Polar-Orbiting Operational Environmental Satellites:		 
Restructuring Is Under Way, but Technical Challenges and Risks	 
Remain (27-APR-07, GAO-07-498). 				 
                                                                 
The National Polar-orbiting Operational Environmental Satellite  
System (NPOESS) is a tri-agency acquisition--managed by the	 
Departments of Commerce and Defense and the National Aeronautics 
and Space Administration--which experienced escalating costs,	 
schedule delays, and technical difficulties. These factors led to
a June 2006 decision to restructure the program thereby 	 
decreasing the program's complexity, increasing its estimated	 
cost to $12.5 billion, and delaying the first two satellites by 3
to 5 years. GAO was asked to (1) assess progress in restructuring
the acquisition, (2) evaluate progress in establishing an	 
effective management structure, (3) assess the reliability of the
cost and schedule estimate, and (4) identify the status and key  
risks facing the program's major segments. To do so, GAO analyzed
program and contractor data, attended program reviews, and	 
interviewed program officials					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-498 					        
    ACCNO:   A68845						        
  TITLE:     Polar-Orbiting Operational Environmental Satellites:     
Restructuring Is Under Way, but Technical Challenges and Risks	 
Remain								 
     DATE:   04/27/2007 
  SUBJECT:   Contract modifications				 
	     Cost analysis					 
	     Cost control					 
	     Cost overruns					 
	     Earth resources satellites 			 
	     Federal procurement				 
	     Interagency relations				 
	     Procurement planning				 
	     Program evaluation 				 
	     Program management 				 
	     Risk assessment					 
	     Schedule slippages 				 
	     Strategic planning 				 
	     Work measurement					 
	     Cost estimates					 
	     Cost growth					 
	     Policies and procedures				 
	     National Polar-Orbiting Operational		 
	     Environmental Satellite System			 
                                                                 

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GAO-07-498

   

     * [1]Results in Brief
     * [2]Background

          * [3]Polar Satellite Data and Products
          * [4]NPOESS Overview
          * [5]NPOESS Acquisition Strategy
          * [6]NPOESS Experienced Cost Increases, Schedule Delays, and Tech
          * [7]Nunn-McCurdy Process Led to a Decision to Restructure the NP
          * [8]Earned Value Management Techniques Provide Insight on Progra

     * [9]NPOESS Acquisition Restructuring Is Well Under Way, but Key
     * [10]Progress Has Been Made in Establishing an Effective NPOESS M

          * [11]NPOESS Program Has Made Progress in Establishing an Effectiv
          * [12]NPOESS Program Has Filled Key Vacancies but Lacks A Programw

     * [13]Methodology Supporting the June 2006 Cost and Schedule Estim

          * [14]Certified Program Estimates Were Developed Using an Acceptab
          * [15]Recent Events Could Lead to Increased Program Costs or Delay

     * [16]Major Program Segments Are Under Development, but Significan

          * [17]Space Segment--Progress Made, but Key Sensors Continue to Fac

               * [18]Earned Value Data Show Problems on the Space Segment
               * [19]Program Office Is Monitoring Sensor Risks and Evaluating
                 Opt

          * [20]Ground Segment--Progress Has Been Made, but Work Remains
          * [21]Ground Segment Cost and Schedule Are on Track; Work and Risk

               * [22]Program Office Has Plans to Address IDPS Risks

          * [23]Launch Segment--NPP Launch Preparation Has Begun, while NPOES

     * [24]Conclusions
     * [25]Recommendations for Executive Action
     * [26]Agency Comments and Our Evaluation
     * [27]GAO Contact
     * [28]Staff Acknowledgments
     * [29]GAO's Mission
     * [30]Obtaining Copies of GAO Reports and Testimony

          * [31]Order by Mail or Phone

     * [32]To Report Fraud, Waste, and Abuse in Federal Programs
     * [33]Congressional Relations
     * [34]Public Affairs

