NASA: Major Management Challenges and Program Risks (12-JUN-03,  
GAO-03-849T).							 
                                                                 
Since its inception, the National Aeronautics and Space 	 
Administration (NASA) has undertaken numerous programs that have 
greatly advanced scientific and technological knowledge. NASA's  
activities span a broad range of complex and technical endeavors.
But the agency is at a critical juncture, and major management	 
improvements are needed. In January of this year, we identified  
four challenges facing NASA: (1) strengthening strategic human	 
capital management, (2) improving contract management; (3)	 
controlling International Space Station costs, and (4) reducing  
space launch costs.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-849T					        
    ACCNO:   A07148						        
  TITLE:     NASA: Major Management Challenges and Program Risks      
     DATE:   06/12/2003 
  SUBJECT:   Cost accounting					 
	     Cost analysis					 
	     Cost control					 
	     Financial management				 
	     Human resources utilization			 
	     Internal controls					 
	     Strategic planning 				 

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GAO-03-849T

Testimony Before the Columbia Accident Investigation Board

United States General Accounting Office

GAO For Release on Delivery Expected at 9: 00 a. m. EDT Thursday, June 12,
2003 NASA

Major Management Challenges and Program Risks

Statement of Allen Li, Director Acquisition and Sourcing Management

GAO- 03- 849T

Page 1 GAO- 03- 849T NASA Challenges and Risks

Chairman Gehman and Members of the Columbia Accident Investigation Board:
Thank you for inviting me to discuss the challenges and risks facing the
National Aeronautics and Space Administration (NASA). You asked that we
provide information concerning NASA, particularly the management of

the Space Shuttle Program. We recognize the complexity and difficulty in
establishing not only the cause of the Columbia accident, but also in
understanding the agency*s environment in which management decisions are
made. We believe our body of work can help the Board in this area.

Since its inception, NASA has undertaken numerous programs that have
greatly advanced scientific and technological knowledge. As you are aware,
NASA*s activities span a broad range of complex and technical endeavors.
But the agency is at a critical juncture, and major management
improvements are needed. In January of this year, we identified four
challenges facing NASA. 1  Strengthening strategic human capital
management.

 Improving contract management.  Controlling International Space Station
costs.  Reducing space launch costs.

Weak contract management and financial controls pose risks across the
agency. Therefore, we have placed this area on our high- risk list.

In summary, these challenges affect NASA*s ability to effectively run its
largest programs. NASA*s ultimate challenge will be in tackling the root
problems impeding those programs. This will require (1) instituting a
results- oriented culture that fosters knowledge sharing and empowers its
workforce to accomplish programmatic goals; (2) ensuring that the agency
adheres to management controls to prevent cost overruns and scheduling

problems; (3) transforming the financial management organization so it
better supports NASA*s core mission; and (4) sustaining commitment to
change.

1 See U. S. General Accounting Office, Major Management Challenges and
Program Risks: National Aeronautics and Space Administration, GAO- 03- 114
(Washington, D. C.: January 2003). Results in Brief

Page 2 GAO- 03- 849T NASA Challenges and Risks

An agency*s most important organizational asset is its people* they define
the agency*s culture, drive its performance, and embody its knowledge
base. Leading public organizations worldwide have found that strategic
human capital management must be the centerpiece of any serious change
management initiative. However, NASA, like many federal agencies, is
facing substantial challenges in attracting and retaining a highly skilled
workforce, thus putting the agency*s missions at risk. While NASA is
taking comprehensive steps to address this problem across all mission
areas, implementing a strategic approach to marshal, manage, and maintain
human capital has been a significant challenge. In January 2001, we
reported that NASA*s shuttle workforce had declined

significantly to the point of reducing NASA*s ability to safely support
the shuttle program. 2 Many key areas were not sufficiently staffed by
qualified workers, and the remaining workforce showed signs of overwork
and

fatigue. Recognizing the need to revitalize the shuttle program*s
workforce, NASA discontinued its downsizing plans in December 1999 and
initiated efforts to hire new staff. In September 2001, we testified that
NASA was hiring approximately 200 full- time equivalent staff and that it
had focused more attention on human capital in its annual performance plan
by outlining an overall strategy to attract and retain skilled workers. 3
However, considerable challenges remain, including the training of new

staff and addressing the potential loss of key personnel through
retirement.

