Polar-Orbiting Operational Environmental Satellites: Technical	 
Problems, Cost Increases, and Schedule Delays Trigger Need for	 
Difficult Trade-off Decisions (16-NOV-05, GAO-06-249T). 	 
                                                                 
Polar-orbiting environmental satellites provide data and imagery 
that are used by weather forecasters, climatologists, and the	 
military to map and monitor changes in weather, climate, the	 
oceans, and the environment. Our nation's current operational	 
polar-orbiting environmental satellite program is a complex	 
infrastructure that includes two satellite systems, supporting	 
ground stations, and four central data processing centers. In the
future, the National Polar-orbiting Operational Environmental	 
Satellite System (NPOESS) is to combine the two current systems  
into a single, state-of-the-art environment-monitoring satellite 
system. This new satellite system is considered critical to the  
United States' ability to maintain the continuity of data	 
required for weather forecasting and global climate monitoring	 
through the year 2020. GAO was asked to discuss the NPOESS	 
program's schedule, cost, trends, and risks, and to describe	 
plans and implications for moving the program forward.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-249T					        
    ACCNO:   A41677						        
  TITLE:     Polar-Orbiting Operational Environmental Satellites:     
Technical Problems, Cost Increases, and Schedule Delays Trigger  
Need for Difficult Trade-off Decisions				 
     DATE:   11/16/2005 
  SUBJECT:   Cost analysis					 
	     Cost overruns					 
	     Earth resources satellites 			 
	     Environmental monitoring				 
	     Environmental research				 
	     Future budget projections				 
	     Interagency relations				 
	     Life cycle costs					 
	     Procurement planning				 
	     Research and development contracts 		 
	     Schedule slippages 				 
	     Weather forecasting				 
	     Program evaluation 				 
	     Cost estimates					 
	     Polar-orbiting satellites				 
	     Defense Meteorological Satellite Program		 
	     National Polar-Orbiting Operational		 
	     Environmental Satellite System			 
                                                                 
	     NOAA Polar-Orbiting Operational			 
	     Environmental Satellites				 
                                                                 

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GAO-06-249T

Testimony

Before the Committee on Science, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EST

Wednesday, November 16, 2005

POLAR-ORBITING OPERATIONAL ENVIRONMENTAL SATELLITES

Technical Problems, Cost Increases, and Schedule Delays Trigger Need for
Difficult Trade-off Decisions

Statement of David A. Powner, Director Information Technology Management
Issues

GAO-06-249T

Mr. Chairman and Members of the Committee:

We appreciate the opportunity to participate in today's hearing to discuss
our work on the planned National Polar-orbiting Operational Environmental
Satellite System (NPOESS) program. NPOESS is expected to be a
state-of-the-art environment-monitoring satellite system that will replace
two existing polar-orbiting environment satellite systems. Polar-orbiting
satellites provide data and imagery that are used by weather forecasters,
climatologist, and the military to map and monitor changes in weather,
climate, the oceans, and the environment. The NPOESS program is considered
critical to the United States' ability to maintain the continuity of data
required for weather forecasting and global climate monitoring through the
year 2020. At your request, we will discuss the NPOESS program's schedule,
cost, trends, and risks, and describe plans and implications for moving
the program forward.

This statement builds on other work we have done on environmental
satellite programs over the last several years.1 As agreed with your staff
members, we plan to continue our oversight of this program. An overview of
the approach we used to perform this work-our objectives, scope, and
methodology, is provided in appendix I.

                                Results in Brief

Over the past several years, the NPOESS program has experienced continued
schedule delays, cost increases, and technical challenges. The schedule
for the launch of the first satellite has been delayed by at least 17
months (until September 2010 at the earliest), and this delay could result
in a gap in satellite coverage of at least 3 years if the last satellite
in the prior series fails on launch. Program life cycle cost estimates
have grown from $6.5 billion in 2002 to $8.1 billion in 2004 and are still
growing. While the program is currently reassessing its life cycle cost
estimates, our analysis of contractor trends as of September 2005 shows a
likely $1.4 billion contract cost overrun-bringing the life cycle cost
estimate to about $9.7 billion. Technical risks in developing key sensors
continue, and could lead to further cost increases and schedule delays.

1GAO, Polar-orbiting Environmental Satellites: Information on Program Cost
and Schedule Changes, GAO-04-1054 (Washington, D.C.: September 30, 2004);
Polar-orbiting Environmental Satellites: Project Risks Could Affect
Weather Data Needed by Civilian and Military Users, GAO-03-987T
(Washington, D.C.: July 15, 2003); Polar-orbiting Environmental
Satellites: Status, Plans, and Future Data Management Challenges,
GAO-02-684T (Washington, D.C.: July 24, 2002); National Oceanic and
Atmospheric Administration: National Weather Service Modernization and
Weather Satellite Program, GAO/T-AIMD-00-86 (Washington, D.C.: March 29,
2000); and Weather Satellites: Planning for the Geostationary Satellite
Program Needs More Attention, GAO-AIMD-97-37 (Washington, D.C.: March 13,
1997).

