NASA: Sound Management and Oversight Key to Addressing Crew	 
Exploration Vehicle Project Risks (28-SEP-06, GAO-06-1127T).	 
                                                                 
The National Aeronautics and Space Administration (NASA) plans to
spend nearly $230 billion over the next two decades implementing 
the President's Vision for Space Exploration (Vision) plans. In  
July 2006, GAO issued a report that questioned the program's	 
affordability, and particularly, NASA's acquisition approach for 
one of the program's major projects--the Crew Exploration Vehicle
(CEV). This testimony, which is based upon that report and	 
another recent GAO report evaluating NASA's acquisition policies,
highlights GAO's continuing concerns with (1) the affordability  
of the exploration program; (2) the acquisition approach for the 
CEV, and; (3) NASA's acquisition policies that lack requirements 
for projects to proceed with adequate knowledge.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-1127T					        
    ACCNO:   A61547						        
  TITLE:     NASA: Sound Management and Oversight Key to Addressing   
Crew Exploration Vehicle Project Risks				 
     DATE:   09/28/2006 
  SUBJECT:   Aerospace contracts				 
	     Cost analysis					 
	     Cost overruns					 
	     Future budget projections				 
	     Program management 				 
	     Research and development contracts 		 
	     Risk assessment					 
	     Risk management					 
	     Schedule slippages 				 
	     Space exploration					 
	     Strategic planning 				 
	     Target architecture				 
	     Crew Exploration Vehicle				 
	     Crew Launch Vehicle				 
	     NASA Constellation Program 			 
	     Vision for Space Exploration			 

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GAO-06-1127T

     

     * Summary
     * Background
     * Firm Cost Estimates Cannot Be Developed at This Time
     * Expected Budget and Competing Demands Will Challenge Archite
     * Lack of Sound Business Case Puts CEV Acquisition at Risk
     * Sound Management and Oversight Key to Addressing CEV Project
     * Conclusions
     * GAO Contact and Staff Acknowledgements
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

Testimony before the Committee on Science, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 2:00 p.m. EDT

Thursday, September 28, 2006

NASA

Sound Management and Oversight Key to Addressing Crew Exploration Vehicle
Project Risks

Statement of Allen Li, Director, Acquisition and Sourcing Management

GAO-06-1127T

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss the National Aeronautics and
Space Administration's (NASA) plans for implementing the President's
Vision for Space Exploration (Vision).1 NASA plans to spend nearly $230
billion over the next two decades-more than $31 billion of which will be
spent in the next 5 years-to bring the Vision to reality.2 In July 2006,
we issued a report that questioned the program's affordability, and in
particular, NASA's acquisition approach for one of the program's major
projects-the Crew Exploration Vehicle (CEV).3 My statement today, which is
based upon that report and another report evaluating NASA's acquisition
policies,4 highlights our continuing concerns with the affordability of
the exploration program and the acquisition approach for the CEV project,
as well as the absence of firm requirements in NASA's acquisition policies
for projects to proceed with development with the appropriate level of
knowledge. Given the competing demands facing the federal government and
an already troubling funding profile for the program, it is imperative
that NASA implement the various aspects of the Vision in a fiscally
prudent and competent manner. Our work was performed in accordance with
generally accepted government auditing standards.

                                    Summary

In summary, we found that because NASA's exploration program is in its
early stages, the agency cannot develop a firm cost estimate for the
program at this time. The changes that have occurred to the program over
the past year and the resulting refinement of its associated cost
estimates are indicative of the evolving nature of the program.
Furthermore, we found that it will likely be a challenge for NASA to
implement the program, as laid out in its Exploration Systems Architecture
study (ESAS)5 due to the high costs associated with the program in some
years and the long-term sustainability of the program relative to
anticipated funding. Finally, we found that NASA's acquisition strategy
for the CEV was not based upon obtaining an adequate level of knowledge
when making key resources decisions, placing the program at risk for cost
overruns, schedule delays, and performance shortfalls. These risks were
evident in NASA's plan to commit to a long-term product development effort
before establishing a sound business case for the project that includes
well-defined requirements, mature technology, a preliminary design, and
firm cost estimates. Furthermore, in our 2005 report on NASA's acquisition
policies, we found that NASA's policies lacked major decision reviews
beyond the initial project approval gate and lacked a standard set of
criteria with which to measure projects at crucial phases in the
development life cycle. These decision reviews and development measures
are key markers needed to ensure that projects are proceeding with and
decisions are being based upon the appropriate level of knowledge and can
help to lessen project risks.