As we reported in January 2003, these challenges have not been mitigated,
and work climate indicators, such as forfeited leave and absences from
training courses continue to reflect high levels of job stress. In
addition,

staffing shortages in many key skill areas of the shuttle program remain a
problem, despite the recent hires. These areas include subsystems
engineering, flight software engineering, electrical engineering,

environmental control, and shuttle resources management. NASA*s hiring
posture for fiscal year 2003 has been to target areas where skill
imbalances still exist in the shuttle program.

2 See U. S. General Accounting Office, Major Management Challenges and
Program Risks: National Aeronautics and Space Administration, GAO- 01- 258
(Washington, D. C.: January 2001). 3 See U. S. General Accounting Office,
Space Shuttle Safety: Update on NASA*s Progress in Revitalizing the
Shuttle Workforce and Making Safety Upgrades GAO- 01- 1122T (Washington,
D. C.: Sept. 6, 2001). Strengthening

Strategic Human Capital Management

Page 3 GAO- 03- 849T NASA Challenges and Risks

NASA believes that similar workforce problems affect the entire agency and
that, as a result, its ability to perform future missions and manage its
programs may be at risk. Currently, the average age of NASA*s workforce

is over 45, and 15 percent of NASA*s science and engineering employees are
eligible to retire; within 5 years, about 25 percent will be retirement
eligible. At the same time, the agency is finding it difficult to hire
people with science, engineering, and information technology skills*
fields critical to NASA*s missions. Within the science and engineering
workforce, the over- 60 population currently outnumbers the under- 30
population nearly 3 to 1. As the pool of scientists and engineers shrinks,
competition for these workers intensifies. The agency also faces the loss
of significant procurement expertise through 2007, according to NASA*s
Inspector General. 4 Coupled with these concerns, NASA has limited
capability for personnel tracking and planning, particularly on an
agencywide or programwide basis. Furthermore, NASA acknowledges that it
needs to complete and submit to the Office of Management and Budget (OMB)
a transformation workforce restructuring plan, which it notes that, in
conjunction with its strategic human capital plan, will be critical to
ensuring that skill gaps or deficiencies do not exist in mission- critical
occupations. 5 NASA is taking steps to address its workforce challenges.
For example:

 NASA is developing an agencywide integrated workforce planning and
analysis system that aims to track the distribution of NASA*s workforce
across programs, capture critical competencies and skills, determine
management and leadership depth, and facilitate gap analyses. NASA has
completed a pilot of an interim competency management system to facilitate
analyses of gaps in skills and competencies. NASA plans to implement the
interim system agencywide in 2003 and integrate it with the new
comprehensive workforce planning and analysis system in 2005. The new
system should foster better management of the existing workforce and
enable better strategic decisions about future workforce needs.  NASA has
developed a strategic human capital plan, which identifies

human capital goals, problems, improvement initiatives, and intended 4 See
National Aeronautics and Space Administration, Audit Report: Procurement
Workforce Planning, IG- 01- 041 (Washington, D. C.: September 2001). 5 As
stated in President*s Management Agenda Action Plans for the National
Aeronautics And Space Administration, (Washington, D. C.: May 9, 2002).
This document is an

agreement between NASA and OMB on NASA*s plans for addressing the
governmentwide initiatives in The President*s Management Agenda.