As a result of expected program cost growth, the Executive Committee
responsible for NPOESS is evaluating options for moving the program
forward-and new cost estimates for those options. Key options under
consideration in August 2005 included removing a key sensor from the first
satellite, delaying launches of the first two satellites, and not
launching a preliminary risk-reduction satellite. All of these options
impact the program's cost and schedules, and the system users who rely on
satellite data to develop critical weather products and forecasts-although
the full extent of that impact is not clear. Further, last week we were
informed that there are nine new options now under consideration, and all
are likely to impact costs, schedules, and system users. Until a decision
is made, the program remains without a plan for moving forward, and there
are opportunity costs in not making a decision-some options are lost, and
others may become more difficult. Given the history of large cost
increases and the factors that could further affect NPOESS costs and
schedules, continued oversight, strong leadership, and timely decision
making are more critical than ever.

                                   Background

Since the 1960s, the United States has operated two separate operational
polar-orbiting meteorological satellite systems: the Polar-orbiting
Operational Environmental Satellites (POES), managed by the National
Oceanic and Atmospheric Administration (NOAA) and the Defense
Meteorological Satellite Program (DMSP), managed by the Department of
Defense (DOD). The satellites obtain environmental data that are processed
to provide graphical weather images and specialized weather products and
are the predominant input to numerical weather prediction models. These
images, products, and models are all used by weather forecasters, the
military, and the public. Polar satellites also provide data used to
monitor environmental phenomena, such as ozone depletion and drought
conditions, as well as data sets that are used by researchers for a
variety of studies, such as climate monitoring.

Unlike geostationary satellites, which maintain a fixed position above the
earth, polar-orbiting satellites constantly circle the earth in an almost
north-south orbit, providing global coverage of conditions that affect the
weather and climate. Each satellite makes about 14 orbits a day. As the
earth rotates beneath it, each satellite views the entire earth's surface
twice a day. Currently, there are two operational POES satellites and two
operational DMSP satellites that are positioned so that they can observe
the earth in early morning, mid morning, and early afternoon polar orbits.
Together, they ensure that, for any region of the earth, the data provided
to users are generally no more than 6 hours old. Figure 1 illustrates the
current operational polar satellite configuration. Besides the four
operational satellites, six older satellites are in orbit that still
collect some data and are available to provide some limited backup to the
operational satellites should they degrade or fail. In the future, both
NOAA and DOD plan to continue to launch additional POES and DMSP
satellites every few years, with final launches scheduled for 2007 and
2011, respectively.

Figure 1: Configuration of Operational Polar Satellites

Each of the polar satellites carries a suite of sensors designed to detect
environmental data that are either reflected or emitted from the earth,
the atmosphere, and space. The satellites store these data and then
transmit them to NOAA and Air Force ground stations when the satellites
pass overhead. The ground stations then relay the data via communications
satellites to the appropriate meteorological centers for processing. The
satellites also broadcast a subset of these data in real time to tactical
receivers all over the world.

Under a shared processing agreement among four satellite data processing
centers-NOAA's National Environmental Satellite Data and Information
Service (NESDIS), the Air Force Weather Agency, the Navy's Fleet Numerical
Meteorology and Oceanography Center, and the Naval Oceanographic
Office-different centers are responsible for producing and distributing,
via a shared network, different environmental data sets, specialized
weather and oceanographic products, and weather prediction model outputs.2
Each of the four processing centers is also responsible for distributing
the data to its respective users. For the DOD centers, the users include
regional meteorology and oceanography centers, as well as meteorology and
oceanography staff on military bases. NESDIS forwards the data to NOAA's
National Weather Service for distribution and use by government and
commercial forecasters. The processing centers also use the Internet to
distribute data to the general public. NESDIS is responsible for the
long-term archiving of data and derived products from POES and DMSP.

In addition to the infrastructure supporting satellite data processing
noted above, properly equipped field terminals that are within a direct
line of sight of the satellites can receive real-time data directly from
the polar-orbiting satellites. There are an estimated 150 such field
terminals operated by U.S. and foreign governments and academia. Field
terminals can be taken into areas with little or no data communications
infrastructure-such as on a battlefield or a ship-and enable the receipt
of weather data directly from the polar-orbiting satellites. These
terminals have their own software and processing capability to decode and
display a subset of the satellite data to the user. Figure 2 depicts a
generic data relay pattern from the polar-orbiting satellites to the data
processing centers and field terminals.

2These environmental data sets, specialized weather and oceanographic
products, and weather prediction model outputs are produced through
algorithmic processing. An algorithm is a precise set of procedures that
enable a desired end result, such as a measurement of natural phenomena.

Figure 2: Generic Data Relay Pattern for the Polar Meteorological
Satellite System

NPOESS Overview

Given the expectation that combining the POES and DMSP programs would
reduce duplication and result in sizable cost savings, a May 1994
Presidential Decision Directive3 required NOAA and DOD to converge the two
satellite programs into a single satellite program capable of satisfying
both civilian and military requirements. The converged program, NPOESS, is
considered critical to the United States' ability to maintain the
continuity of data required for weather forecasting and global climate
monitoring through the year 2020. To manage this program, DOD, NOAA, and
the National Aeronautics and Space Administration (NASA) formed a
tri-agency Integrated Program Office, located within NOAA.

Within the program office, each agency has the lead on certain activities.
NOAA has overall program management responsibility for the converged
system and for satellite operations; DOD has the lead on the acquisition;
and NASA has primary responsibility for facilitating the development and
incorporation of new technologies into the converged system. NOAA and DOD
share the costs of funding NPOESS, while NASA funds specific technology
projects and studies. Figure 3 depicts the organizations comprising the
Integrated Program Office and lists their responsibilities.

3NSTC-2, May 5, 1994.