1The Vision includes a return to the moon that is intended ultimately to
enable exploration of Mars and other destinations. To accomplish this,
NASA initially plans to (1) complete its work on the International Space
Station by 2010, fulfilling its commitment to 15 international partner
countries; (2) begin developing a new manned exploration vehicle to
replace the space shuttle; and (3) return to the moon no later than 2020
in preparation for future, more ambitious missions.

2All cost estimates related to the Vision are reported as inflated ("real
year") dollars.

3GAO, NASA: Long-Term Commitment to and Investment in Space Exploration
Program Requires More Knowledge, GAO-06-817R (Washington, D.C.: July 17,
2006).

4GAO, NASA: Implementing a Knowledge-Based Acquisition Framework Could
Lead to Better Investment Decisions and Project Outcomes, GAO-06-218
(Washington, D.C.: Dec. 21, 2005).

In our July 2006 report, we recommended that NASA adjust its acquisition
strategy to ensure that sufficient program knowledge-to include
well-defined requirements, mature technologies, a stable design, and
realistic cost estimates-be attained prior to committing the government to
a long-term contract. NASA did not concur with our recommendation and in
late August awarded a contract for the design, development, production,
and sustainment of the CEV to Lockheed Martin. However, prior to awarding
the contract, NASA adjusted its acquisition approach and the agency
included the production and sustainment portions of the contract as
options-a move that is consistent with the recommendation in our report
because it lessens the government's financial obligation at this early
stage. While these changes are positive steps, the agency's acquisition
strategy needs further refinement to conform to acquisition best
practices. Given the approach that NASA has chosen, continued
congressional oversight will be critical for ensuring that the program
stays within cost and schedule goals. This is especially true given NASA's
"go as you can afford to pay" approach, wherein lower priority efforts
will be deferred, descoped, or discontinued to allow NASA stay within its
budget profile. Competing demands within the agency, coupled with a
declining supply of federal discretionary funding requires due diligence
on the part the agency and Congress to ensure successful program outcomes.
As our work has found, all too often, programs are allowed to proceed
without adequate knowledge being attained at key phases of development.
Without such knowledge, it is difficult to predict with any confidence how
much the program will cost, what technologies will or will not be
available to meet performance expectations, and when the vehicle will be
ready for use.

5The ESAS was an effort to identify the best architecture and strategy to
implement the Vision. The architecture supports the development of a new
CEV, Crew Launch Vehicle (CLV), a Cargo Launch Vehicle (CaLV), and other
supporting systems. The architecture also calls for various Research and
Technology (R&T) and Robotic Lunar Exploration Program (RLEP) projects.
NASA's Exploration Systems Mission Directorate's Constellation program is
responsible for the development of the CEV, CLV, and CaLV.

                                   Background

Despite many successes in the exploration of space, such as landing the
Pathfinder and Exploration Rovers on Mars, NASA has had difficulty
bringing a number of projects to completion, including several efforts to
build a second generation reusable human spaceflight vehicle to replace
the space shuttle. NASA has attempted several costly endeavors, such as
the National Aero-Space Plane, the X-33 and X-34, and the Space Launch
Initiative. While these endeavors have helped to advance scientific and
technical knowledge, none have completed their objective of fielding a new
reusable space vehicle. We estimate that these unsuccessful development
efforts have cost approximately $4.8 billion since the 1980s. The high
cost of these unsuccessful efforts and the potential costs of implementing
the Vision make it important that NASA achieve success in its new
exploration program beginning with the CEV project.