Page 4 GAO- 03- 849T NASA Challenges and Risks

outcomes and incorporates strategies and metrics to support the goals. 6
The plan has been approved by OMB and the Office of Personnel Management
(OPM). According to NASA, the plan is based on OMB*s scorecard of human
capital standards and OPM*s scorecard of supporting human capital
dimensions, as well as our own model, which we published in March 2002. 7
 NASA has renewed its attention to hiring applicants just out of college
and

intends to pursue this even more aggressively in coming years. The agency
is undertaking a number of initiatives and activities aimed at acquiring
and retaining critically needed skills, such as using the new Federal
Career Intern Program to hire recent science and engineering graduates,
supplementing the workforce with nonpermanent civil servants where it
makes sense, and implementing a program to repay student loans to attract
and retain employees in critical positions.  Finally, NASA has included
an objective in its most recently updated

strategic plan 8 and fiscal year 2004 performance plan 9 to implement an
integrated agencywide approach to human capital management. The plans
state that this approach will attract and maintain a workforce that
represents America*s diversity and will include the competencies that NASA
needs to deliver the sustained levels of high performance that the
agency*s challenging mission requires.

The 108th Congress is currently considering a series of legislative
proposals developed by NASA to provide it with further flexibilities and
authorities for attracting, retaining, developing, and reshaping a skilled
workforce. These include a scholarship- for- service program; a
streamlined hiring authority for certain scientific positions; larger and
more flexible recruitment, relocation, and retention bonuses;
noncompetitive conversions of term employees to permanent status; a more
flexible critical pay authority; a more flexible limited- term appointment
authority for the senior executive service; and greater flexibility in
determining annual leave accrual rate for new hires.

6 NASA has also developed a companion strategic human capital
implementation plan that contains detailed action plans for the
improvement initiatives. 7 See U. S. General Accounting Office, A Model of
Strategic Human Capital Management,

GAO- 02- 373SP (Washington, D. C.: Mar. 15, 2002). 8 See National
Aeronautics and Space Administration, 2003 Strategic Plan (Washington, D.
C.: 2003). 9 NASA*s fiscal year 2004 performance plan is integrated with
its fiscal year 2004 budget request.

Page 5 GAO- 03- 849T NASA Challenges and Risks

We continue to monitor NASA*s progress in resolving its human capital
problems, including how well its human capital initiatives and reforms and
any new and existing flexibilities and authorities are helping to
strategically manage and reshape its workforce.

Much of NASA*s success depends on the success of its contractors* who
received more than 85 percent, or $13.3 billion, of NASA*s funds in fiscal
year 2002. However, since 1990, we have identified NASA*s contract
management function as an area at high risk because of its ineffective
systems and processes for overseeing contractor activities. Specifically,
NASA has lacked accurate and reliable information on contract spending and
has placed little emphasis on end results, product performance, and cost
control. NASA has addressed many of these acquisition- related weaknesses,
but key tasks remain, including completing the design and implementation
of a new integrated financial management system.

Since 1990, our reports and testimonies have repeatedly demonstrated just
how debilitating these weaknesses in contract management and oversight
have been. For example, our July 2002 report on the International Space

Station found that NASA did not effectively control costs or technical and
scheduling risks, provide adequate oversight review, or effectively
coordinate efforts with its partners. In other examples, we found that
NASA lacked effective systems and processes for overseeing contractor
activities and did not emphasize controlling costs.

Center- level accounting systems and nonstandard cost- reporting
capabilities have weakened NASA*s ability to ensure that contracts are
being efficiently and effectively implemented and that budgets are
executed as planned. The agency*s financial management environment is
comprised of decentralized, nonintegrated systems with policies,
procedures, and practices unique to each of its field centers. For the
most part, data formats are not standardized, automated systems are not
interfaced, and on- line financial information is not readily available to
program managers. NASA*s lack of a fully integrated financial management
system also hurts its ability to collect, maintain, and report the full
cost of its projects and programs. For example, in March 2002, we
testified that NASA was unable to provide us with detailed support for
amounts that it

reported to the Congress as obligated against space station and related
Correcting