Report to Congressional Requesters

United States Government Accountability Office

GAO

April 2007

POLAR-ORBITING OPERATIONAL ENVIRONMENTAL SATELLITES

Restructuring Is Under Way, but Technical Challenges and Risks Remain

GAO-07-498

Contents

Letter 1

Results in Brief 2
Background 5
NPOESS Acquisition Restructuring Is Well Under Way, but Key Steps Remain
To Be Completed 21
Progress Has Been Made in Establishing an Effective NPOESS Management
Structure, but Executive Turnover Will Increase Risks, and Staffing
Problems Remain 26
Methodology Supporting the June 2006 Cost and Schedule Estimate Was
Reliable, but Recent Events Could Increase Program Costs 31
Major Program Segments Are Under Development, but Significant Risks Remain
34
Conclusions 42
Recommendations for Executive Action 43
Agency Comments and Our Evaluation 43
Appendix I Objectives, Scope, and Methodology 46
Appendix II Overview of Satellite Data Processing Algorithms and the
Calibration and Validation Process 48
Appendix III Comments from the Department of Commerce 51
Appendix IV Comments from the Department of Defense 54
Appendix V Comments from the National Aeronautics and Space Administration
56
Appendix VI GAO Contact and Staff Acknowledgments 57

Tables

Table 1: Expected NPOESS Instruments as of August 31, 2004 (critical
sensors are in bold) 13
Table 2: Summary of Changes to the NPOESS Program 17
Table 3: Key Program Milestones 18
Table 4: Changes to NPOESS Instruments (critical sensors are in bold) 19
Table 5: Planned Configuration of Sensors on NPP and NPOESS Satellites 20
Table 6: Elements of a Sound Cost Estimating Methodology 32
Table 7: Status of Selected Components of the Space Segment, as of April
2007 35
Table 8: Status of Ground Segment Components 39

Figures

Figure 1: Configuration of Operational Polar Satellites 6
Figure 2: A Generic Data Relay Pattern for Polar Meteorological Satellite
Systems 7
Figure 3: Satellite Data Processing Steps 8
Figure 4: Analysis of Ozone Concentration from POES Satellite Data 9
Figure 5: POES Image of Hurricane Katrina in 2005 10
Figure 6: Organizations Coordinated by the NPOESS Integrated Program
Office 12
Figure 7: Progress on Planned Milestones in Fiscal Year 2006, as of
October 1, 2006 23
Figure 8: Progress on Planned Milestones in Fiscal Year 2007, as of
January 20, 2007 24
Figure 9: Overview of New Management Structure 27
Figure 10: Cumulative Cost and Schedule Variance for the NPOESS Space
Segment over a 13-Month Period 37
Figure 11: Cumulative Cost and Schedule Variance for the NPOESS IDPS
Development over a 13-Month Period 40
Figure 12: Cumulative Cost and Schedule Variance for the NPOESS Command,
Control, and Communications Segment over a 13-Month Period 41
Figure 13: Satellite Data Processing Algorithms 49
Figure 14: Describes the High-Level Calibration and Validation Process 50

Abbreviations

ATMS advanced technology microwave sounder
CMIS conical-scanned microwave imager/sounder
CrIS cross-track infrared sounder
DMSP Defense Meteorological Satellite Program
DOD Department of Defense
EDR environmental data record
IDPS interface data processing system
NASA National Aeronautics and Space Administration
NESDIS National Environmental Satellite Data and Information Service
NOAA National Oceanic and Atmospheric Administration
NPOESS National Polar-orbiting Operational Environmental Satellite System
NPP NPOESS Preparatory Project
POES Polar-orbiting Operational Environmental Satellites
OMPS ozone mapper/profiler suite
VIIRS visible/infrared imager radiometer suite

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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separately.

