Space Shuttle: Further Improvements Needed in NASA's		 
Modernization Efforts (15-JAN-04, GAO-04-203).			 
                                                                 
The Columbia tragedy has accentuated the need to modernize the	 
20-year-old space shuttle, the only U.S. launch system that	 
carries people to and from space. The shuttle will now be needed 
for another two decades. As it ages, the spacecraft's components 
will also age, and it may become increasingly unreliable. GAO	 
examined the National Aeronautics and Space Administration's	 
(NASA) plans to upgrade the shuttle through 2020, how it will	 
identify and select what upgrades are needed, how much the	 
upgrades may cost, and what factors will influence that cost over
the system's lifetime.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-203 					        
    ACCNO:   A09113						        
  TITLE:     Space Shuttle: Further Improvements Needed in NASA's     
Modernization Efforts						 
     DATE:   01/15/2004 
  SUBJECT:   Cost analysis					 
	     Life cycle costs					 
	     Planning programming budgeting			 
	     Safety						 
	     Space exploration					 
	     Strategic planning 				 
	     Equipment upgrades 				 
	     Operational life					 
	     NASA Integrated Space Transportation		 
	     Plan						 
                                                                 
	     NASA Space Shuttle Service Life			 
	     Extension Program					 
                                                                 

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GAO-04-203

United States General Accounting Office

GAO

                       Report to Congressional Requesters

January 2004

SPACE SHUTTLE

          Further Improvements Needed in NASA's Modernization Efforts

GAO-04-203

Highlights of GAO-04-203, a report to congressional requesters

The Columbia tragedy has accentuated the need to modernize the 20-year-old
space shuttle, the only U.S. launch system that carries people to and from
space. The shuttle will now be needed for another two decades. As it ages,
the spacecraft's components will also age, and it may become increasingly
unreliable.

GAO examined the National Aeronautics and Space Administration's (NASA)
plans to upgrade the shuttle through 2020, how it will identify and select
what upgrades are needed, how much the upgrades may cost, and what factors
will influence that cost over the system's lifetime.

NASA needs to fully define shuttle upgrade requirements so decisions on
upgrade projects can be integrated with its transportation plan. The
agency must improve how it selects upgrades by developing an indicator
that shows how upgrading will increase shuttle life or safety as well as
other analytic tools to help its staff make judgments. It must develop a
thorough estimate of the total lifecycle cost of upgrades through 2020, to
determine the funding that will be needed for shuttle upgrades.

NASA fully concurred with most GAO recommendations, and agreed with the
intent of the recommendation to develop a cost estimate for all shuttle
upgrades through 2020.

www.gao.gov/cgi-bin/getrpt?GAO-04-203.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Allen Li at (202) 512-3600
or [email protected].

January 2004

SPACE SHUTTLE

Further Improvements Needed in NASA's Modernization Efforts

NASA cannot fully define shuttle upgrade requirements until it resolves
questions over the shuttle's operational life and determines requirements
for elements of its Integrated Space Transportation Plan such as the
International Space Station. Prior efforts to upgrade the shuttle have
been stymied because NASA could not develop a strategic investment plan or
systematically define the spacecraft's requirements because of changes in
its life expectancy and mission.

NASA is trying to improve how it identifies, selects, and prioritizes
shuttle upgrades. In March 2003, it institutionalized a Space Shuttle
Service Life Extension Program to ensure safe and effective operations,
along with a management plan documenting roles and responsibilities and an
annual process for selecting upgraded projects and studies. In addition,
NASA will try to improve shuttle safety by implementing the
recommendations of the Columbia Accident Investigation Board (CAIB).

NASA's estimate of the total cost to upgrade the shuttle-$300 million-$500
million a year, or a total of $5 billion-$8 billion through 2020-is
reasonably based but could be significantly higher, as it does not include
potential projects such as a crew escape system. It will be difficult for
NASA to make an accurate estimate until it firmly establishes the basic
requirements (such as life expectancy) for the shuttle and the process for
selecting shuttle upgrades. A number of potential changes could
significantly increase the cost of shuttle upgrades, including responses
to the recommendations of the CAIB.

Space Shuttle Atlantis Lift-Off

Contents

  Letter

Results in Brief
Background
Shuttle Requirements Process Lacks Systematic Approach
NASA's Process for Selecting and Prioritizing Upgrades Could Be

Further Improved Shuttle Upgrades Could Potentially Cost Billions More
Than

Currently Estimated Conclusions Recommendations for Executive Action
Agency Comments Scope and Methodology 1

1 3 4

5

12 15 16 17 18

Appendix I 	Comments from the National Aeronautics and Space
Administration

Appendix II 	Recommended Upgrade Projects Resulting from the Service Life
Extension Program Summit

Appendix III 	Comparison of Crew Escape Concepts Under Consideration

Appendix IV Staff Acknowledgments

  Table

Table 1: Service Life Extension Program Projects by Category- Fiscal Year
2004-2008 9

  Figures

Figure 1: Cockpit Avionics Upgrade 7

Figure 2: Roof Deterioration on the Vehicle Assembly Building at

Kennedy Space Center (the tape shows a 5-foot section

for perspective) 10 Figure 3: Space Shuttle Crew Escape Design Concepts 14

Abbreviations

AHMS Advanced Health Management System
ATP Authority to Proceed
C/W Caution and Warning
CAIB Columbia Accident Investigation Board
CAU Cockpit Avionics Upgrade
CG Center of Gravity
ET External Tank
ISS International Space Station
ISTP Integrated Space Transportation Plan
MLG Main Landing Gear
NASA National Aeronautics and Space Administration
OMM Orbiter Major Modification
OSP Orbital Space Plane
PLB Payload Bay
PRA Probabilistic Risk Assessment
PRSD Power Reactant Storage and Distribution (fuel cells)
ROM Rough Order of Magnitude
RSRM Reusable Solid Rocket Motor
SLEP Service Life Extension Program
SSME Space Shuttle Main Engine
STE Special Test Equipment

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separately.

