Despite the program's change in
acquisition strategy to address GAO's concerns, GAO concluded
that the revised plan still might not permit the maturity of
key technologies to be adequately tested prior to program
start. Consequently, GAO recommended that the NASA
Administrator direct the JWST program to (1) fully apply a
knowledge-based acquisition approach to ensure that adequate
knowledge is attained at key decision points and (2) continue
to adhere to NASA acquisition policy and go forward only after
demonstrating that it is meeting incremental knowledge markers
and has sufficient funds to execute the program. NASA concurred
with GAO's recommendations.
Following a review requested by this Committee's
then-Ranking Member, Rep. Bart Gordon, GAO reported in December
2005 [GAO-06-218] that while NASA's revised policy for
developing flight systems and ground support projects
incorporated some of the best practices used by successful
developers, it lacked certain key criteria and major decision
reviews that support a knowledge-based acquisition framework.
For example, NASA's policy requires projects to conduct a major
decision review before moving from formulation to
implementation and that prior to moving from formulation to
implementation, projects must validate requirements and develop
realistic cost and schedule estimates. However, as GAO found,
NASA's policies did not require projects to demonstrate
technologies at high levels of maturity before program start.
By not establishing a minimum threshold for technology
maturity, GAO said that NASA increased the risk that design
changes would be required later in development, when such
changes are typically more costly to make. GAO made several
recommendations to help ensure NASA uses a knowledge-based
acquisition approach in making informed investment decisions.
NASA concurred with GAO's recommendations.
In releasing GAO's report, Rep. Gordon said:
``As NASA embarks on an initiative to return
American astronauts to the Moon--an endeavor estimated
to cost more than $100 billion over the next 13 years--
we need to have confidence that the Agency will be good
stewards of taxpayer dollars.'' He added ``In its
report out today, the GAO offers some common sense
recommendations aimed at reducing the chances that
NASA's projects will suffer cost growth and schedule
delays. I hope NASA will take the GAO's guidance
seriously.''
This week, GAO released its report [GAO-09-306]
assessing the status of 18 large-scale projects at NASA. GAO's
independent assessment was conducted in response to the
explanatory statement of the House Committee on Appropriations
accompanying the Consolidated Appropriations Act of 2008; the
Committee on Science and Technology was a co-requester of the
assessment. Ms. Cristina Chaplain, a witness at this hearing,
directed GAO's work and will highlight the report's findings to
the Subcommittee. GAO compared projects against best practice
criteria for system development including attainment of
knowledge on technologies and design. The office found that 10
out of 13 projects that had entered the implementation phase of
the project life cycle experienced significant cost and/or
schedule growth. For those projects, GAO found that development
costs increased by an average of 13 percent from baseline cost
estimates that were established just two or three years ago;
average launch delay was 11 months.
As an illustration, the development cost of the Mars Science
Laboratory (MSL) increased in the past year by over $200
million--more than a 26 percent increase and now stands at over
$1.2 billion. GAO anticipates that the MSL's development cost
will be even greater due to the launch being delayed from
October 2009 to 2011, a 25-month delay. Initially scheduled for
September 2009, the next window of opportunity for a Mars
launch occurs in the October/November 2011 timeframe. NASA
notified the Committee of that delay in December 2008, with the
Agency stating that a 2009 launch would be too risky because of
technical uncertainties. Regarding the challenges faced by MSL,
GAO reported that the program relied on several heritage
technologies that had to be re-designed, re-engineered, or
replaced. For example, the heat shield made of a light-weight
material had flown on previous missions and was considered
nearly ready. But a setback in testing forced NASA to select a
new and less mature technology. Also, the initial decision to
use dry lubricated lightweight titanium gears for rover
actuators had to be revisited when NASA found, during
fabrication, that the gears would not meet its durability
needs. As a result, the project has had to revert to heavier
stainless steel gears with a wet lubricant used by prior
projects. To keep the lubricant from freezing in Martian
temperatures, the project also had to add heaters. GAO said
this increased the mass of the MSL's rover.
The underestimation of complexity resulting from the planned
use of new or heritage technology is not unique to the MSL
mission. GAO said that many of the projects reviewed indicated
that they had experienced challenges in developing new
technologies or retrofitting older technologies as well as in
managing their contractors. From a general standpoint, NASA
projects faced difficulty understanding the risks and
challenges they were up against when they started their
efforts. Challenges GAO identified included technology
maturity, design stability, complexity of heritage technology,
contractor performance, and performance by a development
partner such as an international space agency. GAO did not make
recommendations in this report as it acknowledged that NASA was
undertaking an array of initiatives aimed at improving program
management, cost estimating, and contractor oversight. However,
GAO said that NASA would benefit from a more disciplined
approach to its acquisitions and called for continued attention
to NASA's efforts to enable the Agency to maximize the
effectiveness of its acquisition investments.
NRC's Review of NASA's Beyond Einstein Program
NRC released a report in September 2007 entitled ``NASA's Beyond
Einstein Program: An Architecture for Implementation.'' Prompted by
Congress and the Office of Science and Technology Policy, NASA and the
Department of Energy asked the committee to assess the five proposed
mission concepts for achieving the goals of the Beyond Einstein space-
based physics research initiative, and recommend one for first
development and launch.
As part of its charge, the committee was tasked with determining
the realism of preliminary technology and management plans, and cost
estimates of the candidate Beyond Einstein mission set. Five mission
areas--Joint Dark Energy Mission, Black Hole Finder Probe, Inflation
Probe, and Einstein Great Observatories--comprised 11 mission
candidates. Criteria used by the committee included plans for the
maturing of critical mission technology, technical performance margins,
schedule margins, risk-mitigation plans, and the proposal's estimated
costs versus independent probable cost estimates prepared by the
committee.
The committee worked with an experienced outside contractor to
develop independent cost estimates and a probable cost range for each
candidate mission. The probable cost ranges were also compared with
those of previous missions of similar scope and complexity. In all
cases, the committee found higher costs and longer schedules than those
estimated by the mission teams. The committee observed that this is
typical of the differences between the estimates developed by mission
teams and by independent cost estimators at this early stage of a
program. Given the long history of missions comparable to the Beyond
Einstein mission candidates, the committee said that it believed that
the most realistic cost range for each of these missions is
significantly more than the current estimates provided by the research
teams.
In discussing its assessment of mission readiness, the committee
stressed the importance of technology readiness as a key consideration
in the decision to proceed to mission development. The committee said
that ideally, mission development should not commence until all new
technologies necessary for mission success have reached a certain level
of technology readiness. Experience has shown, the committee added,
``that NASA and other missions pay the price when a mission enters
development prematurely.''
NASA Self-Examinations
NASA research on incidents of cost and schedule growth and their
causes is conducted by a number of organizations and individuals.
Typically, according to NASA, this research is intended to assist the
organization in evaluating performance trends; evaluate the
effectiveness of their own organizational processes, tools and methods;
and develop proposals for changes to their organization, processes,
methods, and tools. NASA's Office of Program Analysis and Evaluation
(PA&E) performs studies on an on-going basis and the topic of cost
growth is frequently discussed at NASA Project Management Workshops and
Cost Community Events such as a Cost Symposium. Because there is no
clearinghouse for all cost estimating research being undertaken within
NASA, the full extent of the Agency's research in cost growth and
schedule delay cannot be fully characterized. Nonetheless, the
following four examples are illustrative of self examinations the
Agency has undertaken in recent years.
In February 2004, NASA completed an analysis
comparing initial and final budget estimates of development
costs for 45 recent projects and computed percent budget growth
as a surrogate for cost growth. The analysis found that an
average cost growth of 36 percent and a median growth of 26
percent; 35 of 45 projects exceeded the initial budget
estimate. The relative change from the total of the 45 initial
budgets to the total of the 45 final budgets indicated a total
growth of 28 percent. In comparing historical budget growth
trends in the Department of Defense (DOD) and NASA as well as
describing the cost-estimating process changes made by DOD,
NASA analysts suggested that NASA cost-estimating processes
were in need of reform. But the analysts also listed a number
of changes already in progress that would have beneficial
impact, such as the then near-release of an update of NPR
7120.5 codifying the requirement for an Independent Program
Assessment Office project review prior to the two key project
milestones and requirements for a Cost Analysis Requirements
Description (CARD) and a full continuum of sound cost- and
program management practices; updating of NASA's Cost
Estimating Handbook; and development of training tools for
program managers. But the analysts also indicated that still
needed was a method for capturing project cost, technical, and
schedule data recorded in a standardized format and collected
at a reasonable frequency.
At a NASA Cost Symposium in July 2007, analysts from
the Aerospace Corporation and NASA conducted a presentation
entitled ``Using Historical NASA Cost and Schedule Growth to
set Future Program and Project Reserve Guidelines.'' Analysts
discussed their investigation of the cost and schedule growth
history for 40 science missions--the ``mission set.'' By
looking at historical schedule and cost growth, analysts sought
to determine whether the past could be used to establish
guidelines for the levels of reserves needed for future
missions.
Reserves are unallocated funds that are provided to counter
risks to costs and schedule that are unanticipated; they reduce
the probability that actual costs will overrun estimates. In
essence, they act as contingency funds to address circumstances
or outcomes that were not conceived of by an observer at a
given point in time--what is commonly known in project planning
as ``unknown unknowns.'' In contrast, ``known unknowns'' refers
to circumstances or outcomes that are known to be possible, but
for which it is unknown whether or not those outcomes or
circumstances will be realized.
Examination of the historical data set by the analysts from
Aerospace and the Science Mission Directorate (SMD) showed that
the majority of projects had experienced cost and schedule
growth and that this cost and schedule growth was substantial.
The average cost and schedule growth for the mission set was 27
percent and 22 percent, respectively. Analysts said the data
highlighted that the primary internal reason for cost and
schedule growth was instrument development issues, and the
fundamental external reason for the growth was launch vehicle
delay.
Analysis of project reserves was challenging to the
analysts. This is because reserve levels are not explicitly
identified in NASA budget documents. Using NASA backup budget
documents and other sources, analysts were able to identify
reserve values for eighteen of the forty missions were
obtained. The cost reserve levels held by each mission varied
from 10 to 30 percent while the average reserve was on the
order of 18 percent. Additionally, although specific schedule
reserve could not be identified from the budget, a general
industry rule of thumb that was prevalent when these missions
were developed was that a mission should carry one-month of
schedule reserve for each year of development. This equates to
an 8.3 percent schedule reserve for the project.
Suggestions provided by analysts from Aerospace and SMD
included doing the following:
Requiring better technical and programmatic
definitions at the beginning of a project
Independently assessing design and cost/schedule
assumptions
Performing earlier instrument development to reduce
risk
Holding instrument CDR prior to spacecraft and
mission PDR
Considering increased cost and schedule reserves for
projects, some to be held outside the project.
``Best Practices'' for the control of cost and schedule in a
project were also identified, including:
Proper mission scoping
Robust initial cost and schedule estimate
Monthly estimates to complete
Importance of managing to schedule
Effective Use of Earned Value Management (EVM). Both
the IMAGE and Stardust missions used EVM. EVM is a
technique that compares the value of work accomplished
during a given period with the work scheduled for that
period. By using the value of completed work as a basis
for estimating cost and time needed to complete the
program, earned value can alert program managers to
potential problems early in the program. As was stated
for the IMAGE mission: ``The Earned Value system worked
well as an early indicator of cost problems ahead.''
Analysts also stated that the real problem is that there is
no incentive for any project manager to underrun cost
estimates. They said that in today's culture, an underrun is
considered evidence that the project manager did not do enough
testing or analysis or should have added another instrument or
made the resolution better. A secondary problem identified by
the analysts was that project managers do not have the
authority to control costs, such as not being able to remove
excess personnel without Center Director approval. Until more
control is given to the project manager and incentives are put
into place to return funding, analysts concluded that cost
growth will still occur.
In March 2008, NASA's SMD, assisted by the Science
Applications International Corporation (SAIC) presented a
summary overview entitled ``SMD Cost/Schedule Performance
Study'' before the NASA Advisory Council's Planetary Science
Subcommittee. The objective of the study was to evaluate the
cost/schedule performance record of selected SMD flight
projects to determine key drivers of cost/schedule performance,
and implementation approaches that enhance performance of SMD
missions. Project Managers and other key staff members were
interviewed to collect narrative descriptions to compare with
and explain the detailed historical data. Among its findings,
the study showed that:
Cost history data for 21 of the 24 projects studied
indicated cost growth. Total cost growth from the start
of the design phase to Estimate-to-Complete (ETC) at
Launch for all projects studied represented a combined
impact of $2.0 billion to SMD's mission portfolio.
Schedule history data indicated schedule slips for
19 of the 24 projects studied. The delays ranged from
five to 42 months.
Interview comments by eight projects cited early
planning deficiencies as a significant source of
development problems (underestimates, inexperience,
inadequate early technology investment, and/or design
heritage that was not realized).
The four projects that reported using EVM as a
management tool showed lower average growth in
development costs compared to projects that did not use
EVM.
Regarding the key drivers that affected cost/schedule
performance for SMD projects, internal factors identified were
over-optimism early in the project's formulation phase, as
instrument development complexity. Launch service issues and
unstable or inadequate initial funding profiles were cited as
the most common external factors affecting cost and schedule.
Among the study's recommendations to mitigate cost growth and
schedule slips was one that SMD require more rigor in the
process used to generate early cost and schedule estimates and
establish a minimum set of requirements for a credible basis of
estimate for mission concept costing. It was also recommended
that projects be encouraged to include more conservatism in
base estimates early in the process and be required to
carefully evaluate all key project assumptions including design
heritage credits.
At a presentation before the Goddard Space Flight
Center Symposium in June 2008, a member of the Aerospace
Corporation discussed perspectives on mission cost and schedule
performance trends, building on his team's review of 40 NASA
robotic science missions. The team's findings included the
following:
While estimates become more accurate as a project
matures, the greatest growth manifests itself late in
the project during integration and test.
Data highlighted that the primary reason for cost
and schedule growth is internal project technical and
development issues often associated with instruments.
Initial project estimates may be unreliable due to
design and technology immaturity and inherent optimism.
Better technical and programmatic appraisal early in
the life cycle is needed along with independent
assessment of design and programmatic assumptions.
In addition, the team analyzed the relationship between
cost, schedule and complexity. A complexity index was
established for the projects reviewed based on performance,
mass, power and technology choices. The team plotted missions'
cost versus complexity index and found a near linear rising
``band'' where successful missions cluster. On the other hand,
those missions failed that were below that clustered range.
This led the team to characterize this area as the ``no-fly
zone.''
GAO's Characterization of NASA Acquisition Management as High-Risk
Since 1990, GAO has periodically reported on government operations
that it identifies as ``high-risk.'' This effort has brought focus to
problems impeding effective government and costing the government
billions of dollars each year. GAO's high-risk status reports are
provided at the start of each new Congress. Historically, high-risk
areas have been so designated because of traditional vulnerabilities
related to their greater susceptibility to fraud, waste, abuse, and
mismanagement. As GAO's high-risk program has evolved, it has
increasingly used the high-risk designation to draw attention to areas
associated with broad-based transformations needed to achieve greater
economy, efficiency, effectiveness, accountability, and sustainability
of selected key government programs and operations. In 1990, GAO
designated NASA's contract management as high-risk in view of
persistent cost growth and schedule slippage in the majority of its
major projects. Since that time, GAO's high-risk work has focused on
identifying a number of causal factors, including antiquated financial
management systems, poor cost estimating, and undefinitized contracts.
In the January 2009 update of its high-risk list [GAO-09-271], GAO
reported that since the 2007 high-risk update, NASA had taken
significant steps to improve its acquisition management with the
implementation of new policies and procedures and the development of a
corrective action plan to address weaknesses in areas identified as
high-risk by GAO. For example, NASA revised its acquisition and
engineering polices to incorporate elements of a knowledge-based
approach that should allow the Agency to make informed decisions.
According to GAO, NASA is also instituting a new approach whereby
senior leadership is reviewing acquisition strategies earlier in the
process and developed broad procurement tenets to guide the Agency's
procurement practices. Among procurement policy reforms, GAO noted that
an earned value management procurement policy has been established and
a requirement that all award fee contracts undergo a cost-benefit
analysis has been codified to improve the likelihood that NASA is using
its resources most effectively. GAO noted NASA's broad plan for
reducing acquisition risk and observed that successful implementation
of both the plan and revised policies should stem cost growth and
schedule slippage.
However, GAO said that because cost growth and schedule delays
persist, this area--now titled ``acquisition management'' because of
the scope of issues that need to be resolved--remains high-risk. GAO
added that to maximize NASA's investment dollars, implementation needs
to be complemented by vigorous executive leadership to foster the
expansion of a business-oriented culture and a sustained commitment to
identify and take action on projects that are not achieving cost,
schedule or performance goals upon which they were based when they were
initiated. Ms. Cristina Chaplain, who directed GAO's effort looking at
NASA, is a witness at today's hearing and will highlight her team's
findings.
Similarities Between NASA and DOD in Their Acquisition of Space Systems
GAO has reported that the costs for DOD space acquisitions over the
past several decades have consistently been underestimated--sometimes
by billions of dollars. For example, Space Based Infrared System High
program costs were originally estimated at $4 billion, but the program
is now estimated to cost over $10 billion. Estimated costs for the
National Polar-orbiting Operational Satellite System program--conducted
jointly by DOD, the National Oceanic and Atmospheric Administration and
NASA--have grown from almost $6 billion at program start to over $11
billion.
GAO found in November 2006 [GAO-07-96] that, for the most part,
cost growth in DOD space acquisitions has been caused by the tendency
to start programs before knowing whether requirements can be achieved
within available resources--largely because of pressures to secure
funding. GAO reported that unrealistic program office cost estimates
exacerbated space acquisition problems and that with budgets originally
set at unrealistic amounts, DOD has had to resort to continually
shifting funds to and from programs, and such shifts have had costly,
reverberating effects.
GAO's analyses of six ongoing space programs shows some parallels
with challenges faced by NASA. GAO found that original cost estimates
were particularly unrealistic regarding the potential for savings from
increased contractor program management responsibilities, the constancy
and availability of the industrial base, savings that could be accrued
from heritage systems, the amount of weight growth that would occur
during a program, the availability of mature technology, the stability
of funding, the stability of requirements, and the achievability of
planned schedules. Ms. Cristina Chaplain, who directed GAO's effort
looking at DOD's space acquisitions, is a witness at today's hearing
and will highlight her team's findings. In addition, Mr. Gary P.
Pulliam, from the Aerospace Corporation, has been asked to comment on
whether there are any similarities in cost growth and schedule delays
experienced by NASA and the Department of Defense/other federal
agencies in their acquisition of space systems, and whether there are
any ``lessons learned'' that would be applicable to these
organizations.
Latest Actions by NASA to Address Cost Growth and Schedule Delay in Its
Programs
In addition to agreeing to the recommendations made by GAO, NASA
has implemented corrective actions on its own to address the issue of
cost and schedule performance. For example, it has:
Issued the 2008 NASA Cost Estimating Handbook (CEH),
a reorganized and updated version of the 2004 handbook.
According to NASA, the handbook provides useful information on
cost estimating for the entire NASA Cost Estimating Community.
It is meant to be both informative for the new cost estimator
and a good reference document for the experienced cost
estimator. Explanatory material accompanying the handbook
indicates that based on the extensive feedback from the NASA
Cost Estimating Community, the 2008 edition of the handbook has
been streamlined to make references easy to find, simplified to
make new initiatives easy to understand, and clarified to
communicate key policy messages efficiently. The material also
says that the handbook's information provides NASA-relevant
perspectives and NASA-centric data useful in the NASA
environment and facilitates the development of reliable,
comprehensive, defensible, and well documented cost estimates.
Instituted a policy of budgeting to the 70 percent
confidence level. The policy, which is applicable to space
flight and information technology programs and projects, is
institutionalized in a new NASA Policy Directive (NPD 1000.5),
effective January 15, 2009. Programs are to be budgeted at a
confidence level of 70 percent or the level approved by an
authority of the Agency-level management council. As an
example, a 70 percent confidence level is the point on the
joint cost and schedule probability distribution where there is
a 70 percent probability that the project will be completed at,
or lower than, the estimated cost and at or before the
projected completion date. In the case of the Constellation
program, the confidence level was set at 65 percent by then-
Administrator Michael Griffin due to programmatic conclusions
regarding the amount of technology heritage that would inform
the Constellation designs.
Emphasized educating NASA staff on the need for
probabilistic cost and schedule estimating, how to do it, and
providing enabling tools.
Implemented independent assessments of projects
through Standing Review Boards.
Conducted in depth interviews with past NASA Program
Managers to better understand root causes of cost growth and
schedule delay. In particular, NASA recognized the need to
fully understand which factors contributed the most.
Collected ideas to improve cost and schedule
estimates, such as spending more on R&D to mature technology
readiness levels, developing instruments first, demanding
better data to support claims at decision gates, and keeping
requirements stable.
Established, under the Office of the Chief Engineer,
the Academy of Program/Project & Engineering Leadership (APPEL)
which provides leadership, advice, direction, and support for
the development and education of the NASA program/project
management and engineering community. Among its numerous
functions, the Academy facilitates the dissemination of
``lessons learned'' and ``best practices'' through knowledge
sharing activities, including conferences, forums,
publications, case studies, and communities of practice.
Risk Management and the Challenge of Containing Project Costs
Meeting technical and safety goals while also meeting programmatic
constraints related to cost and schedule is a tremendous challenge. To
that end, identifying and managing risks can be of significant help, as
they are closely related to cost management efforts--initially in the
planning of the project when costs are estimated and later during
development when cost fluctuations invariably occur. Since mission
success is the primary goal of any NASA activity, the Agency has
recognized that effective risk management is critical to achieving that
mission success. The implementation of a thorough, disciplined risk
management approach is now required of all NASA programs and projects.
Because of the pressure to contain costs, difficult decisions often
need to be made when unplanned increases occur. To manage cost
increases, particularly when increased funding is not provided, NASA
projects have in the past altered (1) the scope of the project,
including the elimination of scientific instruments, (2) management
oversight by reducing the number of personnel assigned to that
function, and (3) the testing sequence or reduced the testing
requirements.
When performed without sufficient recognition of risks, making such
alterations can lead to catastrophic results as was demonstrated by the
``lessons learned'' activity following the failure of the Mars Climate
Orbiter probe. That spacecraft, developed under the Faster, Better,
Cheaper (FBC) mantra advanced by NASA in the 1990s, was lost as it was
landing on Mars in September 1999. In its report on Project Management
in NASA dated March 13, 2000, the Mars Climate Orbiter Mishap
Investigation Board stated that:
``Greater attention needs to be paid to risk identification
and management. Risk management should be employed throughout
the life cycle of the project, much the way cost, schedule and
content are managed. Risk, therefore, becomes the ``fourth
dimension'' of project management--treated equally as important
as cost and schedule.''
The Board also said that it saw strong evidence that the systems
engineering team and the systems processes were inadequate on the
project, adding that:
``Inadequate independent verification and validation of Mars
Climate Orbiter ground software (end-to-end testing to validate
the small forces ground software performance and its
applicability to the software interface specification did not
appear to be accomplished).''
With regards to reduced oversight, the Board noted:
``To exacerbate this situation, the mission was understaffed,
with virtually no Jet Propulsion Laboratory oversight of
Lockheed Martin Astronautics' subsystem developments. Thus, as
the mission workforce was reduced and focus shifted from
spacecraft development to operations, several mission critical
functions--such as navigation and software validation--received
insufficient management oversight.''
The lesson learned, the Board said was that:
``In the era of ``Faster, Better, Cheaper,'' projects and line
organizations need to be extremely vigilant to ensure that a
Mission Success First attitude propagates through all levels of
the organization. A proper balance of contractor and project
oversight by technical divisions at NASA field centers is
required to ensure mission success and to develop a sense of
ownership of the project by the institution.''