Our past work has shown that developing a sound business case, based on
matching requirements to available and reasonably expected resources
before committing to a new product development effort, reduces risk and
increases the likelihood of success. High levels of knowledge should be
demonstrated before managers make significant program commitments,
specifically: (1) At program start, the customer's needs should match the
developer's available resources in terms of availability of mature
technologies, time, human capital, and funding; (2) Midway through
development, the product's design should be stable and demonstrate that it
is capable of meeting performance requirements; (3) By the time of the
production decision, the product must be shown to be producible within
cost, schedule, and quality targets, and have demonstrated its
reliability. Our work has shown that programs that have not attained the
level of knowledge needed to support a sound business case have been
plagued by cost overruns, schedule delays, decreased capability, and
overall poor performance. With regard to NASA, we have reported that in
some cases the agency's failure to define requirements adequately and
develop realistic cost estimates-two key elements of a business
case-resulted in projects costing more, taking longer, and achieving less
than originally planned.6

              Firm Cost Estimates Cannot Be Developed at This Time

Although NASA is continuing to refine its exploration architecture cost
estimates, the agency cannot at this time provide a firm estimate of what
it will take to implement the architecture. The absence of firm cost
estimates is mainly due to the fact that the program is in the early
stages of its life cycle. NASA conducted a cost risk analysis of its
preliminary estimates through fiscal year 2011. On the basis of this
analysis and through the addition of programmatic reserves (20 percent on
all development and 10 percent on all production costs), NASA is 65
percent confident that the actual cost of the program will either meet or
be less than its estimate of $31.2 billion through fiscal year 2011. For
cost estimates beyond 2011, when most of the cost risk for implementing
the architecture will be realized, NASA has not applied a confidence level
distinction. Since NASA released its preliminary estimates, the agency has
continued to make architecture changes and refine its estimates in an
effort to establish a program that will be sustainable within projected
resources. While changes to the program are appropriate at this stage when
concepts are still being developed, they leave the agency in the position
of being unable to firmly identify program requirements and needed
resources. NASA plans to commit to a firm cost estimate for the
Constellation program at the preliminary design review in 2008, when
requirements, design, and schedule will all be baselined. It is at this
point where we advocate program commitments should be made on the basis of
the knowledge secured.

6GAO, NASA: Lack of Disciplined Cost-Estimating Processes Hinders
Effective Program Management, GAO-04-642 (Washington, D.C.: May 28, 2004).

Expected Budget and Competing Demands Will Challenge Architecture Implementation

NASA will be challenged to implement the ESAS recommended architecture
within its projected budget, particularly in the longer-term. As we
reported in July 2006, there are years when NASA has projected
insufficient funding to implement the architecture with some yearly
shortfalls exceeding $1 billion; while in other years the funding
available exceeds needed resources. Per NASA's approach, it plans to use
almost $1 billion in appropriated funds from fiscal years 2006 and 2007 in
order to address the short-term funding shortfalls. NASA, using a "go as
you can afford to pay" approach, maintains that in the short-term the
architecture could be implemented within the projected available budgets
through fiscal year 2011 when funding is considered cumulatively. However,
despite initial surpluses, the long-term sustainability of the program is
questionable given the long-term funding outlook for the program. NASA's
preliminary projections show multibillion-dollar shortfalls for its
Exploration Systems Mission Directorate in all fiscal years from 2014 to
2020, with an overall deficit through 2025 in excess of $18 billion.
According to NASA officials, the agency will have to keep the program
compelling for both Congress and potential international partners, in
terms of the activities that will be conducted as part of the lunar
program, in order for the program to be sustainable over the long run.

NASA is attempting to address funding shortfalls within the Constellation
program by redirecting funds to that program from other Exploration
Systems Mission Directorate activities to provide a significant surplus in
fiscal years 2006 and 2007 to cover projected shortfalls beginning in
fiscal year 2009. Several Research and Technology programs and missions
were discontinued, descoped, or deferred and that funding was shifted to
the Constellation Program to accelerate development of the CEV and CLV. In
addition, the Constellation program has requested more funds than required
for its projects in several early years to cover shortfalls in later
years. NASA officials stated the identified budget phasing problem could
worsen given the changes that were made to the exploration architecture
following issuance of the study. For example, while life cycle costs may
be lower in the long run, acceleration of development for the five segment
Reusable Solid Rocket Booster and J-2x engine will likely add to the
near-term development costs, where the funding is already constrained.
NASA has yet to provide cost estimates associated with program changes.