United States General Accounting Office Washington, DC 20548

  Results in Brief

January 15, 2004

The Honorable John Breaux
Ranking Minority Member
Subcommittee on Science, Technology, and Space
Committee on Commerce, Science, and Transportation
United States Senate

The Honorable Bill Nelson
United States Senate

The space shuttle is the only U.S. launch system capable of carrying
people to and from space. It has operated for over 20 years and is planned
for use well into the second decade of this century and possibly beyond.
As the shuttle ages, the National Aeronautics and Space Administration
(NASA) is faced with an increased need to modernize the shuttle due to
component obsolescence and/or to enhance safety. The Shuttle Columbia
tragedy has accentuated this need. At your request, we reviewed the
shuttle modernization efforts to determine (1) NASA's past requirements
and plans to upgrade the shuttle through 2020, (2) how NASA will identify
what upgrades are required in the future and how those upgrades will be
selected and prioritized, and (3) NASA's estimated life-cycle cost for
shuttle upgrades through 2020 and identify the potential program
uncertainties that may affect cost.

Even before the Columbia tragedy, NASA faced critical decisions on how
best to modernize the shuttle to keep it flying safely throughout its
operational life. With NASA's need to improve shuttle safety as the
shuttle
fleet returns to service, NASA has not yet clearly defined shuttle upgrade
requirements, improved the process for selecting and prioritizing
upgrades, and developed an estimate of the total life-cycle cost of
upgrades through 2020.

NASA cannot fully define shuttle upgrade requirements until it resolves
its
uncertainty over the shuttle's operational life and determines the basic
requirements for elements of its Integrated Space Transportation Plan1

1 NASA's Integrated Space Transportation Plan provides a road map for
continued shuttle operations and for key investment decisions.

(ISTP), which includes the International Space Station (ISS). NASA has
known that it needs to establish an upgrade program to modernize various
components of the space shuttle to keep it flying safely throughout its
life. However, efforts to upgrade the shuttle have been stymied by the
agency's inability to develop a long-term strategic investment plan to fly
the shuttle safely and a systematic approach for defining the spacecraft's
requirements because its life expectancy and mission have continued to
change from an original design of a 10-year life to the year 2020 and
possibly beyond.

NASA is making an effort to improve the process that identifies, selects,
and prioritizes shuttle upgrades. In March 2003, it institutionalized a
Space Shuttle Service Life Extension Program (SLEP) as the primary
framework for ensuring safe and effective operations, along with a
management plan documenting roles and responsibilities and an annual
process for selecting and prioritizing upgraded projects and studies.
Prior to the SLEP, NASA had no documented systematic selection process,
and managers made decisions on upgrades using their professional insight
and judgment and a limited number of quantitative or analytic tools rather
than relying on extensive use of hard data or rigorous analysis. In
addition, NASA is planning to make upgrades and other improvements to
enhance shuttle safety as a result of implementing the recommendations of
the Columbia Accident Investigation Board (CAIB).

NASA has not yet attempted to prepare a total detailed life-cycle cost
estimate for all upgrades through 2020. NASA did prepare a rough order of
magnitude estimate of the total cost to upgrade the shuttle-$300
million$500 million a year, or a total of $5 billion-$8 billion through
2020-based on current project estimates. Although the estimate appears to
be reasonably based, the total cost could be significantly higher, as the
estimate does not include the costs of major potential projects such as a
crew escape system. NASA will continue to have difficulty making an
accurate and reliable estimate of the total cost until it finalizes the
basic requirements (such as life expectancy) for the shuttle and further
improves the process for identifying and selecting shuttle upgrades.
Accurate and reliable cost estimates to upgrade the shuttle and enable it
to continue operations are needed by decision makers. In addition, a
number of potential program changes could significantly increase the
estimated cost of shuttle upgrades, including major changes in shuttle
requirements such as redesigned rocket boosters to provide additional lift
capability. Other costly potential program changes include schedule
slippages caused by delays in software and hardware integration and
modifications responding to the recommendations of the CAIB.

Background

We are making recommendations aimed at strengthening NASA's efforts to
modernize the space shuttle by fully defining basic requirements for the
shuttle; improving its analytic tools to assess shuttle upgrades; and,
once basic requirements are defined, developing a comprehensive estimate
of the total cost for the shuttle through 2020.

In written comments on a draft of this report, NASA's Deputy Administrator
stated that the agency concurred with the first three recommendations and
concurred with the intent of the fourth recommendation concerning
development of a cost estimate for all shuttle upgrades through 2020.
NASA's detailed comments are included as appendix I.

The space shuttle is the world's first reusable space transportation
system. It consists of a reusable orbiter with three main engines, two
partially reusable solid rocket boosters, and an expendable external fuel
tank. The space shuttle is an essential element of NASA's transportation
plan that includes a framework for maintaining shuttle fleet capability to
fly safely through 2020. The space shuttle is NASA's largest individual
program accounting for about 25 percent of the agency's fiscal year 2004
budget request. Since it is the nation's only launch system capable of
transporting people, the shuttle's viability is critical to the space
station.

We have reported in the past that extensive delays in the development and
assembly of the ISS and difficulties defining requirements and maturing
technologies for the next generation space transportation systems have
hindered the development and funding of a long-term space transportation
program.2 We have also testified that NASA faced a number of programmatic
and technical challenges in making shuttle upgrades, including
revitalizing its workforce and defining shuttle technical requirements. In
another report, we reported that NASA continued to rely on qualitative
risk assessments to supplement engineering judgments and had made only
limited progress in the use of quantitative assessment

2 See U.S. General Accounting Office, Space Transportation: Status of the
X-33 Reusable Launch Vehicle Program, GAO/NSIAD-99-176 (Washington, D.C.:
Aug. 11, 1999), Space Transportation: Challenges Facing NASA's Space
Launch Initiative, GAO-02-1020 (Washington, D.C.: Sept. 17, 2002), and
Space Station: Impact of the Grounding of the Shuttle Fleet, GAO-03-1107
(Washington, D.C.: Sept. 12, 2003).

methods.3 Recognizing such needs, NASA has taken steps to bring a more
formal approach to identifying, prioritizing, and funding improvements.