United States Government Accountability Office
Washington, DC 20548

April 27, 2007

The Honorable Nick Lampson
Chairman
The Honorable Bob Inglis
Ranking Republican Member
Subcommittee on Energy and Environment
Committee on Science and Technology
House of Representatives

The Honorable David Wu
House of Representatives

The Honorable Vernon J. Ehlers
House of Representatives

The planned National Polar-orbiting Operational Environmental Satellite
System (NPOESS) program is expected to be a state-of-the-art,
environment-monitoring satellite system that will replace two existing
polar-orbiting environmental 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 2026. The
planned National Polar-orbiting Operational Environmental Satellite System
(NPOESS) program is expected to be a state-of-the-art,
environment-monitoring satellite system that will replace two existing
polar-orbiting environmental 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 2026.

Three agencies share responsibility for the NPOESS acquisition: the
Department of Commerce's National Oceanic and Atmospheric Administration
(NOAA), the Department of Defense (DOD)/United States Air Force, and the
National Aeronautics and Space Administration (NASA). To manage the NPOESS
program, these agencies established a tri-agency integrated program
office. In recent years, this program has experienced escalating costs,
schedule delays, and technical difficulties, leading to a June 2006
decision to restructure the program. This decision decreased the
complexity of the program by reducing the number of satellites and
sensors, increased the estimated cost of the program to $12.5 billion, and
delayed the launches of the first two satellites by 3 to 5 years. Three
agencies share responsibility for the NPOESS acquisition: the Department
of Commerce's National Oceanic and Atmospheric Administration (NOAA), the
Department of Defense (DOD)/United States Air Force, and the National
Aeronautics and Space Administration (NASA). To manage the NPOESS program,
these agencies established a tri-agency integrated program office. In
recent years, this program has experienced escalating costs, schedule
delays, and technical difficulties, leading to a June 2006 decision to
restructure the program. This decision decreased the complexity of the
program by reducing the number of satellites and sensors, increased the
estimated cost of the program to $12.5 billion, and delayed the launches
of the first two satellites by 3 to 5 years.

This report responds to your request that we (1) evaluate the NPOESS
program office's progress in restructuring the acquisition, (2) evaluate
the This report responds to your request that we (1) evaluate the NPOESS
program office's progress in restructuring the acquisition, (2) evaluate
the program office's progress in establishing an effective management
structure, (3) assess the reliability of the life cycle cost estimate and
proposed schedule, and (4) identify the status and key risks facing the
program's major segments and evaluate the adequacy of the program's
efforts to mitigate these risks.

To evaluate the program office's progress in restructuring the
acquisition, we assessed program documentation, attended management status
briefings, and interviewed program officials. To determine progress in
establishing a new management structure, we assessed the status of efforts
to implement past recommendations regarding the management structure and
staffing, attended senior-level management review meetings, reviewed
program documents, and interviewed program officials. To assess the cost
estimate, we evaluated the methodology and assumptions used to develop the
estimate and interviewed program officials to identify any assumptions
that may have changed. To determine the status, risk, and risk mitigation
efforts for the program, we analyzed monthly program management documents
and interviewed NOAA, NASA, and DOD officials to determine concerns with
these mitigation efforts. In addition, this report builds on other work we
have done on environmental satellite programs over the last several
years.^1

We conducted our work at the NPOESS Integrated Program Office headquarters
and at DOD, NOAA, and NASA facilities in the Washington, D.C.,
metropolitan area. We performed our work from July 2006 to April 2007 in
accordance with generally accepted government auditing standards. Appendix
I contains additional details on our objectives, scope, and methodology.

Results in Brief

The NPOESS program office has made progress in restructuring the
acquisition by establishing and implementing interim program plans guiding
the contractors' work activities in 2006 and 2007; however, important
tasks leading up to finalizing contract changes remain to be completed.
While the program office developed key acquisition documents, including a
memorandum of agreement on the roles and responsibilities of the three
agencies, a revised acquisition strategy, and a system engineering plan,
the responsible executives in the three agencies have not yet approved
these documents--even though they were due by September 1, 2006.
Finalizing these documents is essential to ensure interagency agreement
and will allow the program office to move forward in completing other
activities related to restructuring the program. These activities include
conducting an integrated baseline review with the contractor to reach
agreement on the schedule and work activities and finalizing changes to
the NPOESS development and production contract--thereby allowing the
program office to lock down a new acquisition baseline cost and schedule.
Until the key acquisition documents are approved by the appropriate
executives in each agency, the program faces increased risk that
restructuring activities will not be completed in time to allow it to move
forward in fiscal year 2008 with a new program baseline in place. This
places the NPOESS program at risk of continued delays and future cost
increases.