Appendix A
NASA PROJECT MANAGEMENT STUDY
(January 1981)
(Known as the ``Hearth Study'')
OBJECTIVES
To assess project management in NASA
To identify generic reasons which aggravate cost and schedule
growth
To recommend appropriate actions by NASA
SUMMARY CONCLUSIONS
Significant contributors to cost growth of several NASA
projects
Technical complexity of projects
Inadequate definition prior to commitment
Effect of low contractor bids
Poor tracking of contractor accomplishments
Significant contributors to good cost performance of several
NASA projects
The function of the NASA project manager
Adequate definition prior to commitment
Proper planning and management of reserves
Early understanding between NASA and implementing contractor
Good implementation by NASA and contractor(s)
Not significant factors in cost growth of several NASA
projects
Inability to make cost estimates when project well defined
Non-utilization of classified technologies
Excessive influence of ``users''
Difficulty to quantify effect of high inflation has
contributed to cost growth in recent years
Use and definition of reserves not consistent within NASA
Ground segments have experienced cost growth and are not well
defined prior to implementation
Management of some projects assigned to multiple NASA Centers
without timely interface definition
Concurrent developments increase risk substantially
Other concerns
Industry's workload, interest in NASA work, etc.
Composition of NASA workforce.
SUMMARY OF RECOMMENDATIONS
Continue to pursue technically-advanced projects. Expect cost
growth in some future projects.
Require pre-project analysis and definition phases.
Sufficient definition funding in NASA budget. Formal definition
reviews. Require approved project initiation agreement and project
plan.
Select contractors primarily on technical considerations,
management plans, past performance, etc.
Issue NASA Policy to have adequate visibility of contractor
activity. Center Directors responsible for policy implementation.
Requires strong NASA in-house capability and adequate center resources.
Fund implementing contractor at low level to develop thorough
understanding. NASA project manager reconfirms or changes initial
commitment.
Provide completion costs of major projects in terms of
budget-years dollars.
Issue NASA Policy to have adequate reserves in all major
projects. Based on definition maturity, risk, technical complexity, and
concurrent developments. Managed by Headquarters program manager and
project manager.
General practice, minimize NASA management interfaces. When
teaming of NASA Centers is appropriate, define interfaces prior to
project implementation.
Revise and re-issue NASA management Instructions defining
project management policies.
Chairwoman Giffords. Good morning, everyone. I am very
pleased to welcome all of you to the first hearing on the
Subcommittee for Space and Aeronautics of the 111th Congress. I
am very much looking forward to working with the Ranking Member
Pete Olson, who represents a district that has JSC in it and my
colleagues on both sides of the aisle, I am very pleased that
we have Members that make up many of the NASA facilities and a
real passion on this committee or this subcommittee for space
and aeronautics.
We have a lot to do this year, but I am confident that we
will have a productive and a cordial year ahead of us. I think
that all Members of the Subcommittee would agree that NASA is
one of America's greatest achievements, and as we look forward
to the next two years on the Subcommittee, Congress and the
American people will be looking to NASA to help solve some of
our greatest challenges: development of Orion, the next
exploration vehicle, as the Shuttle is scheduled to retire in
2010; the ability to forecast and understand changes in climate
as our planet continues to warm; other countries competing in
space exploration for both military, also technological and
scientific purposes; and the continuing decline that we have in
numbers of STEM field graduates. The United States is not
graduating enough students inspired to pursue career areas in
these important areas of science, technology, engineering, and
mathematics.
What I like about this committee, well, I guess there is a
lot I like about this committee, but one is this quote that
stands above us. ``Where there is no vision the people will
perish.'' So I think about NASA, and I want the American people
to know as we continue to look for all of you that vision, that
you have inspired us, that you have captured our imaginations,
and you have transformed our nation.
Our jobs as Members of Congress is to give you the tools
and the resources you need to do your jobs, but we also have to
be responsible as good stewards of the American taxpayers for
the dollars that are allocated to your agency. And this is a
responsibility that the Subcommittee Members take very
seriously.
With that the legislative session, the hearing today is
going to be on cost management issues in NASA's acquisition and
programs. I want everyone to know that this subcommittee
hearing, just like all the Committee hearings, will be cast on
the web, but I believe this is a good start for us, because it
is appropriate for us to take some time to look at our
oversight activities. It is clear that good cost and schedule
management will be critical to the success of NASA's planned
robotic and human space flight activities. It is good common
sense given that NASA will always be working with a constrained
budget and competing priorities.
As has been summarized in numerous reports and studies,
NASA has suffered cost growth and schedule delays of a number
of projects and programs in recent years. The stated causes of
the cost growth and delays have varied, and the prescriptions
to fix the problems offered by individuals inside and outside
the Agency are also varied, and indeed, sometimes have been in
conflict.
I want to use this hearing to start to sort out the facts
and to explore what can and should be done to reduce the
instances of cost and scheduled growth that we see at NASA. As
was noted in the charter for today's hearing, cost and
scheduled growth has been a concern at NASA since the early
1980s, if not earlier. Moreover, from my vantage point on the
House Armed Services Committee it is clear that our military
space programs suffer from similar problems.
However, it is also clear that NASA, DOD, and the other
agencies of the Federal Government involved in space activities
have many dedicated and competent scientists and engineers
working long hours to try to deliver complex and successful
projects. That tells me that dealing with these costs and
schedule issues is hard, and that there is no simple fix or
situation. If that was the case, certainly we would have
resolved this a long time ago.
So we need to figure out why preventing cost and schedule
growth in our space project is so hard, but more importantly
what we can do about it to be on a better path for the future.
I suspect that getting on that better path will involve the
need for improved practices within NASA in the Agency's
oversight of its contractors and in its collaborations with our
international partners, as well as better efforts by us, those
of us in Congress, and the White House to reduce the vagaries
of the budgeting process that introduce additional instability
in NASA programming planning.
It may not be possible to achieve perfection, but we
certainly need to do our best to ensure that NASA is making the
best use of its funds it has been given. We owe that to the
American taxpayers as well as to those who are working so hard
to advance this nation's agenda in space and aeronautics
research.
Today's hearing should be viewed as simply a first step in
this subcommittee's oversight of NASA's acquisition and program
management. I am very pleased that we have an incredibly
knowledgeable panel of witnesses here before us today. I want
to welcome each of you, and I look forward to hearing your
testimony.
With that I now yield to Mr. Olson for any opening
statement that he would care to make.
[The prepared statement of Chairwoman Giffords follows:]
Prepared Statement of Chairwoman Gabrielle Giffords
Good morning. I'm pleased to welcome everyone to this the first
hearing of the Subcommittee on Space and Aeronautics in the 111th
Congress.
I'm very much looking forward to working with Ranking Member Olson
and my colleagues on both sides of the aisle this year to tackle the
important space and aeronautics issues facing the Nation.
We have a lot to do, but I am confident that we will have a
productive--and collegial--year ahead of us.
I think all Members of the Subcommittee will agree with me that
NASA is one of America's greatest achievements.
As we look to the next two years, Congress and the American people
will be looking to NASA to help solve some of our greatest challenges:
the development of our next exploration vehicle as the Shuttle is
scheduled to retire in 2010; the ability to forecast and understand
changes in climate as our planet continues to warm; other countries
competing in space exploration for both military, technological and
scientific purposes; the continuing decline in numbers of STEM field
graduates as are not graduating enough students inspired to pursue a
career in these important areas.
This quote that appears above us --where there is no vision the
people perish.
So as we look to the next two years, I want the American people to
continue to look to NASA for that vision, and our job as Members of
Congress is to ensure that NASA has the resources and tools you need to
carry out the vision including the many tasks that we have given you.
With that, however, goes the responsibility of ensuring that NASA
is being a good steward of the resources provided to you by our
constituents.
I take that responsibility seriously, as I know my colleagues do,
and that is why we are kicking off this legislative session with
today's hearing--a hearing that is also being webcast, as are all of
the Science and Technology Committee hearings.
The topic of today's hearing--Cost Management Issues in NASA's
Acquisitions and Programs--is an appropriate one with which to begin
the Subcommittee's oversight activities.
It is clear that good cost and schedule management will be critical
to the success of NASA's planned robotic and human space flight
activities.
That is only good common sense, given that NASA will always be
working with constrained budgets and competing priorities.
As has been summarized in numerous reports and studies, NASA has
suffered cost growth and schedule delays in a number of projects and
programs in recent years.
The stated causes of the cost growth and delays have varied, and
the prescriptions to fix the problems offered by individuals inside and
outside of the Agency have also varied--and indeed sometimes have been
in conflict.
I want to use this hearing to start to sort out the facts and to
explore what can and should be done to reduce the instances of cost and
schedule growth that we see at NASA.
As was noted in the charter for today's hearing, cost and schedule
growth has been a concern at NASA since the early 1980s, if not
earlier.
Moreover, from my vantage point on the House Armed Services
Committee, it is clear that our military space programs suffer from
similar problems.
However, it is also clear that NASA, DOD, and the other agencies of
the Federal Government involved in space activities have many dedicated
and competent scientists and engineers working long hours to try to
deliver successful projects.
That tells me that dealing with these cost and schedule issues is
hard, and that there's no simple fix or the situation would have been
resolved long ago.
We need to find out why preventing cost and schedule growth in our
space projects is so hard, and more importantly, what we can do to put
us on a better path for the future.
I suspect that getting on that better path will involve the need
for improved practices within NASA, in the Agency's oversight of its
contractors, and in its collaborations with its international
partners--as well as better efforts by Congress and the White House to
reduce the vagaries of the budgeting process that introduce additional
instability in NASA's program planning.
It may not be possible to achieve perfection, but we certainly need
to do our best to ensure that NASA is making the best use of the funds
that it is given.
We owe that to the American taxpayers, as well as to those who are
working so hard to advance the Nation's agenda in space and aeronautics
research.
Today's hearing should be viewed as simply a first step in this
subcommittee's oversight of NASA's acquisition and program management.
I am very pleased that we have a very knowledgeable panel of
witnesses here today to help us in that work.
I want to welcome each of you, and I look forward to your
testimony.
With that, I will now yield to Mr. Olson for any opening statement
that he would care to make.
Mr. Olson. Madam Chairwoman, thank you for convening this
hearing today. The subject matter we are going to discuss is
always of great concern but particularly now in the current
budget environment. I, too, want to welcome and thank our
witnesses for taking the time to brief us on the GAO report,
assessments of selected large-scale projects at NASA.
Since this is our first Subcommittee hearing of the 111th
Congress, I would like to offer my gratitude to Chair Gordon
and Ranking Member Hall for this opportunity to serve. I would
especially like to say that I am extremely pleased to be
working with our Chairwoman Gabrielle Giffords. In every
conversation we have had she has been more than gracious in the
welcoming of my thoughts and perspectives. I want to thank you
for that. And as further encouragement it turns out our
thoughts and our perspectives are often the same. Our goals are
similar, and our respect for the men and women of our nation's
space and aeronautics agencies and industries are beyond
measure.
Our nation faces enormous challenges. In their own way the
sectors we will be dealing with can help by offering ways to
meet those challenges, whether by creating jobs, performing
cutting-edge scientific research, or serving as the inspiration
to a new generation of explorers. We must work to serve--our
work must serve as a means to help those who are doing the work
to fulfill their missions in the most effective way possible.
And along those lines today's hearing on cost effectiveness
in particular is a very critical one. Right now NASA has as
much room for error in their budgeting as they do for one of
their manned space missions. That much. The Agency needs to
have a well-balanced, well-managed, and cost-efficient system
of budgeting and scheduling for their future missions.
I am glad to read that NASA, according to the GAO, has
``developed a comprehensive plan to address systematic
acquisition management weaknesses.'' I look forward to learning
how this was done, what challenges remain, and how this will
apply to future missions. But the GAO also writes that NASA
``would benefit from a more-disciplined approach to its
acquisitions.''
There are many Members of this--in this Congress, myself
and the Chairwoman chief among them, who stand ready and
willing to stand up for increased NASA funding. To be effective
in doing so we need to be able to show our colleagues and most
importantly the American people that their tax dollars are
being invested wisely.
Thank you again for being here, and I look forward to
hearing your statements into our discussion. Thank you.
[The prepared statement of Mr. Olson follows:]
Prepared Statement of Representative Pete Olson
Madame Chairwoman, thank you for convening this hearing today. The
subject matter we are going to discuss is always of great concern, but
particularly now in this current budget environment. I too want to
welcome and thank our witnesses for taking the time to brief us on the
GAO report assessing selected large-scale projects at NASA.
Since this is our first subcommittee hearing of the 111th Congress,
I'd like to offer my gratitude to Chair Gordon and Ranking Member Hall
for this opportunity to serve. I would especially like to say that I'm
extremely pleased to be working with Chairwoman Gabrielle Giffords. In
every conversation we have had, she has been more than gracious and
welcoming of my thoughts and perspectives. I thank you for that. As a
further encouragement, it turns out our thoughts and perspectives are
often the same. Our goals are similar, and our respect for the men and
women of our nation's space and aeronautics agencies and industries are
beyond measure.
Our nation faces enormous challenges. In their own way, the sectors
we will be dealing with can help by offering ways to meet those
challenges. Whether by creating jobs, performing cutting edge
scientific research, or serving as the inspiration to a new generation
of explorers, our work must serve as a means to help those who are
doing the work to fulfill their missions in the most effective way
possible.
And along those lines, today's hearing on cost effectiveness in
particular is a very critical one. Right now, NASA has as much room for
error in their budgeting as they do for one of their space missions.
The Agency needs to have a well balanced, well managed, and cost
efficient system of budgeting and scheduling for their future missions.
I am glad to read that NASA, according to GAO, has ``developed a
comprehensive plan to address systemic acquisition management
weaknesses'' and I looking forward to learning how this was done, what
challenges remain, and how this will apply to future missions. But GAO
also writes that NASA ``would benefit from a more disciplined approach
to its acquisitions.''
There are many members in this Congress, myself and the Chairwoman
chief among them, who stand ready and willing to stand up for increased
NASA funding. To be effective in doing so, we need to be able to show
our colleagues, and most importantly the American people, that their
tax dollars are being invested wisely.
Thank you again for being here and I look forward to hearing your
statements and to our discussion.
Chairwoman Giffords. Thank you, Mr. Olson. If there are
Members who wish to submit additional opening statements, your
statements will be added to the record at this point.
At this time I would like to introduce our witnesses. First
up we have Mr. Christopher Scolese, who is currently the Acting
Administrator at NASA. I would note that we will be having
hearings on NASA's fiscal year 2010, budget request in the near
future, and Members will have plenty of opportunities to ask
questions of the Agency on the budget request at those
hearings. So I would like to ask Members to confine their
questions to Acting Administrator Scolese today to the topic of
this hearing.
We also have with us Ms. Cristina Chaplain, who is the
Director of Acquisition and Sourcing Management at the
Government Accountability Office, and we have Mr. Gary Pulliam,
who is Vice President for Civil and Commercial Operations at
the Aerospace Corporation. Welcome.
As our witnesses should know, you will each have five
minutes for your spoken testimony. Your written testimony will
be included in the record for the hearing. When you have all
completed your spoken testimony, we will begin with questions.
Each Member, myself included, will have five questions for the
panelists, and I would like to start with Mr. Scolese.
STATEMENT OF MR. CHRISTOPHER SCOLESE, ACTING ADMINISTRATOR,
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA)
Mr. Scolese. Thank you, Ms. Chairwoman, and Members of the
Subcommittee. Thank you for the opportunity to appear today to
discuss NASA's efforts to improve the cost and schedule of the
Agency's projects.
NASA missions have allowed us to rove the surface of Mars,
other planets, to send people to live and work in space, to
improve our understanding of the universe, and to better
understand our Earth. So we recognize the importance of
delivering missions on cost and on schedule and developing
clear and stable baselines for planning.
We continually strive to improve our tools so that we can
develop better estimates and implement corrective actions, and
we are pleased that the Government Accountability Office
recognizes these efforts. Today I will outline the progress
NASA has made to date.
NASA is fortunate to be entrusted with conducting
revolutionary missions in Earth and space science, aeronautics,
and human space flight. These missions are often one of a kind
and require new capabilities and new technologies to meet
mission goals. These new developments, while exciting and
offering benefits to society, seldom have clear analogs to past
missions, thus presenting challenges for the development of
cost and schedule estimates. As a result, there is no perfect
formula for estimating cost, so we must rely on a combination
of experience, cost models based on past missions, and actual
costs when available.
We recognize two types of growth to understand our
projects. First is internal growth, resulting from actions by
the project. Examples are optimism in estimates of cost,
optimisms in estimates of schedule or technology readiness,
under-estimation of mission complexity, or the over-estimation
of the utility of heritage components, components that have
flown before. Growth may also be caused by poor management. We
don't see this very often, but we do see it.
The other type of growth result from external factors that
are beyond the control of the project, and I mean, the project.
Sometimes they are beyond the control of NASA, sometimes they
are beyond the control of the government, but strictly speaking
we are talking about the project. These include partner
performance, industrial base issues, launch manifest issues, or
changes in planned budget or budget profile.
However, not all external factors affecting a project are
due to poor performance. A project can be impacted by the
success of other missions, missions that last well beyond
expectation in terms of discovery and lifetime.
We are planning to conduct further study to improve our
understanding of these factors and to allow us to better
estimate project life cycle costs. The existing analysis
indicates that early in the project development estimates can
be driven by the optimism I mentioned earlier. Typically, NASA
uses these early estimates for planning purposes to identify
the rough cost and schedule range for the proposed mission. It
is important to note that we do not consider these early
estimates as cost commitments.
As a project advances, we develop a better understanding of
the challenges, risks, technologies, and therefore, costs and
schedule. We believe that we have the best estimate at a time
when decisive action can still be taken at the completion of a
properly-funded preliminary design. Thus, it is at this point
that NASA makes our cost and schedule commitment for the
project to the Congress.
I am pleased to say that we have put improvements in place
in our processes and tools to improve our cost and schedule
performance. This was recognized by the GAO in the high-risk
series. Improvements include standardization of project life
cycle milestones and reports to ensure that all projects are
measured consistently and are reporting to our stakeholders is
likewise more consistent.
Use of historical cost analysis, where possible, to
identify areas that need to be addressed with corrective
actions. Implementation of joint cost and schedule
probabilistic estimation tools to better provide estimates for
both early phase planning and later to support our commitment
when we make it.
Implementation of a rigorous monthly review process to
provide ongoing senior management review of program project and
institutional performance so we can correct problems before
they become serious. Use of independent review boards to
evaluate project performance at key decision points. Formal
commitment of cost and schedule following the preliminary
design review, and better use of tools such as earned value
management.
Also, annual assessments of proposed new missions versus
the approved activities that are already in place to determine
industrial base, partner, and NASA ability to accomplish those
objectives.
We recognize that cost and schedule estimation of a one-of-
a-kind mission is difficult. Therefore, multiple techniques are
required to improve estimates and performance. Let me assure
you and the American public that we are committed to this
improvement and to working with the GAO and Congress to provide
consistent metrics on our performance. There are many
improvements already in place. Others are underway. From these
we have developed and will continue to develop improved NASA
processes yielding results now and in the years to come.
Thank you for the time to speak today, and I am ready for
questions.
[The prepared statement of Mr. Scolese follows:]
Prepared Statement of Christopher J. Scolese
Ms. Chairwoman and Members of the Subcommittee, thank you for the
opportunity to appear today to discuss NASA's progress in managing the
cost and schedule of the Agency's projects. NASA missions have allowed
us to rove the surface of other planets, to send people to live and
work in space, to improve our understanding of the Universe, and to
better understand our Earth. NASA recognizes the importance of
delivering missions on cost and on schedule, and developing clear and
stable baselines for planning. We strive to continually improve our
tools to identify issues so we can implement corrective action. Today,
my testimony will outline NASA's progress to date and the actions the
Agency is taking to continue to improve its performance. We are pleased
that the Government Accountability Office (GAO) recognizes our efforts
to mitigate acquisition management risk and lay a foundation to improve
project cost and schedule performance.
Federal Research and Development Environment
As one of the Federal Government's research and development (R&D)
organizations, NASA functions in an environment where we must accept
and manage considerable risk and uncertainty. NASA develops scientific
instruments, spacecraft, and new launch systems that redefine state-of-
the-art. The Agency strives to standardize and reuse systems and
capabilities where feasible. However, where we endeavor to achieve the
next goal, develop the next technology, and make the next discovery, we
venture beyond the realm of past experience and into an environment of
uncertainty and higher risk. This is just one of the facts of life in
an aggressive and exciting R&D environment.
Let me take a moment to share some examples with you, partially
because they are illuminating, and partially because they show why
people really love working at NASA.
The International Space Station (ISS), permanently crewed since
November 2000, is being built by over a dozen nations. The ISS already
has the American Destiny and European Columbus science laboratories on
board and, with the flight of STS-127 later this year, the Japanese
Kibo laboratory will be complete. Upon its completion next year, the
ISS will have a mass of over 900,000 pounds and be a world-class
research center for conducting experiments in life and materials
sciences; it will also serve as a training ground for long-duration
human space missions. The ISS has repeatedly demonstrated the ability
of nations to work together on complex projects: with Station
components being designed and built in different countries, many were
actually assembled for the first time in orbit. Now, international
crews are operating, repairing, and utilizing the ISS for the benefit
of the world. This kind of cooperation is essential if we are to
continue to expand our reach beyond our planet. Research results have
already improved medical science here on Earth: as you probably know,
experiments conducted aboard the Space Shuttle and the ISS have been
useful in demonstrating techniques for the development of salmonella
vaccines. The ISS Program represents unprecedented international
cooperation on a peacetime task of immense technical complexity.
In the past five years, NASA has landed three vehicles on the
surface of Mars--each without human intervention. The planning and on-
board capabilities to avoid obstacles make these landings some of the
most difficult accomplishments imaginable. Think of shooting a
basketball from Washington, DC, and making a perfect shot through a
basketball hoop located at in Los Angeles without hitting the rim,
while the rim is moving. The discoveries made by these rovers and their
companion orbiters have changed our view of Mars. We now know that, at
one time, Mars was indeed a wet planet, and our vehicles have found ice
on its surface. More mysteries remain to be unlocked. The Mars Science
Laboratory (MSL) is the next in the series of missions to Mars. MSL is
significantly more complex than its predecessors, as it builds upon the
lessons and discoveries they made to address the next level of
scientific questions. As a result, the MSL vehicle is much larger--
about the size of a Mini-Cooper--than the Mars Rovers Spirit and
Opportunity--roughly the size of a coffee table--so it requires a new
type of landing system.
The Nation and the world benefit from NASA's breakthrough research
in Earth science and technology on a daily basis. This legacy began in
April 1960 when NASA launched the world's first environmental
satellite. The focus then was to improve weather forecasts. Our focus
now is much more challenging. NASA conducts a comprehensive research
program to advance fundamental knowledge on the most important
scientific questions on the global and regional integrated Earth
system. NASA presently operates 15 on-orbit Earth science missions,
making measurements ranging from precision sea level through
atmospheric chemistry and composition, and winds through ocean color
and land vegetation, as well as ice cover and surface temperature.
NASA's robust research and analysis develops outstanding scientific
advances that improve climate projections and provide societal
applications. NASA has six missions in formulation and development, and
is pleased to have a first-ever National Research Council Decadal
Survey for Earth science and applications that establishes NASA's
priorities for satellite missions to study changes in the Earth's
climate and environment. Achieving simultaneity of NASA's outstanding
measurements is a major challenge for progress in understanding the
changing climate, its interaction with life, and how human activities
affect the environment.
As you can imagine, the NASA and Earth science communities are
saddened at the loss of a key Earth science asset when the NASA
Orbiting Carbon Observatory satellite failed to reach orbit last week
following launch. NASA immediately convened a Mishap Investigation
Board to determine the cause of the launch failure. In addition, we are
assessing options for its replacement. Although rare, these kinds of
events demonstrate the need for flexibility in NASA's ongoing
portfolio.
The scientific and technical results across NASA's portfolio are
substantial, and often extraordinary. However, as we push the
performance envelope on several fronts, NASA's specific cost and
schedule performance has, indeed, been less than desired in the past.
