Polar-Orbiting Operational Environmental Satellites: Cost	 
Increases Trigger Review and Place Program's Direction on Hold	 
(30-MAR-06, GAO-06-573T).					 
                                                                 
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. They are critical to long-term	 
weather prediction, including advance forecasts of a hurricane's 
path and intensity. 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. NPOESS is considered critical to the United States'	 
ability to maintain the continuity of data required for weather  
forecasting and global climate monitoring though the year 2020.  
The National Oceanic and Atmospheric Administration (NOAA), the  
Department of Defense (DOD), and the National Aeronautics and	 
Space Administration (NASA) have formed a tri-agency integrated  
program office to manage NPOESS. GAO was asked to determine the  
NPOESS program's current status and plans and to discuss	 
considerations in moving the program forward.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-573T					        
    ACCNO:   A50479						        
  TITLE:     Polar-Orbiting Operational Environmental Satellites: Cost
Increases Trigger Review and Place Program's Direction on Hold	 
     DATE:   03/30/2006 
  SUBJECT:   Cost analysis					 
	     Data collection					 
	     Data transmission					 
	     Earth resources satellites 			 
	     Program evaluation 				 
	     Program management 				 
	     Schedule slippages 				 
	     Weather forecasting				 
	     Cost estimates					 
	     Cost growth					 
	     National Polar-Orbiting Operational		 
	     Environmental Satellite System			 
                                                                 

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GAO-06-573T

     

     * Results in Brief
     * Background
          * NPOESS Overview
          * NPOESS Acquisition Strategy
          * NPOESS Has Experienced Continued Cost Increases and Schedule
     * NPOESS Status and Plans: Decision on Program's Future Direct
          * Nunn-McCurdy Process Puts Program Direction on Hold
          * Program Office Has Interim Efforts Under Way
     * Considerations in Moving the NPOESS Program Forward
     * Contact and Acknowledgements
     * Appendix I. Objectives, Scope, and Methodology
     * PDF6-Ordering Information.pdf
          * Order by Mail or Phone

Mr. Chairman and Members of the Subcommittee:

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,
climatologists, 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 (including severe weather events such as
hurricanes) and global climate monitoring through the year 2020. Three
agencies share responsibility for NPOESS: the National Oceanic and
Atmospheric Administration (NOAA), the Department of Defense (DOD), and
the National Aeronautics and Space Administration (NASA). To manage the
program, these agencies established a tri-agency integrated program
office. At your request, we will discuss the program's current status and
plans, as well as considerations in moving the program forward.

This statement builds on other work we have done on environmental
satellite programs over the last several years.1 An overview of the
approach we used to perform this work (our objectives, scope, and
methodology) is provided in appendix I.

1GAO, Polar-orbiting Operational Environmental Satellites: Technical
Problems, Cost Increases, and Schedule Delays Trigger Need for Difficult
Trade-off Decisions, GAO-06-249T (Washington, D.C.: Nov. 16, 2005);
Polar-orbiting Environmental Satellites: Information on Program Cost and
Schedule Changes,  GAO-04-1054 (Washington, D.C.: Sept. 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.: Mar. 29,
2000); and Weather Satellites: Planning for the Geostationary Satellite
Program Needs More Attention, GAO-AIMD-97-37 (Washington, D.C.: Mar. 13,
1997).

                                Results in Brief

The future direction of the NPOESS program-what will be delivered, at what
cost, and by when-is currently on hold pending a decision on how to
proceed. In recent years, the program has experienced significant cost
increases and schedule delays, with cost estimates increasing to about $10
billion and launch delays approaching 3 years. These factors triggered the
need for difficult decisions about the program's direction and
capabilities. In mid-November 2005, we reported that the NPOESS executive
committee expected to make a decision by December 2005 on the direction of
the program. We noted the importance of making a decision quickly so that
the program could proceed. However, in late November 2005, NPOESS cost
growth exceeded a legislatively mandated threshold that requires DOD to
certify the program to Congress. This placed any decision about future
direction on hold until certification takes place in June 2006. In the
meantime, the program office has implemented an interim plan to continue
work on key sensors and other program elements using fiscal year 2006
funding. Following certification, a decision on future direction should be
clear. That will require a new program baseline2 and renegotiated
contracts-efforts that could take up to a year.