^1GAO, Polar-orbiting Operational Environmental Satellites: Cost Increases
Trigger Review and Place Program's Direction on Hold, [35]GAO-06-573T
(Washington, D.C.: Mar. 30, 2006); GAO, Polar-orbiting Operational
Environmental Satellites: Technical Problems, Cost Increases, and Schedule
Delays Trigger Need for Difficult Trade-off Decisions, [36]GAO-06-249T
(Washington, D.C.: Nov. 16, 2005); GAO, Polar-orbiting Environmental
Satellites: Information on Program Cost and Schedule Changes,
[37]GAO-04-1054 (Washington, D.C.: Sept. 30, 2004); GAO, Polar-orbiting
Environmental Satellites: Project Risks Could Affect Weather Data Needed
by Civilian and Military Users, [38]GAO-03-987T (Washington, D.C.: July
15, 2003); and GAO, Polar-orbiting Environmental Satellites: Status,
Plans, and Future Data Management Challenges, [39]GAO-02-684T (Washington,
D.C.: July 24, 2002).

The program office has also made progress in establishing an effective
management structure by adopting a new organizational framework with
increased oversight from program executives and by instituting more
frequent and rigorous program management reviews; however, planned changes
in executive management will likely increase program risk, and the program
lacks a process and plan for identifying and filling staffing shortages.
As a result, the program experienced delays in beginning key activities
such as cost estimating and contract revisions. Until this process is in
place and working, the NPOESS program faces increased risk of further
delays.

The methodology supporting a June 2006 cost and schedule estimate was
reliable, but recent events could lead to increased program costs and
delay schedules. DOD's independent cost estimating group used an
acceptable methodology in developing a June 2006 cost estimate of $11.5
billion for the acquisition portion of the restructured program with the
expectation of initial satellite launch in January 2013. Consistent with
DOD direction, this estimate did not include roughly $1 billion in
operations and support costs--bringing the total life cycle cost estimate
to $12.5 billion. However, the program continues to experience technical
problems on key sensors, and program costs will likely be adjusted during
upcoming negotiations on contract changes. The NPOESS program office is
developing its own cost estimate to further refine the one developed in
June 2006 to help it negotiate contract changes. A new baseline cost and
schedule will be established once the contract is finalized--an event that
the Program Director expects to occur by July 2007.

Development and testing of major program segments--including key sensors
and the ground systems--are under way, but significant risks remain. For
example, work continues on key sensors, but two sensors--the
Visible/Infrared Imager Radiometer Suite and the Cross-track Infrared
Sounder--continue to experience significant difficulties. Specifically,
the former encountered three significant problems with image quality and
reliability during environmental testing of the engineering unit, and the
latter suffered a major structural failure during vibration testing.
Additionally, while significant progress has been made in reducing delays
in the NPOESS data processing system, much work remains in refining the
algorithms needed to translate sensor observations into usable weather
products. Given the tight time frames for completing key sensors,
integrating them with the demonstration spacecraft (called the NPOESS
Preparatory Project or NPP) and getting the ground-based data processing
systems developed, tested, and deployed, it will be important for the
Integrated Program Office, the Program Executive Office, and the Executive
Committee to continue to provide close oversight of milestones and risks.

We are making recommendations to the Secretaries of Commerce and Defense
and to the Administrator of NASA to ensure that the appropriate executives
finalize key acquisition documents by the end of April 2007 in order to
allow the restructuring of the program to proceed. We are also making
recommendations to the Secretary of Defense to direct the Air Force to
delay reassigning the recently appointed Program Executive Officer until
key program risks are resolved. We are also making recommendations to the
Secretary of Commerce to ensure that NPOESS program authorities develop
and implement a written process for identifying and addressing human
capital needs and that they establish a plan to immediately fill needed
positions.