It is NASA's responsibility to maximize the value of the American
taxpayer's dollars. We already have some tools in place, but we also
have plans to incorporate additional tools and make better use of
existing tools and processes to improve our delivery of missions on
cost and on schedule.
Potential Causes of Cost Growth and Schedule Delay
NASA puts great effort into managing the environment of uncertainty
that naturally surrounds a project. Some uncertainties are within the
realm of the project's control. Proposers can be overly optimistic in
their efforts to provide the most attractive package in a competition.
The cost savings assumed based on the use of ``heritage technology''
for spacecraft or instruments can be over estimated. New technology
development can ultimately be much more challenging than anticipated.
Sometimes inadequate time is planned for early engineering efforts and
refinement of requirements. These are all areas within project
accountability and the majority of this statement outlines the steps
NASA has taken to address these issues.
I would like to digress for a moment to add a bit of ``ground
truth'' on cost or schedule variances. NASA focuses a great deal of
effort on measuring variations from plans and responding to trend
patterns reported in monthly Baseline Performance Reviews, and in
program and project reviews. NASA's renewed emphasis on the use of
various tools such as Earned Value Management also help provide
indications of problems early enough to take corrective action.
Reports of apparent cost growth can be misleading. If one measures
project cost or schedule from the very earliest conceptual phase, as
compared to measuring cost after the preliminary design is complete,
the project typically appears to have incurred significant growth. NASA
commits to project cost and schedule estimates at the completion of the
preliminary design phase when technology readiness is better
understood, preliminary designs are complete, and partner arrangements
and industrial base considerations are better understood. This
information provides a much better basis for estimating cost and
schedule. While useful and necessary for the initial planning phase of
a mission, early estimates are, at best, educated guesses made with
preliminary conceptual information. As an example, although there
remains plenty of room for improvement in the case of MSL, one of these
early conceptual estimates quoted in the press for MSL was not even an
estimate produced by NASA.
Other events can occur that are not within the control of the
project, but are typically under the control, and within the
accountability, of the overall program or the Agency. Owing to other
stresses in the host program, funding flexibility to address problems
may be inadequate, there may be inadequate validation of cost and
schedule assumptions, or performance on one project may negatively
affect others. This last point needs clarification. Not all projects
that adversely impact other projects are poor performers. Sometimes
they are stellar performers. For example, because on-orbit lifetime of
a mission is difficult to predict from afar, projects already in
operation that extend well beyond the original planned operational life
may require more funding, resulting in the need to obtain resources
from other sources, often projects in development. As an example, the
Spirit and Opportunity Rovers on Mars were planned for approximately
three months of operation, but are now past five years of operations
and are still returning valuable data. NASA also tries to estimate
these costs and control impacts by having a group of independent
experts periodically review these extraordinary missions to assess
their value and the likelihood that they will operate until the end of
the projected budget horizon. However, who could have guessed that the
Terra Earth Science mission--approaching its 10th anniversary--would
operate over twice its design life, or that the Voyagers--at over 30
years in space--would still be operational outside of our solar system?
Of course, some events occur that are not under the control of the
project or the Agency, although we take measures to mitigate the
attendant risk. In the case of the Solar Dynamics Observatory, national
launch manifest priorities--not project performance--resulted in delays
of about a year, with the attendant cost growth. In the case of the
Glory project--a first-of-a-kind Earth science mission--the mission
experienced unexpected problems due to a loss of contractor expertise,
which is illustrative of challenges in the aerospace industrial base.
Simply put, the number of capable suppliers has substantially
contracted and the demand is such that the skills of the remaining
suppliers are difficult to maintain. Contributions from our
international partners can be late. Launch vehicle delays or price
increases have also had significant impacts. External changes in budget
profiles, including the unavoidable impacts of Continuing Resolutions,
can also occur. Out of the ten NASA projects in the GAO QuickLook
Report that exceeded the Congressionally-mandated cost and schedule
thresholds, approximately half did so as a result of external factors;
some with limited solution options open to NASA.
In an effort to better understand the extent to which our
performance has been impacted by events that are beyond the control of
the project and program, we have initiated a study of NASA and
Department of Defense projects with the objective of being able to
quantitatively separate internal and external growth. This will enable
the Agency to better compare the results of a project's detailed cost
estimate with the results of analytical cost estimates based upon
historical performance. NASA currently anticipates completing this
study by the end of calendar year 2009. We will keep the Congress
informed of our progress in evaluating these factors.
Historical Cost and Schedule Studies
Over time, various NASA organizations have studied cost and
schedule growth after the fact. Most of the studies were focused on a
specific question, or measured cost or schedule from different points
in a project's life cycle. Additionally, the individual research tasks
utilized different data, methods, and approaches, and thus are not
directly comparable.
To provide a proactive means to control costs, NASA has implemented
monthly reviews--using common data set requirements and consistent data
and analyses that are centrally coordinated--to produce results that
are comparable from project to project and from year to year. It is
this data that is now reported both internally to NASA and to the
Administration and externally to the Congress. The January 2009 update
to the GAO High-Risk Series notes a number of these changes that have
improved NASA's standard reporting.
Additionally, NASA is using the research on historical cost and
schedule performance to identify areas that need to be addressed with
corrections to tools or processes. A number of changes have been
initiated that address common issues such as optimism in cost estimates
and schedules, inadequate identification of risks, and unrealistic
assumptions on technology maturity, along with external issues such as
instability in funding, launch vehicle issues, and the performance of
partners.
Steps Already Taken
The Agency has undertaken a number of actions to address cost and
schedule growth through modifications to NASA's project lifecycle.
These actions are also noted in the NASA High-Risk Corrective Action
Plan, which the Agency developed in recognition of the complexity and
cross-functional nature of the issues identified in the GAO High-Risk
Series. While NASA continues to address the issues outlined in the GAO
High-Risk series, we were pleased that the January 2009 update to the
series highlighted the efforts we have made to improve NASA acquisition
management.
Some actions that NASA has taken relate to the definition of a
project life cycle that is now used by all space flight projects.
Examples include:
The project life cycle has six phases that each space
flight project now must address. This is a change from the
past, where different types of projects followed different
paths, so that comparisons were more difficult to make, and
most importantly, progress across NASA was difficult to assess.
To ensure that we have an unbiased assessment of
project performance and plans, NASA has implemented the use of
Standing Review Boards to evaluate the project at each key
decision point in the project's life cycle. The Standing Review
Boards are composed of discipline experts who are independent
of the project being reviewed. The Boards provide the Agency
with independent advice on project design implementation,
manufacturing plans, cost and schedule planning, risks, and
margins. This change helps address past performance issues
related to optimism, inadequate evaluation of technology
maturity, heritage assumptions, etc.
NASA commits to the project content, cost, and
schedule baseline only after successful completion of the Key
Decision Point C (KDP-C). At that point in the life cycle,
following the completion of the Preliminary Design Review,
project management has a more thorough understanding of the
technological maturity, complexity, and risk associated with
the project. As a number of risks have been retired by that
point, and the implications of the project requirements are
better understood, the baseline established at KDP-C provides a
more meaningful basis for measuring cost and schedule
performance. Several NASA research efforts confirm that the
Agency's cost and schedule performance is better when measured
from the KDP-C gate than when measured from the earlier
milestones.
Recent Actions
In January 2009, NASA adopted a new acquisition strategy policy,
which improves its ability to manage performance risk (including the
adoption of probabilistic cost and schedule estimating methods). Among
its features, the new policy requires space flight and information
technology projects and programs to develop joint cost and schedule
probabilistic estimates. Probabilistic estimating provides NASA with an
approach that fully integrates technical, cost, and schedule plans and
risks to develop both an understanding of the sensitivity of parameters
to each other and the most likely estimate. Using this approach allows
NASA to understand and document how the mitigation of technical risks
would enable an increase in the project confidence level. Conversely,
the introduction of a budget reduction would have the effect of
increasing technical and schedule risks and thus lower the confidence
level for the project. The use of probabilistic estimates also
generates baseline values that include funding to address impacts
associated with contingencies and uncertainties, such as industrial
base, partner performance and technology optimism.
The introduction of probabilistic joint cost and schedule
estimating puts NASA on the leading edge of applying these techniques
in both the federal and space sectors. Because this estimating approach
requires the employment of new tools and techniques, full
implementation will take some time to deploy; we are currently
estimating at least two years to develop the tools, training, and
understanding across the Agency. Given the deployment and the typical
project development cycle of three to five years, it is unlikely that
NASA will be able to evaluate the impact of these changes for a few
more years. The recent GAO QuickLook Report underlines the fact that it
takes time to realize the results from policy and process changes.
Further, as we implement this joint confidence level policy, we are
looking back at existing projects in development to ascertain risks and
make adjustments where prudent to improve our cost and schedule
posture.
As noted earlier in this testimony, there have been issues with the
consistency of historical data used for various cost research studies.
In another recent action, NASA has taken steps to improve and bring
consistency to the cost and schedule data collection that is now
included in the Cost Analysis Data Requirement documents. This effort
is also part of the NASA High Risk Corrective Action Plan. These
documents serve to collect data in a standard format to allow us to
assess performance on current projects and to provide a reference for
future activities. At this time, NASA has completed detailed
documentation on 38 historical projects and has captured data from 90
KDPs on current projects.
NASA is committed to using our tools and processes to identify
issues and take corrective actions to address those issues. The steps
that we have taken to standardize our project life cycle, to utilize
Standing Review Boards to provide focused assessments at Key Decision
Points, the renewed emphasis on tools such as Earned Value Management,
the institution of strengthened acquisition planning and monthly
reviews, and the use of joint cost and schedule confidence levels in
our decision-making, have all moved NASA along a path towards improving
our delivery of projects on time and within budget.
Conclusion
In closing, cost and schedule estimation and performance are
extremely important, and the Agency has taken a number of steps in
recent years that have been acknowledged in the January 2009 update to
the GAO High-Risk Series. We understand and support transparency and
accountability in NASA project cost and schedule assessment.
NASA is dedicated to the continuous improvement of its acquisition
management processes and performance. There are many improvement
efforts already in place, and others are underway. From these, we have
developed--and will continue to develop--significantly improved NASA
processes yielding results now and in the years to come.
I would be happy to respond to any questions you or the other
Members of the Subcommittee may have.
Biography for Christopher J. Scolese
Since January 20, 2009, Mr. Christopher J. Scolese has been serving
as the Acting Administrator of the National Aeronautics and Space
Administration (NASA). As the Acting Administrator, Mr. Scolese is
responsible for leading the development, design, and implementation of
the Nation's civil space program. As such, Mr. Scolese provides overall
leadership for NASA's multiple field installations, works closely with
the Executive and Legislative branches to ensure that NASA is
supporting appropriate national policy, and leads an international
collaboration in carrying out high-profile space missions including the
Space Shuttle, the International Space Station, the Hubble Space
Telescope, and a multitude of other scientific and technological
efforts.
In addition, Mr. Scolese is still serving in the position of
Associate Administrator, NASA's highest-ranking civil servant. As
Associate Administrator, Mr. Scolese is responsible for the oversight
and integration of NASA's programmatic and technical efforts to ensure
the successful accomplishment of the Agency's overall mission.
Previously, Mr. Scolese served as NASA's Chief Engineer. As Chief
Engineer, Mr. Scolese was responsible for ensuring that development
efforts and mission operations within the Agency were planned and
conducted on a sound engineering basis, as well as for the long-term
health of the NASA engineering workforce.
Formerly, Mr. Scolese was the Deputy Director of the Goddard Space
Flight Center where he assisted the Director in overseeing all
activities. He also served as the Deputy Associate Administrator in the
Office of Space Science at NASA Headquarters. In this position, he was
responsible for the management, direction and oversight of NASA's Space
Science Flight Program, mission studies, technology development and
overall contract management of the Jet Propulsion Laboratory.
Mr. Scolese also served as the Earth Orbiting Satellite (EOS)
Program Manager and the Deputy Director of Flight Programs and Projects
for Earth Science at Goddard. In these positions, he was responsible
for the operation and development of all Earth Science missions
assigned to Goddard. While there, he also served as the EOS Terra
Project Manager. In addition, Mr. Scolese was the EOS Systems Manager
responsible for the EOS system architecture and the integration of all
facets of the project. During his tenure at Goddard, he chaired the EOS
Blue Team that re-scoped the EOS Program; he supported the EOS
investigators in the development of the EOS payloads in the
restructured EOS; and he has been responsible for the adoption of
common data system architecture on EOS and some other Earth orbiting
spacecraft.
Prior to his 1987 appointment at Goddard, Mr. Scolese's experience
included work in industry and government. While a senior analyst at the
General Research Corporation of McLean, Va., he participated in several
SDIO programs. He was selected by Admiral Hyman Rickover to serve at
Naval Reactors where he was associated with the development of
instrumentation, instrument systems and multi-processor systems for the
U.S. Navy and the DOE while working for NAVSEA.
Mr. Scolese is the recipient of several honors including the
Presidential Rank Award of Meritorious Executive, Goddard Outstanding
Leadership, two NASA Outstanding Leadership Medals and the American
Institute of Aeronautics and Astronautics (AIAA) National Capital
Section Young Engineer/Scientist of the Year award. He was recognized
as one of the outstanding young men in America in 1986, was a member of
college honor societies including Eta Kappa Nu and Tau Beta Pi, and was
recipient of the 1973 Calspan Aeronautics award. He is a Fellow of the
AIAA and a member of the Institute of Electrical and Electronics
Engineers. He also served as a member of the AIAA Astrodynamics
Technical Committee and chaired the National Capitol Section Guidance
Navigation and Control Technical Committee.
Chairwoman Giffords. Thank you, Mr. Scolese.
Ms. Chaplain, please.
STATEMENT OF MS. CRISTINA T. CHAPLAIN, DIRECTOR, ACQUISITION
AND SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE (GAO)
Ms. Chaplain. Madam Chairwoman and Members of the
Subcommittee, thank you for inviting me to discuss our work on
NASA's major acquisitions. In addition to my formal written
statement, I would like to point out that GAO has just issued
its first annual comprehensive assessment of major NASA
programs, which is available on the GAO.gov website.
To put this work into context I would like to start with
our designation of NASA's contract management as a high-risk
area in 1990. We put NASA on GAO's high-risk list because our
work was continually finding there was little emphasis on end
results, performance, and cost control. At the time NASA found
itself procuring expensive hardware that did not always work
properly.
Numerous reviews following that report identified some more
issues. Fourteen years later in a review of NASA's cost
estimating practices, we concluded that acquisition problems
still existed and found significant cost growth across a
portfolio of 27 programs. In that review we found NASA lacked
basic cost-estimating processes needed to establish priorities,
quantify risks, and make informed investment decisions.
We also found that programs were being moved forward into
the development phases without a clear understanding of whether
their requirements could be achieved within available funding,
technologies, expertise, and other resources.
Five years later in this most recent review we are finding
that improvements have been made, but problems still exist. To
NASA's credit much has been done to address the causal factors
identified in our previous work, particularly in the areas of
cost estimating, cost reporting, program management, and
oversight.
In addition, Congress has also done its part by instilling
requirements that make cost growth more transparent and limit
the circumstances in which programs can be re-baselined and by
asking GAO to conduct an independent, annual assessment of
major projects, many of which do not receive much external
oversight.
Because baselines were set just two or three years ago, the
true magnitude of cost growth in the programs in our assessment
is understated. Nevertheless, it is clear that programs still
anticipate growth and cost and schedule. In just two or three
years 10 of 13 projects we assessed in implementation
experienced an average of 13 percent cost growth, and they had
an average launch delay of 11 months.
Many of the projects we reviewed indicated they have
experienced challenges in developing new technologies or
retrofitting older technologies, as well as in managing their
contractors and more generally understanding the risks and
challenges they were up against when they set their baselines.
In conducting this work, we assessed the level of knowledge
programs have about technologies, design, and their contractors
at certain points in the development process, while at the same
time tracking other causal factors that we have identified in
previous reviews such as funding instability, requirements
growth, program and contract management weaknesses.
This methodology is designed to provide more insight into
why programs encounter problems, as well as what actions are
needed to address problems. While it is beneficial to have a
wealth of policies and procedures aimed at ensuring successful
execution, it is still necessary for us and the Congress to see
what is happening on the ground and what types of unknowns
exist in programs despite what policies encourage.
This assessment is not meant to create a debate over the
uniqueness of NASA's projects or what specific criteria should
be applied to assess what types of unknowns and problems exist
in programs and implementation, but rather to serve as a useful
oversight and management tool. We remain open to working with
NASA to determine the best way forward for measurement. Though
the criteria we have used has been time-tested, it is based on
sound program management practices, and it has been well-
received in communities involving all types of complex and
technical development efforts, including the defense space
community.
In conclusion, what is fundamentally important today is
that NASA is being asked to undertake new missions in space
science and aeronautics. As such, it is vital that NASA and
Congress clearly understand the costs and uncertainties of
programs proposed for authorization and during their execution.
It is equally important that problems be transparent, well
understood, and tracked. We believe our report sets the course
for doing so.
Thank you, and I am happy to answer any questions.
[The prepared statement of Ms. Chaplain follows:]
Prepared Statement of Cristina T. Chaplain
Madam Chairwoman and Members of the Subcommittee:
Thank you for inviting me to discuss the National Aeronautics and
Space Administration's (NASA) oversight and management of its major
projects. As you know, in 1990, GAO designated NASA's contract
management as high-risk in view of persistent cost growth and schedule
slippage in the majority of its major projects. Since that time, GAO's
high-risk work has focused on identifying a number of causal factors,
including antiquated financial management systems, poor cost
estimating, and undefinitized contracts. Because cost growth and
schedule delays persist, this area--now titled acquisition management
because of the scope of issues that need to be resolved--remains high-
risk.
To its credit, NASA has recently made a concerted effort to improve
its acquisition management. In 2007, NASA developed a comprehensive
plan to address systemic weaknesses related to how it manages its
acquisitions. The plan specifically seeks to strengthen program/project
management, increase accuracy in cost estimating, facilitate monitoring
of contractor cost performance, improve agency-wide business processes,
and improve financial management.
While we applaud these efforts our recent work has shown that NASA
needs to pay more attention to effective project management. It needs
to adopt best practices are adopted that focus on closing gaps in
knowledge about requirements, technologies, funding, time and other
resources before it makes commitments to large-scale programs. For
instance, the Mars Science Laboratory, which was already over budget,
recently announced a two-year launch delay. Current estimates suggest
that the price of this delay may be $400 million--which drives the
current project life cycle cost estimate to $2.3 billion; up from its
initial confirmation estimate of $1.6 billion. Also, in just one year,
the development costs of NASA's Glory mission increased by 54 percent,
or almost $100 million, because of problems NASA's contractor is having
developing a key sensor. Total project costs for another project,
Kepler, have increased almost another $100 million within two fiscal
years because of similar issues. Taken together, these and other
unanticipated cost increases hamper NASA's ability to fund new
projects, continue existing ones, and pave the way to a post-Shuttle
space exploration environment.
Given the constrained fiscal environment and pressure on
discretionary spending it is critical that NASA get the most out of its
investment dollars for its space systems. The Agency is increasingly
being asked to expand its portfolio to support important scientific
missions including the study of climate change. Therefore, it is
exceedingly important that these resources be managed as effectively
and efficiently as possible for success. The recent launch failure of
the Orbiting Carbon Observatory is an all-too-grim reminder of how much
time, hard work, and resources can be for naught when a space project
cannot execute its mission.
In response to congressional direction, we have prepared a
comprehensive report on the management and oversight of NASA's major
projects. It contains summaries of 18 projects with a combined life
cycle cost exceeding $50 billion. It also contains an assessment of
issues affecting projects across-the-board. A copy of this report is
now available on GAO's website (www.gao.gov).\1\ In conducting this
work, we compared projects against best practice criteria for system
development including attainment of knowledge on technologies and
design, as well as various aspects of program management. We expect to
continue this assessment on an annual basis and to continually refine
our examination so that our work can inform your oversight and NASA's
own efforts to improve in the high-risk area of acquisition management.
---------------------------------------------------------------------------
\1\ GAO, NASA: Assessments of Selected Large-Scale Projects. GAO-
09-306SP (Washington, D.C.: Mar. 2, 2009).
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In responding to our report, NASA asserted that the unique nature
of its work and external factors beyond its control make it difficult
to apply the same criteria that we apply to other major government
acquisitions, particularly those with large production runs. We
disagree. The criteria we used to assess NASA's projects represent
commonly accepted, fundamental tenets of disciplined project
management, regardless of complexity or quantity. In fact, the concept
of the knowledge-based approach we use has been adopted in NASA's own
acquisition policy. Key criteria that we use have been developed by
NASA and/or incorporated into its engineering policy. Moreover, facing
long-standing cost and schedule growth and performance shortfalls, the
Department of Defense (DOD) acknowledges the need for a knowledge based
approach in the Air Force's ``back to basics'' policy for space
systems. Lastly, we remain open to discussions with NASA as to whether
additional criteria can and should be applied to its systems to ensure
that decisions to move forward in development are well-informed and
ultimately, that taxpayer dollars are well spent.
Today I will be highlighting the results of this work, the actions
NASA is taking to address the concerns raised in our high-risk report
and better position its projects to meet their goals, and what we
believe is necessary to make these actions successful. Because we also
have responsibility for examining military space systems, we will also
highlight common challenges with space acquisitions within NASA and the
Department of Defense (DOD). This testimony is based on previously
issued GAO work, which was conducted in accordance with generally
accepted government auditing standards.
Acquisition Management Problems Persist
We assessed 18 projects in NASA's current portfolio. Four were in
the ``formulation'' phase, a time when system concepts and technologies
are still being explored, and 14 were in the ``implementation''
phase,\2\ where system design is completed, scientific instruments are
integrated, and a spacecraft is fabricated. When implementation begins,
it is expected that project officials know enough about a project's
requirements and what resources are necessary to meet those
requirements that they can reliably predict the cost and schedule
necessary to achieve its goals. Reaching this point requires
investment. In some cases, projects that we reviewed spent two to five
years and up to $100 million or more before being able to formally set
cost and schedule estimates.
---------------------------------------------------------------------------
\2\ We only received data for 13 of the 14 projects in
implementation. NASA did not provide cost or schedule data for the
James Webb Space Telescope, which is in implementation.
---------------------------------------------------------------------------
Ten of the projects in our assessment for which we received data
and that had entered the implementation phase experienced significant
cost and/or schedule growth from their project baselines.\3\ Based on
our analysis, development costs for projects in our review increased by
an average of almost 13 percent from their baseline cost estimates--all
in just two or three years--including one that went up more than 50
percent. It should be noted that a number of these projects had
experienced considerably more cost growth before a baseline was
established in response to statutory reporting requirement. Our
analysis also shows that projects in our review had an average delay of
11 months to their launch dates.
---------------------------------------------------------------------------
\3\ For purposes of our analysis, significant cost and schedule
growth occurs when a project's cost and/or its schedule growth exceeds
the thresholds established for Congressional reporting per the National
Aeronautics and Space Administration Authorization Act of 2005, Pub. L.
No. 109-161, 103; 42 U.S.C. 16613 (b), (f) (4).
---------------------------------------------------------------------------
We found challenges in five areas that occurred throughout the
various projects we reviewed that can contribute to project cost and
schedule growth. These are not necessarily unique to NASA projects and
many have been identified in many other weapon and space systems that
we have reviewed and have been prevalent in the Agency for decades.
Technology maturity. Four of the 13 projects in our
assessment for which we received data and that had entered the
implementation phase did so without first maturing all critical
technologies, that is they did not know that technologies
central to the project's success could work as intended before
beginning the process of fabricating the spacecraft. This means
that knowledge needed to make these technologies work remained
unknown well into development. Consequences accrue to projects
that are still working to mature technologies well into system
development, when they should be focusing on maturing system
design and preparing for production. Simply put, projects that
start with mature technologies experience less cost growth than
those that start with immature technologies.