NASA must also contend with competing budgetary demands within the agency
as implementation of the exploration program continues. NASA's estimates
beyond 2010 are based upon a surplus of well over $1 billion in fiscal
year 2011 due to the retirement of the space shuttle fleet in 2010.
However, NASA officials said the costs for retiring the space shuttle and
transitioning to the new program are not fully understood; thus, the
expected surplus could be less than anticipated. This year, NASA plans to
spend over 39 percent of its annual budget for space shuttle and
International Space Station (ISS) operations-dollars that will continue to
be obligated each year as NASA completes construction of the ISS by the
end of fiscal year 2010. This does not include the resources necessary to
develop ISS crew rotation or logistics servicing support capabilities for
the ISS during the period between when the space shuttle program retires
and the CEV makes its first mission to the ISS. While, generally, the
budget for the space shuttle is scheduled to decrease as the program moves
closer to retirement, a question mark remains concerning the dollars
required to retire the space shuttle fleet as well as transition portions
of the infrastructure and workforce to support implementation of the
exploration architecture. In addition, there is support within Congress
and the scientific community to restore money to the Science Mission
Directorate that was transferred to the space shuttle program to ensure
its viability through its planned retirement in 2010. Such a change could
have an impact on future exploration funding.

            Lack of Sound Business Case Puts CEV Acquisition at Risk

In July 2006, we reported that NASA's acquisition strategy for the CEV
placed the project at risk of significant cost overruns, schedule delays,
and performance shortfalls because it committed the government to a
long-term contract before establishing a sound business case. We found
that the CEV contract, as structured, committed the government to pay for
design, development, production and sustainment upon contract award-with a
period of performance through at least 2014 with the possibility of
extending through 2019.

Our report highlighted that NASA had yet to develop key elements of a
sound business case, including well-defined requirements, mature
technology, a preliminary design, and firm cost estimates that would
support such a long-term commitment. Without such knowledge, NASA cannot
predict with any confidence how much the program will cost, what
technologies will or will not be available to meet performance
expectations, and when the vehicle will be ready for use. NASA has
acknowledged that it will not have these elements in place until the
project's preliminary design review scheduled for fiscal year 2008. As a
result, we recommended that the NASA Administrator modify the current CEV
acquisition strategy to ensure that the agency does not commit itself, and
in turn the federal government, to a long-term contractual obligation
prior to establishing a sound business case at the project's preliminary
design review. In response to our recommendation, NASA disagreed and
stated that it had the appropriate level of knowledge to proceed with its
current acquisition strategy. NASA also indicated that knowledge from the
contractor is required in order to develop a validated set of requirements
and, therefore, it was important to get the contractor on to the project
as soon as possible. In addition, according to NASA officials, selection
of a contractor for the CEV would enable the agency to work with the
contractor to attain knowledge about the project's required resources and,
therefore, be better able to produce firm estimates of project cost. In
our report, we highlighted that this is the type of information that
should be obtained prior to committing to a long-term contract. To our
knowledge, NASA did not explore the possibility of utilizing the
contractor, through a shorter-term contract, to conduct work needed to
develop valid requirements and establish higher-fidelity cost estimates-a
far less risky and costly strategy.

Subsequent to our report, NASA did, however, take steps to address some of
the concerns we raised. Specifically, NASA modified its acquisition
strategy for the CEV and made the production and sustainment schedules of
the contract-known as Schedules B and C-contract options that the agency
will decide whether to exercise after project's critical design review in
2009. Therefore, NASA will only be liable for the minimum quantities under
Schedules B and C when and if it chooses to exercise those options. These
changes to the acquisition strategy lessen the government's financial
obligation at this early stage. Table 1 outlines the information related
to the CEV acquisition strategy found in the request for proposal and
changes that were made to that strategy prior to contract award. While we
view these changes as in line with our recommendation and as a positive
step to address some of the risks we raised in our report, NASA still has
no assurance that the project will have the elements of a sound business
case in place at the preliminary design review. Therefore, NASA's
commitment to efforts beyond the project's preliminary design review-even
when this commitment is limited to design, development, test and
evaluation activities (DDT&E)-is a risky approach. It is at this point
that NASA should (a) have the increased knowledge necessary to develop a
sound business case that includes high-fidelity, engineering-based
estimates of life cycle cost for the CEV project, (b) be in a better
position to commit the government to a long-term effort, and (c) have more
certainty in advising Congress on required resources.