As NPOESS undergoes the Defense certification process and important
decisions are made on how the program is to proceed, there are several
important considerations. First, NOAA and NASA representation in the DOD
certification process is imperative. It will be important for these
agencies to remain active players in the deliberation of options and the
final decision on how to move the program forward. Second, continued
indecision increases the risk of a gap in satellite coverage. NPOESS is
the backup satellite for the final satellite in the predecessor satellite
series. If this predecessor satellite were to fail, there could be a
significant data gap until NPOESS is launched and operational. Thus, once
a program direction is decided, it will be important to move quickly to
adjust agency budgets and contracts. Third, continuing oversight of
program and executive management is essential to avoid repeating past
problems.

2A program baseline is a plan for what will be delivered, when it will be
delivered, and at what cost over the life of the program.

                                   Background

Since the 1960s, the United States has operated two separate operational
polar-orbiting meteorological satellite systems: the Polar-orbiting
Operational Environmental Satellite (POES) series, 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
models are a primary tool for forecasting weather 3 or more days in
advance, including forecasting the path and intensity of hurricanes. The
models are used to predict the potential impact of severe weather so that
communities and emergency managers can help prevent and mitigate their
effects. 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.3
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.

3These 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

With the expectation that combining the POES and DMSP programs would
reduce duplication and result in sizable cost savings, a May 1994
Presidential Decision Directive4 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
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 that make up the
Integrated Program Office and lists their responsibilities.

4NSTC-2, May 5, 1994.

Figure 3: Organizations Coordinated by the NPOESS Integrated Program
Office

Current 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

Note: 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's 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 
(CMIS)                  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      
(VIIRS)                 earth's clouds, atmosphere, ocean, and  
                           land surfaces.                          

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

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 (VIIRS), 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 records5 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 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 was estimated to be $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.

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.

5Environmental data records are weather products derived from sensor data
records and temperature data records.

NPOESS Has Experienced Continued Cost Increases and Schedule Delays

Over the past several years, the NPOESS program has experienced a series
of cost increases and schedule delays. In 2003, we reported that changes
in the NPOESS funding stream caused a delay in the program's schedule.6
Specifically, 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.7 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 noncontract costs and management reserves.

6GAO-03-987T.

7GAO-04-1054.

At that time, 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 on the new baseline because of
technical issues in the development of key sensors, including the critical
VIIRS sensor. 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.

Most recently, in our November 2005 testimony, we noted that NPOESS
schedules, costs, and trends had continued to worsen.8 We reported that
over the past year, NPOESS cost increases and schedule delays demonstrated
worsening trends, and that there were continuing problems in the
development of a key sensor. We further noted that contractor data showed
that costs and schedules were likely to continue to increase in the
future. Our trend analysis at the time showed that the contractor would
most likely overrun costs by $1.4 billion, resulting in a life cycle cost
of about $9.7 billion, unless critical changes were made. We also noted
that program risks, particularly with the development of critical sensors,
could further increase NPOESS costs and delay schedules. At the November
hearing, program officials confirmed that the program's life cycle cost
estimate would likely grow to $10 billion unless critical changes were
made to the program. Table 2 provides a summary of recent growth in
program cost estimates.

As for schedule changes, in November 2005, we noted that 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 those schedule changes is shown in table 3. 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 could be significantly
degraded.

8GAO-06-249T.

Table 2: Changes in NPOESS Life Cycle Cost Estimates through November 2005

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  $10 billiona             To be determined 

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

aAnticipated decisions on program direction are likely to affect this
estimate.

Table 3: Changes in NPOESS Schedule Estimates as of November 2005

               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        
launch a    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        
launch a    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.

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

b A 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 3 months to the
September 2010 launch date.

Problems involving multiple levels of management-including subcontractor,
contractor, program office, and executive leadership-played a role in
bringing the NPOESS program to its current state. For example, the 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 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 had 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. We also reported that the involvement of NPOESS executive
leadership had wavered from frequent heavy involvement to occasional
meetings with few resulting decisions. Specifically, the Excom had met
five times over the preceding 2 years. Most of these meetings did not
result in major decisions, but rather triggered further analysis and
review.

Sound management is critical to program success. In our reviews of major
acquisitions throughout the government, we have reported that key factors
determining a project's ability to be delivered on time, within budget,
and with promised functionality include sound program management,
contractor oversight, risk identification and escalation, and effective
and timely executive level oversight.9 Given the history of large cost
increases and the factors that could further affect NPOESS costs and
schedules, we reported that continued oversight, strong leadership, and
timely decision making are more critical than ever.