Design stability. The majority of the projects in our
assessment that held a critical design review did so without
first achieving a stable design. If design stability is not
achieved, but a product development continues, costly re-
designs to address changes to project requirements and
unforeseen challenges can occur. All of the projects in our
assessment that had reached their critical design review and
that provided data on engineering drawings experienced some
growth in the total number of design drawings after their
critical design review. Growth ranged from eight percent to, in
the case of two projects, well over 100 percent. Some of this
increase can be attributed to change in system design after
critical design review.
Complexity of heritage technology. More than half the
projects in the implementation phase--eight of them--
encountered challenges in integrating or modifying heritage
technologies. Additionally, two projects in formulation--Ares I
and Orion--also encountered this problem. We found that the
projects that relied on heritage technologies underestimated
the effort required to modify them to the necessary form, fit,
or function.
Contractor performance. Six of the seven projects
that cited contractor performance as a challenge also
experienced significant cost and/or schedule growth. Through
our discussions with the project offices, we were informed that
contractors encountered technical and design problems with
hardware that disrupted development progress.
Development partner performance. Five of the thirteen
projects we reviewed encountered challenges with a development
partner. In these cases, the development partner could not meet
its commitments to the project within planned timeframes. This
may have been a result of problems within the specific
development partner organization or as a result of problems
faced by a contractor to that development partner.
Common Acquisition Management Challenges Persist between NASA and DOD
The challenges we identified in the NASA assessment are similar to
ones we have identified in other weapon systems, including Defense
space systems. For example, we testified last year that DOD space
system cost growth was attributable to programs starting before they
have assurance that capabilities being pursued can be achieved within
available resources and time constraints. For example, DOD's National
Polar Orbiting Environmental Satellite System (NPOESS) has doubled in
cost from $6 billion to $12 billion due to challenges with maturing key
technologies. We have also tied acquisition problems in space systems
to inadequate contracting strategies and contract and program
management weaknesses. Further, we issued a report in 2006 that found
DOD space system cost estimates were consistently optimistic. For
example, DOD's Space-Based Infrared High System was originally expected
to cost about $4 billion and is now expected to cost nearly $12
billion.
We have found these problems are largely rooted in the failure to
match the customer's needs with the developer's resources--technical
knowledge, timing, and funding--when starting product development. In
other words, commitments were made to achieving certain capabilities
without knowing whether technologies and/or designs being pursued could
really work as intended. Time and costs were consistently
underestimated. As we have discussed in previous work on space systems
at both DOD and NASA, a knowledge-based approach to acquisitions,
regardless of the uniqueness or complexity of the system is beneficial
because it allows program managers the opportunity to gain enough
knowledge to identify potential challenges earlier in development and
make more realistic assumptions about what they can achieve.
NASA Is Making a Concerted Effort to Reduce High Risk in Acquisition
Management But More Needs to Be Done
NASA has also taken significant steps to improve in the high-risk
area of acquisition management. For example, NASA revised its
acquisition and engineering polices to incorporate elements of a
knowledge-based approach that should allow the Agency to make informed
decisions. The Agency is also instituting a new approach whereby senior
leadership is reviewing acquisition strategies earlier in the process
and has developed broad procurement tenets to guide the Agency's
procurement practices. Further, NASA is working to improve management
oversight of project cost, schedule, and technical performance with the
establishment of a baseline performance review with senior management.
In order to improve it's contracting and procurement process, NASA has
instituted an agency wide standard contract-writing application
intended to ensure all contracts include the most up-to-date NASA
contract clauses and to improve the efficiency of the contracting
process. NASA is also requiring project managers to quantify the
program risks they identify and collect more consistent data on project
cost and technologies. It is taking other actions to enhance cost
estimating methodologies and to ensure that independent estimates are
used.
These changes brought the policy more in line with best practices
for product development. However, the Agency still lacks defined
requirements across centers and mission directorates for consistent
metrics that demonstrate knowledge attainment through the development
cycle. In order for a disciplined approach to take hold, we would
expect project officials across the Agency to be held accountable for
following the same required policies.
More steps also need to be taken to manage risk factors that NASA
believes are outside of its control. NASA asserts that contractor
deficiencies, launch manifest issues, partner performance, and funding
instability are to blame for the significant cost and schedule growth
on many of its projects that we reviewed. Such unforeseen events,
however, should be addressed in project-level, budgeting and resource
planning through the development of adequate levels of contingency
funds. NASA cannot be expected to predict unforeseen challenges, but
being disciplined while managing resources, conducting active oversight
of contractors, and working closely with partners can put projects in a
better position to mitigate these risks should they occur.
Realistically planning for and retiring technical or engineering risks
early in product development allows the project to target reserves to
issues NASA believes are outside of its control.
In conclusion, managing resources effectively and efficiently as
possible is important more than ever for NASA. The Agency is
undertaking a new multi-billion dollar program to develop the next
generation of spacecraft for human space flight and at a time when it
is faced with increasing demands to support important scientific
missions, including the study of climate change, and to increase
aeronautics research and development. By allowing major investment
commitments to continue to be made with unknowns about technology and
design readiness, contractor capabilities, requirements, and/or
funding, NASA will merely be exacerbating the inherent risks it already
faces in developing and delivering new space systems. Programs will
likely continue to experience problems that require more time and money
to address than anticipated. Over the long run, the extra investment
required to address these problems may well prevent NASA from pursuing
more critical science and space exploration missions. By contrast, by
continuing to implement its acquisition management reforms and ensuring
programs do not move forward with such unknowns, NASA can better align
customer expectations with resources, minimize problems that could hurt
programs, and maximize it ability to meet increased demands.
Madam Chairwoman, this concludes my statement. I will be happy to
answer any questions that you have.
Biography for Cristina T. Chaplain
Ms. Chaplain currently serves as a Director, Acquisition and
Sourcing Management, at the U.S. Government Accountability Office. She
has responsibility for GAO assessments of military and civilian space
acquisitions. Ms. Chaplain has also led a variety of DOD-wide
contracting-related and best practice evaluations for the GAO. Before
her current position, Ms. Chaplain worked with GAO's financial
management and information technology teams. Ms. Chaplain has been with
GAO for 18 years. She received a Bachelor's degree, magna cum laude, in
International Relations from Boston University and a Master's Degree in
Journalism from Columbia University.
Chairwoman Giffords. Thank you, Ms. Chaplain.
Mr. Pulliam.
STATEMENT OF MR. GARY P. PULLIAM, VICE PRESIDENT, CIVIL AND
COMMERCIAL OPERATIONS, THE AEROSPACE CORPORATION
Mr. Pulliam. Good morning. Madam Chairwoman and Members of
the Subcommittee, I am pleased to represent the Aerospace
Corporation and to appear before you today as you deliberate
cost management issues in NASA's acquisitions and programs.
As a private, non-profit corporation, the Aerospace
Corporation has provided engineering and scientific services to
government space organizations for almost 50 years. As its
primary activity Aerospace operates a federally-funded research
and development center, but we also undertake projects for NASA
and other civil agencies.
The Subcommittee asked us to focus on the main causes of
cost and schedule delays at NASA, how effective NASA has been
at mitigating these problems, and similarities we see in other
agencies. While there are many factors affecting cost and
schedule growth, I will briefly discuss four main causes as we
see them.
First, sometimes NASA is too optimistic in its initial
designs. This is understandable because NASA's job is to push
science to new frontiers, yet there is palpable pressure for
mission execution at the lowest-possible cost. The net result
can be a less-than-complete appreciation for the complexity of
the technical baseline. This can lead to artificially-low
initial cost estimates and optimistic schedules. The cost-
estimating process itself can introduce optimism depending on
what data and what missions are included. These factors taken
together can increase the likelihood that the initial cost
estimate will not be an accurate indicator of the final program
cost.
Second, there can be scope changes as the design evolves.
Designs and technologies mature as projects proceed through
development. This, too, is understandable and perhaps even
desirable from a science perspective. The project manager wants
to deliver maximum value to his customer.
However, the effects are clear. An instrument that is more
complex than originally thought will likely require more mass
or more power. We should not be surprised that these changes
from the original design produce changes in cost and schedules
as well.
Third, the inherent difficulty of developing world-class
technologies contributes to cost and schedule growth.
Technology immaturity is most often apparent in the advancement
of science through new instrument development. Delays in
instrument development can lead to schedule delays for the
entire project. NASA is working toward reducing risks
associated with immature technologies but has reduced
technology development in some other areas.
Fourth, we must acknowledge that external influences can
have a major effect on cost and schedule performance. From the
program or project manager's perspective whether that change
comes from the Congress or from inside NASA the effects are the
same. Project changes can set off chain reactions all across an
agency. Cost growths in one program may result in reducing
funding from other programs that were performing well, making
them less executable. Missions can be delayed or canceled
because existing programs are consuming available budget. Each
of these actions has a negative impact on established costs and
schedule.
In looking at the effectiveness NASA has in mitigating cost
and schedule growth we believe NASA deserves some credit for
their efforts. In the past few years NASA has initiated several
measures specifically designed to solve this problem. Some are
strategic such as budgeting at a higher confidence level, and
some are tactical, such as collecting the necessary data for
sound cost estimating. NASA should be commending, commended for
investing in new and innovative technologies and techniques.
One example is schedule estimating, which is a relatively
new capability in our industry. Another is affordability
analysis, which allows examination of the portfolio
interactions, long-range planning, and evaluation of costs,
risks, and program reserves. These are ground-breaking efforts,
and they will produce positive results.
Even with these management actions, however, there is still
uncertainty in the cost management process. NASA is attempting
to manage this uncertainty through establishing cost estimates
at a higher level of confidence than in previous years. While
commendable, this higher level of confidence is valid only if
the baseline remains stable, if technology maturation is
controlled, and if external influences are understood and
managed. Effective cost and schedule management requires a
project manager to accept, be accountable for, and execute to a
valid baseline. NASA is studying how to reconcile project
estimates with independent estimates. Greater transparency into
both processes and reconciliation of these basis of estimate
will yield positive results.
Our overall assessment of NASA's mitigation efforts is that
the Agency is implementing many measures which should provide
increased capability for cost and schedule management, and as a
result better cost and schedule performance.
And finally, the Committee asked us to look at similarities
between NASA and other federal agencies. We found far more
similarities than differences. As outlined above, optimism,
baseline growth, technology changes, and external influences
are not unique to NASA. Dozens of commissions and panels have
studied cost and schedule for decades, and the themes are
generally consistent. While each federal agency can point to
their unique problems and circumstances, the fundamental
challenges of good cost and schedule estimating and performance
are remarkably similar across federal agencies.
Madam Chairwoman, I am pleased to present our findings and
assessments to the Subcommittee, and I look forward to your
questions.
[The prepared statement of Mr. Pulliam follows:]
Prepared Statement of Gary P. Pulliam
Madam Chairwoman and Members of the Subcommittee:
I am pleased to present The Aerospace Corporation's findings,
assessments, and recommendations on cost and schedule management issues
in NASA's programs.
The Aerospace Corporation
The Aerospace Corporation is a private, nonprofit corporation,
headquartered in El Segundo, California. Aerospace was created in 1960
at the recommendation of Congress and the Secretary of the Air Force to
provide research, development, and advisory services to the United
States government in the planning and acquisition of space, launch, and
ground systems and their related technologies. We provide a stable,
objective, expert source of engineering analysis and advice to the
government, free from organizational conflict of interest. We are
focused on the government's best interests, with no profit motive or
predilection for any particular design or technical solution.
Aerospace does not compete with industry for government contracts,
and we do not manufacture products. The government relies on Aerospace
for objective development of pre-competitive system specifications and
impartial evaluation of competing concepts and engineering hardware
developments to ensure that government procurements can meet the user's
needs in a cost-and-performance-effective manner.
Aerospace employs about 4,000 people of whom 2,700 are scientists
and engineers with expertise in all aspects of space systems
engineering and technology. As its primary activity, Aerospace operates
a Federally Funded Research and Development Center sponsored by the
Under Secretary of the Air Force, and managed by the Space and Missile
Systems Center in El Segundo, California. Our principal tasks are
systems planning, systems engineering, integration, flight readiness
verification, operations support, and anomaly resolution for National
Security Space (NSS) systems. Through our comprehensive knowledge of
space systems and our sponsor's needs, our breadth of staff expertise,
and our long-term, stable relationship with the government, we are able
to integrate technical lessons learned across all NSS space programs
and develop system-of-systems architectures that integrate the
functions of many separate space and ground systems.
The Aerospace Corporation also undertakes projects for civil
agencies, including the National Aeronautics and Space Administration
(NASA). Such projects contribute to the common good of the Nation while
broadening the knowledge base of the corporation. Aerospace's support
to NASA includes work on solutions to the foam and ice debris damage
that resulted in the loss of the Space Shuttle Columbia, analysis of
alternatives to robotically servicing the Hubble Space Telescope, and
contributions to the Mars Exploration Rovers program. Our support to
NASA includes its headquarters and virtually all directorates as well
as almost every NASA Center. NASA and the NSS clients emphasize
different areas when they task Aerospace. NASA requests far less
support but proportionately more programmatic and budgeting support
while the NSS clients place primary emphasis on technical support.
While Aerospace certainly does not have full and complete insight into
all NASA programs and projects, nor do we support all NASA programs, we
have a unique relationship with NASA and have unique insights which we
are privileged to share with the Committee.
The Subcommittee asked us to focus our testimony on: 1) Identifying
the main causes of cost growth and schedule delays in NASA programs and
projects found during the course of The Aerospace Corporation's body of
work at NASA; 2) Assessing the effectiveness of NASA's efforts in
mitigating them; and 3) Identifying, in the context of The Aerospace
Corporation's work at other federal agencies, any similarities in cost
growth and schedule delays experienced at NASA.
Identifying the main causes of cost growth and schedule delays in NASA
programs and projects found during the course of
The Aerospace Corporation's body of work at NASA
Aerospace has enjoyed a relationship with NASA for many years. We
have studied NASA project cost and schedule for the Administrator,
Associate Administrator, the Office of Program Analysis and Evaluation,
Headquarters Mission Directorates, and many NASA Centers. Our work with
NASA reveals that cost growth and schedule delays result from a variety
of complex reasons.
In recent years, NASA has commissioned several studies to determine
the primary contributing factors to cost and schedule growth. These
studies, as well as others in the field, identified several common
themes: significant optimism in initial designs, changes in scope
associated with the evolution of the design over time, the inherent
technical difficulty of developing world class technologies, and the
effect of external influences on the project such as funding
instability. Although the conclusions stated above are primarily drawn
from the analysis of a subset of NASA's science missions, we believe
that the observations are applicable to a broader array of NASA
projects.
Optimism in Initial Design
NASA, as part of its charter, conducts unprecedented exploration
and science. These missions continually push the envelope of the
capabilities required by its human space flight and scientific
instruments and spacecraft. The novelty and value of these science
instruments are indisputable, as evidenced by the recent discovery by
the Fermi Gamma Ray Space Telescope of the highest-energy gamma-ray
burst ever recorded. At the same time, there is significant competitive
pressure, both within NASA and among its contractors, to initiate a
mission at the lowest possible cost. As noted by former NASA
Administrator James Webb, it is not unusual for teams to ``put their
best foot forward'' when proposing a new mission. In a recent study of
the cost and schedule growth of 40 NASA science missions, only five of
the 40 missions investigated resulted in no cost and schedule growth
while over a quarter experienced cost growth greater than 40 percent
above and beyond the project's internal cost reserves. In some cases,
the content or complexity of the technical baseline is under-
appreciated. In other cases, the initial estimate of technical
resources such as mass or power is inadequate or reliance on heritage
systems is overstated. The initial inadequate technical baseline and/or
poorly defined requirements lead to an artificially low initial cost
estimate resulting in significant cost growth beyond the project's
internal cost reserves. Furthermore, optimism may be introduced into
the cost estimating process from empirical cost models that do not
incorporate canceled missions, missions currently in development that
are experiencing difficulties, or missions whose actual costs have been
omitted or modified based on ``unusual'' circumstances. Another key
driver of a project's final cost is schedule risk, which is often not
adequately captured, making the initial schedule incompatible with the
budget, resulting in an overall plan that is not executable. In
summary, the optimism in the initial design starts the cycle, which is
exacerbated by limitations in the cost estimating process.
Scope Changes as the Design Evolves
The natural progression of a mission from its early conceptual
design through its detailed design and implementation typically
requires that resources (weight, power, performance, etc.) be added to
meet stressing requirements. This growth in required spacecraft
resources results in an associated cost growth. The understatement of
the required resources is built into how the cost of the initial
technical baseline is estimated. For example, while a recent historical
study of robotic science missions observed that mass grew over 40
percent on average from initial design inception to flight design,
large mass growth factors are typically not applied in determining a
cost estimate. Often, the complexity of the development effort,
underestimated at the outset, is more fully understood as the
development progresses. While the accuracy of project estimates
improves over time, cost growth, over and above reserves, still occurs
deep into the project life cycle. In short, the concept that is
proposed is often not what is built. The initial cost estimate is
likewise not representative of the final, as-built configuration due to
required changes as the understanding of the design evolves. In
essence, cost estimators are trying to estimate a moving target as
projects progress toward their final design form.
Inherent Difficulty of Developing World Class Technologies
NASA is continually pushing the technological envelope to reach its
science objectives. The difficulty of landing a piece of hardware the
size of a small car on the surface of another planet is only one
example of the challenges that NASA faces on a regular basis. Each NASA
development is unique, technically challenging and inherently
difficult. To confront these challenges, technology is essential. The
lack of mature critical technologies at project start contributes to
the cost and schedule growth. A generally accepted risk avoidance
practice is to fund focused technology development prior to system
development. NASA, however, has reduced technology development funding
in many areas due to budget constraints. Technology immaturity in
science missions is often most apparent in instrument development, as
opposed to spacecraft. Instrument development difficulties often lead
to schedule delays in which a ``marching army'' cost is incurred
awaiting instrument delivery. Additional investment to mature
instruments, prior to the start of full project development, could
potentially lead to reduced cost and schedule growth for science
missions.
External Influences
External influences can have a major effect on cost and schedule
performance. From the program or project manager's perspective, whether
change comes from Congress or from inside NASA, the effects are the
same. Examples of external influences outside a project's control
include budget modifications, funding instability, changes in
requirements or priorities, and launch vehicle delays. The project
manager depends on access to unallocated budget, or reserves, to
address problems. When Headquarters or Congress reassigns budget or
change priorities, it is often at the cost of increased execution risks
that fall outside of a given project's ability to accommodate within
reserves. Within a portfolio, cost growth in one project may result in
reducing funding to other projects making them all less executable. The
resulting domino effect impacts all missions that follow as missions
that have not started are postponed or missions early in their
development are stretched to fit annual budget constraints.
Assessing the effectiveness of NASA's efforts in mitigating them (cost
and schedule delays)
NASA initiated several measures to mitigate cost and schedule
growth since the middle of this decade. Some of these measures are
strategic in nature, such as budgeting at the 70 percent confidence
level, and some are more tactical, such as the collection of historical
data to provide a sound basis for new cost and schedule methodology
development. Schedule estimation, which is a relatively new capability
within the industry, is an area in which NASA is investing to improve
the state of the practice commensurate with the more mature cost
analysis methodologies. Affordability analysis, which allows
examination of portfolio interactions, longer-range planning/analysis,
and evaluation of cost risk and reserve policies, is another capability
in which NASA has invested. Several introspective studies were
commissioned to more fully understand the reasons for cost and schedule
growth and provide recommendations on how to limit growth. The majority
of these studies received peer review and have been published in the
public domain. The progress in each of these areas is commendable.
The collection of cost, schedule, and technical data is vital to
developing representative cost and schedule models that are based in
historical fact. NASA has embarked on an initiative to collect data,
the Cost Analysis Data Requirement (CADRe) initiative. Aerospace is a
contributor to this effort. Prior to the CADRe initiative, NASA's
historical cost and schedule data collection from the early 1990s had
been scarce and was based primarily upon the ability of individual
organizations or programs to gather their own cost data. The CADRe
initiative has institutionalized collection of data at specific
milestones for a large set of missions across a large number of
organizations. This data is invaluable in understanding and analyzing
the cost and schedule growth of NASA projects and identifying
contributing factors and causal relationships.
In spite of these efforts, significant uncertainty remains in the
cost estimating process. To offset this uncertainty, NASA has moved to
estimating cost in a probabilistic fashion where a range of cost is
estimated with associated confidence levels. NASA has also instituted a
new requirement for budgeting projects at a higher level of confidence
than previously experienced with a goal of giving projects a 70 percent
chance of successfully meeting their budget. The validity of this
approach, however, depends on the stability and soundness of the
baseline. Every project has a budget estimate set by many inputs.
Significant changes in these underlying assumptions and technical
baseline will reduce the program's budget confidence. Furthermore,
substantial differences of opinion remain within the cost-estimating
community on how to develop and interpret probabilistic estimates.
For effective NASA cost and schedule performance execution, the
project must manage to a valid baseline estimate. One area of concern
for the NASA project managers is the relevance and utility of
independent cost estimates they do not own. Different methodologies are
used by the project and independent estimate such that there is not a
common understanding of the basis of estimate for each. Projects
typically use bottoms up estimates that do not necessarily incorporate
all of the risks. The disconnect between independent cost estimates and
project estimates is exacerbated by the fact that unanticipated risks
often manifest themselves late in development cycle during integration
and test, when it is often too late to make adjustments. Greater
transparency into the basis of estimate for each approach is important
and needs to be communicated in ways that both the cost estimating
community and project managers understand and recognize. One effort
underway to strengthen the connection between an independent cost
estimate and the project estimate is to include the effects of risk and
risk mitigation to promote the project's ownership of the estimate.
Incorporating the project's assessment of risks into the cost
estimating process earlier and more often can put greater validity into
the project's baseline cost estimate and provide a more robust reserve
posture and promote the project's ownership of the estimate. NASA is
using aspects of this philosophy on some of its projects. Continued
expansion of its use should reduce unexpected cost and schedule growth
in the future.
The results of these measures have not yet had time to reach
fruition as missions developed under the new initiatives have not yet
been fully deployed. New methodologies such as schedule analysis tools
and strategic mission portfolio models take time to influence project
and program design in order to develop more robust project and program
plans. Although it is too early to make an assessment, the studies that
NASA has conducted and the initiatives that NASA has begun should move
the Agency toward a more positive outcome and improve the ability to
predict and control cost and schedule in its future.
Identifying, in the context of The Aerospace Corporation's work at
other federal agencies, any similarities in cost
growth and schedule delays experienced by NASA
NASA is not alone in facing challenges in cost and schedule growth.
The causes outlined above including optimism, growth, technology, and
external influences, are not unique to NASA. The military procurement
system has been analyzed for decades. Dozens of major commissions,
panels, and academic studies have echoed these same issues, and we
generally concur with the findings. The Aerospace Corporation's current
and previous Presidents supported the May 2003 Defense Science Board/
Air Force Scientific Advisory Board Joint Task Force on Acquisition of
National Security Space Programs. That group reported:
The space acquisition system is strongly biased to produce
unrealistically low cost estimates throughout the acquisition
process. These estimates lead to unrealistic budgets and
unexecutable programs.
The Task Force went on to note the need for new technology and the
impact of technology risk on cost and schedule risk.
In its most recent critique of defense acquisition, the Government
Accountability Office noted:
Invariably, the Department of Defense and the Congress end up
continually shifting funds to and from programs--undermining
well-performing programs to pay for poorly performing ones. At
the program level, weapon system programs are initiated without
sufficient knowledge about requirements, technology, and design
maturity. Instead, managers rely on assumptions that are
consistently too optimistic, exposing programs to significant
and unnecessary risks and ultimately cost growth and schedule
delays.'' (Defense Management: Actions Needed to Overcome Long-
standing Challenges with Weapon Systems Acquisition and Service
Contract Management. GAO-09-362T, February 11, 2009)
While each federal agency can point to unique problems and
circumstances which impact project development, the fundamental
challenges of good cost and schedule estimating and performance are
remarkably similar across federal agencies.