The Department of Commerce, DOD, and NASA provided written comments on our
draft report (see apps. III, IV, and V). All three agencies agreed that it
was important to finalize key acquisition documents in a timely manner,
and DOD proposed extending the due dates for the documents to July 2,
2007. In addition, the Department of Commerce concurred with our
recommendation to identify and address human capital needs and immediately
fill open positions in the NPOESS program office. Commerce noted that NOAA
was taking actions in both areas. However, DOD did not concur with our
recommendation to delay reassigning the Program Executive Officer, noting
that the Program Director responsible for the acquisition program would
remain in place for 4 years. While it is important that the System Program
Director remain in place to ensure continuity in executing the
acquisition, this position does not ensure continuity in the important
oversight and coordination functions provided by the current Program
Executive Officer. We remain concerned that reassigning the Program
Executive at a time when NPOESS is still facing critical cost, schedule,
and technical challenges will place the program at further risk.

All three agencies also provided technical comments, which we have
incorporated in this report as appropriate.

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 NOAA, and
the Defense Meteorological Satellite Program (DMSP)--managed by the Air
Force. These satellites obtain environmental data that are processed to
provide graphical weather images and specialized weather products. These
satellite data are also the predominant input to numerical weather
prediction models, which are a primary tool for forecasting weather 3 or
more days in advance--including forecasting the path and intensity of
hurricanes. The weather products and 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 relative
to 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, midmorning, 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 limited backup to the operational satellites should they degrade
or fail. In the future, both NOAA and the Air Force plan to continue to
launch additional POES and DMSP satellites every few years, with final
launches scheduled for 2009 and 2012, respectively.^2

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 broadcast a subset of these data
in real time to properly equipped field terminals that are within a direct
line of sight; these field terminals are located at universities, on
battlefields, or on ships. Additionally, the polar satellites store the
observed environmental 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.

^2Three DMSP satellites and one POES satellite remain to be launched.

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.

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, the Naval Fleet, and mobile field
sites. 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. Figure 2 depicts a generic data relay
pattern from the polar-orbiting satellites to the data processing centers
and field terminals.

Figure 2: A Generic Data Relay Pattern for Polar Meteorological Satellite
Systems

Polar Satellite Data and Products

Polar satellites gather a broad range of data that are transformed into a
variety of products. Satellite sensors observe different bands of
radiation wavelengths, called channels, which are used for remotely
determining information about the earth's atmosphere, land surface,
oceans, and the space environment. When first received, satellite data are
considered raw data. To make them usable, the processing centers format
the data so that they are time-sequenced and include earth location and
calibration information. After formatting, these data are called raw data
records. The centers further process these raw data records into
channel-specific data sets, called sensor data records and temperature
data records. These data records are then used to derive weather and
climate products called environmental data records (EDR). EDRs include a
wide range of atmospheric products detailing cloud coverage, temperature,
humidity, and ozone distribution; land surface products showing snow
cover, vegetation, and land use; ocean products depicting sea surface
temperatures, sea ice, and wave height; and characterizations of the space
environment. Combinations of these data records (raw, sensor, temperature,
and environmental data records) are also used to derive more sophisticated
products, including outputs from numerical weather models and assessments
of climate trends. Figure 3 is a simplified depiction of the various
stages of satellite data processing, and figures 4 and 5 depict examples
of EDR weather products.

Figure 3: Satellite Data Processing Steps

Figure 4: Analysis of Ozone Concentration from POES Satellite Data

Figure 5: POES Image of Hurricane Katrina in 2005

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 Directive required NOAA and DOD to converge the two
satellite programs into a single satellite program capable of satisfying
both civilian and military requirements.^3 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 2026. To manage this program, DOD, NOAA, and
NASA formed the 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 6 depicts the organizations that make up the
NPOESS program office and lists their responsibilities.