Figure 3: Organizations Coordinated by the NPOESS Integrated Program
Office

Program acquisition plans call for the procurement and launch of six
NPOESS satellites over the life of the program, as well as the integration
of 13 instruments, consisting of 10 environmental sensors and 3
subsystems. Together, the sensors are to receive and transmit data on
atmospheric, cloud cover, environmental, climate, oceanographic, and
solar-geophysical observations. The subsystems are to support
nonenvironmental search and rescue efforts, sensor survivability, and
environmental data collection activities. According to the program office,
7 of the 13 planned NPOESS instruments involve new technology development,
whereas 6 others are based on existing technologies. In addition, the
program office considers 4 of the sensors involving new technologies
critical, because they provide data for key weather products; these
sensors are shown in bold in table 1, which lists the planned instruments
and the state of technology on each.

Table 1: Expected NPOESS Instruments (critical sensors in bold)

                                                                   State of   
Instrument name         Description                             technology 
Advanced technology     Measures microwave energy released and  New        
microwave sounder       scattered by the atmosphere and is to   
                           be used with infrared sounding data     
                           from NPOESS' cross-track infrared       
                           sounder to produce daily global         
                           atmospheric temperature, humidity, and  
                           pressure profiles.                      
Aerosol polarimetry     Retrieves specific measurements of      New        
sensor                  clouds and aerosols (liquid droplets or 
                           solid particles suspended in the        
                           atmosphere, such as sea spray, smog,    
                           and smoke).                             
Conical-scanned         Collects microwave images and data      New        
microwave               needed to measure rain rate, ocean      
imager/sounder          surface wind speed and direction,       
                           amount of water in the clouds, and soil 
                           moisture, as well as temperature and    
                           humidity at different atmospheric       
                           levels.                                 
Cross-track infrared    Collects measurements of the earth's    New        
sounder                 radiation to determine the vertical     
                           distribution of temperature, moisture,  
                           and pressure in the atmosphere.         
Data collection system  Collects environmental data from        Existing   
                           platforms around the world and delivers 
                           them to users worldwide.                
Earth radiation budget  Measures solar short-wave radiation and Existing   
sensor                  long-wave radiation released by the     
                           earth back into space on a worldwide    
                           scale to enhance long-term climate      
                           studies.                                
Ozone mapper/profiler   Collects data needed to measure the     New        
suite                   amount and distribution of ozone in the 
                           earth's atmosphere.                     
Radar altimeter         Measures variances in sea surface       Existing   
                           height/topography and ocean surface     
                           roughness, which are used to determine  
                           sea surface height, significant wave    
                           height, and ocean surface wind speed    
                           and to provide critical inputs to ocean 
                           forecasting and climate prediction      
                           models.                                 
Search and rescue       Detects and locates aviators, mariners, Existing   
satellite aided         and land-based users in distress.       
tracking system                                                 
Space environmental     Collects data to identify, reduce, and  New        
sensor suite            predict the effects of space weather on 
                           technological systems, including        
                           satellites and radio links.             
Survivability sensor    Monitors for attacks on the satellite   Existing   
                           and notifies other instruments in case  
                           of an attack.                           
Total solar irradiance  Monitors and captures total and         Existing   
sensor                  spectral solar irradiance data.         
Visible/infrared imager Collects images and radiometric data    New        
radiometer suite        used to provide information on the      
                           earth's clouds, atmosphere, ocean, and  
                           land surfaces.                          

Source: GAO, based on NPOESS Integrated Program Office data.

In addition to the sensors and subsystems listed above, in August 2004,
the President directed NASA and the Departments of Defense, the Interior,
and Commerce to place a LANDSAT-like imagery capability on the NPOESS
platform. This new capability is to collect imagery data of the earth's
surface similar to the current LANDSAT series of satellites, which are
managed by the Department of Interior's U.S. Geological Survey and are
reaching the end of their respective lifespans. One instrument was
launched in 1984 and is now long past its 3-year design life; the newer
satellite is not fully operational. LANDSAT is an important tool in
environmental monitoring efforts, including land cover change, vegetation
mapping, and wildfire effects. The decision to add a LANDSAT-like sensor
to the NPOESS platform is currently being revisited by the President's
Office of Science and Technology Policy and the Office of Management and
Budget.

In addition, the NPOESS Preparatory Project (NPP), which is being
developed as a major risk reduction and climate data continuity
initiative, is a planned demonstration satellite to be launched several
years before the first NPOESS satellite is to be launched. It is planned
to host three of the four critical NPOESS sensors (the visible/infrared
imager radiometer suite, the cross-track infrared sounder, and the
advanced technology microwave sounder), as well as a noncritical sensor
(the ozone mapper/profiler suite). NPP will provide the program office and
the processing centers an early opportunity to work with the sensors,
ground control, and data processing systems. Specifically, this satellite
is expected to demonstrate the validity of about half of the NPOESS
environmental data records4 and about 93 percent of its data processing
load.

NPOESS Acquisition Strategy

NPOESS is a major system acquisition that consists of three key phases:
the concept and technology development phase, which lasted from roughly
1995 to early 1997; the program definition and risk reduction phase which
began in early 1997 and ended in August 2002; and the engineering and
manufacturing development and production phase, which began with the award
of the development and production contract in August 2002 and will
continue through the end of the program. Before the contract was awarded
in 2002, the life cycle cost estimate for the program was estimated to be
$6.5 billion over the 24-year period from the inception of the program in
1995 through 2018. Shortly after the contract was awarded, the life cycle
cost estimate grew to $7 billion.