Conclusion
NASA's challenging mission includes a varied portfolio and
substantial technological challenges. Many factors contribute to cost
and schedule growth, but optimism in initial designs, changes in scope
over time, the inherent technical difficulty of maturing technologies,
and external influences are common themes we found. Many of these
conditions and constraints exist for other federal agencies. NASA has
initiated several measures to mitigate cost and schedule growth and
these efforts should provide positive results over the next few years.
The Aerospace Corporation is pleased that the Subcommittee
requested we offer our views and stand ready for your questions.
Further Reading
1) Bearden, D., Boudrough R., and Wertz J., Chapter on ``Cost
Modeling,'' Reducing the Cost of Space Systems, Microcosm Press, 1998.
2) Apgar, H., Bearden D. and Wong R., Chapter on ``Cost Modeling,''
Space Mission Analysis and Design (SMAD) 3rd edition, Microcosm Press,
1999.
3) Bearden, David A., ``A Complexity-based Risk Assessment of Low-
Cost Planetary Missions: When is a Mission Too Fast and Too Cheap?''
Fourth IAA International Conference on Low-Cost Planetary Missions,
JHU/APL, Laurel, MD, 2-5 May, 2000.
4) Bearden, David A., ``Small Satellite Costs,'' Crosslink Magazine,
The Aerospace Corporation, Winter 2000-2001.
5) Bitten, R., Lao, N., Muhle, J., ``Joint Government/Industry Space
Programs: Lessons Learned And Recommendations,'' SPACE 2001 Conference,
28-30 August 2001.
6) Bitten R.E., Bearden D.A., Lao N.Y. and Park, T.H., ``The Effect
of Schedule Constraints on the Success of Planetary Missions,'' Fifth
IAA International Conference on Low-Cost Planetary Missions, 24
September 2003.
7) Bitten R.E., Emmons D., Min I.A., and Radcliffe T.O., ``An
Integrated Architecture Design/Cost/Scheduling Approach for Future
Space Exploration Program Affordability,'' 1st Space Exploration
Conference, 30 January-1 February 2005.
8) Bearden, D.A., ``Perspectives on NASA Robotic Mission Success with
a Cost and Schedule-constrained Environment,'' Aerospace Risk
Symposium, Manhattan Beach, CA, August 2005.
9) Bitten R.E., Bearden D.A., Emmons D.L., ``A Quantitative
Assessment of Complexity, Cost, and Schedule: Achieving A Balanced
Approach For Program Success,'' 6th IAA International Low Cost
Planetary Conference, Japan, 11-13 October 2005.
10) Bitten R.E., ``Determining When A Mission Is ``Outside The Box'':
Guidelines For A Cost-Constrained Environment,'' 6th IAA International
Low Cost Planetary Conference, 11-13 October 2005.
11) Bitten R., Emmons D., Freaner C., ``Using Historical NASA Cost and
Schedule Growth to Set Future Program and Project Reserve Guidelines,''
IEEE Aerospace Conference, Big Sky, Montana, 3-10 March 2007.
12) Emmons D., ``A Quantitative Approach to Independent Schedule
Estimates of Planetary & Earth-orbiting Missions,'' 2008 ISPA-SCEA
Joint International Conference, Netherlands, 12-14 May 2008.
13) Freaner C., Bitten R., Bearden D., and Emmons D., ``An Assessment
of the Inherent Optimism in Early Conceptual Designs and its Effect on
Cost and Schedule Growth,'' 2008 SSCAG/SCAF/EACE Joint International
Conference, Noordwijk, The Netherlands, 15-16 May 2008.
14) Bearden D. ``Perspectives on NASA Mission Cost and Schedule
Performance Trends,'' Presentation at GSFC Symposium, 3 June 2008.
Biography for Gary P. Pulliam
Gary P. Pulliam is Vice President of Civil and Commercial
Operations. He was appointed to this position in December 2004. Pulliam
directs all civil and commercial business at Aerospace and is
responsible for contracts valued at $90 million annually. Key customers
include the National Aeronautics and Space Administration, the National
Oceanic and Atmospheric Administration, and a wide number of other
civil and commercial organizations in the United States and overseas.
In addition to his responsibilities in Civil and Commercial
Operations, Pulliam is Corporate Director of Government Relations.
Pulliam joined The Aerospace Corporation in 1994 as Director of
Government Operations after serving for five years as Chief of Staff
for U.S. Representative Earl Hutto of Florida's first congressional
district. He concurrently was a professional staff member for the House
Armed Services Committee, supporting Chairman Hutto, and was the
Congressman's campaign manager.
Pulliam was appointed General Manager in charge of non-Defense
Department business at Aerospace in 1997. He has continued to handle
government relations responsibilities while managing increasingly
important civil and commercial programs.
During a 20-year career in the Air Force, Pulliam served as a pilot
and instructor and held assignments at the Aeronautical Systems Center
in Dayton, Ohio. He also held several positions at the Pentagon,
including an assignment as legislative liaison in the Office of the
Secretary of the Air Force.
He holds a Bachelor's degree in English from Clemson University and
earned a Master's in operations management at the University of
Arkansas. He also is a graduate of Harvard University's Kennedy School
of Senior Managers in Government Program.
The Aerospace Corporation, based in El Segundo, California, is an
independent, nonprofit company that provides objective technical
analyses and assessments for national security space programs and
selected civil and commercial space programs in the national interest.
Discussion
Impediments to Performance in NASA Projects
Chairwoman Giffords. Thank you, Mr. Pulliam. At this point
we are going to begin our first round of questions. The Chair
recognizes herself for five minutes.
Beginning with Mr. Scolese, we have heard testimony from
Ms. Chaplain and Mr. Pulliam about the factors that have
historically led to cost scheduled growth. They have also been
able to identify some of the standard approaches that should be
considered in attempting to mitigate such growth. But none of
these approaches or none of these factors are certainly new,
dating back to 1981, to the Hearth Report, certainly earlier
than that there have been similar causes and mitigation
strategies for cost and schedule growth in NASA and certainly
for projects.
Yet we are sitting here today because these projects
continue to persist. I see from your biography that you have
been on the front lines of the battle to control costs as a
NASA Project and Program Manager in a variety of important
positions. So in addition to knowing theoretically what should
be done, you have actually experienced first-hand the real life
challenges of attempting to manage cost and schedule.
What from your perspective specifically are the most
important real world impediments to consistently achieving on-
budget, on-schedule performance in NASA's projects and
programs? And following that are we just going to have to
accept some level of cost growth if we want to conduct space
research and exploration? I realize that this is very
challenging what we are asking you to do, but--or is it
possible that measures that you and the other witnesses have
outlined can make a significant difference?
Mr. Scolese. Well, to answer the question first, you are
correct. Many of these techniques have been talked about in the
past, and Gary and Cristina discussed techniques that we are
using. One of the things we are doing different today is we are
using all of them in a consistent framework, so that we are not
just doing cost estimation, we are not just improving our
models, we are not just using EVM. We are taking all of those
tools, and we are using all of them.
In addition, we are having other people look at it, people
that are independent of the performing organization, whether it
is a project or a program or a center to go off and look at it
because when you are sitting there, and you are looking at it,
and you are doing it day to day, you think you can solve the
problem. Otherwise you probably wouldn't be in the job. But
somebody else looking at it is going to be a little bit more
skeptical and look at what you are doing a little bit more
clearly and bring that back for others to go off and evaluate
and see if we can't make adjustments to help do it, to help
correct problems, whether they are due to the project or they
are outside of the project's control. That can be done if we
know what they are early enough.
You also asked, having lived in the trenches, what are the
things that are most important to a project in order to be
successful. Probably the most important thing is stability. One
of the things that is extremely difficult in the project
environment is uncertainty in your budget or uncertainty in
requirements that you don't control. Once they are stable and
they usually become stable later in the program development,
things go fairly well. I mean, there can be surprises. There is
no doubt about it. We are doing things that oftentimes haven't
been done before, so we do get surprised. But stability was one
of the things that we really looked for, and we really looked
for, and we really felt that we needed in order to be
successful.
And last you asked do we have to live with consistent cost
overruns. I think the answer is no, and I think you have heard
from the three of us that we can do better. If implement these
tools, we can better predict what our costs will be. Will they
be totally gone? No. I don't think so, because what we do is
very different. We have high-risks, and therefore, there is
probability of failure and there is probability of cost growth.
But overall we can do better, and I think when we put all these
tools together you will see our performance improve.
NASA Implements Incentive and Punitive Measures to Increase
Accountability
Chairwoman Giffords. Mr. Scolese, when instances of cost
growth arise, many in the public want to know who exactly is
accountable. It seems that assigning accountability can be
difficult when there are a number of contributing factors that
have led to the cost growth, but the desire for accountability
at heart is based on the belief that it can contribute to
preventing future cost and schedule growth at the Agency.
As you know, in trying to deal with such growth and if some
have called for punitive measures and some have called for
providing incentives for good performance, what mechanisms does
NASA currently have for penalizing poor cost and schedule
performance, and conversely, what kinds of incentives does NASA
provide for good performance?
Mr. Scolese. Well, first and most important is, as you
said, we need to understand what caused the growth. If it was
something that was clearly caused by the project, the
performance of the project, then, indeed, we do take actions,
and over the last several years, over the life cycle of
projects coming to completion now, we have replaced probably
about 10 percent of our project managers. So there is strong
accountability there for performance, if it is due to the
project.
Oftentimes it is not due to the project. It is due to that
lack of stability, it is due to unforeseen technical problems.
It is due to taking over a project that was originally in
trouble. So first we look at what the causes are and then we
take the appropriate actions as needed.
In addition, we clearly hold accountable all of the people
that are in the project. If a contractor is not performing, we
have award fee scores. How much additional fee or how much fee
we provide to them for their performance. Theoretically, if
they were perfect, they would get 100 percent, and if they were
terrible, they would get zero percent. So we evaluate based on
that.
I do want to say, though, that when we do that, we
recognize that many of the people, most of the people that are
performing on these projects are very good people. They have
distinguished themselves in other fields, in other areas within
NASA. So while they may not be successful here, we rely on our
people to do our missions. Without them we can't do them. We
rely on our contractor personnel and our partner personnel to
do our missions.
So when we do have to take action, we recognize these
people have distinguished themselves somewhere else, and we
move them onto other activities. So there is no public, you
know, discussion of this. They move onto other things where
they were at one time very good.
But overall I think we have the tools to reward people for
doing good performance. We have the tools to penalize people
and organizations for doing bad performance.
Chairwoman Giffords. Thank you, Mr. Scolese.
The Chair will now recognize Mr. Olson for five minutes.
Mr. Olson. And thank you, Madam Chairwoman. With your
permission I would like to extend my time to the Ranking Member
of the Full Committee and a fellow Texan, Mr. Hall.
Mr. Hall. Thank you. I am not sure I thank you, but I
didn't get to hear all of the--but, you know, we have a
problem. We have a new Administrator coming aboard, and I don't
think there is any secrets that Chair Gordon and I joined as
Ranking Member requested the President to maintain Mike
Griffin, and I know everything he did was not perfect, but he
was always upright with us and made projections that we doubted
but understood. And we are here with a four-year gap in there
that concerns everybody, and we don't want to depend on nations
that we don't really trust, but we are under some type of
contract with them now.
NASA's Problems Could Be Fixed With a Small Fraction of
Stimulus
I understand the acting Administrator can tell us about
that, but I guess what I am trying to say is that, ``be not the
first by whom the new is tried nor yet the last to lay the old
aside.'' I don't know about the lone experience of schedule and
cost growth and very complex robotic missions, and I think
maybe we ought to just impose higher costs and schedules there
in the projects' outset at the very beginning rather than
trying to squeeze in too small reserves when the project
encounters difficulties.
But no matter what, where we are now and we need to somehow
squeeze together those four years between the time that we can
quit using Discovery and Endeavor and Atlantis, and get the
project Constellation underway. Somehow--and with the minute
budget compared to the overall budget that we extract for this
project, it just seems to make sense to me, and with the
offsets of--and the $850 billion expenditure and throwaway that
the former President launched and the stimulus program of $700
or $800 billion. It makes our project look like a very small
cost and easy to add to.
So I hope that we can all get together and push and carry
out the program that had been set forward. The--and the hopes
are--and it makes our expenditures look minute compared to the
give-aways and the waste-aways and the throw-aways that they
are, because I believe Jay Leno was right when he said that he
thought the automobile-makers ought to keep on making
automobiles and those guys on Wall Street ought to start making
license tags.
But we have such a small comparative budget and request for
such an important program project. I just hope we will be more
realistic in our approaches. And I didn't get to hear all the
testimony, but that is the only thing I can offer.
I yield back and thank you, Madam Chair.
Chairwoman Giffords. Thank you, Mr. Hall. I think everyone
on this committee agrees that we always look forward to your
comments and you're an incredible asset to this subcommittee.
The Chair will now recognize Ms. Fudge, who has Glenn in
her district. Ms. Fudge, please.
Cost Management of Human Flight Missions Compared to Robotic
Missions
Ms. Fudge. Thank you, Madam Chair.
My first question is for Mr. Scolese. Are--do you believe
that human space flight projects are likely to encounter cost
and schedule growth? Are they more likely than if you use
robotic science projects?
Mr. Scolese. I don't think they are inherently different in
terms of their purpose, but the difference is with human space
flight programs we tend to do developments on such long time
scales that they are separated by such a large amount of time.
We started designing the Shuttle in the 1970s and began flying
it in the 1980s. We did the Station in the 1990s, and we are
doing Constellation now in the 2000s. And that presents some
challenges because with robotic missions we tend to do several
per year. With our aeronautics activities we tend to do several
per year.
So we don't have as strong a historical database to allow
us to make the predictions that we can do with the robotic
missions. So from that standpoint I think we have greater
uncertainties in our initial estimates for the human missions
than we do for the robotic missions, but that is because we
haven't done so many of them. You can basically count on one
hand all the human missions or the human space flight
activities that we have done in the four decades, five decades
that the space program has been around.
So that presents a challenge for us. But to say that they
are inherently different or that one can do different things
than the other, that is certainly true, but that doesn't add to
it. It is the fact that we don't do as many human missions as
we do robotic missions.
Ms. Fudge. Thank you. Mr. Pulliam----
Mr. Pulliam. Yes, ma'am.
Should NASA Freeze Cost Estimate Design?
Ms. Fudge.--you stated in your testimony that the initial
cost estimate is not representative of the final as built
configuration due to required changes. Should NASA either
freeze requirements early on or not proceed to implementation
until it establishes greater knowledge of requirements and the
resources needed?
Mr. Pulliam. Thank you. It is among the most difficult
problems to try to solve at NASA or other agencies spending
taxpayer dollars. As we noted, when you start a program, you
don't know everything that you need to know to execute that
program. Sometimes the technologies just are in development,
and that goes the way it goes.
There is this optimism at the beginning. That is in part
fostered by an increasingly competitive environment for NASA
programs, so contractors and bidders are likely to bid more and
more against the mission that is available. That contributes to
optimism.
So while one could just freeze design and say we are not
going to allow any of this, our view is you would wind up not
being able to accomplish the mission that is so important to
NASA, and that is to put the world's best technology up for the
benefit of mankind.
So it is a difficult dilemma, that the answer in our view
is somewhere along the way. You have to manage this technology
maturity in a planned organizational way, understand the path
that technology maturity is on, and understand the changes that
accompany that to both your cost and your schedule. And then as
NASA has stated, confirm that baseline at some point, at which
time you have an executable program.
So we wouldn't suggest that technology just continues to
roam indefinitely, nor would we suggest locking it down so
early solely for the benefit of cost and schedule because you
would lose out on what you are trying to accomplish to some
extent.
Long-duration Human Space Flight and Its Effect on Cost
Ms. Fudge. Thank you. And this is for any member of the
panel. Certainly assuring the health and safety of our crews is
critical to the success of NASA's exploration mission, and I
guess because of NASA Glenn, we have had some discussions about
the lack of timely demonstrations of hardware and techniques to
mitigate the adverse effects of long duration space flights.
Does that cost become one of the costs that you can't
contain, or is that one of the issues that arises that creates
some growth in the cost?
Mr. Scolese. It certainly could, and that is one of the
things that, of course, we have to address if we are going to
do long-duration space flight. The Space Station is the tool to
help us do that, and the better we can utilize it, the better
we can retire those risks and develop better cost estimations,
schedule estimates, and better estimates overall about when we
can start sending people on those long-duration missions beyond
low Earth orbit.
So, yes, it does add an uncertainty to what we are doing.
We are looking at that for the, you know, utilization of the
Space Station. I am certain some of the efforts that Glenn is
pursuing in those areas would be included in that.
Ms. Fudge. Thank you, Madam Chair. I yield back.
Chairwoman Giffords. Great. Thank you, Ms. Fudge.
Mr. Olson, please.
Shrinking Industrial Base Adds to Cost
Mr. Olson. Thank you, Madam Chairwoman. And, Mr. Scolese, I
have a question for you. In your opening statement you
mentioned the issues with the American industrial base, and I
was just wondering if you could elaborate on the impact that a
dwindling industrial base has on NASA and its maintaining a
cost-effective schedule.
Mr. Scolese. Yes, sir. As the industrial base has
collapsed, of course, one of the initial or I shouldn't say
collapsed. That is too strong of a word. As the industrial base
has shrunk and consolidated that provides us less opportunity
for competition. So oftentimes we have to go with the supplier
that exists, and we don't have a choice.
The bigger problem probably is the loss of expertise that
was mentioned earlier in the opening statements. We don't have
as many scientists and engineers and technicians to go off and
build our instruments, build our spacecraft, build the
components that go into those instruments or spacecraft, and
that has created some degree of a problem for us.
In addition, it has some unintended consequences because we
have to go overseas for many of our components, and that, of
course, hurts American industry.
A third factor that plays into this is with lack of some
parts we have had a rise in the number of counterfeit parts,
things that we can't deal with. This is a worldwide problem. It
is not a U.S. problem. This is a worldwide problem, and in
dealing with that you find out late typically when you get
counterfeit parts. We do inspections, we do all the things that
you are supposed to do. That adds cost clearly, but when you
find out about them, if you don't find out about them at
receipt, you find out about it when you are in test or you find
out about it when you are sitting on top of the rocket or
worse, you find out about it when you are in space. And all of
those have cost implications.
One of the things that could help that, of course, is
having, you know, more missions that are available along the
lines of what we are talking about here. If we can reduce our
costs, improve our cost estimations, we can provide, you know,
opportunities to do that. But I think what I said pretty much
summarizes the concerns that we see with the consolidation of
the industrial base.
Growing American Industrial Base Means Changes to ITAR
Mr. Olson. Thank you very much. In addition to having more
missions, any suggestions what we can do as a nation to help
grow the American industrial base to ensure we are competitive
and we have the capacity here in America to perform the
missions that NASA performs?
Mr. Scolese. Yes, sir. One area clearly is, I believe there
was a hearing last week about the ITAR activities, and we are
all very concerned about our national defense and recognize
what ITAR's purpose is. But its implementation has been, has
had an effect, a negative effect on our ability of our industry
to compete overseas.
It has also made it very difficult for us as the Nation's
Space Program to also work with our partners overseas because
we can't necessarily share information with them in ways that
are as effective as they could be. It has also delayed our
ability to make agreements, which has caused cost growth that
we have talked about.
When it takes a year or two to come to an agreement about a
mission that you have agreed to do, you have clearly built risk
into it as you can't talk to the international organizations
that are providing resources. But for our industry they lack
the ability to go off and compete because a contract on a
communications satellite usually has about what, 30 days or 60
days, to put in a bid. It takes that long to get through the
process.
So reducing some of those requirements or streamlining the
process, and there is other people that know more about it than
I do, could certainly help our industrial base be able to
compete on the open market.
External Factors in NASA's Cost Growth
Mr. Olson. Thank you for that question. That is a nice
segue to my final question here, but in your testimony you
indicated that ten of the projects that--of the ten projects
that exceeded the costs five of those were due to external
factors out of NASA's control. The ITAR thing is probably a
great example.
What are these external factors? Could you elaborate, and
what can we do to help mitigate?
Mr. Scolese. Well, not all can be mitigated easily. Three
of them, I think four of them, in fact, were due to issues with
either the launch manifest or with partner performance, and we
have a backed up launch manifest right now. Two of the missions
were delivered on time and unfortunately, the launch manifest
is backed up to the point where one, the solar dynamics
observatory will be delayed almost a year. That is something
that we couldn't foresee. We are, of course, working with our
colleagues in the Defense Department and the commercial
industry to try and improve the launch manifest to improve our
launch posture, but that is one area where we could, you know,
clearly see some help.
The other missions were affected by partner performance,
international or U.S. partner performance, where they ran into
difficulties that were unforeseen to us, and I am not sure
there is much more that could be done that we haven't talked
about. They have the same issues as was mentioned earlier that
we do in terms of optimism and over-estimation, as well as
stability of their funding requirements.
And in at least one case it was due to, you know,
industrial concerns, where, you know, if you went to a
government lab or you went to a university or you went to
industry, you might have had the same problems because of the
lack of expertise. But that was an issue that we experienced.
So it was those three things; the launch manifest, which is
something we can do by, you know, encouraging a robust launch
capability in this country, by partner issues, which were for a
variety of different reasons that could have been unforeseen.
Mr. Olson. Thank you very much, and I yield my time.
Chairwoman Giffords. Great. Thank you, Mr. Olson.
And just for the record, I think it is important to note
that Mr. Olson and all of these Members down on this side
either represent a NASA center or are adjacent to a NASA center
and have NASA employees in it.
And with that, Mr. Griffith, who represents Marshall.
NASA Success Has Led to Heightened Public Expectations
Mr. Griffith. Thank you, Madam Chair, and thank you, panel,
for being here, and I would like to make a comment. Many of the
questions that I had have been asked.
One of the frustrations that I think that we are hearing is
that cost overruns are inherent in any scientific endeavor.
They are not budgeted, cannot be budgeted. Burn rates for
discovering the unknown are going to be there. We understand
that. I think it is unfortunate in a way that NASA has been so
successful, has held themselves to such a standard of
excellence that the general public expects that NASA is like
starting their car in the morning. And that is really not that
much science to it anymore, and there is not that much danger
anymore, and there is not that much that really goes into it.
We are just building rockets and exploding them into space.
Nothing could be further from the truth. We are still on
the frontier. China walked in space two months ago. Japan is on
the way up, India is on the way up, Russia, of course, has been
up. For the last 50 years NASA has established excellence in
the pursuit of science and now you are going to become part of
the high ground and the national defense. I expect there to be
cost overruns, not only for safety issues but because we are
going to be pushing the envelope because we will remain number
one in space.
So I think my question to you would be can we do a better
job letting the public know what a huge scientific endeavor
this is and how much we really don't know when we send humans
into space? And can we maybe reeducate the public that we are
on the great frontier again, trying to achieve the high ground,
competing not only with Russia now but China, India, Japan, and
certainly others?
So I appreciate our attention to the detail of costs, but
when we were discovering the vaccine for polio, we did not ask
that question. We needed Dr. Salk and Dr. Sabin to get that
polio vaccine. I think we are going to have the same attitude
towards NASA. We want you to do what you need to do, and we
want to help you do that, so my question is can we educate the
public so they are not frustrated about the scientific method?
And the other thing, what can we do to help you?
And thank you very much, and I will yield my time.
Mr. Scolese. Well, thank you for that. I think if we could
copy that speech we would go a long way towards addressing that
question, and you bring up, you know--actually I only want to
correct one thing that you said. We don't like to explode our
things into space.
But you bring up, you know, a very important point. We
can't lose sight of the need for mission success or safety. We
have to balance the success of the mission, the risk of the
mission with the cost and the schedule. We can't focus on any
one of those three or four items in order to be successful.
And, yes, sir, we can do a better job of explaining that,
and we will.
Chairwoman Giffords. Thank you, Mr. Griffith.
Mr. McCaul, please.
Mr. McCaul. Thank you, Madam Chair, and let me congratulate
you and the Ranking Member on your new positions and----
Chairwoman Giffords. Thank you.
GAO Recommendations for NASA's Future Human Space Flight
Mr. McCaul.--we are very excited to have you.