In February 1997, NASA established the Space Shuttle Program Development
Office at NASA's Johnson Space Center to sustain, improve, and add
capability to the space shuttle through an upgrade program. In December
2002, a new selection and prioritization process for upgrades was
implemented through the Service Life Extension Program. The SLEP provided
a formal process to select, prioritize, and fund upgrades needed to keep
the shuttle flying safely and efficiently and allow upgrades to be
evaluated and approved on a priority basis. Shuttle upgrades are items
that contribute toward the Space Shuttle Program goals to (1) fly safely,
(2) meet the manifest, (3) improve mission supportability, and (4) improve
the system in order to meet NASA's commitments and goals for human
operations in space. According to NASA, upgrades achieve major reductions
in the operational risks inherent in the current systems by making changes
that eliminate, reduce, or mitigate significant hazards and critical
failure modes and that increase the overall reliability of the current
system with respect to the likelihood of catastrophic failure. Examples of
upgrade projects currently funded to improve safety include Cockpit
Avionics, Vehicle Main Landing Gear Tire and Wheel, External Tank Friction
Stir Weld, and Shuttle Main Engine Advanced Health Management System.

  Shuttle Requirements Process Lacks Systematic Approach

To keep the shuttle flying safely, NASA needs to fully implement an
upgrade program to modernize various shuttle components. However, efforts
to do so have been stymied by the agency's inability to develop a
long-term strategic investment plan and a systematic approach for defining
shuttle requirements, because the spacecraft's life expectancy and mission
have continued to change. Key decisions about the ultimate life and
mission of the basic elements of the integrated transportation plan-the
ISS and the Orbital Space Plane (OSP)-were not made prior to fully
defining shuttle requirements.

Originally, the shuttle was designed for a 10-year/100-flight service-
transporting satellites and other cargo for the Department of Defense and

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) and Space
Shuttle: Need to Sustain Launch Risk Assessment Process Improvements,
GAO/NSIAD-96-73 (Washington, D.C.: Mar. 26, 1996).

others and placing in orbit and maintaining the Hubble Space Telescope-
after which its life was to end. During this time, NASA was reluctant to
make long-term investments due to the shuttle's perceived short life
expectancy. With the advent of the ISS, the agency's transportation plan
indicated that the shuttle would be used to operate and support the ISS
until 2012, when a new space launch vehicle was to take over that mission.
Recently, use of the new launch vehicle was de-emphasized by a new ISTP,
which in its place proposed development of an OSP (to transfer the crew to
the ISS) and continued use of the shuttle (to transfer cargo). The new
plan proposes upgrading the shuttle's software and hardware to extend its
operational life to 2020.

NASA recognizes the need for a systematic approach for defining
requirements to upgrade the shuttle, and it recently institutionalized a
new process to select and prioritize shuttle upgrades. However, NASA has
not yet fully defined the basic elements of the ISTP-which include the
ISS, the OSP, and the Next Generation Launch Technology.4 NASA has not
precisely determined when the ISS will be completed; its ultimate mission,
its useful life, and even how many astronauts will be on board, for
example. Specifically, NASA has not made explicit decisions on shuttle
requirements--such as its future mission, lift capability, and life
expectancy. According to NASA officials, these decisions will
significantly affect shuttle upgrades. Similarly, the CAIB found that the
shifting date for shuttle replacement has severely complicated decisions
on how to invest in shuttle upgrades.

NASA is making an effort to improve how it identifies, selects, and
prioritizes shuttle upgrades. In December 2002, NASA initiated a SLEP as
the primary framework for ensuring safe and effective operations. By March
2003, NASA had prepared a formal management plan documenting roles and
responsibilities and defining an annual process for selecting and
prioritizing upgraded projects and studies. Prior to the SLEP, NASA had no
documented systematic selection process, and managers made decisions on
upgrades using their professional insight and judgment and a limited
number of quantitative or analytic tools rather than extensive use of hard
data or rigorous analysis. As a result, projects that were identified,
funded, and implemented flowed from an informal "bottom-up" approach that

4 Next Generation Launch Technology will develop key technologies, such as
propulsion and structures, for a future launch vehicle.

  NASA's Process for Selecting and Prioritizing Upgrades Could Be Further
  Improved

relied largely on insight and judgment of selected managers and limited
use of quantitative tools.

    Earlier Process to Identify and Prioritize Upgrades

According to NASA officials, prior to the new SLEP process, the
identification, selection, and prioritization of shuttle upgrade projects
largely involved an informal bottom-up approach. The upgrades were first
proposed in an open and a continuous call for projects concepts and were
drawn from shuttle element project organization, industry, or other
shuttle program stakeholders. Upgrade projects would then go to the Space
Shuttle Program Manager, the Shuttle Program Development Manager, and the
directors of the affected NASA field centers, who would provide proposed
projects to the Associate Administrator for Space Flight, who would select
and prioritize the projects. This early process was much more strongly
driven by collective management insight or "judgment" rather than by hard
data or rigorous analysis. During this process, there was little guidance
from top management as to how the decisions on shuttle upgrades integrated
with all the other elements of the ISTP.

The identification, selection, and prioritization of the Cockpit Avionics
Upgrade (CAU) is one example of a lack of a documented, structured, and
systematic selection process prior to the SLEP. The CAU is estimated to
cost $442 million and is NASA's most costly of the currently approved
upgrade projects. The CAU will update the cockpit's dials and gauges with
a modern instrument panel. By automating complex procedures in the shuttle
cockpit, the upgrade is intended to improve the situational awareness of
the crew and to better equip them to handle potential flight problems by
reducing crew workload. (See fig. 1.)