When the NPOESS development contract was awarded, program officials
identified an anticipated schedule and funding stream for the program. The
schedule for launching the satellites was driven by a requirement that the
satellites be available to back up the final POES and DMSP satellites
should anything go wrong during the planned launches of these satellites.
In general, program officials anticipate that roughly 1 out of every 10
satellites will fail either during launch or during early operations after
launch.

4Environmental data records are weather products derived from sensor data
records and temperature data records.

Early program milestones included (1) launching NPP by May 2006, (2)
having the first NPOESS satellite available to back up the final POES
satellite launch in March 2008, and (3) having the second NPOESS satellite
available to back up the final DMSP satellite launch in October 2009. If
the NPOESS satellites were not needed to back up the final predecessor
satellites, their anticipated launch dates would have been April 2009 and
June 2011, respectively.

In 2003, we reported that these schedules were subsequently changed as a
result of changes in the NPOESS funding stream.5 A DOD program official
reported that between 2001 and 2002 the agency experienced delays in
launching a DMSP satellite, causing delays in the expected launch dates of
another satellite. In late 2002, DOD shifted the expected launch date for
the final satellite from 2009 to 2010. As a result, the department reduced
funding for NPOESS by about $65 million between fiscal years 2004 and
2007. According to program officials, because NOAA is required to provide
the same level of funding that DOD provides, this change triggered a
corresponding reduction in funding by NOAA for those years. As a result of
the reduced funding, program officials were forced to make difficult
decisions about what to focus on first. The program office decided to keep
NPP as close to its original schedule as possible, because of its
importance to the eventual NPOESS development, and to shift some of the
NPOESS deliverables to later years. This shift affected the NPOESS
deployment schedule. To plan for this shift, the program office developed
a new program cost and schedule baseline.

After this new baseline was completed in 2004, we reported that the
program office increased the NPOESS cost estimate from about $7 billion to
$8.1 billion, and delayed key milestones, including the planned launch of
the first NPOESS satellite-which was delayed by 7 months.6 The cost
increases reflected changes to the NPOESS contract as well as increased
program management funds. According to the program office, contract
changes included extension of the development schedule, increased sensor
costs, and additional funds needed for mitigating risks. Increased program
management funds were added for non-contract costs and management
reserves.

5GAO-03-987T.

6GAO-04-1054.

We also noted that other factors could further affect the revised cost and
schedule estimates. Specifically, the contractor was not meeting expected
cost and schedule targets of the new baseline because of technical issues
in the development of key sensors. Based on its performance through May
2004, we estimated that the contractor would most likely overrun its
contract at completion in September 2011 by $500 million. In addition, we
reported that risks associated with the development of the critical
sensors, integrated data processing system, and algorithms, among other
things, could contribute to further cost increases and schedule slips.

             NPOESS Schedules, Costs, and Trends Continue to Worsen

Over the past year, NPOESS cost increases and schedule delays have
demonstrated worsening trends. NPOESS has continued to experience problems
in the development of a key sensor, resulting in schedule delays and
anticipated cost increases. Further, contractor data show that costs and
schedules are likely to continue to increase in the future. Our trend
analysis shows that the contractor will most likely overrun costs by $1.4
billion, resulting in a life cycle cost of about $9.7 billion, unless
critical changes are made. Program risks, particularly with the
development of critical sensors, could further increase NPOESS costs and
delay schedules. Management problems at multiple levels-subcontractor,
contractor, program office, and executive leadership-have contributed to
these cost and schedule issues.

NPOESS Sensor Problems Triggered Schedule Delays and Cost Increases

NPOESS has continued to experience problems in the development of a key
sensor, resulting in schedule delays and anticipated cost increases. In
early 2005, the program office learned that a subcontractor could not meet
cost and schedule due to significant technical issues on the
visible/infrared imager radiometer suite (VIIRS) sensor-including problems
with the cryoradiator,7 excessive vibration of sensor parts, and errors in
the sensor's solar calibration. These technical problems were further
complicated by inadequate process engineering and management oversight by
the VIIRS subcontractor. To address these issues, the program office
provided additional funds for VIIRS, capped development funding for the
conical-scanned microwave imager/sounder (CMIS) and the ozone
mapper/profiler suite sensors, and revised its schedule in order to keep
the program moving forward.

7The cryoradiator is a key component of the VIIRS sensor. It is intended
to cool down components of the sensor.

By the summer of 2005, the program office reported that significant
technical issues had been resolved-but they had a significant impact on
the overall NPOESS program. Regarding NPOESS schedule, the program office
anticipated at least a 10-month delay in the launch of the first satellite
(totaling at least a 17-month delay from the time the contract was
awarded) and a 6-month delay in the launch of the second satellite. A
summary of recent schedule changes is shown in table 2. The effect of
these delays is evident in the widening gap between when the last POES
satellite is expected to launch and when the first NPOESS satellite could
be available if needed as a backup. This is significant because if the
last POES satellite fails on launch, it will be at least 3 years before
the first NPOESS satellite could be launched. During that time, critical
weather and environmental observations would be unavailable-and military
and civilian weather products and forecasts would be significantly
degraded.