Weaknesses in Contract Management

Page 6 GAO- 03- 849T NASA Challenges and Risks

shuttle program cost limits, 10 as required by the National Aeronautics
and Space Administration Authorization Act of 2000. 11 In recent years,
NASA made progress in addressing its contract

management challenges. For example:  In July 1998, we reported that NASA
was developing systems to provide

oversight and information needed to improve contract management and that
it had made progress in evaluating its field centers* procurement
activities on the basis of international quality standards and its own
procurement surveys. In January 1999, we reported that NASA was
implementing its new system for measuring procurement- related activities
and had made progress in evaluating procurement functions in its field
centers.  NASA has also made progress reducing its use of undefinitized
contract

actions (UCA) 12 *that is, unnegotiated, or uncosted, contract changes. In
2000, we reported that NASA*s frequent use of undefinitized contract
changes could result in contract cost overruns and cost growth in the
International Space Station program. In March 2003, NASA*s Office of
Inspector General reported that NASA had significantly reduced both the
number and dollar amount of undefinitized contract actions since we
highlighted UCAs as one reason for designating NASA*s contract management
as a major management challenge.  NASA has also recognized the urgency of
implementing a fully integrated

financial management system. We recently reported that NASA has estimated
the life- cycle cost of this effort through 2008 to be $861 million. 13 ,
14 While this is NASA*s third attempt at implementing a new financial
management system (NASA*s first two efforts covered 12 years

10 See U. S. General Accounting Office, National Aeronautics and Space
Administration: Leadership and Systems Needed to Effect Financial
Management Improvements,

GAO- 02- 551T (Washington, D. C.: Mar. 20, 2002). 11 Section 202 of P. L.
106- 391.

12 An undefinitized contract action means a unilateral or bilateral
contract modification or delivery/ task order in which the final price or
estimated cost and fee have not been negotiated and mutually agreed to by
NASA and the contractor. 48 C. F. R. 1843.7001. 13 See U. S. General
Accounting Office, Business Modernization: Improvements Needed in
Management of NASA*s Integrated Financial Management Program, GAO- 03- 507
(Washington, D. C.: Apr. 30, 2003).

14 For this estimate, NASA has defined life- cycle costs to include
implementation efforts through fiscal year 2008 and major upgrades, plus
operation and support costs for each system module for the first 2 years
after the module goes live.

Page 7 GAO- 03- 849T NASA Challenges and Risks

and cost $180 million), this effort is expected to produce an integrated,
NASA- wide financial management system through the acquisition and
incremental implementation of commercial software packages and related
hardware and software components. 15 The core financial management module,
which NASA considers to be the backbone of the Integrated Financial
Management Program, is currently operating at 6 of NASA*s 10 centers 16
and is expected to be fully operational in June 2003. According to NASA*s
business case analysis for the system, the core financial module will
provide NASA*s financial and program managers with timely, consistent, and
reliable cost and performance information for management decisions.

While NASA has made noteworthy progress in strengthening its contract
oversight, much work remains. As NASA moves ahead in acquiring and
implementing its new financial management system, NASA needs to ensure
that its systems and processes provide the right data to oversee its
programs and contractors* specifically, data to allow comparisons of
actual costs to estimates, provide an early warning of cost overruns or
other related difficulties, and monitor contract performance and make
program requirement trade- off decisions. In addition, NASA must employ
proven best practices, including (1) aligning its selection of commercial

components of the system with a NASA- wide blueprint, or *enterprise
architecture;* (2) analyzing and understanding the dependencies among the
commercial components before acquiring and implementing them; (3)
following an event- driven system acquisition strategy; (4) employing
effective acquisition management processes, such as those governing
requirements management, risk management, and test management; (5)
ensuring that legacy system data are accurate to avoid loading and
perpetuating data errors in the new system; and (6) proactively
positioning NASA for the business process changes embedded in the new
system, for

example, by providing adequate formal and on- the- job training. However,
as we reported in April 2003, the core financial module is not being
designed to accommodate much of the information needed by