NPOESS Status and Plans: Decision on Program's Future Direction on Hold, Interim
                               Efforts Under Way

The future direction of the NPOESS program-what will be delivered, at what
cost, and by when-is currently on hold pending a decision on how to
proceed. Over the last few years, NPOESS has experienced continued cost
increases and schedule delays, requiring difficult decisions about the
program's direction and capabilities.

In mid-November 2005, we reported that the NPOESS executive committee
expected to make a decision in December 2005 on the direction of the
program. This involved deciding among options involving increased costs,
delayed schedules, and reduced functionality. We urged the committee to
make a decision quickly so that the program could proceed. However, in
late November 2005, NPOESS cost growth exceeded a legislatively mandated
threshold that requires the Department of Defense to certify the program
to Congress. This placed any decision about the future direction of the
program on hold until the certification takes place in June 2006.

9For 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).

In the meantime, the program office has implemented an interim plan to
continue work on key sensors and other program elements using fiscal year
2006 funding. Following certification, a decision on future direction
should be clear. That will require developing a new program baseline and
renegotiating contracts-efforts that could take up to a year.

Nunn-McCurdy Process Puts Program Direction on Hold

The Nunn-McCurdy Act10 requires DOD to take specific actions when a major
system acquisition exceeds certain cost thresholds. Key provisions require
the Secretary of Defense to notify Congress when a major defense
acquisition is expected to overrun its project baseline by 15 percent or
more, and to certify the program to Congress when it is expected to
overrun its baseline by 25 percent or more. Certification is an assurance
that

           0M the program is essential to national security,
           0M there are no alternatives to the program that will provide
           equal or greater military capability at less cost,
           0M the new estimates of the program's cost are reasonable, and
           0M the management structure for the program is adequate to manage
           and control cost.

In August 2005, the NPOESS program office determined that it could not
execute its planned program within the constraints of its current baseline
and notified its executive committee. In turn, Congress was notified that
the program was expected to overrun its baseline by 15 percent.
Subsequently, in late November 2005, it was determined that at completion
the final program cost would be greater than 25 percent over its baseline.
At the beginning of January 2006, DOD notified Congress that NPOESS was
expected to overrun its baseline by more than 25 percent and began the
process of certifying the program.

1010 U.S.C. section 2433, as amended by Pub. Law No. 109-163, Div. A,
section 802.

The Nunn-McCurdy Act pertains to Defense acquisitions, but because NPOESS
is a joint program, the certification process was expanded to include
input from NOAA and NASA. Specifically, the Defense Acquisition Executive,
who is responsible for the certification process, invited the NPOESS
executive committee members to participate in the process, with principal
stakeholders from each NPOESS partner agency serving as intermediaries
between the executive committee members and working groups set up to
address each of the four certification elements. Additionally, these
working groups are made up of DOD, NOAA, and NASA personnel, as well as
others (such as representatives of the NPOESS senior user advisory group)
as warranted.

As part of the certification process, DOD is evaluating options for the
future of the program. These options could include reducing the number or
function of NPOESS satellites, relying on European satellites, increasing
costs, delaying planned launch dates, or canceling the program. According
to Defense officials, a decision is expected to be announced during the
first week of June 2006. However, the completion of the certification
process does not end the negotiations on this program. Any major cost
changes will need to be worked into the respective agencies' budgets, and
any major program changes will need to be worked into a new baseline
describing what will be delivered by when and then negotiated with the
contractor. According to program office officials, a revised baseline will
likely take 6 to 12 months to develop and implement from the time a
decision is made.

Program Office Has Interim Efforts Under Way

The NPOESS Integrated Program Office has several initiatives under
way-both to improve its management of the program and to keep NPOESS
sensor development moving forward-as it waits for completion of the
Nunn-McCurdy process. To address concerns about program management that we
and others have raised, the program office has

           0M increased staffing of cost analysts and earned value management
           experts to improve contractor and subcontractor oversight,
           0M increased the presence of system engineers on sensor
           development initiatives,
           0M developed a proposal for restructuring the program office and
           overall satellite program to allow for clearer decision-making
           authority and more timely decisions, and
           0M taken steps to improve communications among the program office,
           tri-agency executives, and contractors.

           These initiatives should help improve program management, but they
           are not yet fully implemented-and will not guarantee success. The
           proposed management changes still need to be approved, funded, and
           implemented. Further, NPOESS development is technically
           challenging. Thus, stringent oversight and risk management will
           continue to be important throughout the life of the project.