Table 1: CEV Acquisition Strategy in the Request for Proposal and Awarded
Contract

                                     Request for                              
Contract                          proposal                      Contract   
schedule and Schedule activities  period of     Contract period cost       
type         and deliverables     performance   of performance  estimate
Schedule A-  Schedule A is for       o             o  2006      $3.9       
                design development,     Contract      through 2013 billion    
DDT&E        test and evaluation     award date                 (CPAF)     
                of the CEV.             through                               
Cost plus    Deliverables under      2013                       Up to $750 
award fee    Schedule A include                                 million    
(CPAF)a      all test articles                                  (ID/IQ)    
                and two operational                                
Indefinite   CEV vehicles-one                                   
delivery/    human-rated variant                                
indefinite   and one pressurized                                
quantity     cargo variant.                                     
(ID/IQ)b                                                        
Schedule B-  Schedule B is for       o  2009       o  Initial   $3.5       
                production beyond       through       option       billion    
Production   the two operational     2014 (base    period from             
                vehicles delivered      period)       2009 through (Not to    
ID/IQ        under Schedule A.       o  5-year     2014         exceed)    
                The CEV request for     option        o            
                proposal stated that    period        Additional   
                the "guaranteed         through       option       
                minimum" quantity       2019          period from  
                for Schedule B is                     2014 through 
                "two CEV," the type                   2019         
                of which, according                                
                to NASA officials is                               
                undetermined.                                      
Schedule C-  Schedule C is for       o  2009       o  Initial   $750       
                sustainment in          through       option       million    
Sustaining   support of              2014 (base    period from  
Engineering  operations and in       period)       2009 through 
                support of Schedule     o  5-year     2014         
ID/IQ        B activities.           option        o            
                                        period        Additional   
                                        through       option       
                                        2019          period from  
                                                      2014 through 
                                                      2019         

Source: GAO Analysis of NASA's CEV Request for Proposal and Contract

aA cost-plus-award-feed contract is a cost-reimbursement contract that
provides for a fee consisting of a base amount (which may be zero) fixed
at inception of the contract and an award amount, based upon a judgmental
evaluation by the government, sufficient to provide motivation for
excellence in contract performance.

bAn indefinite quantity contract provides for an indefinite quantity
within stated limits, of supplier or services during a fixed period. The
government places orders for individual requirements. This type of
contract includes a minimum quantity and a maximum quantity.

       Sound Management and Oversight Key to Addressing CEV Project Risks

Sound project management and oversight will be key to addressing risks
that remain for the CEV project as it proceeds with its acquisition
approach. To help mitigate these risks, NASA should have in place the
markers necessary to help decision makers monitor the CEV project and
ensure that is following a knowledge based approach to its development.
However, in our 2005 report that assessed NASA's acquisition policies, we
found that NASA's policies lacked major decision reviews beyond the
initial project approval gate and a standard set of criteria with which to
measure projects at crucial phases in the development life cycle-key
markers for monitoring such progress. In our review of the individual
center policies, we found that the Johnson Space Center project management
policy, which is the policy that the CEV project will be required to
follow, also lacked such key criteria. We concluded that without such
requirements in place, decision makers have little knowledge about the
progress of the agency's projects and, therefore, cannot be assured that
they are making informed decisions about whether continued investment in a
program or project is warranted.

We recommended that NASA incorporate requirements in its new systems
engineering policy to capture specific product knowledge at key junctures
in project development. The demonstration of such knowledge could then be
used as exit criteria for decision making at the following key junctures:

           o  Before projects are approved to transition in to
           implementation, we suggested that projects be required to
           demonstrate that key technologies have reached a high maturity
           level.
           o  Before projects are approved to transition from final design to
           fabrication, assembly, and test, we suggested that projects be
           required to demonstrate that the design is stable.
           o  Before projects are approved to transition to production, we
           suggested that projects be required to demonstrate that the design
           can be manufactured within cost, schedule, and quality targets.