As for NPOESS costs, program officials reported that the VIIRS development
problems caused the program to overrun its budget, and that they need to
reassess options for funding the program. They did not provide an updated
cost estimate, noting that new cost estimates are under development. A
summary of recent program cost growth is shown in table 3.

Table 2: Program Schedule Changes

               As of                           Net                            
               August   As of                  change   Minimum               
               2002     February     As of     from     change     
               contract 2004         August    contract from       Potential
Milestones  award    (rebaseline) 2005      award    rebaseline data gap
NPP launch  May 2006 October 2006 April     23-month 18-month   Not        
                                     2008      delay    delay      applicable 
Final POES  March    March 2008   December  4-month             Not        
launcha     2008                  2007      advance             applicable 
First       April    November     September 17-month 10-month   Not        
NPOESS      2009     2009         2010      delay    delay      applicable 
satellite                                                       
planned for                                                     
launch                                                          
First       March    February     December  33-month            3-year     
NPOESS      2008     2010b        2010c     delay               data gap   
satellite                                                       if final   
launch if                                                       POES fails 
needed to                                                       on launch  
back up the                                                     
final POES                                                      
Final DMSP  October  May 2010     October   24-month            Not        
launcha     2009                  2011      delay               applicable 
Second      June     June 2011    December  6-month  6-month    Not        
NPOESS      2011                  2011      delay    delay      applicable 
satellite                                                       
planned for                                                     
launch                                                          

Source: GAO analysis, based on NPOESS Integrated Program Office data.

aPOES and DMSP are not part of the NPOESS program. Their launch dates are
provided because of their relevance to the NPOESS satellite schedules.

bA program official reported that if the first NPOESS satellite is needed
to back up the final POES satellite, the contractor will prepare the
satellite to be launched in a different orbit with a different suite of
sensors. These factors will prevent launch from taking place until
February 2010.

CIf the first NPOESS satellite is needed to back up the final POES
satellite, the contractor will prepare the satellite to be launched in a
different orbit with a different suite of sensors, adding three months to
the September 2010 launch date.

Table 3: Program Life Cycle Cost Changes

As of            Life cycle cost estimate   Life cycle range   
July 2002        $6.5 billion               1995-2018          
July 2003        $7.0 billion               1995-2018          
September 2004   $8.1 billion               1995-2020          
November 2005    To be determined           To be determined   

Source: GAO analysis, based on NPOESS Integrated Program Office data.

Trends in Contractor Data Show Continued Cost and Schedule Overruns; Overall
Costs Projected to Grow

In addition to the overall program office cost and schedule estimates, it
is valuable to assess contractor data to monitor the contractor's progress
in meeting deliverables since contractor costs comprise a substantial
portion of the overall program costs. NPOESS contractor data show a
pattern of cost and schedule overruns-and a most likely contract cost
growth of about $1.4 billion.

One method project managers use to track contractor progress on
deliverables is earned value management. This method, used by DOD for
several decades, compares the value of work accomplished during a given
period with that of the work expected in that period. Differences from
expectations are measured in both cost and schedule variances. Cost
variances compare the earned value of the completed work with the actual
cost of the work performed. For example, if a contractor completed $5
million worth of work and the work actually cost $6.7 million, there would
be a -$1.7 million cost variance. Schedule variances are also measured in
dollars, but they compare the earned value of the work completed to the
value of work that was expected to be completed. For example, if a
contractor completed $5 million worth of work at the end of the month, but
was budgeted to complete $10 million worth of work, there would be a -$5
million schedule variance. Positive variances indicate that activities are
costing less or are completed ahead of schedule. Negative variances
indicate that activities are costing more or are falling behind schedule.
These cost and schedule variances can then be used in estimating the cost
and time needed to complete the program.

Using contractor-provided data, our analysis indicates that NPOESS cost
performance continues to experience negative variances. Figure 4 shows the
6-month cumulative cost variance for the NPOESS contract. From March 2005
to September 2005, the contractor exceeded its cost target by $103.7
million, which is about 9 percent of the contractor's budget for that time
period. The contractor has incurred a total cost overrun of $253.8 million
with NPOESS development only about 36 percent complete. This information
is useful because trends often tend to continue and can be difficult to
reverse unless management attention is focused on key risk areas and risk
mitigation actions are aggressively pursued. Studies have shown that, once
programs are 15 percent complete, the performance indicators are
indicative of the final outcome.

Based on contractor performance from March 2005 to September 2005, we
estimate that the current NPOESS contract will overrun its budget-worth
approximately $3.4 billion-by between $788 million and $2 billion. Our
projection of the most likely cost overrun is about $1.4 billion. The
contractor, in contrast, estimates about a $371 million overrun at
completion of the NPOESS contract. Adding our projected $1.4 billion
overrun to the prior $8.1 billion life cycle cost estimate and the project
office's estimated need for $225 million in additional management costs
brings the total life cycle cost of the program to about $9.7 billion.

Figure 4: Cumulative Cost Variance of the NPOESS Contract over a 6-Month
Period

Our analysis also indicates that the contract is showing a negative
schedule variance. Figure 5 shows the 6-month cumulative schedule variance
of NPOESS. From March 2005 to September 2005, the contractor was unable to
complete $27.8 million worth of scheduled work. In September, the
contractor was able to improve its overall schedule performance because of
an unexpectedly large amount of work being completed on the spacecraft (as
opposed to the sensors). It was not a reflection of an improvement in the
contractor's ability to complete work on the critical sensors.
Specifically, performance on the development of critical sensors over the
past 6 months continued to be poor, which indicates that schedule
performance will likely remain poor in the future. This is of concern
because an inability to meet contract schedule performance could be a
predictor of future rising costs, as more spending is often necessary to
resolve schedule overruns.