           As for continuing sensor development, because any major changes to
           the program will not be known until the certification process is
           completed, the program office has implemented an interim plan to
           continue work on key sensors and other program elements within the
           fiscal year 2006 funding profile. Officials stated that they chose
           work activities that would be needed regardless of the option
           chosen for the future direction of the program.

           Based on contractor-provided data, our analysis indicates that
           NPOESS is making mixed progress against the fiscal year 2006
           interim plan. Between October 2005 and January 2006, the
           contractor outperformed its program cost and schedule targets and
           completed some unplanned work. However, the contractor continued
           to experience cost overruns on the development of its critical
           sensors-VIIRS and CMIS. The primary cost drivers were the
           extensive manpower beyond what was planned to resolve technical
           issues.

           The development of VIIRS is of particular importance because it is
           to be demonstrated on the NPP satellite, which is currently
           scheduled for launch in April 2008. While CMIS is not part of NPP,
           its development is important because it is one of four critical
           sensors providing data for key weather products. Over the past
           year, work on CMIS was deferred in order to fund efforts to fix
           VIIRS and to keep NPP on schedule.

           In November, we reported that VIIRS was experiencing continued
           problems dealing with the technical complexity of the ground
           support equipment. VIIRS also experienced problems with the
           development of the cryoradiator,11 excessive vibration of sensor
           parts, and errors in the sensor's solar calibration. Since
           November, the program office has taken positive steps to contain
           these technical risks. In particular, VIIRS now has a baseline
           plan for serial development of the sensor design, an approach that
           is intended to minimize rework. The program office also added
           decision gates to provide management review and approval of
           progress.

           We also reported in November on the problems experienced on CMIS.
           Specifically, CMIS continued to face technical challenges in the
           design of the receivers, the sensor structure, and the antenna
           calibration system. In addition, it experienced system reliability
           and thermal issues, among other things. Since November, work has
           been ongoing to simplify the CMIS design. These design changes are
           intended to reduce the weight of the CMIS structure by moving
           several subsystems from the instrument onto the spacecraft.
           Additionally, the program office reported that the contractor has
           demonstrated that a complex component of the CMIS receiver is
           feasible.

           While positive measures have been taken in the development of both
           of these sensors, the program office continues to consider VIIRS
           to be a high-risk initiative because of technical challenges that
           it is facing. VIIRS is fast approaching a critical developmental
           milestone that will determine the extent of progress made.
           Specifically, a prototype is expected to begin thermal vacuum
           testing in summer 2006. This testing will assess the stability of
           the current sensor design. If the current design fails to meet its
           performance metrics, VIIRS could be in danger of falling further
           behind in cost and schedule. Program officials acknowledge that
           CMIS requires a watchful eye, but note that there is more time
           available to meet its development requirements. To the program
           office's credit, however, it is aware of these risks and is using
           its risk management plans to help mitigate them.

11The cryoradiator is a key component of the VIIRS sensor. It is intended
to cool down components of the sensor.

              Considerations in Moving the NPOESS Program Forward

As NPOESS undergoes the Nunn-McCurdy certification process and important
decisions are made on how the program is to proceed, there are several
important considerations.

           0M NOAA and NASA representation in the DOD Nunn-McCurdy
           certification process is imperative. As a joint program, NPOESS is
           expected to fulfill many military, civilian, and research
           requirements for environmental data. Thus, it is important that
           all agency partners have a voice in the DOD proceedings. As noted
           earlier, DOD has included NOAA and NASA in its process-both in an
           executive advisory capacity and on the teams working to address
           each of the four certification requirements. Further, NOAA and
           NASA officials reported that they believe that they are being
           effectively involved in the certification process. However,
           because this is a DOD process and decision, and because Defense
           requirements differ from NOAA and NASA requirements, there is risk
           that the chosen alternative could sacrifice NOAA and NASA
           requirements. It will be important for NOAA and NASA to remain
           active players in the deliberation of options and the final
           decision on how to move the program forward.
           every day of delay on the NPOESS program. Specifically, if
           thsatellite in the predecessor satellite series (the
           Polar-orbiting Operational Environmental Satellites or POES) were
           to fail, there would be a gap in satellite coverage until the
           first NPOESS satwas launched and put into operation (see fig. 2).
           Such a gap could have a devastating effect on our national ability
           to forecast severe weather events, such as those associated with
           future hurricane seasons. Since a decision on how the NPOESS
           program is to proceed is not expected until June 2006, and there
           will likely be least another year while a new baseline is
           established and thecontract modified, it is important that the
           departments move expeditiously to fund their chosen program
           direction and to implement contract changes. 
		   