15 The system is to consist of nine modules: core financial management,
resume management, travel management, position description management,
human resource management, payroll, budget formulation, contract
administration, and asset management. 16 NASA is comprised of its
headquarters offices, nine centers located throughout the country, and the
Jet Propulsion Laboratory. The Jet Propulsion Laboratory is operated by
the California Institute of Technology, but for the purpose of this
testimony, we treat the Jet Propulsion Laboratory as a center.

Page 8 GAO- 03- 849T NASA Challenges and Risks

program managers and cost estimators. 17 For example, to adequately
oversee NASA*s largest contracts, program managers need reliable contract
cost data* both budgeted and actual* and the ability to integrate these
data with contract schedule information to monitor progress on the
contract. However, because program managers were not involved in defining
system requirements or reengineering business processes, the core
financial module is not being designed to integrate cost and schedule data
needed by program managers. In addition, because NASA has embedded in the
core financial module the same accounting code structure that it uses in
its legacy reporting system, the core financial module is not being
implemented to capture cost information at the same level of detail that
it has received from NASA*s contractors. Finally, because NASA has done
little to reengineer its acquisition management processes to ensure that
its contractors consistently provide the cost and performance information
needed, the core financial module does not provide cost estimators with
the detailed cost data needed to prepare credible cost estimates.

Because more work is needed to demonstrate substantial progress in
resolving the root causes of NASA*s contract management weaknesses, our
2003 Performance and Accountability Series continued to report contract
management as a major management challenge for NASA and a high- risk area.
We are continuing to monitor NASA*s progress in addressing contract
management weaknesses. In response to a request from the Senate Commerce,
Science, and Transportation Committee and the House Science Committee, we
continue to assess the extent to which NASA*s financial management system
acquisition is in accordance with

effective system acquisition practices and is designed to support NASA*s
decision- making needs and external reporting requirements.

The International Space Station represents an important effort to foster
international cooperation in scientific research and space exploration. It
is also considered one of the most challenging engineering feats ever
attempted. The estimated cost of the space station has mushroomed, and
expected completion has been pushed out several years. NASA is taking
action to keep costs in check, but its success in this area still faces
considerable challenges. In the meantime, NASA has had to make

17 See GAO- 03- 507. Controlling

International Space Station Costs

Page 9 GAO- 03- 849T NASA Challenges and Risks

substantial cuts in the program, negatively impacting its credibility with
the Congress, international partners, and the scientific community.

The grounding of the shuttle fleet following the Columbia accident has had
a significant impact on the continued assembly and operation of the
International Space Station. The shuttle is the primary vehicle for
transferring crew and equipment to and from the station and is used to
periodically reboost the station into a higher orbit. Although on- orbit
assembly of the station has stopped, NASA must continue to address the
challenges of developing and sustaining the station and conducting
scientific experiments until shuttle flights resume. While controlling
cost and schedule and retaining proper workforce levels have been
difficult in the past, the shuttle grounding will likely exacerbate these
challenges.

Because the return- to- flight date for the shuttle fleet is unknown at
this time and manifest changes are likely, the final cost and schedule
impact on the station is undefined at this time.

NASA has had difficulty predicting and controlling costs and scheduling
for the space station since the program*s inception in 1984. In September
1997, we reported that the cost and schedule performance of

its prime development contractor, which showed signs of deterioration in
1996, had continued to worsen and that the program*s financial reserves
for contingencies had all but evaporated. In our January 2001 Performance
and Accountability Series, we reported that the prime contract was
initially expected to cost over $5.2 billion and that the assembly of the
station was expected to be completed in June 2002. But by October 2000,
the prime contractor*s cost had grown to about $9 billion*$ 986 million of
which was for cost overruns* and the current estimate is about $11

billion. Because of on- going negotiations with the international partners
and uncertainty associated with the shuttle*s return to flight, the
station*s final configuration and assembly date cannot be determined at
this time.