And you, Mr. Scolese, in your new position. I have two
areas of questioning. The first I think one of the greatest--
and NASA has many missions, but I think one of--the one with
the greatest vision is the one of going to the moon, Mars and
beyond. There is a proverbs quote up here, ``Where there is no
vision, the people perish.'' This is the greatest vision for
mankind. It was Kennedy's vision.
This has been estimated to cost about $100 billion over the
next 13 years, and the Chair of this committee, Bart Gordon,
took a look at GAO's recommendations and said that they were
common sense and hopes that you at NASA will take a look at
these recommendations and implement them. And hopes that you
will take these seriously.
I want to just get your initial--Ms. Chaplain, if you could
just briefly summarize the recommendations as they pertain to
that specific mission, and Mr. Scolese, how you intend to work
with GAO on that.
Ms. Chaplain. Our recommendations have been pretty
consistent across a lot of projects. Basically we would like to
see NASA pushing technology is one thing, and they have, each
project has two to five years to do that and to learn about
what they are doing and to set requirements. But when they get
to the point where they are ready to commit to Congress and get
authorized to move ahead as a formal program, that is where we
would like to see requirements get settled and technology to be
understood.
If that happens, you have a very solid foundation for
moving forward. So I don't want there to be a misunderstanding
that GAO is saying there is a bad thing to have cost growth and
lots of things going on when you are trying to learn to do
something that hadn't done, been done before. We really
encourage that to happen, but there is a time and place for
that to happen. Once a program is ready to move forward, you do
need stability to make it executable.
And I think, you know, across the board NASA has
consistently agreed with these recommendations. It has built it
into its policy. It is reflected in a lot of the actions it is
undertaking right now. So the thing to do is just to sustain
the attention to these improvement efforts and to adhere to
these good practices that are reflected in their policies going
forward, especially with these big ticket programs that are
ready to enter these implementation phases, including areas of
Orion, James Webb Telescope.
Mr. McCaul. Okay. Mr. Scolese.
Mr. Scolese. I think Cristina said it right. We are--we
have taken those seriously. We are working on all of those. I
would like to add one of the things that we are doing to make
sure that we are, in fact, implementing that guidance or
something that resembles that guidance, because we do conduct
our independent reviews at each milestone to make sure that, in
fact, we are doing what we said we were going to do, and we
have independent people looking at it. And then we monitor that
monthly to go off and make sure that all the pieces are still
coming together.
One of the challenges that we have is the stability, and it
is getting to the point where we can make that commitment. As
you can imagine as you are maturing your requirements and
maturing your technologies, there is a lot of people that want
you to go faster and commit sooner. We can't take forever. We
recognize that, but we need to be able to take the time to get
that done, and the support that we can get to allow us to do
that would be greatly appreciated.
And it typically takes, you know, sometimes two, three, and
in some cases as in the JWST, James Webb Space Telescope, took
us almost a decade to get to a point where we felt we had
technologies mature enough to proceed, which we really just
decided on this year.
Mr. McCaul. Now, I just want to let you know, we in the
Congress support you in that effort and stay in close
communication with us.
Cost Overruns in Climate Change Missions
Lastly on--in the stimulus bill there was money
appropriated for the purpose of climate change. Can you, Ms.
Chaplain, speak to prior programs related to this, that
particular mission and some of the cost overruns? Specifically
I know the Glory Program had some cost overruns.
Ms. Chaplain. Yeah. Several of the climate and
environmental programs have had cost overruns. A lot of them
have been attributable to contractor performance and not really
recognizing that the contractor may not have had the expertise
to develop some of the key sensors for satellites. What we
would like to see is more attention paid up-front into what
contractors can do and cannot do and to make sure you have a
plan for dealing with any risks that you see in the contractor.
We also like to see with these programs more stability with
requirements once they start, and we also would like to see not
too many expectations placed on any one program. The NPOESS
Program, for example, has more than ten sensors on it, makes it
very difficult to design and execute that program with so many
sensors and so many problems associated with each one of them
and the integration process and so forth.
So there is a lot of risks associated with these kinds of
satellites but a lot that can be done to mitigate those risks.
Mr. McCaul. Thank you, Madam Chair.
Chairwoman Giffords. Thank you, Mr. McCaul.
Another terrific asset we have on this subcommittee is Ms.
Edwards, who used to work at Goddard and now represents the
interests of Goddard, so, please, five minutes.
Ms. Edwards. Thank you, Madam Chairwoman, and thank you to
the panel.
Contractor Performance Contributes to Cost Overruns
I just want to focus this morning on contractor performance
and the ways in which contractor performance contributes to
overrunning cost estimates, and so Mr. Scolese, I think you
came to Goddard just as I was departing Goddard, and Ms.
Chaplain, both of you in your testimony talked about that. And
so I am wondering what there is about contractor performance
and whether there are positive incentives and not just negative
incentives to increase performance to contract and to avoid
overruns, and then secondly, I wonder if you could speak to the
internal capacity at NASA that actually might help us better
oversee some of the highly-technical and scientific projects in
which NASA is engaged.
Mr. Scolese. Yes. In regard to the contracts and what our
mechanisms are, we do have positive feedback mechanisms. I
mentioned earlier that many of our contracts have award fee
provisions, and that allows us to reward performance
periodically all the way up until in many cases the end of the
planned mission life. So even if--after it is launched, we can
still go off and say, if you performed well, you can get, you
know, a fee on that performance.
So we have the positive incentives to go off and do that,
and also it can serve as a negative incentive by getting lower
scores. So we do try and find ways to motivate and reward, you
know, performance. We do the same with our civil servants as
you know, although it is not quite the same as that, with
awards and metals and monetary awards when that is appropriate.
So I think we have, you know, many of the incentives in
place, and of course, one of the biggest incentives for both
the contractor and the team that is doing it is to see the
successful performance of the mission. You know, oftentimes,
you know, it is answering a scientific question that hasn't
been asked before, and the results can yield as they did with
COBE with a Nobel Prize. So there is some great rewards that
come from the scientific discovers that can be made.
NASA's Civil Servant Capacity to Provide Technological
Expertise
Ms. Edwards. But does--what I wonder, though, is internally
within the civil servant component of NASA, of the Agency, do
you have the capacity to provide the kind of technological
expertise that is needed over these projects to ask the right
questions of contractors over the lifespan of a project to
ensure that we are, you know, tamping down on costs where
necessary and estimating what the overall cost of the project
will be?
Mr. Scolese. Yes. I do believe that we have that. We have,
you know, a very good workforce. What we haven't always given
them is the tools and the support that they needed. We have, as
you well know, some of the brightest people around that are
working these activities.
What we haven't always done is the things that I tried to
outline here is give them a forum to speak up when they have
issues, to give them the opportunity to speak with senior
management who could do things, whether it is adding additional
resources, additional people if the project needs additional
people, additional technical expertise if we need additional
technical expertise. We can reach into the Agency at other
centers. That is often been a problem where centers don't know
what each other's capabilities are. We have broken down those
barriers with organizations like the NASA engineering and
safety center so that we can go off and share resources amongst
the centers.
We also have the ability to go outside of the Agency to
organizations like Aerospace Corporation and others. So we made
that more available to people.
In addition, by having, as I mentioned, and all the centers
now do this, having monthly reviews or periodic reviews where
you can bring up issues to senior management, we can take
actions. They can be as simple as picking up the phone and
calling a contractor and saying, you are not doing what we
think you should be doing, and here is why and having the
details. Or it could be, you know, more invasive than that.
NASA Life Cycle Performance
Ms. Edwards. Let me just interrupt you because I have
probably just enough time for this last thing, and that is
whether you are able to--are there interim assessments, and can
you look at international agencies in addition to the
Department of Defense to learn about where you can better
assess over the life of the project whether you are meeting
cost estimates. And so looking at like agencies or over the
lifetime of a project, and you can think about this later. I am
looking, for example, at Landsat, and Landsat over a period of
time, are there things that we have learned about those
assessments that actually might help us for other projects.
Mr. Scolese. Yes. In fact, we are doing that. We have been
doing that, and we are going to embark on a broader study to go
off and look at performance of other agencies and other
activities. I am not sure that we could get the information on
the international ones, but we will certainly go off and look
and see if that is doable.
Ms. Edwards. Thank you.
Chairwoman Giffords. Thank you, Ms. Edwards.
Mr. Grayson.
Firm-fixed Contracts Incentive to Avoid Cost Overruns
Mr. Grayson. Thank you, Madam Chair. Mr. Scolese, what
percentage of NASA's contract dollars are spent on firm-fixed
priced contracts?
Mr. Scolese. I will have to get you the exact details on
that. I don't have that off the top of my head, but I can tell
you that where we can do firm-fixed price we do, and I can give
you a couple of examples here and then for the record I will
provide you with more details.
On the tracking and data relay satellite system,
communication satellites, those were fixed-price contracts. For
portions of the GOES satellite that we do for NOAA, those were
fixed price. For many of our small Explorer missions the
spacecraft bus is often a fixed-price bus.
What percentage of our contracts beyond--in precise terms I
can't give you off the top of my head and will get that to you.
Mr. Grayson. Well, for firm-fixed price contracts, the
contractor pays 100 percent of the cost of overruns. Correct?
Mr. Scolese. If it is caused by them. That is correct. Yes.
Mr. Grayson. And for cost reimbursement contracts, the
contractor is not legally obliged to pay any part of the cost
overrun. Is that correct?
Mr. Scolese. That is correct.
Mr. Grayson. So is it fair to say that if NASA did more
firm-fixed price contracts we would be giving the contractor an
incentive, a real incentive to avoid cost overruns?
Mr. Scolese. We look very carefully at what type of a
contract we use to try and balance the risk that is going to be
in there. Typically we do firm-fixed price contracts when we
understand the requirements so that a contractor will, in fact,
bid on it and know that they have a chance of being successful.
We use cost reimbursement type contracts when there is some
uncertainty in the, in either the requirements that we have or
in the ability to perform. So we do a very careful risk benefit
relationship. Where possible and as often as possible we try
and use fixed-price contracts. But that isn't the only remedy
that we can use.
Mr. Grayson. Mr. Scolese, it seems that have here two
extremes. We have one condition where the contractor pays all
the cost of overruns. The other condition where the contractor
is legally obliged to pay none of the cost of overruns.
Wouldn't it be useful to have something in-between?
Mr. Scolese. Well, in fact, we actually do try and work
that way, and I just want to, you know, on the firm-fixed
price, if we change something, we pay. If they can't meet the
original specification, they pay. And, yes, I mean, we actually
try and work those cost reimbursable contracts where we have
negotiations, they will not be reimbursed for all the costs if
we feel it was their fault to cause it. We can't guarantee that
at the beginning of the contract or we can't guarantee that at
the beginning of the negotiations. But we do work hard to try
and make that stick and to assign responsibility where
responsibility lies.
Mr. Grayson. What percentage of NASA's contracts, if any,
are awarded under invitations for bids, sealed bids, rather
than through competitive proposals?
Mr. Scolese. I don't have the answer to that. Most of our
stuff is done competitively, but there may be some
institutional activities that are done by sealed bids. I can't
answer that off the top of my head.
Mr. Grayson. Now, when there are competitive proposals
which I am sure you will agree is the predominant form of
NASA's contracting, when there are competitive proposal's,
there is a cost technical tradeoff in those proposals. Correct?
Mr. Scolese. Yes.
Mr. Grayson. All right. Now, you can correct me if I am
wrong, but I believe that there is nothing in the statutes that
indicates to NASA what that tradeoff should be. Is that
correct?
Mr. Scolese. What the tradeoff between the cost and the
technical should be?
Mr. Grayson. Right. How much of an emphasis should be put
on cost versus technical?
Mr. Scolese. No. We--there isn't a statute for that. We
determine that before the contract is released for bid.
Mr. Grayson. Right. But the Agency determines that in its
sole discretion without any guidance from us. Correct?
Mr. Scolese. Yes. That is correct.
Mr. Grayson. Now, if we were trying to save money, it seems
that one way we could try to do that would be to emphasize cost
more in this cost technical tradeoff. Is that a fair statement?
Mr. Scolese. Well, we do emphasize cost. It is a fair
statement, but we have to manage the cost and the schedule and
the risk and the technical performance. All of those factors
have to be considered. Yes.
Mr. Grayson. Now, returning again to the tradeoff between
having a firm-fixed price contract where the contractor bears
the risk and the cost reimbursement contract where the
contractor legally bears none of the risk, apart from the
question of whether we should have something between those two,
would you agree with me that now it is the Agency that makes
that decision and not Congress?
Mr. Scolese. Yes. I would agree with that.
Mr. Grayson. All right. Now, again, if we were trying to
avoid cost overruns, do you think it might be a good idea for
us to give you some direction about when to use a cost
reimbursement contract and when to have the contractor bear the
risk of the cost overrun?
Mr. Scolese. No, sir. I think, you know, those are very
difficult decisions that have to be made as we are developing
our requirements, and you know, when we have very stable
requirements, firm-fixed price contracts are absolutely the
right thing to do. And that determination, as was mentioned
earlier, comes after we have done some definition of what it is
that we want to achieve. And as I tried to mention earlier, we
do, in fact, do that. Many of our spacecraft for the small
Explorers as an example are, in fact, firm-fixed price because
we understand our requirements very well. And we have good
performance there.
So I think it is going to be, it would be very difficult to
look at each and every one of our missions to try and determine
which should be firm-fixed price, which should be cost plus,
and which portion of the mission should be firm-fixed price and
which portion should be cost plus. Because in any given mission
you will have different types of contracts for different
components that are being delivered.
Mr. Grayson. Thank you. I will look forward to receiving
the information that you promised.
Thank you, Madam Chairwoman.
Chairwoman Giffords. Thank you, Mr. Grayson.
Now we have Ms. Kosmas with us, also a Central Floridian,
representing the Kennedy Space Center.
More Cost Overruns Flexibility in Human Space Flight
Ms. Kosmas. Thank you. I am honored to be here. Thank you,
Madam Chair, and thank you to the panel for being here.
I want to start by saying I am very excited to be
representing the Kennedy Space Center and thrilled to have been
a neighbor and watched the launches for 35 years in my time in
Central Florida.
I want also to echo the comments made by Parker Griffith,
my colleague here, about how it is very important to me that we
maintain the U.S. supremacy in man space exploration
specifically and also the other areas in which we use space
exploration, whether it is for national defense, whether it is
for environment, whether it is for weather prediction, or
whatever the use might be, but man space flight, of course, is
of a high interest to me.
So with reference to the comments made by Congressman
Grayson and the cost analysis, would you say that you put a
greater emphasis or that you allow a greater latitude or
flexibility in terms of cost overruns when there is a
significant safety factor involved, particularly with regard to
human space flight?
Mr. Scolese. Well, certainly that goes exactly to the risk
discussion that we were just talking about. Clearly, if we have
a mission, we err on the side of safety. There is no question
about that. Clearly we can't allow it to go so far beyond what
our ability to pay is, and we would have to take a step back
and see if we are doing it the right way and ask that question.
But clearly we are not going to scrimp when it comes to safety.
Ms. Kosmas. Well, good. I mean, I assumed that to be the
case, but I thought it needed to be pointed out perhaps----
Mr. Scolese. Thank you.
A Fixed Date to End the Space Shuttle Increase Cost Stability
Ms. Kosmas.--that that is an area in which cost overruns
maybe are--we have learned from experience that certain things
require greater care in terms of the safety risk factor.
Which brings me to the second part of my question which has
to do with, in my district, of course, we are concerned about
the end of the Shuttle launch and the beginning of the
Constellation Program and the difficulties that that poses for
us in maintaining a professional workforce in the area. And
wanted to ask you with regard to the safety aspect of putting a
hard and fast date on the end of the Shuttle Program, do you
think that that is a wise thing to do?
Mr. Scolese. I won't comment on the wise part, but I will
say that clearly that having a fixed date adds to the, one of
the things that we mentioned earlier, which is stability. We
need that same workforce, portions of that same workforce, to
go off and build the next system, design the next system, test
the next system. So we need to move some of those talented
people over to that activity. They are doing a wonderful job in
flying the Shuttle, but we also need them in other areas as
well. So we need to start transitioning some of those people
over.
We also need some of those facilities. As you know, you
were down there just recently, and you saw the three lightening
towers going up on 39B. We need to have those facilities
available to begin launching the new systems.
So from a stability standpoint, from a risk standpoint,
having a fixed date to allow us to start transitioning those
people and those resources is important to us, and I think
2010, is a reasonable date for us to go off and do that by. We
have, as you know, we have the hardware to get us there. We
would have to build additional external tanks to go beyond
that, but so I think 2010, is a reasonable date, and it
provides us a reasonable risk posture to proceed.
Ms. Kosmas. You think it does provide a reasonable risk
posture----
Mr. Scolese. Yes.
Ms. Kosmas.--for you to proceed? Okay.
Mr. Scolese. Yes.
Ms. Kosmas. Given the flexibility shall we say and time for
rocket launches to take off and that provides a flexibility in
time, how much flexibility do you think would be reasonable
past 2010?
Mr. Scolese. You mean to fly the Shuttle or to----
Ms. Kosmas. Yes. To fly the Shuttle.
Mr. Scolese. We will have to get back to you on that. We
have a report actually that is coming in on----
Ms. Kosmas. Okay.
Mr. Scolese.--the answer specifically that question.
Ms. Kosmas. Okay. Thanks very much.
How New Contracting Procedures Will Effect NASA
Chairwoman Giffords. Thank you, Ms. Kosmas. That completes
our first round of the questions. We know that votes will be
called very shortly, but we are going to attempt to do a second
round.
So with that, Mr. Scolese, President Obama yesterday singed
a Presidential memorandum to overhaul the way the government
does its contracting. He indicated that your agency would be
working with other agencies as well as OMB to come up with new
procedures and practices.
Can you tell us today anything about the impact this
overhaul will have on NASA contracting?
Mr. Scolese. Actually, we took a quick look at it, and we
think that we are largely in line with the provisions in there,
the utilization of fixed-price contracts as we discussed
earlier. We do that where that is appropriate on space hardware
as well as, you know, institutional items. So we are certainly
going to look at it and see where we can improve.
The other provision to use competition we regularly use
competition and require competitive activities. We require a
justification when we do not use competitive bids, so we do
that where there is one supplier, for instance, as is the case
for large solids, the first stage of the Ares vehicle. There is
only one supplier of large solids, so we had to do fixed price
or, I mean, sole source there.
But predominantly we use competition, and then as far as
the A-176, we have had some experience with that but not as
much, and that requires a little bit more of our looking at it.
But it is along the lines of the way we have proceeded to
maintain inherently governmental responsibilities within the
government.
NASA Addresses Launch Conflicts and Increased Cost
Chairwoman Giffords. Thank you, and our subcommittee will
likely have you come back and report on how things are going.
I also understand that NASA is very concerned as is
indicated by your testimony earlier about the crowded manifest
for launch vehicles in 2011, and the fact that the Mars Science
Labs launch window that year will be very tight. Evidently NASA
needs to contend not only with the Juno Mission to Jupiter but
also with DOD launches as well.
However, this is not the first time that this has happened.
As you know, launch delays increase project costs. We have
heard a bit about that, but what is NASA doing to mitigate
launch conflicts?
And also, Mr. Pulliam, based on the Aerospace Corporation's
work at DOD, what can NASA do better to mitigate launch
conflicts, and is this problem going to get better, or is it
going to get worse?
Mr. Scolese. Well, what we are doing to resolve the problem
is, of course, we are working with United Launch Alliance, we
are working with our colleagues in the Department of Defense
and Department of Commerce to try and make sure that we have a
manifest that is doable, and we--and that we can have
confidence in. We are behind right now. There is no question
about it. The launch manifest as you mentioned is backed up,
causing some missions to slip.
What the exact way to fix that problem is going to take
some time. We are also looking within NASA, I am certain you
have heard about the COTS activities and about our launch
vehicle on-ramps for the NASA launch services, we are also
looking at other suppliers as they come online to fly our
vehicles. And where partnerships make sense we use
international launches on a not-for-fee basis. That is their
contribution to us.
So we are looking at all three of those things; working
with our colleagues in Defense Department and ULA to improve
the manifest, improve the capability to launch more frequently,
we are encouraging the development of other launch vehicles,
particularly the medium-class launch vehicle that will end when
the Delta II stops producing, which carries most of our science
payloads, and we also, where it makes sense and where it is
beneficial to the United States, are looking at international
launches as well.
Mr. Pulliam. I would agree with the statements Chris has
made. You know, we see the clogging of the manifest just from
inside the DOD perspective even before you integrate the NASA
launches into that. So it is clear, and that clogging of the
manifest comes and goes as missions encounter these
difficulties we have talked about and perhaps move into a new
area of the launch manifest where maybe it wasn't so bad
before. Now it is worse than you thought.
So it is an ever-changing game. So even though we see a
clogged manifest in the future, that will change some as we
approach it as well.
I think the answers to it are as they are with most of
these other problems. It requires a very close interaction
between NASA and the DOD on which instruments need to go when.
If it is a planetary mission, then surely we need to hold onto
those windows, lest we lose two years. If the DOD has a mission
that is more important to national security, then perhaps that
takes the precedence, and I think we do that now. So that
coordination and cooperation needs to continue.
And then finally I would say we need to look at what is on
the critical path as we try to use our facilities in the most
efficient way. Is it just the physical turn of the pad? Does it
have something to do with range capabilities? You know, what is
it that could be viewed from a multi-user perspective to see if
we want to operate at the maximum efficiency? Are we doing that
now? Are there upgrades that are required? Is there
infrastructure that we don't know have, and to look far enough
in advance to know what that is so that we don't wind up just
accepting whatever capacity there happens to be, perhaps based
on a time when the demand wasn't quite so high.
Chairwoman Giffords. Thank you.
Mr. Olson.
Mr. Olson. Thank you, Madam Chairwoman, and Mr. Scolese,
give you a little break.
Mr. Pulliam----
Mr. Pulliam. My turn.
Mr. Scolese. Thank you.
Mr. Olson. Spread the love a little bit so to speak.
Mr. Pulliam. Okay.
Mr. Olson. Just wanted to talk about NASA and in comparison
to the Department of Defense, and in your testimony you
compared NASA with the National Security Space Community. You
said NASA was far less, received requests far less overall
support from the Aerospace Corporation but proportionately more
programmatic in budgeting support.
Mr. Pulliam. Yes.
Comparison Between NASA and DOD on Cost Estimating, Budgeting,
and Programmatic Control
Mr. Olson. And so between NASA and the National Security
Space Community, who in your view does a better job with cost
estimating, budgeting, maintaining programmatic control over
their programs? What are the differences, and why do you think
those differences exist?
Mr. Pulliam. Thank you. It is true that the predominant
customer for the Aerospace Corporation is the Department of
Defense Space Program. That is why we were created back in
1960. NASA is the company's third largest customer right behind
DOD and NRO. So we are privileged to work with them, and we did
want to make the point that--and we think it accrues to NASA's
credit while the Air Force typically uses Aerospace more for
the in-line, hardcore technical and scientific kinds of things
that we are expected to do, NASA has that capacity more capably
in its organic workforce, so they turn to Aerospace as we would
expect federal agencies to do to see what we have that serves
them in the accomplishment of their national mission.
And that has turned out to be this body of work and cost
estimating, looking at the parameters that go into that, and we
think NASA in partnership with Aerospace is doing some things
that other agencies frankly aren't doing. And it is going to
pay off, and we are going to see the dividends of that.
Which organization is doing best? We can cite examples
across both agencies where there have been spectacular failures
of managing costs and schedule. We did find that the causes and
fundamental elements seem to be about the same. The Department
of Defense uses other very capable contractors to help them
with their cost estimating, so we are not as deeply involved
with them as we are with NASA in trying to figure out the
doctrine and the managerial techniques.
But I think it sounds a bit like a cop-out, but I think the
agencies have essentially the same problems, and they are
running at similar kind of overhead rates. NASA can say, yeah,
but we had this mission that really pushes the science in a way
that no other mission has. DOD can respond by saying, yeah, but
we have this multi-military user community that requires things
to change in technology and schedule and growth.