In addition, we recommended that NASA institute additional major decision
reviews that are tied to these key junctures to allow decision makers to
reassess the project based upon demonstrated knowledge.

While NASA concurred with our recommendations, the agency has yet to take
significant actions to implement them. With regard to our first
recommendation, NASA stated that the agency would establish requirements
for success at the key junctures mentioned above. NASA planned to include
these requirements in the systems engineering policy it issued in March
2006. Unfortunately, NASA did not include these criteria as requirements
in the new policy, but included them in an appendix to the policy as
recommended best practices criteria. In response to our second
recommendation, NASA stated it would revise its program and project
management policy for flight systems and ground support projects, due to
be completed in fall 2006. In the revised policy, NASA indicated that it
would require the results of the critical design review and, for projects
that enter a large-scale production phase, the results of the production
readiness review to be reported to the appropriate decision authority in a
timely manner so that a decision about whether to proceed with the project
can be made. NASA has yet to issue its revised policy; therefore, it
remains to be seen as to whether the CEV project decision authorities will
have the opportunity to reassess and make decisions about the project
using the markers recommended above after the project has initially been
approved. Briefings that we have recently received indicate that NASA
plans to implement our recommendation in the revised policy.

The risks that NASA has accepted by moving ahead with awarding the
contract for DDT&E for CEV could be mitigated by implementing our
recommendations as it earlier agreed. Doing so would provide both NASA and
Congress with markers of the project's progress at key points. For
example, at the preliminary design review, decision makers would be able
to assess the status of the project by using the marker of technology
maturity. In addition, at the critical design review, the agency could
assess the status of the project using design stability (i.e., a high
percentage of engineering drawings completed). If NASA has not
demonstrated technology maturity at the preliminary design review or
design stability at the critical design review, decision makers would have
an indication that the project will likely be headed for trouble. Without
such knowledge, NASA cannot be confident that its decisions about
continued investments in projects are based upon the appropriate
knowledge. Furthermore, NASA's oversight committees could also use the
information when debating the agency's yearly budget and authorizing funds
not only for the CEV project, but also for making choices among NASA's
many competing programs. If provided this type of information from NASA
about its key projects, Congress will be in a better position to make
informed decisions about how to invest the nation's limited discretionary
funds.

NASA's ability to address a number of long-standing financial management
challenges could also impact management of NASA's key projects. The lack
of reliable, day-to-day information continues to threaten NASA's ability
to manage its programs, oversee its contractors, and effectively allocate
its budget across numerous projects and programs. To its credit, NASA has
recognized the need to enhance the capabilities and improve the
functioning of its core financial management system, however, progress has
been slow. NASA contract management has been on GAO's high-risk list since
1990 because of such concerns.

                                  Conclusions

In conclusion, implementing the Vision over the coming decades will
require hundreds of billions of dollars and a sustained commitment from
multiple administrations and Congresses. The realistic identification of
the resources needed to achieve the agency's short-term goals would
provide support for such a sustained commitment over the long term. With a
range of federal commitments binding the fiscal future of the United
States, competition for resources within the federal government will only
increase over the next several decades. Consequently, it is incumbent upon
NASA to ensure that it is wisely investing its existing resources. As NASA
proceeds with its acquisition strategy for the CEV project and other key
projects, it will be essential that the agency ensure that the investment
decisions it is making are sound and based upon high levels of knowledge.
NASA should require that the progress of its projects are evaluated and
reevaluated using knowledge based criteria, thereby improving the quality
of decisions that will be made about which program warrant further
investment. Furthermore, it will be critical that NASA's financial
management organization delivers the kind of analysis and forward-looking
information needed to effectively manage its programs and projects. Clear,
strong executive leadership will be needed to ensure that these actions
are carried out. Given the nation's fiscal challenges and those that exist
within NASA, the availability of significant additional resources is
unlikely. NASA has the opportunity to establish a firm foundation for its
entire exploration program by ensuring that the level of knowledge
necessary to allow decision makers to make informed decisions about where
continued investment is justified. Doing so will enhance confidence in the
agency's ability to finally deliver a replacement vehicle for future human
space flight.