Figure 1: Cockpit Avionics Upgrade

Managers gave the CAU project the highest priority based on their
professional insight and judgment and a limited number of quantitative or
analytic tools rather than extensive use of hard data or rigorous
analysis. The upgrade was ranked as the highest priority based on the
perceived importance of crew situational awareness. NASA did not have a
metric to show the relationship of the cost of the upgrade to an increase
in shuttle life and/or safety. The ranking was essentially a collaborative
voting process based on their professional knowledge that crew error
accounts for 50 percent of all incidents. As crew awareness depends on a
number of human factors, a quantitative metric, such as NASA's
Quantitative Risk Assessment System, could not be used since it did not
contain key human attributes needed to evaluate the percentage of safety
improvement of the upgrade project.

    The SLEP Process Currently in Place

In December 2002, NASA initiated a SLEP as the primary framework for
ensuring safe and effective operations, along with a management plan a few
months later, documenting roles and responsibilities and an annual process
for selecting and prioritizing upgraded projects and studies. The new
process, which was first used in March 2003 at the first SLEP Summit, uses
panels of experts from NASA, which are mostly chaired by the Deputy Center
Directors, who meet periodically to develop and assess project
recommendations. The SLEP is structured around eight panels of senior
managers that make greater use of quantitative tools in areas such as
safety and sustainability, including an outside panel of industry experts
and an Integration Panel. The Integration Panel refines the prioritized
recommendations of each panel into final recommendations to a group of
top-level managers known as the Space Flight Leadership Council (the
Council). As a result of the last Summit in March 2003, the Council
approved all project recommendations of the Integration Panel with a total
estimated cost of about $1.7 billion from fiscal years 2004-08. (See app.
II.) In making its recommendations, the Council was not restricted by
fiscal constraints. The Council endorsed 60 SLEP upgrade projects for
fiscal year 2004 costing $416 million. By contrast, NASA's fiscal year
2004 budget request, submitted in February 2003, asked for $379 million.
The difference is being deliberated within NASA's internal budget process.

One product resulting from the SLEP 2003 Summit was NASA's selection and
identification of upgrade projects related to safety improvement,
sustainability, and requirements for new capabilities as defined by
"customers" such as the ISS. NASA then placed the projects into one of the
following four categories: (1) "Should Start"-projects strongly
recommended for start in fiscal year 2004 and which would create near term
risk if they did not start, (2) "Existing Commitments"-projects previously
authorized, (3) "Foundational Activities"-projects that add insight into
the current condition of assets, and (4) "Projects and Studies"-system
specific activities at various levels of maturity. (See table 1.)

Table 1: Service Life Extension Program Projects by Category-Fiscal Year
2004-2008

Categories Sustainability Safety improvement

Customer driven capabilities

Should Start RSRM Case Vendor PRSD Tank Vendor SSME STE Equipment

     Existing        RSRM Obsolescence       Cockpit Avionics  
Commitments                                                 
                      Infrastructure           AHMS Phase I    
                                              MLG Tire/Wheel   
                                            Industrial Safety  
Foundational    Aging Vehicle Studies     PRA Development      Performance 
    Activities                                                  Trade Studies 
                     RSRM Ground Test                          
                   Sustainability Health                       
                          Metrics                              
Projects and  Vehicle Health Monitoring  New Start: AHMS II 
     Studies                                                   
                     STE Obsolescence       Study: Hydrazine   
                                            Replacement        
                   Material Obsolescence    Study: SSME Nozzle 
                  Component Obsolescence      Study: Orbiter   
                                                Hardening      
                  Supply Chain Viability     Study: Enhanced   
                                                   C/W         
                    Spares Augmentation        Study: Crew     
                                              Survivability    
                  ET 3rd Generation Foam                       

Source: NASA.

Legend:

AHMS Advanced Health Management System
C/W Caution and Warning
ET External Tank
MLG Main Landing Gear
PRA Probabilistic Risk Assessment
PRSD Power Reactant Storage and Distribution (fuel cells)
RSRM Reusable Solid Rocket Motor
SSME Space Shuttle Main Engine
STE Special Test Equipment

NASA also considers development of the infrastructure to sustain shuttle
operations through 2020 equally as important as upgrades to keep the
shuttle flying safely. One example of a sustainability project for fiscal
year 2004 is the replacement of the roof of the 39-year-old Vehicle
Assembly Building at Kennedy Space Center, which is in poor condition, as
shown by the bubbles that have developed in its surface. (See fig. 2.) The
roof replacement is estimated to cost $16 million and is part of NASA's
total spending on infrastructure of $54 million in fiscal year 2004.

Figure 2: Roof Deterioration on the Vehicle Assembly Building at Kennedy
Space Center (the tape shows a 5-foot section for perspective)

    Further Improvements in the SLEP Possible

NASA needs to improve its analytic tools to help it improve the basis for
identifying and selecting shuttle upgrades. NASA uses Probabilistic Risk
Assessment (PRA) methodologies, specifically the Quantitative Risk
Assessment System, to improve safety by assessing the relative risk
reduction of potential upgrade projects to overall shuttle risk. However,
program managers are aware that the PRA is incomplete and does not contain
certain key attributes that would make it more accurate, reliable, and
useful. Early next year, they plan to begin using a revised PRA more
oriented toward the shuttle. In addition, the Manager of the Shuttle
Program Development Office believes it is important to develop a new
Sustainability Health Metric System in order to mitigate the risk that an
asset required to fly may not be available. The metric would score a
proposed sustainability project after an evaluation of a set of common
sustainability factors for all elements of shuttle flight and ground
systems and subsystems. Similarly, the CAIB could not find adequate
application of a metric that took an integrated systematic view of the
entire space shuttle system. NASA is considering development of a
sustainability metric, and the Manager of the Shuttle Program Development
Office believes that if approved, it could be ready for use during the
SLEP Summit in February 2004. NASA expects that the nomination of projects
at that meeting will come from a more comprehensive evaluation through
extensive use of hard data and rigorous analysis.