So it just needs to be managed uniquely from each agency's
perspective, but in full appreciation of best practices that
might be out there, and if I could just take one more moment,
there is a lot of really fine work being done that was begun at
the GAO and has migrated into NASA and to the Aerospace
Corporation in looking at major acquisition milestones called
key decision points.
And looking in advance of those at the kind of knowledge
one needs to have in order to be ready for those milestones,
and those milestones play directly into cost and schedule. I
know NASA and the Aerospace Corporation and GAO are all very
interested in continuing to define what it takes to be
successful at every part of the program, and that is going to
pay off as well.
MSL Dramatic Cost Estimate Change
Mr. Olson. Thank you very much for that answer.
Mr. Scolese, I couldn't let you get away clean free. I just
want to talk very briefly about the Mars Science Lab, and it is
my understanding that the original cost estimate for the Mars
Science Lab was in the $600 million range. And that NASA's
initial confirmation estimate was closer to $1.6 billion. That
first estimate did not come from NASA as I understand it. And
you have, NASA has recently announced a two-year delay in the
MSL with a cost increase of $400 million.
I just wanted you to elaborate on how those numbers were
obtained and what is being done to eliminate unrealistic
estimates.
Mr. Scolese. Yes. That first number that you mentioned, the
roughly $600 million, came out of what is called a decadal
survey that we do with the National Academies where they look
at our objectives in the future, and they try and prioritize
them and say these are the science goals that you really should
think about doing. And we work with them to try and accomplish
those goals.
The Mars Science Lab was one of those, and at that time it
was estimated at $600 million. When we went off and did our
studies, as was mentioned here, we did the work to mature the
technologies to get a better understanding of it, we estimated
the cost to be $1.6 billion. Clearly, we still underestimated
the complexity of it, and we should and could and can and will
do better in the future.
We are also working with the National Academy to help them
improve their earlier cost estimates that you see there,
because it often gets out, you know, one way or the other that,
you know, somebody thought this was going to cost whatever was
said at the earliest phase. So we are working with them to help
them obtain the tools and to get resources, and the Academy is
doing it as well. So we are doing it together, and we are doing
it willingly so that we can go off and have a better
understanding of what those missions would cost so they can
better establish priorities.
Mr. Olson. Thanks for that answer, and Madam Chairwoman, I
yield back my time.
Chairwoman Giffords. Thank you. We have with us Mr.
Rohrabacher, and of course, votes have been called, but we are
going to have some minutes to hear.
Bad Judgment and Irrational Optimism Affects Cost Estimates
Mr. Rohrabacher. Thank you very much. I apologize for being
late to the hearing. As usual we had two important hearings at
exactly the same time.
I would like to ask a general question just--when we take a
look at this Mars Science Lab and we take a look at, I guess it
is NPOESS, I guess.
Mr. Scolese. NPOESS.
Mr. Rohrabacher. NPOESS. I have never been able to
pronounce that right, and I have been looking at this for
years, but with that said, you know which project I am talking
about.
Mr. Scolese. Yes.
Mr. Rohrabacher. When we look at that and we look at this
whole Mars issue today, are we talking about basically--and
these other problems, are we basically talking about
intentional wrongdoing in terms of lying about a bid. You know,
when you are offering, intentionally offering a bid that you
cannot handle, that is a lie, and that is an intentional
wrongdoing. Then you have another option. Bad judgment, you
know, unintentionally doing something that ends up causing harm
like miscalculating what you really can accomplish for a
certain degree. Or are we talking about systematic flaws?
Because we have had consistently over the years examples
after-example after example after example of overruns and of
people not really being able to fulfill the obligation they
have taken on when a contract has been issued. So what are you
talking about? Are we talking about a systematic flaw? Should
we be doing something else? Are we talking about just bad
judgments that were made but with no ill, nothing, you know,
wrong. People do make bad judgments at times. Or are we talking
about intentional wrongdoing?
Mr. Scolese. Well, let me start off by saying NPOESS isn't
a NASA project, so I can't comment, you know, in any degree of
detail on that, but your question is broader than that. And I
don't believe that intentional wrongdoing is there ever. I
suspect it probably happens occasionally, but that is not what
we see. It is more in your second one, which is, you know, bad
judgment, although I would like to call it optimism.
Mr. Rohrabacher. All right.
Mr. Scolese. The people that are proposing these missions
that want to do them are extremely enthusiastic about it, and
they are optimistic about the technologies that are out there,
they are optimistic about their ability to do the job.
Mr. Rohrabacher. Irrational optimism can be very costly.
Mr. Scolese. Yes, it can. Yes, sir. And that is why get to
this, to the third part, which is really the answer to your
question, which is it is systematic. And that is what we were
trying to talk about here, what we are doing, and that is what
the GAO has pointed out that we need to do.
It is not one thing that is going to improve our
performance. It is many things that are going to improve our
performance. We have to train our people, and we do, and we are
improving our training process so that they will be able to
recognize their optimism as well as others optimism. We have to
monitor the performance of what is going on so that we can see
if optimism is driving the estimate or if, in fact, poor
performance is causing us to have some overruns. We have to put
those tools in place so that we can catch them early enough so
that they don't become, you know, surprises for sure but they
don't become large cost impacts because we can then apply
additional resources without maybe having to increase the
budget or change the schedule.
Mr. Rohrabacher. So training, monitoring oversight, but let
me add one other word here that I over the years that I just
never hear and that is accountability, and if someone has a bad
judgment or if someone is in, especially if someone is
intentionally doing something wrong, I have not found the
ability of people to be fired or to be charges being brought
against people. And I just, especially if they are within the
system and making a bad judgment as compared to a contractor
from the outside. Shouldn't, isn't there a problem with
accountability here?
How many people do you know have been fired from their job
at NASA?
Mr. Scolese. If you mean by fired sent away from NASA----
Mr. Rohrabacher. Yeah.
Mr. Scolese.--you mean for wrongdoing, you know, they
violated the law, I wouldn't have the names but I----
Mr. Rohrabacher. Well, I wouldn't say violated the law. If
someone just has very bad judgment, I remember with Hubble
Telescope there was a bad decision made somewhere there where
they sent it up and the mirrors weren't exactly right, and it
was, it cost the taxpayers a lot of money.
We should--I know my time is up, so I will just say that we
need to be holding people more accountable for bad judgments,
irrational optimism. I know you are going to go to work on the
systematic problems as well.
Mr. Scolese. And we do the other, we do take into account
those types of things. We do hold people accountable, and we
have, in fact, replaced project managers, project personnel,
other personnel if they are not performing. But we also have to
recognize what caused them not to perform, and if it was
certainly their fault, we do remove them. To say that we fire
them, I can't necessarily say that, because oftentimes these
people have performed spectacularly in other areas, so we will
remove them from their current job and move them to another.
Mr. Rohrabacher. Okay. Thank you very much.
Chairwoman Giffords. Thank you, Mr. Rohrabacher. Thank you,
Mr. Scolese. Just in closing, I know that a lot of the work
that NASA has done in the budgetary areas were not reflected in
this GAO report. So when do you expect the Congress to be able
to see the result of the work that you have done?
Mr. Scolese. Well, as the GAO report said, you know, these
tools have been put in place in the last couple of years. Our
missions typically last or our mission cycle is typically three
to five years, so you should be seeing some of the results
soon. I think you will see our estimates, you know, better, but
probably you will see the real benefit of what we are doing in
the next couple of years, the next one to two years as we start
delivering on those missions that we started this process on
about two years ago.
Chairwoman Giffords. Thank you. Before we bring the hearing
to a close, I want to thank the witnesses for testifying before
the Subcommittee today. I want to thank my Ranking Member as
well for our first successful hearing and also as you saw there
is a real passion for space in this subcommittee, and a lot of
Members, new Members to the Congress represent NASA's
interests, the American people's interests. So I look forward
to a fruitful, productive next couple of years.
The record will remain open for two weeks for additional
statements from Members and for answers to any of the follow-up
questions the Subcommittee may ask of our witnesses. The
witnesses are excused, and the hearing is now adjourned. Thank
you.
[Whereupon, at 11:37 a.m., the Subcommittee was adjourned.]
Appendix:
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Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Christopher J. Scolese, Acting Administrator, National
Aeronautics and Space Administration (NASA)
Questions submitted by Chairwoman Gabrielle Giffords
Q1. NASA has noted on several occasions that problems with contractor
performance have led to cost overruns and schedule delays. What
corrective actions is NASA undertaking to ensure better contractor
performance and improve its contractor oversight for major acquisition
projects?
A1. NASA has instituted a multi-pronged approach to strengthen
acquisition planning and execution, increase management oversight, and
assess and address root causes for problems with contractor
performance. NASA has re-visited forums and metrics used to monitor,
track and report contract performance. NASA also is taking a closer
look at how contractor performance contributes to program and project
performance success.
As outlined in NASA Policy Directive 1000.5, ``Policy for NASA
Acquisition'' (issued January 2009), and NASA Procedural Requirements
7120.5D, ``NASA Space Flight Program and Project Management
Requirements,'' the Agency has instituted a strategic acquisition
planning and authorization process designed to strengthen program and
project formulation. This process begins with an Acquisition Strategy
Planning (ASP) Meeting, which approves a new or substantially changed
program or project triggered by Agency requirements or legislative
direction. The ASP is followed by an Acquisition Strategy Meeting (ASM)
to ensure program planning is in place and validates make/buy rationale
and any partnership decisions. The process culminates in a Procurement
Strategy Meeting (PSM) to approve the procurement strategy for
individual procurements. PSMs are conducted in accordance with Federal
Acquisition Regulations for each contract within a Project and focus on
the procurement process. These events are part of the normal program
and project formulation and implementation activities and lay a strong
foundation from which contracts will be managed.
Further, the Agency has instituted a forum to monitor the Agency's
largest and most complex contracts at a Senior Management Review of
program and project performance. On a monthly basis, all large
contracts from NASA's major projects are tracked for current value
compared with original value, award fee status, current and upcoming
significant procurement actions (including undefinitized contract
actions, restructures, etc.). Planned procurements that are within a
six-month horizon are also highlighted and discussed. Each NASA Mission
Directorate program and project is reviewed quarterly and their
associated contracts are addressed in more detail. This forum and the
data reviewed allow the Agency to focus on contract management and
proactively address issues, which should lead to project cost and
schedule growth.
Q2. You state in your testimony that NASA has initiated a number of
changes that address common issues such as optimism in cost estimates
and schedules and unrealistic assumptions on technology maturity, just
to name a few. How do you plan to ensure that current and future major
acquisition projects do not exceed the Congressionally-mandated cost
and schedule thresholds?
A2. NASA will apply improved assessment and reporting processes to the
current missions, but also recognizes that a number of these baseline
commitments were made prior to the introduction of these changes, and
we anticipate that it will be some time prior to realizing the full
results of the changes. If cost and schedule growth do occur in the
interim, NASA believes that our improved reporting processes will
better enable timely notification on the issues. NASA will continue to
take the steps necessary to rebalance the Agency portfolio to
accommodate those problems. It is anticipated that these initiatives
will continue to improve cost and schedule performance in the future.
Q3. You highlight in your testimony the use of Standing Review Boards
to provide an unbiased assessment of project performance at key
decision points. However, the independence of some of the discipline
experts on past boards has been questioned by the Agency's own
Inspector General. What is NASA doing to ensure that organizational
conflicts of interest no longer occur with Standing Review Board
members?
A3. NASA is updating the Agency policy ``NASA Space Flight Management
Requirements'' (NPR 7120.5D) with a NASA Interim Directive (NID) that
will establish the Standing Review Board handbook as the source of
guidance for establishing Standing Review Boards and assessing members
for potential organizational or personal conflict of interest. The NASA
Office of the General Counsel has reviewed the policy and procedures in
the NPR 7120.5D, and the Standing Review Board handbook, which guides
the establishment of Standing Review Boards to ensure that they will be
established in a manner consistent with federal law. The handbook
includes procedures that ensure identification of Standing Review Board
members who have conflicts of interest.
The handbook includes NASA's procedures to determine whether
nominees are employed by companies performing work for the program or
project under review. Ethics officials will verify Standing Review
Board participant independence. For those individuals determined to
have conflicts of interest, and whose value to the Board's work is
viewed by the convening authorities as critical, a waiver will be
submitted to ethics officials to request consideration to allow that
individual to participate on that Standing Review Board. As described
in the handbook, eligibility of Standing Review Board members, with
regard to their independence, will be reviewed on an annual basis.
The NASA Inspector General has accepted these updates as responsive
to their concerns.
Q4. Why is NASA's cost cap for the Joint Dark Energy Mission (JDEM)
lower than the National Research Council panel that reviewed the
mission thinks is realistic? Please provide a specific rationale for
the lower cost cap.
A4. NASA agrees with the National Research Council (NRC) that JDEM is a
>$1 billion-class mission. However, NASA does not expect to pay the
entire cost of the mission. NASA has been working in partnership with
the Department of Energy and is now engaged in discussions with the
European Space Agency (ESA) with the goal of achieving an exciting and
productive dark energy mission with our combined resources. NASA and
its partners have much work to do before establishing a firm cost
commitment at a formal mission confirmation review.
Q5. Pursuant to the NASA Authorization Act of 2005 (P.L. 109-155), on
May 1, NASA notified the Committee that the MSL project would exceed
the Baseline development cost by 15 percent or more. The Act further
requires NASA to notify the Committee after NASA makes a determination
that the development cost has exceeded the Baseline by 30 percent. Has
MSL reached the 30 percent cost growth threshold? If so, when was this
determination made? If not, do you anticipate that the project will
reach the 30 percent cost growth threshold and if so, when?
A5. In its letter of December 4, 2008, NASA informed the Committee of
its decision to defer launch of MSL to the 2011 launch window. NASA
noted MSL would require additional funding of approximately $400
million to support this schedule slip. While the letter does not
describe this prospective budget requirement in percentage terms, this
communication represents a determination that MSL will exceed its
baseline budget requirement by more than 30 percent by virtue of the
additional estimated funding required to accommodate the schedule slip
to 2011. NASA is preparing a formal detailed report pursuant to the
requirements of the NASA Authorization Act of 2005 and plans to submit
this report immediately following release of the FY 2010 budget
request. It should be noted that NASA will continue to review the MSL
program consistent with it program management processes and further
refinements can be expected as the review process progresses.
Q6. The Aerospace Industries Association recently advocated that DOD
budget for an 80 percent probability of success. From NASA's
perspective, what are the pros and cons of using a higher confidence
level than the 70 percent probability currently used by NASA?
A6. Prior to making the decision to adopt a 70 percent confidence
level, NASA evaluated the use of higher confidence levels and concluded
that the use of the 70 percent level allowed the optimal balancing of
risk across the Agency budget portfolio.
Q7. Should there be a reasonable level of reserves included in the
estimated cost of a program, and if so, what would you define as
``reasonable''? What are the pros and cons of a higher level of
reserves?
A7. The Agency has changed its approach to project estimating and
reserves. The use of probabilistic estimation represents a major shift
in the methods utilized to size and manage project and program
resources. This new paradigm requires that the Agency provide resources
and schedule sufficient to assure a specified probability of success
for the project and program. The probabilistic estimates are to be
sized to provide for all requirements, both anticipated and
unanticipated.
Q8. An analysis by the Aerospace Corporation concluded that cost
growth problems would continue until project managers were given
greater control. What are the pros and cons of giving project managers
greater control?
A8. The study suggested that the project manager needed to have full
authority to control costs (e.g., decline to allow the Center Director
to assign additional human resources to the project). The roles and
responsibilities of the Center Director and project manager differ. The
project manager's role is to assure success of his project within
budget and schedule. This role might lead the project manager to make
decisions that were good for the project at the expense of maintaining
Agency capability. The Center Director, on the other hand, is
responsible for maintaining the skills necessary to support all current
and projected projects that are to be executed by the Center.
This split and balancing of roles and responsibilities is
purposeful and important. These sometimes conflicting roles were
specifically created to encourage a balancing of short-term (project)
needs with longer-term institutional needs. Finally, as a check and
balance, decisions on allocating human capital are approved by NASA
leadership at the Mission Directorate, Associate Administrator, and
Administrator levels.
Q9. In his questioning during the hearing, Rep. Grayson raised the
issue of the contrasting approaches of having vendors be responsible
for overruns in fixed price contracts and not being obliged to pay for
cost growth in cost reimbursement contracts. In your response to Mr.
Grayson, you acknowledged that NASA uses fixed price contracts when the
Agency understands the requirements ``so that a contractor will, in
fact, bid on it and know that they have a chance of being successful.''
In contrast, you said that NASA uses cost reimbursement type contracts
when there is some uncertainty in the requirements. Since NASA's
program management process fully recognizes that a project usually
starts with uncertainty but then matures through success design
reviews, could NASA use a cost reimbursement contract for the work up
conducted through the Preliminary Design Review (PDR) or Critical
Design Review (CDR) and then subsequently utilize a fixed price
contract? Has such a hybrid approach ever been taken, and if so, what
were the results?
A9. NASA's goal is to ensure that the cost risk for each requirement is
properly allocated between NASA and industry. Cost-reimbursement award-
fee contracts are generally most appropriate for use on NASA's high-
risk and complex science missions and Design, Development, Test and
Evaluation (DDT&E) contracts. During the development phase of a
project, NASA should take on the cost risk because of the difficulty of
developing firm estimates for the cost of the work to be performed. Use
of fixed price type contracts under these circumstances would
invariably result in contractors proposing significantly higher prices
to compensate for the high-risk. In order to mitigate the Government's
risk under these cost type contracts, NASA utilizes incentive
arrangements (i.e., award fee incentives, performance fee incentives,
etc.) in conjunction with our cost-reimbursement contracts. The
incentive tee arrangements contain clear and unambiguous evaluation
criteria that are linked to cost, schedule, and technical performance
requirements of the contract that provide contractors with distinct
incentive to control costs and develop a high quality product. These
practices are in line with the White House memorandum on Government
Contracting, dated March 4, 2009, and demonstrate NASA's commitment to
contract oversight and risk mitigation.
NASA program and project offices work together to develop
requirements and workload projections with the goal of moving toward
fixed price contracts as soon as possible. As products and services
mature, NASA considers a movement toward fixed price contracts for
production and operations. For fixed price contracts, payment amounts
can be based on performance as measured by standards and metrics. NASA
will have examples of such an approach once a system is fully developed
and going into maximum production. At this time, the hybrid approach
involving costs-reimbursement and fixed price contracts has not yet
been tested.
Question submitted by Representative Ralph M. Hall
Q1. Given the long experience of schedule and cost growth in complex
missions, why not simply impose higher cost and schedule reserves at
the project's outset, instead of trying to operate with a too-small
reserve when the project encounters difficulties?
A1. NASA has undertaken a number of initiatives intended to improve the
quality of initial cost and schedules. These initiatives are documented
in the NASA High-Risk Corrective Action Plan and have been reviewed in
the recent GAO QuickLook Report. In particular, the NASA transition to
the use of joint confidence level calculation at a 70 percent
confidence level will essentially increase the ``set point'' for
project cost and schedule estimates. Probabilistic estimating provides
NASA with an approach that fully integrates technical, cost, and
schedule plans and risks to develop both an understanding of the
sensitivity of parameters to each other and the most likely estimate.
Using this approach allows NASA to understand and document how the
mitigation of technical risks would enable an increase in the project
confidence level. Conversely, the introduction of a budget reduction
would have the effect of increasing technical and schedule risks and
thus lower the confidence level for the project. The use of
probabilistic estimates also generates baseline values that include
funding to address impacts associated with contingencies and
uncertainties, such as industrial base, partner performance and
technology optimism. By controlling the confidence levels at the
program (rather than just project) level, NASA intends to be more
vigilant in evaluating the state of the program's portfolio prior to
undertaking additional projects. NASA expects that these steps will
enable NASA to better control the tendency to undertake too much with
too little.
Questions submitted by Representative Pete Olson
Q1. When NASA experiences large cost increases without advanced
warning it damages the Agency's credibility and reputation with
stakeholders including Congress. Would you detail for us the actions
the Agency has taken to improve its ability to forecast increases
earlier so problems can be more readily managed and solutions more
easily implemented?
A1. NASA has undertaken a number of initiatives intended to forecast
and mitigate problems as early as possible. These initiatives include
increased ongoing performance monitoring and more extensive review at
key life cycle decision points, supported by expert, independent
assessments.
NASA has an ongoing performance review process to ensure that it
can forecast increases, as early as possible, and work a solution. NASA
uses several methods of tracking cost, schedule and science/technical
requirements, and at multiple management levels.
NASA projects employ various tools, including Earned Value
Management, to monitor progress toward the baseline cost, schedule and
technical deliverable. Center and Mission Directorate management review
progress on a monthly or quarterly basis. Additionally, the Baseline
Performance Review (BPR) process was implemented in 2007. The BPR is a
monthly review, which assesses all Agency programs, with Agency Senior
Management. On a quarterly basis, each Mission Directorate is
spotlighted, providing a more in-depth assessment of its portfolio.
This process provides not only individual program assessment but also a
method to identify and address systemic programmatic and institutional
issues that may affect multiple programs.
In addition, the Agency implemented Key Decision Points (KDPs) with
the release of NASA Procedural Requirements, NPR 7120.51D, NASA Space
Flight Program and Project Management Requirements (effective March
2007). KDPs serve as gates through which programs and projects must
pass before proceeding to the next phase. Each KDP is preceded by one
or more project or program-level reviews. Standing Review Boards are
established to provide an expert, independent assessment throughout the
Programs and Project's life cycle. These assessments are provided in
support of the KDPs, with their views and recommendations.
Questions submitted by Representative Charles A. Wilson
Q1. Experience has shown that there are major risks to program cost
and schedule when insufficient large scale testing is performed during
hardware development. What are NASA's plans for Orion and Ares I for
large scale acoustic, vibration, thermal vacuum, and electromagnetic
interference testing?
A1. Both Orion and Ares I will conduct testing starting at the
component level, through system testing and then to large-scale
testing. All component and systems will undergo acoustics, vibration,
thermal, vacuum and electromagnetic interference and compatibility
(EMI/EMC) testing for flight qualification. There will be vehicle
specific (Orion-only, Ares-only) testing as well as integrated testing,
including integrated vehicle (Orion and Ares) and ground systems as
well as flight vehicle testing.
For large-scale testing to support qualification, Orion will
undergo a complete suite of integrated qualification tests for (EMI/
EMC) at the Integrated Environmental Test Facility at Glenn Research
Center's Plum Brook Station in Ohio. The facility is undergoing
modifications to support this testing.
For Ares I, the size of the launch vehicle dictates a different
hardware qualification flow. The components and systems will be tested
to the established environmental (acoustics, vibration, thermal, and
vacuum) as well as EMI/EMC requirements. The Ares I project is planning
to use several full-scale Structural Test Articles to qualify the stage
and tank structure. An entire Integrated System Test Article, including
flight avionics, will be built. This test article will undergo a
complete test firing. For the Ares I First Stage, three qualification
motor firings are planned.
An integrated Orion/Ares stack will undergo a mated Integrated
Vehicle Ground Vibration Test at Marshall Space Flight Center in
Alabama. Plans are also being developed to conduct a complete Flight
Element Integration Test on the integrated Orion/Ares I stack at
Kennedy Space Center in Florida.
And finally, the Constellation test program will culminate with the
Orion 1 flight test. Orion 1 is an un-crewed, fully functional orbital
vehicle which will be launched on the Ares I. This flight has been
designed to test and evaluate the integrated systems, exposed to the
natural and induced environments experienced through the entire
mission.
Answers to Post-Hearing Questions
Responses by Cristina T. Chaplain, Director, Acquisition and Sourcing
Management, Government Accountability Office (GAO)
Questions submitted by Chairwoman Gabrielle Giffords
Q1. In your latest review, you say that NASA has attributed many of
the issues on its projects to contractor performance. The
identification of contractor performance issues begs the question of
whether NASA undertakes adequate contractor oversight.
a. Do you have observations on the level of oversight of
contractors that NASA provides?
b. In your opinion, is NASA doing enough up-front thinking and
communication about the project and its requirement in order to
clearly lay out for the contractor what work needs to be
accomplished?