NASA*s Office of Inspector General also reported cost overruns in a
February 2000 audit report, and based on recommendations in that report,
NASA agreed to take several actions, including discussing the prime
contractor*s cost performance at regularly scheduled meetings and
preparing monthly reports to senior management on the overrun status.
However, in July 2002, we reported continued cost growth due to an
inadequate definition of requirements, changes in program content,
schedule delays, and inadequate program oversight. 18 While NASA*s

18 See U. S. General Accounting Office, Space Station: Actions Under Way
to Manage Cost, but Significant Challenges Remain, GAO- 02- 735
(Washington, D. C.: July 17, 2002).

Page 10 GAO- 03- 849T NASA Challenges and Risks

controls should have alerted management to the growing cost problem and
the need for action, they were largely ignored because NASA focused on
fiscal year budget management rather than on total program cost
management.

NASA is instituting a number of management and cost- estimating reforms,
but significant challenges threaten their successful implementation.
First, NASA*s new life- cycle cost estimate for the program* which is
based on a three- person crew instead of a seven- person crew, as
originally planned* will now have to be revised because of changes to the
program*s baseline. The lack of an adequate financial management system
for collecting space station cost data only exacerbates this challenge.
Second, NASA must still

determine how research can be maximized with only a limited crew. Last,
NASA has yet to reach agreement with its international partners on an
acceptable on- orbit configuration and sharing of research facilities and
costs. As a result, the capacity and capabilities of the space station,
the scope of research that can be accomplished, and the partners* share of
operating costs are unknown at this time.

Ongoing cost and schedule weaknesses have profoundly affected the utility
of the space station* with substantial cutbacks in construction, the
number of crew members, and scientific research. As a part of the space
station*s restructuring, further work and funding for the habitation
module

and crew return vehicle have been deferred, which led to the on- orbit
crew being reduced from seven to three members, limiting the crewmember
hours that can be devoted to research. Additionally, the number of
facilities available for research has been cut from 27 to 20. NASA*s
international partners and the scientific community are not satisfied with
these and other reductions in capabilities and have raised concerns about
the viability of the space station science program.

In our earlier identification of costs to build the International Space
Station, we identified space shuttle launch costs as being a substantial
cost component* almost $50 billion. 19 NASA recognized the need to reduce
such costs as it considered alternatives to the space shuttle. Indeed, a
key goal of the agency*s earlier effort to develop a reusable launch
vehicle was

to reduce launch costs from $10,000 per pound on the Space Shuttle to 19
U. S. General Accounting Office, International Space Station: U. S. Life-
Cycle Funding Requirements, GAO/ NSIAD- 98- 147 (Washington, D. C.: May
22, 1998). Reducing Space

Launch Costs

Page 11 GAO- 03- 849T NASA Challenges and Risks

$1,000 through the use of such a vehicle. As we testified in June 2001,
NASA*s X- 33 program* an attempt to develop and demonstrate advanced
technologies needed for future reusable launch vehicles* ended when the
agency chose not to fund continued development of the demonstrator vehicle
in February 2001. 20 Subsequently, until November 2002, NASA was pursuing
its Space Launch Initiative (SLI)* a 5- year, $4.8 billion program to
build a new generation of

space vehicles to replace its aging space shuttle fleet. SLI was part of
NASA*s broader Integrated Space Transportation Plan, which involves
operating the space shuttle program through 2020 as successive generations
of space transportation vehicles are developed and deployed, beginning
around 2011. The primary goals for SLI were to reduce the risk of crew
loss as well as substantially lower the cost of space transportation so
that more funds could be made available for scientific research,
technology development, and exploration activities. Currently, NASA spends
nearly one- third of its budget on space transportation.