Figure 5: Cumulative Schedule Variance of the NPOESS Contract over a
6-Month Period

Risks Could Further Affect NPOESS Cost and Schedules

Risk management is a leading management practice that is widely recognized
as a key component of a sound system development approach. An effective
risk management approach typically includes identifying, prioritizing,
resolving, and monitoring project risks.

Program officials reported that they recognize several risks with the
overall program and critical sensors that, if not mitigated, could further
increase costs and delay the schedule. In accordance with leading
management practices, the program office developed a NPOESS risk
management program that requires assigning a severity rating to risks that
bear particular attention, placing these risks in a database, planning
response strategies for each risk in the database, and reviewing and
evaluating risks in the database during monthly program risk management
board meetings.

The program office identifies risks in two categories: program risks,
which affect the whole NPOESS program and are managed at the program
office level, and segment risks, which affect only individual segments8
and are managed at the integrated product team level. The program office
has identified 17 program risks, including 10 medium to medium-high risks.
Some of these risks include the delivery of four sensors (VIIRS, CMIS, the
cross-track infrared sounder and the ozone mapper/profiler suite) and the
integrated data processing system; and the uncertainty that algorithms
will meet system performance requirements. Figure 6 identifies the 17
program risks and their assigned levels of risk.

8These segments are identified as (1) overall system integration, (2) the
launch segment, (3) the space segment, (4) the interface data processing
segment, and (5) the command, control, and communications segment.

Figure 6: Key Program Risks as Identified by the NPOESS Program Office, as
of August 2005

Managing the risks associated with the development of VIIRS, the ozone
mapper/profiler suite, the cross-track infrared sounder, the integrated
data processing system, and algorithm performance is of particular
importance because these are to be demonstrated on the NPP satellite that
is currently scheduled for launch in April 2008. The risks with the
development of CMIS are also important because CMIS is one of the four
critical sensors providing data for key weather products.

At present, the program office considers two critical sensors-VIIRS and
CMIS-to present key program risks because of technical challenges that
each is facing. In addition to the previously reported VIIRS problems, the
sensor continues to experience significant problems dealing with the
technical complexity of the ground support equipment. The testing of
optical and solar diffuser components has also been more challenging than
expected and is taking longer than planned to complete. In addition, the
delivery of components for integration onto the sensor, including the
electronics material from two subcontractors, has been behind schedule due
to technical challenges. Until the current technical issues are resolved,
delays in the VIIRS delivery and integration onto the NPP satellite remain
a potential threat to the expected launch date of the NPP.

The CMIS sensor is experiencing schedule overruns that may threaten its
expected delivery date. Based on the prime contractor's analysis, late
deliveries of major CMIS subsystems will occur unless the current schedule
is extended. For example, the simulator hardware is already expected to be
delivered late, based on the current contractual requirement of December
2006. CMIS also continues to experience technical challenges in the design
of the radio frequency receivers, the structure, and the antenna. In
addition, extensive effort has been expended to resolve system reliability
and thermal issues, among other things. To the program office's credit, it
is aware of these risks and is using its risk management plans to help
mitigate them.

Current Program Issues Due, In Part, to Problems at Multiple Management Levels

Problems involving multiple levels of management-including subcontractor,
contractor, program office, and executive leadership-have played a role in
bringing the NPOESS program to its current state. As noted earlier, VIIRS
sensor development issues were attributed, in part, to the subcontractor's
inadequate project management. Specifically, after a series of technical
problems, internal review teams sent by the prime contractor and the
program office found that the VIIRS subcontractor had deviated from a
number of contract, management, and policy directives set out by the main
office and that both management and process engineering were inadequate.
Neither the contractor nor the program office recognized the underlying
problems in time to fix them. After these issues were identified, the
subcontractor's management team was replaced. Further, in January 2005,
the NPOESS Executive Committee (Excom) called for an independent review of
the VIIRS problems. This independent review, delivered in August 2005,
reported that the program management office did not have the technical
system engineering support it needed to effectively manage the contractor,
among other things. Additionally, the involvement of NPOESS executive
leadership has wavered from frequent heavy involvement to occasional
meetings with few resulting decisions. Specifically, the Excom has met
five times over the last 2 years. Most of these meetings did not result in
major decisions, but rather triggered further analysis and review. For
instance, program officials and the program's Tri-agency Steering
Commitee9 identified five options to present at the executive committee
meeting in mid-August 2005 and expected to receive direction on how to
proceed with the project. The Excom did not select an option. Instead, it
requested further analysis of the options by another independent review
team, and an independent cost estimate by DOD's Cost Analysis Improvement
Group.

Sound management is critical to program success. In our reviews of major
acquisitions throughout the government, we have reported that sound
program management, contractor oversight, risk identification and
escalation, and effective and timely executive level oversight are key
factors determining a project's ability to be delivered on time, within
budget, and with promised functionality.10 Given the history of large cost
increases and the factors that could further affect NPOESS costs and
schedules, continued oversight, strong leadership, and timely decision
making are more critical than ever.