Although creation of the SLEP may improve the identification and selection
process, further improvements are possible. According to SLEP program
officials responsible for identifying, selecting, and prioritizing shuttle
upgrades, they need clear guidance from top management as to how those
decisions integrate with the other elements of the ISTP, such as the ISS
and the OSP. In addition, SLEP program officials said the identification
and selection of upgrades for the shuttle program lack a clear measurable
metric showing the relationship of an upgrade investment to an increase in
shuttle operational life. They believe such a metric would be useful to
decision makers in identifying, selecting, and prioritizing shuttle
upgrades. Finally, according to NASA Headquarters officials,
recommendations of the CAIB are under study and will likely change the
selection and prioritization of shuttle upgrades for both the near term
and the long term.

  Shuttle Upgrades Could Potentially Cost Billions More Than Currently Estimated

Until NASA finalizes the basic requirements for the shuttle and further
improves its process for identifying and selecting upgrades, it will be
difficult to accurately and reliably estimate the total cost of upgrades
through 2020. NASA's current estimate for the cost of upgrading the
shuttle is itself highly uncertain. Accurate and reliable cost estimates
to upgrade the shuttle to continue operations are needed by decision
makers. We found that the agency has not yet attempted to prepare a
detailed life-cycle cost5 estimate for all upgrades through 2020. NASA did
prepare a rough order of magnitude estimate based on an analysis of
current project estimates through 2020. The total cost of shuttle
upgrades, however, could potentially be significantly greater as the
estimate did not include potential projects such as a crew escape system.
In addition, a number of potential changes could significantly increase
the estimated cost, such as changes in program requirements, schedule
slippages caused by delays in software and hardware integration, and
implementation of recommendations of the CAIB.

    Current Estimate Is Rough Order of Magnitude

A NASA official stated that it is difficult to develop accurate and
reliable long-term estimates of shuttle upgrades through 2020,
particularly in light of uncertainty of the shuttle's basic requirements
such as its life expectancy. However, developing life-cycle cost estimates
for agency programs is not a new issue in the federal government. The
Office of Management and Budget maintains guidelines for preparing a
cost-effectiveness analysis, including life-cycle cost estimates
applicable to all federal agencies within the executive branch.6 Cost
estimates should include all costs consistent with agency policy guidance.
NASA performs a cost and systems analysis to produce feasible concepts and
explore a wide range of implementation options to meet its program
objectives. To do this, NASA must develop the life cycle of the program to
include the direct, indirect, recurring, nonrecurring, and other related
costs for the design, development, production, operation, maintenance,
support, and retirement of the program.7 Comprehensive life-cycle cost
estimates include both the

5 Life-cycle cost is the sum total of direct, indirect, recurring, and
nonrecurring costs of a system over its entire life through disposal. A
detailed life-cycle cost estimate would include a full range of all
potential upgrades, as well as their full range of potential costs.

6 Office of Management and Budget Circular No. A-94.

7 NASA Procedures and Guidelines (NPG) 7120.5 B.

project cost estimate and the operations cost through the end of shuttle
operations.8

NASA has not prepared a detailed total life-cycle cost estimate for
upgrades through 2020 due to the uncertainty of the shuttle's basic
requirements, as well as the difficulty of preparing estimates of out-year
funding to 2020. However, in June 2003, the agency estimated the shuttle
upgrade cost through that year by using a rough order of magnitude
estimate of $300 million-$500 million a year, or a total of $5 billion$8
billion. The $300 million-$500 million per year estimate projected for
out-year funding was modeled using a simulation tool9 and developed by an
independent consulting firm. According to a NASA official, they will rerun
this estimate by the next SLEP Summit in February 2004, using as a basis
whatever the recommended upgrade projects are at the time.

We performed an analysis of the rough order of magnitude estimate
completed by NASA for all upgrades through 2020. Based on the data, we
found that the $300 million-$500 million range of estimated costs per
year, and the methodology used to estimate the costs, appears to be
reasonable. According to a NASA official, NASA's cost estimates are
focused on the annual budget process, rather than long term through 2020,
because any individual project takes a while to mature and near-year
estimates, such as those from the current year and through 2008, would be
more accurate than those from 2009 and beyond, which are more likely to
change. NASA's estimate is based on known projects for fiscal years 2004
and 2005 whose costs taper off in later years and the assessment of an
additional 20 projects through 2020, where cost estimates and
implementation plans are not certain.

Although the rough order of magnitude estimate, as well as the methodology
used to derive it, appears to be reasonable, the total cost could be
billions more since potential upgrade projects such as a crew escape
system are not included. Initially, Boeing released a list of safety and
supportability options that included crew/cockpit escape concepts for

8 Space Shuttle Program Upgrades Management Plan (NSTS 37400, volume I,
revision A).

9 Performed through the use of a "Monte Carlo" spreadsheet simulation,
which randomly generates values for uncertain variables over and over to
simulate a model. Without the aid of simulation, a spreadsheet model will
only reveal a single outcome, generally the most likely or average
scenario, but after hundreds or thousands of trials, one can view the
statistics of the results and the certainty of any outcome.

the shuttle. Figure 3 illustrates the primary types of crew escape
presently under consideration. The approximate costs involved for the
eight present concepts range between $1 billion and $3.9 billion,
depending on the one selected.10 There are three other ejection concepts
under development, none of which have received a full assessment. These
other concepts will be assessed in a more in-depth manner, as well as
previous metrics and costs, at the next SLEP Summit in February 2004.
(Appendix III contains information on all 11 concepts.)