In September 2002, we reported that SLI was a considerably complex and
challenging endeavor for NASA* from both a technical and business
standpoint. 21 For example, SLI would require NASA to develop and advance
new technologies for the new vehicle, including (1) new airframe
technologies that will include robust, low- cost, low- maintenance
structure, tanks, and thermal protection systems, using advanced ceramic
and metallic composite materials, and (2) new propulsion technologies,
including main propulsion systems, orbital maneuvering systems, main
engines, and propellant management. The program would also require NASA to
carefully coordinate and communicate with industry and government partners
in order to reach agreements on the basic capabilities of the new vehicle,
the designs or architectures that should be pursued, the sharing of
development costs, and individual partner responsibilities. Last, the SLI
project would require careful oversight, especially in view of past
difficulties NASA has had in developing the technologies for reusable
launch vehicles to replace the space shuttle. These efforts did not
achieve their goals primarily because NASA did not

20 U. S. General Accounting Office, Space Transportation: Critical Areas
NASA Needs to Address in Managing Its Reusable Launch Vehicle Program,
GAO- 01- 826T (Washington, D. C.: June 20, 2001).

21 See U. S. General Accounting Office, Space Transportation: Challenges
Facing NASA*s Space Launch Initiative, GAO- 02- 1020 (Washington, D. C.:
Sept. 17, 2002).

Page 12 GAO- 03- 849T NASA Challenges and Risks

develop realistic requirements and, thus, cost estimates, timely
acquisition and risk management plans, or adequate and realistic
performance goals. Most importantly, however, we reported that NASA was
incurring a high

level of risk in pursuing its plans to select potential designs for the
new vehicle without first making other critical decisions, including
defining the Department of Defense*s (DOD) role in the program;
determining the final configuration of the International Space Station;
and identifying the overall direction of NASA*s Integrated Space
Transportation Plan. At the time, indications were that NASA and DOD
differed on program priorities and requirements; NASA had yet to reach
agreement with its international partners on issues that could
dramatically impact SLI requirements, such as how many crew members would
operate the station.

NASA agreed with our findings and, in October 2002, postponed its systems
requirements review for SLI so that it could focus on defining DOD*s role,
determine the future requirements of the International Space Station, and
firm up the agency*s future space transportation needs. In November 2002,
the administration submitted to the Congress an amendment to NASA*s fiscal
year 2003 budget request to implement a new Integrated Space
Transportation Plan. The new plan makes investments to extend the space
shuttle*s operational life for continued safe operations and refocuses the
SLI program on developing an orbital space plane* which provides a crew
transfer capability to and from the space station* and next- generation
launch technology. The Integrated Space Transportation Plan is an integral
part of our ongoing

work assessing NASA*s plans to assure flight safety through space shuttle
modernization through 2020.

As NASA proceeds with its revised plans, it will still be important for
NASA to implement management controls that can effectively predict what
the total costs of the program will be and minimize risks. These include
cost estimates, controls designed to provide early warnings of cost and
schedule overruns, and risk mitigation plans. With such controls in place,
NASA would be better positioned to provide its managers and the Congress
with the information needed to ensure that the program is on track and
able to meet expectations.

Page 13 GAO- 03- 849T NASA Challenges and Risks

In addition to taking actions to address its management challenges, NASA
uses various mechanisms to communicate lessons garnered from past programs
and projects. In 1995, NASA established the Lessons Learned Information
System (LLIS), a Web- based lessons database that managers are required to
review on an ongoing basis. NASA uses several mechanisms to capture and
communicate lessons learned* including

training, program reviews, and periodic revisions to agency policies and
guidelines* but LLIS is the principal source for sharing lessons
agencywide. In January 2002, we reported that NASA had recognized the
importance of learning from the past to ensure future mission success and
had implemented mechanisms to capture and share lessons learned. 22
However, spacecraft failures persist, and there is no assurance that

lessons are being applied toward future mission success. We reported that
insufficient risk assessment and planning, poor team communications,
inadequate review process, and inadequate system engineering were often
cited as major contributors to mishaps. (See table 1.)