  Options for Moving Forward Are under Consideration, but Cost, Schedule, and
                    Impact on Users Are Not Fully Understood

In August 2005, the program office briefed its Executive Committee on the
program's cost, schedule, and risks. The program office noted that the
budget for the program was no longer executable and offered multiple
alternatives for reconfiguring the program. Specifically, the program
office and contractor developed 26 options during the March to August 2005
timeframe. Of these options, the Tri-agency Steering Committee selected
five options, shown in table 4. All of these options alter the costs,
schedules, and deliverables for the program. While the options'
preliminary life cycle cost estimates range from $8.8 billion to $9.2
billion, they all involve reductions in functionality and limited
probabilities for meeting schedules within the cited budgets. None of the
options presented discussed the potential for adding funding in the short
term to hold off longer-term life cycle cost increases.

9The Tri-agency Steering Committee reviews and consolidates issues for the
Executive Committee and provides oversight of the program office.

10For example, GAO, High-Risk Series: An Update, GAO-05-207 (Washington,
D.C.: January 2005) and Major Management Challenges and Program Risks:
Department of Transportation,GAO-03-108 (Washington, D.C.: January 2003).

Table 4: Selected program options

                                     Schedule                                 
                                     change on                                
                                     first and                  
                      Estimated cost second                     
                      increasea/     planned       Probability  
                                     satellite     of meeting   
                      Preliminary    launches      schedule     
                      life cycle     (called C-1   within cited Performance
Option description cost estimate  and C-2)      budget       change:
Delay first and    $948 million/  C-1 launch    50 percent   CMIS sensor   
second NPOESS                     delayed by 10              not included  
satellite launches $9.0 billion   months;                    on C-1        
and do not include                                           
the CMIS sensor on                C-2 launch                 
C-1                               delayed by 6               
                                     months                     
Cancel the last    $948 million/  C-1 launch    75 percent   CMIS sensor   
POES satellite;                   delayed by 16              not included  
delay launch of    $9.0 billion   months                     on C-1        
C-1 and C-2; and                                             
do not include the                C-2 launch                 
CMIS sensor on C-1                delayed by 16              
                                     months                     
Cancel NPP; delay  $758 million/  C-1 launch    40 percent   
C-1 and C-2                       delayed by 10              
launches           $8.9 billion   months;                    
                                                                
                                     C-2 launch                 
                                     delayed by 6               
                                     months                     
Cancel NPP; delay  $676 million/  C-1 launch    70 percent   CMIS sensor   
C-1 and C-2                       delayed by 10              not included  
launches; and      $8.8 billion   months;                    on C-1        
defer CMIS until                                             
C-2                               C-2 launch                 
                                     delayed by 6               
                                     months                     
Cancel C-1, use    $1.105         C-1           60 percent   Does not meet 
European satellite billion/       cancelled;                 critical      
data in its place                                            performance   
                      $9.2 billion   C-2 unchanged              requirements  

Source: NPOESS Integrated Program Office data.

aCost increases include contract costs and $225 million for the program
office.

Project officials anticipated that at its August meeting, the Excom would
decide on an option and provide directions for keeping the project moving.
However, Excom officials requested further analysis and detailed cost
estimates, and they deferred a decision among alternatives until December
2005.

New Options Under Consideration Would Affect Cost, Schedule, and System Users;
Full Extent Unknown

Last week, we learned that in addition to the five options presented in
August 2005, program executives are considering nine new options. While we
were not provided any details about the nine new options, program
officials informed us that they too will affect NPOESS costs, schedule,
and promised functionality for system users-although their full impact is
not yet clear. Program officials expect the Excom to decide on a limited
number of options on November 22, 2005, and to obtain independent cost
estimates of those options and make a decision to implement one of the
options in December 2005. After a decision is made, the prime contractor
will need time to develop more precise cost estimates and the program
office with need to renegotiate the contract. Until a decision is made,
the program remains without a plan for moving forward. Further, there are
opportunity costs in not making a decision-that is, some options may no
longer be viable, contractors are not working towards a chosen solution,
and other potential options become more difficult to implement

Clearly, timely decisions are needed to allow the program to move forward
and for satellite data users to start planning for any data shortfalls
they may experience. Until a decision is made on how the program is to
proceed, the contractor and program office cannot start to implement the
chosen solution and some decisions, such as the ability to hold schedule
slips to a minimum, become much more difficult.

In summary, NPOESS is a program in crisis. Over the last few years, it has
been troubled by technical problems, cost increases, and schedule delays.
Looking forward, technical challenges persist; costs are likely to grow;
and schedule delays could lead to gaps in satellite coverage. Program
officials and executives are considering various options for dropping
functionality in order to handle cost and schedule increases, but the full
impact of these options is not clear. Moving forward, continued oversight,
strong leadership, and informed and timely decision making are more
critical than ever.

This concludes my statement. I would be pleased to respond to any
questions that you or other members of the Committee may have at this
time.

                          Contact and Acknowledgements

If you have any questions regarding this testimony, please contact David
Powner at (202) 512-9286 or by email at [email protected]. Individuals
making contributions to this testimony include Carol Cha, Neil Doherty,
Joanne Fiorino, Kathleen S. Lovett, Colleen Phillips, and Karen Richey.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) discuss the National Polar-orbiting Operational
Environmental Satellite System (NPOESS) program's schedule, cost, trends,
and risks and (2) describe plans and implications for moving the program
forward. To accomplish these objectives, we focused our review on the
Integrated Program Office, the organization responsible for the overall
NPOESS program. We also met with officials from the Department of Defense,
the National Aeronautics and Space Administration, and NOAA's National
Weather Service and National Environmental Satellite Data and Information
Service to discuss user needs for the program.