^3Presidential Decision Directive NSTC-2, May 5, 1994.

Figure 6: Organizations Coordinated by the NPOESS Integrated Program
Office

The NPOESS program office is overseen by an Executive Committee, which is
made up of the Administrators of NOAA and NASA and the Undersecretary of
the Air Force.

NPOESS Acquisition Strategy

NPOESS is a major system acquisition that was originally estimated to cost
about $6.5 billion over the 24-year life of the program from its inception
in 1995 through 2018. The program is to provide satellite development,
satellite launch and operation, and ground-based satellite data
processing. These deliverables are grouped into four main categories: (1)
the space segment, which includes the satellites and sensors; (2) the
integrated data processing segment, which is the system for transforming
raw data into EDRs and is to be located at the four processing centers;
(3) the command, control, and communications segment, which includes the
equipment and services needed to support satellite operations; and (4) the
launch segment, which includes the launch vehicle services.

When the NPOESS engineering, manufacturing, and development contract was
awarded in August 2002, the cost estimate was adjusted to $7 billion.
Acquisition plans called for the procurement and launch of six satellites
over the life of the program, as well as the integration of 13
instruments--consisting of 10 environmental sensors and three subsystems.
Together, the sensors were to receive and transmit data on atmospheric,
cloud cover, environmental, climatic, oceanographic, and solar-geophysical
observations. The subsystems were to support nonenvironmental search and
rescue efforts, sensor survivability, and environmental data collection
activities. The program office considered 4 of the sensors to be critical
because they provide data for key weather products; these sensors are in
bold in table 1, which describes each of the expected NPOESS instruments.

Table 1: Expected NPOESS Instruments as of August 31, 2004 (critical
sensors are in bold)

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

In addition, NPP was planned as a demonstration satellite to be launched
several years before the first NPOESS satellite in order to reduce the
risk associated with launching new sensor technologies and to ensure
continuity of climate data with NASA's Earth Observing System satellites.
NPP is to host three of the four critical NPOESS sensors (VIIRS, CrIS, and
ATMS), as well as one other noncritical sensor (OMPS). NPP is to provide
the program office and the processing centers an early opportunity to work
with the sensors, ground control, and data processing systems.

When the NPOESS development contract was awarded, 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,
satellite experts 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.

NPOESS Experienced Cost Increases, Schedule Delays, and Technical Problems over
Several Years

Over the last few years, NPOESS has experienced continued cost increases
and schedule delays, requiring difficult decisions to be made about the
program's direction and capabilities. In 2003, we reported that changes in
the NPOESS funding stream caused a delay in the program's schedule.^4
Specifically, in late 2002, DOD shifted the expected launch date for its
final DMSP 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 was 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
program's 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.

^4 [40]GAO-03-987T .

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; delayed key milestones, including the planned launch of the
first NPOESS satellite--which was delayed by 7 months; and extended the
life of the program from 2018 to 2020.^5 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.

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--thereby increasing the projected life
cycle cost to $8.6 billion. 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--and we noted that continued oversight
was critical. The program office's baseline cost estimate was subsequently
adjusted to $8.4 billion.

In mid-November 2005, we reported that NPOESS continued to experience
problems in the development of a key sensor, resulting in schedule delays
and anticipated cost increases.^6 At that time, we projected that the
program's cost estimate had grown to about $10 billion based on contractor
cost and schedule data. We reported that the program's issues were due, in
part, to problems at multiple levels of management--including
subcontractor, contractor, program office, and executive leadership.
Recognizing that the budget for the program was no longer executable, the
NPOESS Executive Committee planned to make a decision in December 2005 on
the future direction of the program--what would be delivered, at what
cost, and by when. This involved deciding among options involving
increased costs, delayed schedules, and reduced functionality. We noted
that continued oversight, strong leadership, and timely decision making
were more critical than ever and we urged the committee to make a decision
quickly so that the program could proceed.

^5 [41]GAO-04-1054 .

^6 [42]GAO-06-249T .