A1. Our assessment of selected large-scale NASA project focused on the
status of major projects and the level of knowledge being attained at
critical junctures. While we discussed management and oversight issues
with both project managers and contractors, we did not specifically
seek to measure the level of oversight NASA provided to its
contractors. However, we observed instances where contractor
capabilities were overestimated and could have been better understood
up-front. For example, the Dawn contractor had no experience in deep
space missions and more specifically, in ion propulsion systems for
such missions, and officials from the company acknowledged they had
difficulty developing the ion propulsion system for the spacecraft. In
addition, it appeared to us that the contractor NASA used for the Glory
and NPP projects overestimated its capacity to provide the work when
promised, which was exacerbated when it closed one development facility
and had difficulty hiring experienced staff at its new facility. In
both these cases, the contractors cited communication gaps with NASA
when their projects were experiencing problems. Given these and other
instances, we believe NASA could do more up-front assessments about
contractor capabilities and better plan for potential problems when
contractors have not had prior experience with particular technologies
or types of missions.
Q2. What steps can Congress take to improve its oversight of NASA's
acquisition of major projects in an effort to help address some of the
issues identified by the GAO?
A2. The Congress has laid a good foundation for acquisition oversight
by requiring NASA to establish baselines for major programs and report
back when certain thresholds are breached. It can continue to build on
this foundation by continually examining factors behind cost and
schedule growth. Moreover, Congress can also support change though its
own decisions about whether to authorize and appropriate funds for a
program or project that is not performing well. Specifically, decisions
to move projects into implementation should be based on whether a sound
business case has been established, i.e., there is sufficient knowledge
that requirements can be achieved within available time, funding,
technology, workforce, and industrial base constraints.
Q3. What corrective actions already undertaken by NASA show the most
promise for dealing with cost management issues?
A3. Since NASA only recently issued its Corrective Action Plan, it is
too early to determine whether any of these actions shows more promise
than others. If these corrective actions are implemented in the spirit
intended, they all have merit. Moreover, the success of any one
improvement effort, such as cost estimating reform, depends on the
success of others, such as those focused on producing more attention
and oversight from senior leadership. GAO remains very interested to
see NASA's commitment to following through on this plan and we await
the results.
Q4. Your prepared statement indicates similarities between what NASA
faces with cost and schedule issues and what has been experienced by
DOD and other federal agencies in their acquisition of space systems.
Are some of the corrective actions undertaken by NASA of possible
benefit to other agencies who conduct space acquisitions? Conversely,
are there any ``lessons learned'' from those other agencies?
A4. It is difficult to determine which actions the Department of
Defense and others can benefit from because NASA is still implementing
its plan and not enough time has passed to determine impact. In
addition, the DOD and National Reconnaissance Office space communities
are implementing some similar reforms, notably in the area of cost
estimating. In fact, cost estimators from all three communities have
been sharing lessons learned in this regard. All three communities also
seem to recognize the need to build knowledge about technologies and
other resources before making long-term commitments to programs.
Whether they can sustain the commitments they are making in this
regard, however, remains to be seen.
Q5. Your statement points out the MSL, ``which was already over budget
recently announced a two-year launch delay,'' which you indicate will
increase the cost of the mission. While that is accurate, would GAO
recommend that NASA should have done something other than take the two-
year launch delay? What would GAO do differently at this point in the
project?
A5. Clearly, at the time NASA announced the delay, it had no
alternative but to delay the launch two years, and to fund the delay by
diverting funding from other programs, or to cancel the program
altogether. Our recommendations focus instead on preventing NASA from
being faced with a similar situation in the future. Had the Mars
Science Laboratory program followed a best practice approach, it would
have had more knowledge about the technologies--both critical and
heritage--it was pursuing at the time it estimated cost and schedule.
There would have also been more robust planning for potential risks and
more oversight from the Agency if cost, schedule, and performance
issues did surface.
Q6a. How successful have other agencies been at using confidence
levels?
A6a. It is still too early to tell. NASA has just started to implement
this policy and so has the FAA, DOD and other agencies.
Q6b. Has this technique mitigated cost growth?
A6b. We do not know yet. Other agencies, including DOD, have only
recently begun applying higher confidence levels to estimates of space
and other complex programs. It is too early to determine their success
in mitigating cost growth. It should be stressed, however, that higher
confidence levels will not work as a practice if estimates are being
made when there are significant unknowns about technologies,
contractors' capabilities, funding availability, and requirements,
among other factors. Moreover, higher confidence levels will not work
unless they consider project risk assessments as well as cost and
schedule risk analyses that capture the effects of funding cuts and
lack of contractor capabilities.
Q6c. Do you agree with NASA's choice of 70 percent confidence level or
do you advocate a higher or lower level?
A6c. We have not made a recommendation or analyzed how high a
confidence level should be for space programs but are encouraged that
there is a desire to increase the confidence in estimating and that
there are efforts underway to do so. Experts agree that technically
risky programs that push the edge of technology should be funded at
higher confidence levels (above 50 percent) since there are so many
unknowns. Some experts have recommended that funding be at the 80
percent level for new endeavors where no historical data exists to
cover the ``unknowns'' (e.g., going to Mars).
Q7. Why is NASA acquisition management still characterized by GAO as a
high-risk area after 18 years?
A7. Historically, high-risk areas have been so designated because of
traditional vulnerabilities related to their greater susceptibility to
fraud, waste, abuse, and mismanagement. Since we designated NASA
contract management as high-risk in 1990, our high-risk reports have
focused on a variety of aspects related to controlling costs and risks
in large-scale efforts--including, for example, definitizing contracts,
implementing a new financial management system, and improving cost
estimating. The underlying constant has been that programs are
consistently over cost and behind schedule though the extent of cost
growth had been hard to track until recently because of frequent re-
baselining. Because cost growth and schedule delays persist due to much
more than risks inherent in spacecraft development, this area--now
titled acquisition management because of the scope of issues that need
to be resolved--remains high-risk.
Q8. What must NASA do to warrant removal from GAO's high-risk list?
A8. NASA has taken significant steps in this direction but still faces
substantial work on difficult initiatives where risks remain high. NASA
has laid out a broad plan for reducing acquisition risk and taken steps
to reflect best practices in policies. The plan specifically seeks to
strengthen program and project management, increase accuracy in cost
estimating, facilitate monitoring of contractor cost performance,
improve agency-wide business processes, and improve financial
management. Much work remains to achieve this plan. Some of the
potentially most important initiatives in reducing cost growth and
schedule slippage, and some of the most difficult parts of some
initiatives have yet to be addressed. This will be difficult given the
pressures the Agency is facing as it moves forward with the Ares I,
Orion, and other expensive, highly anticipated programs such as the
James Webb telescope. For instance, the desire to close the gap in
human space flight may pressure NASA to move ahead with its Ares and
Orion programs while there are still unknowns about technologies,
design, and producibility, and to defer testing that is important to
reducing cost and schedule risk. Coming off the high-risk list would
also require NASA to find ways to better anticipate and mitigate what
it currently believes is outside a program's control. For example,
potential delays due to a crowded launch manifest could be better
analyzed and factored into schedule estimates. Contractor capabilities
could also be better understood up-front. NASA could work with the DOD
on both issues, in fact, to develop more strategic approaches to
problems in the launch manifest and the space industrial base.
Q9. During the hearing, Rep. Grayson raised the issue of contrasting
approaches of having vendors be responsible for overruns in fixed-price
contracts and not being obliged to pay for cost growth in cost-
reimbursement contracts. Since NASA's program management process fully
recognizes that a project usually starts with uncertainty but then
matures through successful design reviews, could NASA use a cost-
reimbursement contract for the work conducted through the Preliminary
Design Review (PDR) or Critical Design Review (CDR) and then
subsequently utilize a fixed-price contract? Has such a hybrid approach
ever been taken, and if so, what were the results?
A9. We do not know of instances where the hybrid approach described has
been used for NASA or other space systems. For the hybrid approach to
work, the contracts would need to be applied at a point where there is
a high degree of certainty about technology, requirements, funding,
etc. In DOD space programs, this is often not considered to occur until
two satellites have been built. While we believe NASA can reduce
critical unknowns about programs before programs enter implementation,
there are other uncertainties that could unfairly impact a contractor
under a fixed-price contract, such as a late delivery of a satellite
component by one of NASA's international partners or an unforeseen
problem with a launch vehicle. Moreover, in applying the hybrid
approach, the government would need to be willing to stop programs that
did incur cost increases, as a contractor would be unlikely to be
willing to sustain long-term losses. This has been difficult to do in
the past. For example, when it became apparent that contractors were
sustaining losses for DOD's advanced extremely high frequency satellite
program as well as the evolved expendable launch vehicle, the
government did not stop the programs but rather converted to cost-plus
arrangements. Conversely, when NASA stopped fixed-price arrangements
under the X-33 and X-34 programs, it lost several years in its efforts
to develop a successor to the Space Shuttle. Another caution is that a
number of space programs that have tried to use fixed-price approaches
in the past assumed that there would be a commercial market that would
create a future demand for the outcome of their work with the
government, which in turn, created an incentive for a company to work
under a fixed price arrangement. However, this assumption later proved
to be erroneous.
Question submitted by Representative Ralph M. Hall
Q1. Given the long experience of schedule and cost growth in complex
missions, why not simply impose higher cost and schedule reserves at
the project's outset, instead of trying to operate with a too-small
reserve when the project encounters difficulties?
A1. We would encourage NASA to do so given the history of cost and
schedule problems, though NASA would need to concurrently ensure that
programs are not incentivized to use up all of their reserves.
Ultimately, establishing higher reserves may mean starting fewer
programs--an approach the Administration, Congress and the many
communities involved with NASA's major programs would need to support.
Answers to Post-Hearing Questions
Responses by Gary P. Pulliam, Vice President, Civil and Commercial
Operations, The Aerospace Corporation
Questions submitted by Chairwoman Gabrielle Giffords
Q1. In your statement, you speak of teams wanting to put their best
foot forward when being faced with the competitive pressure of
initiating a mission at the lowest cost. You go on to say that, in some
cases, underestimated content or complexity is often the result. How
can we incentivize NASA teams to be realistic in identifying both their
requirements and resource needs?
A1. Realism in identifying both the requirements and resource needs of
a mission requires the proper balance between the complexity of science
proposed for a mission and the risk of growth in cost and schedule for
this mission.
For NASA missions proposed through the Announcement of Opportunity
(AO) process, the complexity of science that the proposer will pursue
is decided by the proposing team, led by the Science Principal
Investigator. Because of the open-ended nature of the science request
for AOs, the proposer is incentivized to provide the maximum science
capability within a fixed cost and schedule constraint. In order to
capture the opportunity, the proposer typically pushes the envelope of
performance within this cost and schedule cap, without proper regard to
the likelihood of the mission exceeding the cost and schedule ``box.''
Too often the result is cost and schedule growth as the design matures
and the concept is determined to be more difficult to develop than
originally envisioned.
For competed NASA missions, a selection that balances risk with
science value has the potential to significantly reduce cost and
schedule growth. A mission that has robust technical margins and is
clearly within the cost and schedule envelope should experience limited
cost and schedule growth. A selection such as this would be considered
a low risk selection. If NASA solicitations promoted low risk missions
and selected missions that were considered low risk, then the
likelihood cost and schedule growth would be reduced. Further, it is
expected that these NASA actions would incentivize the proposing teams
to be more realistic about their requirements and resources needed.
It must be understood, however, that if NASA selects only low risk
missions, the potential science value of these may be reduced as well.
It is hard to argue that a mission like Kepler, which is attempting to
discover Earth-like planets, is not exciting science. At the same time,
Kepler experienced significant cost and schedule growth. If not for
that allowance of cost and schedule growth, the Kepler mission could
not have been developed.
One way to potentially balance cost and schedule risk versus
science value is to employ a strategy that matures a technology through
a focused technology development program prior to becoming a candidate
NASA project. A generally accepted risk avoidance practice is to fund
focused technology development prior to system development. However,
due to budget constraints, NASA has recently reduced technology
development funding in many areas.
Q2. Your statement indicates similarities between what NASA faces with
cost and schedule issues and what has been experienced by DOD and other
federal agencies in their acquisition of space systems. Are some of the
corrective actions undertaken by NASA of possible benefit to other
agencies who conduct space acquisitions? Conversely, are there any
``lessons learned'' from those other agencies?
A2. The DOD-initiated Cost Analysis Requirements Descriptions (CARD)
inspired the NASA Cost Analysis Data Requirement (CADRe) effort. The
CADRe effort that NASA has initiated is an excellent method to capture
the cost, schedule, and technical data in a uniform way throughout the
life cycle of a mission. Placing this data in a central repository,
which is accessible by the community, is a significant step forward in
terms of documenting and sharing data. CADRe allows NASA to perform
detailed studies within a program as well as across NASA programs.
CADRE also provides the comprehensive information required for the
prediction of cost, schedule, and performance. The DOD could use a
similar approach to share program development data among its
acquisition community.
The concept of budgeting to a confidence level, which NASA has
recently implemented, was first adopted by the DOD. DOD also pioneered
the use of Earned Value Management (EVM) on all of its acquisitions,
and NASA followed with the requirement of EVM for developments over a
certain dollar threshold. Although implementation of budgeting to a
confidence level and the use EVM does not assure success, it should
reduce the likelihood and magnitude of cost and schedule growth. In
2007, NASA again followed DOD's lead in introducing Key Decision Point
(KDP) processes and criteria into the NASA Project development life
cycle. The purpose of KDP processes is to use explicit criteria to
decide whether a particular program or project is ready to move on to
the next phase in its life cycle.
Q3. You state in your prepared statement that: ``the project must
manage to a valid baseline estimate.'' You further note that ``One area
of concern for the NASA project managers is the relevance and utility
of independent cost estimates they do not own. Different methodologies
are used by the project and independent estimates such that there is
not a common understanding of the basis for estimate for each.'' You
note that ``greater transparency into the basis of estimate for each
approach is important.'' Could you please elaborate on your concerns
about independent cost estimate at NASA and what specific types of
actions NASA might take to ensure transparency in its estimates?
A3. NASA independent cost estimates are typically conducted with cost
models using input parameters that are not fully understood by Project
Managers. Consequently, Project Managers often have limited insight
into how an independent cost estimate is developed, and thus its
validity, relevance, and utility. Furthermore, it is often difficult
for NASA cost analysts to communicate the intricacies of their estimate
to the project team. The project team uses a different cost
methodology, estimating the effort of tasks from the bottom-up, based
on the knowledge of the individuals working on the project. These
differences in assumptions and methodologies make reconciliation of
cost estimates difficult.
NASA cost analysts must do a better job of demonstrating how their
estimates compare with historical cost data in order to provide Project
Managers confidence that their models are predictive. The collection of
CADRe data provides the basis for such a comparison. NASA cost analysts
must also fully explain the methodology, as well as the data inputs, to
Project Managers. In particular, when subjective data inputs are
introduced into the cost models, and used in a certain manner, NASA
cost analysts must provide Project Managers with a full understanding
of the basis for using these inputs. This increased transparency would
likely result in Project Managers having an increased understanding and
confidence in the independent cost estimates.
Q4. In describing what else needs to be done, your testimony
highlights the need to strengthen the connection between an independent
cost estimate and the project estimate to include the effects of risk
and risk mitigation. Why is the project's ownership of the cost
estimate so important?
A4. The project must ``own'' the independent cost estimate if it is
expected to manage to it. The project must believe that the baseline
cost estimate is valid and achievable so that they can steadfastly work
toward executing the plan. Too often, the independent cost estimate is
unrelated to project risk management results, and there is a disconnect
between the risk identification process and the cost estimate. It is
critical to link these two processes.
Projects use risk identification to measure their robustness.
Furthermore, an economic assessment can determine if a project should
implement a risk mitigation effort. The identification of risk and risk
mitigation activities helps the project to fully understand how the
baseline plan would be affected by certain risks. Space system
development projects have processes for identifying and managing risks,
such as the 5 x 5 matrix process that classifies likelihood and
consequences for each risk. A probabilistic cost estimate approach that
incorporates all discrete risks may be a way to ensure that the Project
Manager and the independent cost estimate team have a common language
and understanding of risk.
Q5. Your testimony refers to NASA's recent requirement to develop
budgets with a 70 percent confidence level. Your statement also notes
that ``The validity of this approach, however, depends on the stability
and soundness of the baseline'' budget. What is needed to ensure that
the requirement for a 70 percent confidence level in developing NASA
budget estimates will be effective?
A5. A stable baseline budget is critical to the development of a
project plan that can be effectively managed and executed. A sound,
stable baseline plan requires the development early in a project of the
70 percent confidence level that assesses all potential outcomes and
incorporates all potential risks. The development of the 70 percent
confidence level entails identifying the potential risks and
quantifying their potential impact in terms of cost or schedule growth.
The development of this comprehensive risk plan and a robust confidence
level assessment allows for a stable and comprehensive baseline plan.
Note that Earned Value Management (EVM) is much more effective if
the measurement of progress is based on performance against a stable
plan. Multiple replanning or re-baselining activities make EVM
significantly less effective. Replanning and/or re-baselining are
sometimes necessary due to subsequent project changes. However, a
stable, robust baseline plan from the outset should reduce the need for
replanning and lead to a more efficiently managed project.
Q6. How successful have other agencies been at using confidence
levels? Has this technique mitigated cost growth? Do you agree with
NASA's choice of a 70 percent confidence level or do you advocate a
higher or lower level?
A6. Many Blue Ribbon panels advocate creating a program reserve by
budgeting to a higher confidence level as good practice. However, it is
too early to tell how effective budgeting to a higher confidence level
is in controlling cost and schedule growth. The DOD started using cost
confidence levels to improve program budgeting about eight years ago.
It has not been uniformly applied across DOD space programs; and given
the long development timelines for major space programs, there are few
completed programs that were initiated using this budget approach. In
addition, the resulting increased funding from budgeting to higher
confidence levels have not been consistently applied within the
programs. Since several factors contribute to a project's cost and
schedule growth, it may be difficult to determine if solely setting a
cost confidence level has reduced cost growth in the DOD until more
data becomes available.
Q7. In the past year, we have seen a growing number of protests
associated with NASA contract awards. To what do you attribute this
growing number of protests? Are there some steps NASA could take to
minimize vendors' need to file such protests? Is this phenomenon unique
to NASA or are you observing a similar trend at DOD?
A7. Since Aerospace has not participated in a NASA source selection
that has lead to protests, we cannot speak to specific experience on
the subject. It could be postulated, however, that as mergers occur and
fewer and fewer contractors are competing for fewer and fewer missions,
it is inevitable that more protests would be filed. Many elements of
NASA proposal evaluations are subjective in nature and, therefore, are
open to debate and potential protest. For example, it is difficult to
determine objectively the relative science value of a mission visiting
an asteroid vs. one that visits a planet. Even with more objective
evaluation criteria, such as those for DOD procurements, there still
may be an incentive for a company to file a protest if it believes that
its proposal has been misinterpreted.
Q8. During the hearing, Rep. Grayson raised the issue of contrasting
approaches of having vendors be responsible for overruns in fixed price
contracts and not being obliged to pay for cost growth in cost
reimbursement contracts. Since NASA's program management process fully
recognizes that a project usually starts with uncertainty but then
matures through success design reviews, could NASA use a cost
reimbursement contract for the work up conducted through the
Preliminary Design Review (PDR) or Critical Design Review (CDR) and
then subsequently utilize a fixed price contract? Has such a hybrid
approach ever been taken, and if so, what were the results?
A8. Given the nature of NASA's primary objective, which is to develop
missions that provide first-of-a-kind, world-class science, it is our
opinion that using a fixed price contract structure would not be
appropriate for the majority of NASA's contracts. The commercial
communications industry, which has a continuing product line and very
well defined and stable requirements from the customer, uses this
approach with great success. As stated in the written testimony,
however, since NASA does not typically have a mature design and stable
requirements until late in the design process, a fixed price contract
structure must be applied with great caution and only in certain
circumstances. For projects where uncertainty is high and the potential
risks are significant, a fixed price contract would not be beneficial
either for NASA or its contractors.
Q9. Should there be a reasonable level of reserves included in the
estimated cost of a program and, if so, what would you define as
``reasonable''? What are the pros and cons of a higher level of
reserves?
A9. Aerospace was involved in a previous study which suggested nominal
reserve levels based on historical data for a specific set of robotic
science missions. These nominal reserve levels were not intended to
provide a hard and fast rule for specifying a percentage of reserves
that all projects should carry. Aerospace recommends that the level of
reserves should be commensurate with a given project's risks and
criticality. Reserves could be defined by the confidence level
requirement of the budget (i.e., the higher the confidence level, the
greater the magnitude of the reserves). Budgeting using confidence
levels allows the magnitude of a project's reserves to vary
proportionately with each project's 70 percent confidence level, thus
reflecting each project's unique risks.
It is critical that NASA hold funds in reserve to manage its
portfolio of missions. A project will use its available funding,
including reserve, in order to mitigate risks and ensure mission
success. This it is imperative to allocate some portion of the reserve
funding at a higher level, such as to a Program, which is a collection
of Projects, or to NASA Headquarters (HQ). This tiered reserve
allocation allows funding at the Program or HQ level to be quickly
allocated to other Projects that exceed their initial allocation. It
also provides for a more flexible portfolio management approach,
allowing less reserve to be held for any single project.
Question submitted by Representative Ralph M. Hall
Q1. Given the long experience of schedule and cost growth in complex
missions, why not simply impose higher cost and schedule reserves at
the project's outset, instead of trying to operate with a too-small
reserve when the project encounters difficulties?
A1. Since mission success is the objective of Project Managers,
projects tend to use all of the cost and schedule reserves that they
control in order to reduce mission risk. Hence, any additional project
cost and schedule reserves provided would typically be used to further
reduce mission risk through performing additional testing, developing
additional testbeds, purchasing additional spare hardware, etc. Having
higher project cost and schedule reserves may decrease perceived cost
and schedule growth; however, in the end, the actual cost and schedule
of missions may be greater. Given NASA's fixed annual budget, the
approach of imposing higher cost and schedule reserves for could lead
to a reduction in the number of missions that NASA is able to develop.
To be able to effectively manage its portfolio of missions,
however, it is critical that NASA hold funds in reserve. Assuming that
a project will use its available funding including reserve, it is
imperative that NASA allocate some portion of the reserve funding at a
higher level, such as to a Program, which is a collection of Projects,
or to NASA Headquarters (HQ). This tiered reserve allocation allows
funding at the Program or HQ level to be allocated to those Projects
that exceed their initial allocation. This approach also provides for a
more flexible portfolio management approach, allowing less reserve to
be held for any single Project. A tiered reserve, which distributes
reserves at different organizational levels, represents a balanced
approach. While it provides some reserves for the Project Managers to
rapidly address development problems before their costs escalate, it
does not release all reserves to the Projects where the funds would
most likely be used up-front to plan additional mission risk reduction
activities.
Questions submitted by Representative Pete Olson
Q1. Are there valid reasons why it might be necessary for a project to
enter the implementation phase without having fully matured critical
technologies? And if so, are there ways to compensate for the increased
risk?
A1. For the majority of NASA missions, it is prudent for NASA to fully
develop its critical technologies prior to the start of the
implementation phase. However, NASA may be required to start mission
implementation without having fully matured critical technologies if
the timeliness of a mission is such that it must be fielded on a highly
expedited schedule. Although such a timeliness requirement is more
prevalent in national security space systems, NASA could have a
compelling need (e.g., a rescue or replacement of a critical NASA
satellite or capability) that requires such timeliness. When a project
must enter the implementation phase without having fully matured
critical technologies, the project should compensate for the increased
risk by developing alternative technologies in parallel. Then if a
critical technology is not ready, an alternative technology could be
implemented. Note that developing alternative technologies in parallel
to compensate for increased risk may result in higher mission cost and
decreased mission capability.