              Figure 3: Space Shuttle Crew Escape Design Concepts

10 The estimated cost for each of the eight present concepts is
proprietary information.

    Potential Program Changes Could Increase Total Upgrade Cost

A number of potential program changes could significantly increase the
estimated cost of shuttle upgrades through 2020. For example, rough order
of magnitude estimates do not account for possible slippages in the
shuttle schedule. According to a NASA official, if NASA and/or Congress
deem a crew escape option a major priority, more highly developed costs
and schedules would be created. Also, slippage due to delays in hardware
or software integration can affect projects where the final vehicle
modifications are planned for the major maintenance periods.

NASA has not yet made explicit decisions about the end state of the
International Space Station.11 For example, if the useful life of the ISS
were extended and/or an OSP were put into service to support the station
as an alternative to the shuttle, the life-cycle costs of the shuttle may
be affected. Until all requirements about the ISS have been fully defined,
it will be difficult to determine a detailed cost of shuttle upgrades
through 2020.

Other potential program changes that would increase costs include a
requirements change, such as additional lift capability that would require
a new rocket booster. Any redesign option, if selected, would add billions
to the total upgrade cost. For example, redesign and development of new
liquid-fueled rocket boosters is estimated at a rough order of magnitude
cost of $5 billion. Redesign and development of a five-segment solid
booster would be a cheaper but less flexible option, at an estimated rough
order of magnitude of $2 billion.

Another major driver of increased costs would be implementing the
recommendations of the CAIB. Its numerous recommendations, such as major
changes to the shuttle's thermal protection system, could potentially
increase costs. NASA officials have said the agency intends to implement
all the recommendations the CAIB issued in its report, but precise costs
have yet to be determined.

Conclusions 	NASA is at a critical juncture in the life of the space
shuttle. NASA had planned to upgrade the shuttle in the future. Now, after
the Columbia tragedy, NASA has an increased emphasis to fly the shuttle
safely through 2020. NASA officials acknowledge that the loss of the
Columbia will be a

11 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).

key influence on the selection and prioritization of shuttle upgrades as
NASA officials assess both the short-and long-term implications of the
CAIB recommendations. Although creation of the Space Shuttle Service Life
Extension Program institutionalizes the process for identifying,
selecting, and prioritizing upgrades, additional changes are needed to
further strengthen that process such as increased use of analytic tools
and metrics to complement professional judgment. NASA management has also
not yet made explicit decisions about the basic requirements for key
elements in its Integrated Space Transportation Plan-the ISS, the OSP, and
the space shuttle. The agency's lack of a long-term plan, caused by
frequent changes in the life of the shuttle, has made it hard to fully
define, select, and prioritize shuttle upgrade requirements, which form a
basis for identifying needed upgrades. Such a long-term plan needs to be
developed now in conjunction with activities to return the shuttle to fly
safely. In addition, accurate and reliable life-cycle cost estimates are
important for determining resources needed for the selection and priority
of upgrades and to determine annual budget requests. Even though an
estimate of the total life-cycle cost has not been made, it is evident
that the cost of upgrades through 2020 could be billions more than NASA's
current rough order of magnitude estimate if potential projects, such as a
crew escape system and new projects resulting from the CAIB
recommendations, are included. Unless improvements are made in NASA's
shuttle modernization efforts, NASA will not be able to ensure upgrades
are being made to address the most necessary needs or to articulate the
extent of safety that has been enhanced, and determine the total cost of
the program.

Recommendations for 	To strengthen the agency's efforts to modernize the
space shuttle, we recommend that the NASA Administrator take the following
four actions:

  Executive Action

o  	Fully define the requirements for all elements of the ISTP so that
those responsible for identifying, selecting, and prioritizing shuttle
upgrades will have the guidance and a sound basis to ensure their
decisions on upgrade projects are completely integrated with all other
elements of the transportation plan. In particular, the Administrator
should determine, in conjunction with its international partners, the
ultimate life and mission of the ISS in order to provide a sound basis for
fully defining shuttle requirements.

o  	Develop and consistently apply a clear measurable metric to show the
relationship of upgrade investments to an increase in shuttle operational
life and/or safety for the entire space shuttle system. NASA's
Quantitative Risk Assessment System could be a basis for such a metric
since it is intended to measure the safety improvement of a single upgrade
project.

o  	Continue to pursue development of analytic tools and metrics to help
assure that SLEP program officials have accurate, reliable, and timely
quantifiable information to complement their professional judgment.

o  	Develop a total cost estimate for all upgrades through 2020 by
updating the current rough order of magnitude estimate to include new
projects resulting from the CAIB recommendations, estimates of project
life-cycle costs, and estimates of major potential projects, such as a
crew escape system, so that the resources needed to fund shuttle upgrades
can be ascertained.

                                Agency Comments

In written comments on a draft of this report, NASA's Deputy Administrator
stated that the agency concurred with the first three recommendations.
Furthermore, NASA concurred with the intent of the fourth recommendation
concerning development of a cost estimate for all shuttle upgrades through
2020. However, the Deputy Administrator commented that there were major
uncertainties that severely limit the agency's ability to foresee budget
requirements beyond 3 to 5 years, such as unanticipated technical problems
and the required time to accurately assess upgrade projects. Consequently,
NASA believes that it is better to size the long-term (5 to 15 years)
anticipated budget run-out based on broad estimates rather than on
specific lists of projects.