22 See U. S. General Accounting Office, NASA: Better Mechanisms Needed for
Sharing Lessons Learned, GAO- 02- 195 (Washington, D. C.: January 2002).
Better Mechanisms

Needed for Sharing Lessons Learned

Page 14 GAO- 03- 849T NASA Challenges and Risks

Table 1: Persistent Reasons for Spacecraft Failures

At that time, we also reported on a survey we conducted of NASA*s program
and project managers. The survey revealed that lessons are not routinely
identified, collected, or shared by programs and project managers. The
survey found that less than one- quarter of the respondents reported that
they had submitted lessons to LLIS; almost one- third did not even know
whether they had submitted lessons. In addition, most respondents could
not identify helpful lessons for their program or project.

Furthermore, many respondents indicated that they were dissatisfied with
NASA*s lessons learned processes and systems. Managers also identified
challenges or cultural barriers to the sharing of lessons learned, such as

the lack of time to capture or submit lessons and a perception of
intolerance for mistakes. They further offered suggestions for areas of

Page 15 GAO- 03- 849T NASA Challenges and Risks

improvement, including enhancements to LLIS and implementing mentoring and
*storytelling,* or after- action reviews, as additional mechanisms for
lessons learning.

While NASA* s current knowledge management efforts should lead to some
improvement in the sharing of agency lessons and knowledge, they lack
ingredients that have been shown to be critical to the success of
knowledge management at leading organizations. Cultural resistance to
sharing knowledge and the lack of strong support from agency leaders often
make it difficult to implement an effective lessons- learning and
knowledge- sharing environment. We found that successful industry and
government organizations had overcome barriers by making a strong
management commitment to knowledge sharing, developing a welldefined
business plan for implementing knowledge management, providing incentives
to encourage knowledge sharing, and building technology systems to
facilitate easier access to information. The application of these
principles could increase opportunities for NASA to perform its basic
mission of exploring space more effectively.

To fulfill its vision, NASA is taking on a major transformation aimed at
becoming more integrated and results- oriented, and at reducing risks
while working more economically and efficiently. However, to successfully
implement its human capital, financial management, and other reforms, NASA
will need sustained commitment from senior leaders. Given the high stakes
involved, it is critical that NASA*s leadership provide direction,
oversight, and sustained attention to ensure that reforms stay on track.
NASA*s Administrator, who comes to the position with a strong management
background and expertise in financial management, has made a personal
commitment to change the way NASA does business and has appointed a chief
operating officer to provide sustained management attention to strategic
planning, organizational alignment, human capital strategy, performance
management, and other elements necessary for transformation success. The
challenge ahead for NASA will be to achieve the same level of commitment
from managers at NASA centers so that NASA can effectively use existing
and new authorities to manage its people strategically and quickly
implement the tools needed to strengthen management and oversight.

Page 16 GAO- 03- 849T NASA Challenges and Risks

This testimony was drawn from the most recent 23 in a series of GAO
reports first issued in 1999 as well as additional reports that summarize
numerous individual GAO reviews that identify important management,
oversight, and workforce issues facing NASA. The purpose of the series is
to help sustain congressional attention and an agency focus on continuing
to make progress in addressing these issues. The individual reviews were
conducted in accordance with generally accepted government auditing
standards.

Chairman Gehman, this concludes my statement. I will be happy to answer
any questions you or members of the board may have.

Contacts and Acknowledgments

For further information regarding this testimony, please contact Allen Li
at (202) 512- 4841. Individuals making key contributions to this testimony
included Jerry Herley, Shirley Johnson, Charles Malphurs, and Karen Sloan.

23 GAO- 03- 114. Objectives, Scope,

and Methodology

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