Mr. Chairman, this concludes my prepared statement. I would be pleased to
respond to any questions that you or other Members of the Committee may
have.

                     GAO Contact and Staff Acknowledgements

For further information regarding this testimony, please contact Allen Li
at (202) 512-4841 or [email protected] . Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this testimony. GAO staff who made key contributions to this testimony
include Greg Campbell, Richard Cederholm, Hillary Loeffler, James L.
Morrison, Jeffrey M. Niblack, and Shelby S. Oakley.

(120589)

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and methodology, click on the link above.

For more information, contact Allen Li at (202) 512-4841 or [email protected].

Highlights of GAO-06-1127T , a testimony before the Committee on Science,
House of Representatives

September 28, 2006

NASA

Sound Management and Oversight Key to Addressing Crew Exploration Vehicle
Project Risks

The National Aeronautics and Space Administration (NASA) plans to spend
nearly $230 billion over the next two decades implementing the President's
Vision for Space Exploration (Vision) plans. In July 2006, GAO issued a
report that questioned the program's affordability, and particularly,
NASA's acquisition approach for one of the program's major projects-the
Crew Exploration Vehicle (CEV). This testimony, which is based upon that
report and another recent GAO report evaluating NASA's acquisition
policies, highlights GAO's continuing concerns with:

           o  the affordability of the exploration program;
           o  the acquisition approach for the CEV, and;
           o  NASA's acquisition policies that lack requirements for projects
           to proceed with adequate knowledge.

Although GAO is not making recommendations in this testimony, we
previously recommended that NASA modify the CEV acquisition strategy to
ensure that a long-term commitment is not made prior to attaining of key
knowledge. NASA disagreed and stated that it had sufficient knowledge for
proceeding. Subsequent to our report, NASA changed its strategy to lessen
the government's fiscal obligation. GAO also made recommendations
regarding NASA's acquisition policies. The agency agreed, but has yet to
take major actions to implement them.

NASA's proposals for implementing the space exploration Vision raise a
number of concerns:

           o  NASA cannot develop a firm cost estimate for the exploration
           program at this time because the program is in its early stages.
           The changes that have occurred to the program over the past year
           and the resulting refinement of its cost estimates are indicative
           of the evolving nature of the program. While changes are
           appropriate at this stage of the program, they leave the agency
           unable to firmly identify program requirements and needed
           resources and, therefore, not in the position to make a long term
           commitment to the program.

           o  NASA will likely be challenged to implement the program, as
           laid out in its Exploration Systems Architecture study (ESAS), due
           to the high costs associated with the program in some years and
           its long-term sustainability relative to anticipated funding. As
           we reported in July 2006, there are years when NASA, with some
           yearly shortfalls exceeding $1 billion, does not have sufficient
           funding to implement the architecture; while in other years the
           funding available exceeds needed resources. Despite initial
           surpluses, the long-term sustainability of the program is
           questionable, given its long-term funding outlook. NASA's
           preliminary projections show multibillion-dollar shortfalls for
           its exploration directorate in all fiscal years from 2014 to 2020,
           with an overall deficit through 2025 in excess of $18 billion.

           o  NASA's acquisition strategy for the CEV was not based upon
           obtaining an adequate level of knowledge when making key resources
           decisions, placing the program at risk for cost overruns, schedule
           delays, and performance shortfalls. These risks were evident in
           NASA's plan to commit to a long-term product development effort
           before establishing a sound business case for the project that
           includes well-defined requirements, mature technology, a
           preliminary design, and firm cost estimates. NASA adjusted its
           acquisition approach and the agency included the production and
           sustainment portions of the contract as options-a move that is
           consistent with the recommendation in our report because it
           lessens the government's financial obligation at this early stage.
           However, risks persist with NASA's approach.

           o  As we reported in 2005, NASA's acquisition policies lacked
           major decision reviews beyond the initial project approval gate
           and lacked a standard set of criteria with which to measure
           projects at crucial phases in the development life cycle. These
           decision reviews and development measures are key markers needed
           to ensure that projects are proceeding with and decisions are
           being based upon the appropriate level of knowledge and can help
           to lessen identified project risks. The CEV project would benefit
           from the application of such markers.
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