We recognize that there can be many uncertainties in developing long-term
budget estimates. However, NASA's proposal of an anticipated budget runout
based on broad estimates is not a substitute for identifying the financial
implications of identified needs. Specifically, in order for NASA to
develop a credible Integrated Space Transportation Plan, the agency needs
a more accurate and reliable long-term total cost estimate. As we stated
in our recommendation, establishing such an estimate could be facilitated
by (1) using life-cycle cost estimating techniques on its list of
potential projects that NASA used to develop its cost estimate through
2020, (2) updating its list of potential upgrade projects to include
recommended projects of the CAIB, and (3) including major potential
upgrade projects currently under consideration, such as a crew escape
system. The comprehensive nature of this cost estimate will enable (1)
NASA to formulate a more definitive picture of how it will ensure that the
shuttle fleet flies safely in the future and (2) decision makers to
understand associated costs. Therefore, our recommendation remains
unchanged.

  Scope and Methodology

To assess NASA's requirements and plans to upgrade the shuttle for
continuous service through 2020, we obtained and reviewed internal
documents and independent studies and discussed the requirements and plans
with responsible NASA officials.

To assess how NASA determined what upgrades were needed and how they were
identified, selected, and prioritized, we obtained and analyzed schedules
and documents from program officials and obtained an understanding of the
process for identifying, selecting, and prioritizing shuttle upgrades. We
also reviewed documents regarding analytic tools used to select and
prioritize shuttle upgrades.

To assess the estimated life-cycle cost of shuttle upgrades, we reviewed
and discussed NASA's guidance regarding preparation of life-cycle cost
estimates with program officials. To assess the rough order of magnitude
estimate for out-year funding completed by NASA for all upgrades through
2020, we obtained data and analyzed the estimate using a Monte Carlo
simulation tool called @Risk-an Excel-based spreadsheet. Monte Carlo
simulation helps to assess the risks and uncertainties associated with
Microsoft Excel spreadsheet models by randomly generating values for
uncertain variables over and over to simulate a model. We assessed this
technique to determine the level of confidence around the estimates and
verified our assessment with responsible program officials.

To accomplish our work, we interviewed officials and analyzed documents at
NASA Headquarters, Washington, D.C.; Johnson Space Center, Houston, Texas;
and Kennedy Space Center, Florida.

We also reviewed reports and interviewed representatives of NASA's Office
of the Inspector General, Washington, D.C., and NASA's Independent Program
Assessment Office, Langley Research Center, Hampton, Virginia.

We conducted our work from April to October 2003 in accordance with
generally accepted government auditing standards.

Unless you publicly announce the contents of this report earlier, we plan
no further distribution of it until 30 days from the date of this letter.
We
will then send copies to others who are interested and make copies
available to others who request them. In addition, the report will be
available on the GAO Web site at http://www.gao.gov.

Please contact me at (202) 512-4841 if you or your staffs have any
questions about this report. Major contributors to this report are listed
in
appendix IV.

Allen Li
Director
Acquisition and Sourcing Management

Appendix I: Comments from the National Aeronautics and Space
Administration

Appendix II: Recommended Upgrade Projects Resulting from the Service Life
Extension Program Summit

                 Real Year Dollars in Millions-Not in Full Cost

                Subcategory               FY 04 FY 05 FY 06 FY 07 FY 08 Total 
Should Start in FY04a (Sustainability                                
                  Related)                                              
      RSRM-Case Hardware Availability         5     5     5     5     5 
Orbiter-Certify PRSD Tank Supplier and                               
               Procure Spares                 4     8     8     4     8 

SSME-Sustaining Test Equipment Tasks 6 3 1 0 0

Existing Commitmentsb (Safety Related)c Foundational Activitiesf (Sustainability
                                    Related)

                   Vehicle CAU                   91    77    14     0     0   
     Vehicle Main Landing Gear Tire and Wheel     3     0     0     0     0   
               SSME AHMS (Phase 1)                4     3     2     1     0   
        Industrial Engineering for Safety        15    15    15    15    15   
        Othersd (Sustainability Related)e        51    43    27    21    10   
                RSRM Obsolescence                18    19    20    20    21   
                  Infrastructure                 92    77    78    79    80   

                Aging Vehicle Studiesg               10  14   0   0   0  
               RSRM Ground Test Program              4   10  20   9  21  
               Improved Tools/Metricsh               7    5   3   3   3  
       (Customer Driven Capabilities Related)i                           
       Performance Trade Studies (Lift, Power,                           
                      Stay Time)                     2    2   0   0   0     4 
    Projects and Studies (Sustainability Related)j                       
      New Start: Vehicle Health Monitoring Study     4    4   0   0   0     8 
       New Start: ET 3rd Generation Foam Study       3    7   8   0   0    18 
                STE Obsolescence (14)k               16  18  11   7   7    59 
              Material Obsolescence (3)              2    0   0   0   0     2 
             Component Obsolescence (14)             6   23  27  16  13    85 
              Supply Chain Viability (8)             4    0   1   1   0     5 
           Spares Augmentation for SLE (5)           5   10  26  23  18    82 
            (Safety Related Improvements)                                
           New Start: SSME AHMS (Phase 2b)           35  45  45  23  12   160 
             Study: Hydrazine Replacement            3    3   1   0   0     7 
               Study: Orbiter Hardening              2    2   0   0   0     4 
           Study: SSME Channel Wall Nozzle           4   12  16   0   0    32 
           Study: Crew Survivability Trades          1    0   0   0   0     1 

Appendix II: Recommended Upgrade Projects Resulting from the Service Life
Extension Program Summit

Real Year Dollars in Millions-Not in Full Cost Subcategory FY 04 FY 05 FY 06 FY
                                 07 FY 08 Total

                          Reserves 20 20 20 20 20 100

                        Totall 416 426 347 246 233 1,668

Source: NASA.