However, we subsequently reported that, in late November 2005, NPOESS cost
growth exceeded a legislatively mandated threshold that requires DOD to
certify the program to Congress.^7 This placed any decision about the
future direction of the program on hold until the certification took place
in June 2006. In the meantime, the program office implemented an interim
program plan for fiscal year 2006 to continue work on key sensors and
other program elements using fiscal year 2006 funding.

Nunn-McCurdy Process Led to a Decision to Restructure the NPOESS Program

The Nunn-McCurdy law^8 requires DOD to take specific actions when a major
defense acquisition program exceeds certain cost thresholds. In November
2005, key provisions of the act required the Secretary of Defense to
notify Congress when a major defense acquisition was expected to overrun
its project baseline by 15 percent or more and to certify the program to
Congress when it was expected to overrun its baseline by 25 percent or
more.^9 At that time, NPOESS exceeded the 25 percent threshold, and DOD
was required to certify the program. Certifying a program entailed
providing a determination that (1) the program is essential to national
security, (2) there are no alternatives to the program that will provide
equal or greater military capability at less cost, (3) the new estimates
of the program's cost are reasonable, and (4) the management structure for
the program is adequate to manage and control costs. DOD established
tri-agency teams--made up of DOD, NOAA, and NASA experts--to work on each
of the four elements of the certification process.

In June 2006, DOD (with the agreement of both of its partner agencies)
certified a restructured NPOESS program, estimated to cost $12.5 billion
through 2026. This decision approved a cost increase of $4 billion over
the prior approved baseline cost and delayed the launch of NPP and the
first two satellites by roughly 3 to 5 years. The new program also
entailed establishing a stronger program management structure, reducing
the number of satellites to be produced and launched from 6 to 4, and
reducing the number of instruments on the satellites from 13 to
9--consisting of 7 environmental sensors and 2 subsystems. It also
entailed using NPOESS satellites in the early morning and afternoon orbits
and relying on European satellites for midmorning orbit data.^10 Table 2
summarizes the major program changes made under the Nunn-McCurdy
certification decision.

^7 [43]GAO-06-573T .

^810 U.S.C. S 2433 is commonly referred to as Nunn-McCurdy.

^910 U.S.C. S 2433 (e)(2) has recently been amended by Pub. L. No.
109-163, S 802 (Jan. 6, 2006) and Pub. L. No. 109-364, S 213 (a) (Oct. 17,
2006).

Table 2: Summary of Changes to the NPOESS Program

Source: GAO analysis of NPOESS Integrated Program Office data.

The Nunn-McCurdy certification decision established new milestones for the
delivery of key program elements, including launching NPP by January
2010,^11 launching the first NPOESS satellite (called C1) by January 2013,
and launching the second NPOESS satellite (called C2) by January 2016.
These revised milestones deviated from prior plans to have the first
NPOESS satellite available to back up the final POES satellite should
anything go wrong during that launch.

^10The European Organization for the Exploitation of Meteorological
Satellite's MetOp program is a series of three polar-orbiting satellites
dedicated to operational meteorology. MetOp satellites are planned to be
launched sequentially over 14 years.

^11According to program officials, although the Nunn-McCurdy certification
decision specifies NPP is to launch by January 2010, NASA plans to launch
it by September 2009 to reduce the possibility of a climate data
continuity gap.

Delaying the launch of the first NPOESS satellite means that if the final
POES satellite fails on launch, satellite data users would need to rely on
the existing constellation of environmental satellites until NPP data
becomes available--almost 2 years later. Although NPP was not intended to
be an operational asset, NASA agreed to move NPP to a different orbit so
that its data would be available in the event of a premature failure of
the final POES satellite. However, NPP will not provide all of the
operational capability planned for the NPOESS spacecraft. If the health of
the existing constellation of satellites diminishes--or if NPP data is not
available, timely, and reliable--then there could be a gap in
environmental satellite data. Table 3 summarizes changes in key program
milestones over time.

Table 3: Key Program Milestones

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 to indicate the increased risk of satellite data gaps between
when these systems launch and when the NPOESS satellites launch.