		   Figure 4: A Potential
           Gap in Satellite

           w

           subcontractor, contractor, project office, and executive
           oversight-led to NPOESS recent cost and schedule overruns. As
           thimplements a new management structure and increased contractor
           oversight, it will be important to measure and report on the
           progresof these changes so as to not repeat past problems.

           program in crisis" because of technical problems on critical
           sensorescalating costs, poor management at multiple levels, and
           the lack of a decision on how to proceed with the program. Today,
           the program is still troubled, and its future direction is not yet
           knowThe program office and contractor are addressing problems on
           the critical sensors and have adopted strategies that are expected
           to reduce risks on these sensors. Additionally, the program office
           is working to address management challenges by increasing
           programoffice skills and staffing, increasing contractor
           oversight, and restructuring the program office to allow for more
           timely and authoritative decisions. Further, the Nunn-McCurdy
           certificatioJune 2006 is expected to result in a firm decision on
           how to proceedwith the program. Over the next few months, it will
           be important for all of the agency partners to have a voice in the
           final decision on how to proceed. Once this decision is made, it
           will be important tmove quickly to implement the decision in
           agency budgets and contracts. Further, as the project continues,
           it will be critical to ensure that the management issues of the
           past will not be repeat

           questions that you or other members of the Subcommittee may haveat
           this time.

                                If you have any

David Powner at (202) 512-9286 or by e-mail at [email protected] .
Individuals making contributions to this testimony include Colleen
Phillips (Assistant Director), Carol Cha, Barbara Collier, Neil Doherty,
Kathleen S. Lovett, and Karen Talley.

                 Appendix I. Objectives, Scope, and Methodology

Our objectives were to determine the National Polar-orbiting Operational
Environmental Satellite System's (NPOESS) current status and plans, and to
discuss considerations in 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
interviewed officials from the Department of Defense (DOD), the National
Aeronautics and Space Administration (NASA), and NOAA's National Weather
Service and National Environmental Satellite Data and Information Service
to determine plans for the program.

To identify schedule and cost changes related to NPOESS's status we
reviewed program office data and interviewed program officials. We
compared changes in NPOESS cost and schedule estimates to prior cost and
schedule estimates as reported in our July 2002, July 2003, and November
2005 testimonies and in our September 2004 report.12

To further analyze trends that could affect the program in fiscal year
2006, we assessed the prime contractor's cost and schedule performance. To
make these assessments, we applied earned value analysis techniques13 to
data from the contractor earned value and variance analysis reports. We
compared the cost of work completed with the budgeted costs for scheduled
work during January 2006 to show trends in cost and schedule performance
against the interim plan for fiscal year 2006.

12GAO, Polar-orbiting Environmental Satellites: Status, Plans, and Future
Data Management Challenges, GAO-02-684T (Washington, D.C.: July 24, 2002);
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: Information on Program Cost and Schedule Changes, GAO-04-1054
(Washington, D.C.: September 30, 2004); and Polar-orbiting Operational
Environmental Satellites: Technical Problems, Cost Increases, and Schedule
Delays Trigger Need for Difficult Trade-off Decisions, GAO-06-249T
(Washington, D.C.: November 16, 2005).

13Earned value analysis is a means of placing a dollar value on a
project's status in order to compare budget versus actual costs versus
project status in dollar amounts. For our analysis, we used standard
earned value formulas to calculate cost and schedule variances.

NOAA and DOD 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 offices in the Washington, D.C., metropolitan area, between
February 2006 and March 2006, in accordance with generally accepted
government auditing standards.

(310812)

United States Government Accountability Office

GAO

Testimony

Before the Subcommittee on Disaster Prevention and Prediction, Committee
on Commerce, Science, and Transportation, U.S. Senate

For Release on Delivery

Expected at 11 a.m. EST Thursday, March 30, 2006

POLAR-ORBITING OPERATIONAL ENVIRONMENTAL SATELLITES

Cost Increases Trigger Review and Place Program's Direction on Hold

Statement of David A. Powner, Director

Information Technology Management Issues

GAO-06-573T

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