Note: Final funding profile is dependent on the outcome of the FY 2005
President's Budget Submission.

a"Should Start" - High scoring sustainability projects that are strongly
recommended by NASA for starts in FY04 and which would create near-term
risk for the program if they did not start.

b"Existing Commitments"-Projects previously authorized.

c"Safety Improvement"-Projects and studies designed to improve loss of
vehicle/loss of crew probabilities.

d"Others"-A major item in this category is the program installation costs
for the Cockpit Avionics Upgrade, which is tracked separately, as well as
the costs of other smaller projects.

e"Sustainability"-Assuring the assets required to fly are in place.

f"Foundational Activities"-Tasks that add to NASA's general insight into
the current condition of their assets. Non-system specific.

gAging Vehicle Studies include: Mid-Life Certification Assessment & Issue
Mitigation, Fleet Leader Program, Corrosion Control, STE
Survey/Evaluation, Non-Destructive Evaluation Upgrades.

hProbabilistic Risk Assessment (safety related), Sustainability Health
Metrics (sustainability related), Analytical Hierarchy Tool System
(sustainability related).

i"Customer Driven Capabilities"-Requirements for new capabilities as
defined by current or potential customers. Customers in this context are
the entities that require the space shuttle for access to space.
Currently, that is mainly the space station, the research community, and
the space telescope community.

j"Projects and Studies"-System-specific activities at various levels of
maturity within the system.

kThis number represents the number of projects in each subcategory.

lTotals do not add due to rounding.

Legend:

AHMS Advanced Health Management System
CAU Cockpit Avionics Upgrade
ET External Tank
PRSD Power Reactant Storage and Distribution (fuel cells)
RSRM Reusable Solid Rocket Motor
SLE Service Life Extension
SSME Space Shuttle Main Engine
STE Special Test Equipment

Appendix III: Comparison of Crew Escape Concepts Under Consideration

                                                    Ascent     Ascent         
                                         1st kit   coverage   coverage   NASA 
                     Crew      Mass     delivery      no      fireball  PRA % 
      Concepta       size   properties   and OMM  fireballb  potential   risk
                   5 crew 5   122 lb      4.5 y                               
1.               flight   added No   after ATP 0 to 9k ft    None      31%
Extraction-50     deck     ballast   18 m OMM                        
                             required                                   
                   6 crew 4  1,788 lb     4.5 y                               
2. Ejection-42A flight / added 1,900 after ATP  0 to 70k  10k to 70k   52%
                    2 mid     ballast   18 m OMM      ft         ft     
                     deck                                               
                   7 crew 4  3,012 lb     4.5 y                               
3. Ejection-43A flight/  added 2,700 after ATP  0 to 70k  10k to 70k   52%
                    3 mid     ballast   18 m OMM      ft         ft     
                     deck                                               
                   7 crew 4  8,315 lb     5.5 y                               
4. Forebody-12N flight / added 2,700 after ATP 3k to 210k   10k to     80%
                    3 mid    ballastc   18 m OMM      ft      210k ft   
                     deck                                               
                   6 crew 4  6,448 lb     5.5 y                               
         5.        flight / added 2,700 after ATP 0 to 210k    10k to     87%
    Hybrid-1-H42A   2 mid    ballastd   18 m OMM      ft      210k ft   
                     deck                                               
                    5 crew   4,825 lb     5.5 y   0 to 210k    10k to         
6. Hybrid-1-H50  flight  added 2,700 after ATP     ft      210k ft     87%
                     deck    ballastd   18 m OMM                        
                   7 crew 2  7,256 lb   5 y after Capsule 2k  Capsule         
7. PLB Capsule  flight / added 2,700 ATP 16 m    - 210k   10k - 210k   52%
& Seats            5      ballastd      OMM     Seat 0 -  Seat 10k - 
                   capsule                           70k        70k     
8. Payload Bay  7 crew 2  6,024 lb   4 y after  No Padf   10k to 70k       
Compartment and flight / added 2,700 ATP 12 m  75k/80k ft     ft       52%
Seatse           5 PLB    ballastd      OMM       Max                
                   2 crew 2   xxxx lb     x.x y    0 to 70k  10k to 70k       
    9. Ejectiong    flight  added xxxx  after ATP     ft         ft       52%
                     deck     ballast   xx m OMM                        
                   3 crew 3   xxxx lb     x.x y    0 to 70k  10k to 70k       
    10. Ejectiong   flight  added xxxx  after ATP     ft         ft       52%
                     deck     ballast   xxx m OMM                       
                   4 crew 4   xxxx lb     x.x y    0 to 70k  10k to 70k       
    11. Ejectiong   flight  added xxxx  after ATP     ft         ft       52%
                     deck     ballast   xx m OMM                        

Source: NASA.

Appendix III: Comparison of Crew Escape Concepts Under Consideration

aUnder the "Concept" column: The first number usually represents the
number of crew on the flight deck and the second number usually represents
the amount of crew on the mid-deck. The letter following these numbers
represents the option. For example, for #2, "42A" represents 4 on Flight
Deck, 2 on Mid-deck, option "A". However, for #4, "1-2N" strictly
represents the option and for #5 & #6, "1-H" stands for "Hybrid" option.

bThe "fireball" is the environment following a shuttle explosion during
ascent. The fireball size, temperature, and pressure are a function of the
amount of ascent propellant remaining and the altitude of the vehicle. The
more the propellant and the lower the altitude, the larger the fireball
and the more difficulty for the crew to survive. The options do not adjust
for a fireball ascent.

cCenter of Gravity cannot be corrected with max ballast of 2,700 lb.

d/ePRA and Ascent coverage based on 42A ejection seat assessment.

f"NO PAD" means that it does not have pad-abort capability (crew could not
use option to escape while Shuttle is on pad).

gAssessment due by February 2004 for Service Life Extension Program
Summit.

Legend:

ATP Authority to Proceed
CG Center of Gravity
OMM Orbiter Major Modification
PLB Payload Bay
PRA Probabilistic Risk Assessment
ROM Rough Order of Magnitude
SLEP Service Life Extension Program

Appendix IV: Staff Acknowledgments

Acknowledgments 	Individuals making key contributions to this report
included Jerry Herley, Thomas Hopp, T. J. Thomson, and Karen Richey.

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