To identify schedule and cost changes, we reviewed program office contract
data, the Executive Committee minutes and briefings, and an independent
review team study, and we interviewed program officials. We compared
changes in NPOESS cost and schedule estimates to prior cost and schedule
estimates as reported in our July 20021 and July 2003 testimonies2 and in
our September 2004 report.3

To identify trends that could affect the program baseline in the future,
we assessed the prime contractor's cost and schedule performance. To make
these assessments, we applied earned value analysis techniques4 to data
from contractor cost performance reports. We compared the cost of work
completed with the budgeted costs for scheduled work for a 6-month period,
from March to September 2005, to show trends in cost and schedule
performance. We also used data from the reports to estimate the likely
costs at the completion of the prime contract through established earned
value formulas. This resulted in three different values, with the middle
value being the most likely. We used the base contract without options for
our earned value assessments.

1GAO, Polar-orbiting Environmental Satellites: Status, Plans, and Future
Data Management Challenges, GAO-02-684T (Washington, D.C.: July 24, 2002).

2GAO, Polar-orbiting Environmental Satellites: Project Risks Could Affect
Weather Data Needed by Civilian and Military Users, GAO-03-987T
(Washington, D.C.: July 15, 2003).

3GAO, Polar-orbiting Environmental Satellites: Information on Program Cost
and Schedule Changes, GAO-04-1054 (Washington, D.C.: September 30, 2004).

4The earned value concept is applied as a means of placing a dollar value
on project status. It is a technique that compares budget versus actual
costs versus project status in dollar amounts. For our analysis, we used
standard earned value formulas to calculate cost and schedule variance and
forecast the range of cost overrun at contract completion.

To identify risks, we reviewed program risk management documents and
interviewed program officials. Further, we evaluated earned value cost
reports to determine the key risks that negatively affect NPOESS's ability
to maintain the current schedule and cost estimates.

To assess options and implications for moving the program forward, we
reviewed the five options presented at the Executive Committee briefing
and met with representatives of the National Weather Service and National
Environmental Satellite Data and Information Service to obtain their views
on user's needs and priorities for satellite data.

NOAA officials generally agreed with the facts presented in this statement
and provided some technical corrections, which we have incorporated. We
performed our work at the Integrated Program Office, DOD, NASA, and NOAA
in the Washington, D.C., metropolitan area, between June 2005 and November
2005, in accordance with generally accepted government auditing standards.

(310497)

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www.gao.gov/cgi-bin/getrpt?GAO-06-249T.

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact David Powner at (202) 512-9286 or
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Highlights of GAO-06-249T, a testimony before the Committee on Science,
House of Representatives

November 16, 2005

POLAR-ORBITING OPERATIONALENVIRONMENTAL SATELLITES

Technical Problems, Cost Increases, and Schedule Delays Trigger Need for
Difficult Trade-off Decisions

Polar-orbiting environmental satellites provide data and imagery that are
used by weather forecasters, climatologists, and the military to map and
monitor changes in weather, climate, the oceans, and the environment. Our
nation's current operational polar-orbiting environmental satellite
program is a complex infrastructure that includes two satellite systems,
supporting ground stations, and four central data processing centers.

In the future, the National Polar-orbiting Operational Environmental
Satellite System (NPOESS) is to combine the two current systems into a
single, state-of-the-art environment-monitoring satellite system. This new
satellite system is considered critical to the United States' ability to
maintain the continuity of data required for weather forecasting and
global climate monitoring through the year 2020.

GAO was asked to discuss the NPOESS program's schedule, cost, trends, and
risks, and to describe plans and implications for moving the program
forward.

The NPOESS program has experienced continued schedule delays, cost
increases, and technical challenges over the last several years. The
schedule for the launch of the first satellite has been delayed by at
least 17 months (until September 2010 at the earliest), and this delay
could result in a gap in satellite coverage of at least 3 years if the
last satellite in the prior series fails on launch (see figure below).
Program life cycle cost estimates have grown from $6.5 billion in 2002 to
$8.1 billion in 2004 and are still growing. While the program is currently
reassessing its life cycle cost estimates, our analysis of contractor
trends as of September 2005 shows a likely $1.4 billion contract cost
overrun-bringing the life cycle cost estimate to about $9.7 billion.
Technical risks in developing key sensors continue, and could lead to
further cost increases and schedule delays. As a result of expected
program cost growth, the Executive Committee responsible for the program
is evaluating options for moving the program forward-and new cost
estimates for those options.

Key options under consideration in August 2005 included removing a key
sensor from the first satellite, delaying launches of the first two
satellites, and not launching a preliminary risk-reduction satellite. All
of these options impact the program's cost, schedules, and the system
users who rely on satellite data to develop critical weather products and
forecasts-although the full extent of that impact is not clear. Further,
last week GAO was informed that there are nine new options now under
consideration, and that they are likely to impact costs, schedules, and
system users. Until a decision is made, the program remains without a plan
for moving forward. Further, there are opportunity costs in not making a
decision-some options are lost and others may become more difficult. Given
the history of large cost increases and the factors that could further
affect NPOESS costs and schedules, continued oversight, strong leadership,
and timely decision making are more critical than ever.

Potential Gap in Satellite Coverage
*** End of document. ***