^bAlthough the certification decision specified NPP is to launch by
January 2010, NASA plans to launch it by September 2009 to reduce the
possibility of a gap in climate data continuity.

In order to reduce program complexity, the Nunn-McCurdy certification
decision decreased the number of NPOESS sensors from 13 to 9 and reduced
the functionality of 4 sensors. Specifically, of the 13 original sensors,
5 sensors remain unchanged, 3 were replaced with less capable sensors, 1
was modified to provide less functionality, and 4 were cancelled. Table 4
shows the changes to NPOESS sensors, including the 4 identified in bold as
critical sensors.

Table 4: Changes to NPOESS Instruments (critical sensors are in bold)

Source: GAO analysis of NPOESS Integrated Program Office data.

^aWhile direct program funding for these instruments was eliminated, the
instruments could be reintegrated on NPOESS satellites should other
parties choose to fund them. The Nunn-McCurdy decision requires the
program office to allow sufficient space on the spacecraft for these
instruments and to provide the funding needed to integrate them.

The changes in NPOESS sensors affected the number and quality of the
resulting weather and environmental products, called EDRs. In selecting
sensors for the restructured program, the Nunn-McCurdy process placed the
highest priority on continuing current operational weather capabilities
and a lower priority on obtaining selected environmental and climate
measuring capabilities. As a result, the revised NPOESS system has
significantly less capability for providing global climate measures than
was originally planned. Specifically, the number of EDRs was decreased
from 55 to 39, of which 6 are of a reduced quality. The 39 EDRs that
remain include cloud base height, land surface temperature, precipitation
type and rate, and sea surface winds. The 16 EDRs that were removed
include cloud particle size and distribution, sea surface height, net
solar radiation at the top of the atmosphere, and products to depict the
electric fields in the space environment. The 6 EDRs that are of a reduced
quality include ozone profile, soil moisture, and multiple products
depicting energy in the space environment.

Given the changes in planned sensors, program officials established a
planned configuration for NPP and the four satellites of the NPOESS
program, called C1, C2, C3, and C4 (see table 5). Program officials
acknowledged that this configuration could change if other parties decided
to develop the sensors that were cancelled. However, they noted that the
planned configuration of the first satellite cannot change without
increasing the risk that the launch will be delayed.

Table 5: Planned Configuration of Sensors on NPP and NPOESS Satellites

Source: GAO analysis of NPOESS Integrated Program Office data.

Earned Value Management Techniques Provide Insight on Program Cost and Schedule

To be effective, project managers need current information on a
contractor's progress in meeting contract deliverables. One method that
can help project managers track this progress 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 with 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 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.

NPOESS Acquisition Restructuring Is Well Under Way, but Key Steps Remain To Be
Completed

Since the June 2006 decision to revise the scope, cost, and schedule of
the NPOESS program, the program office has made progress in restructuring
the satellite acquisition; however, important tasks leading up to revising
and finalizing contract changes remain to be completed. Restructuring a
major acquisition program like NPOESS is a process that involves
identifying time critical and high priority work and keeping this work
moving forward, while reassessing development priorities,
interdependencies, deliverables, risks, and costs. It also involves
revising important acquisition documents including the memorandum of
agreement on the roles and responsibilities of the three agencies, the
acquisition strategy, the system engineering plan, the test and evaluation
master plan, the integrated master schedule defining what needs to happen
by when, and the acquisition program baseline. The Nunn-McCurdy
certification decision required the Secretaries of Defense and Commerce
and the Administrator of NASA to sign a revised memorandum of agreement by
August 6, 2006. It also required that the program office, Program
Executive Officer, and the Executive Committee revise and approve key
acquisition documents including the acquisition strategy and system
engineering plan by September 1, 2006, in order to proceed with the
restructuring. Once these are completed, the program office can proceed to
negotiate with its prime contractor on a new program baseline defining
what will be delivered, by when, and at what cost.

The NPOESS program office has made progress in restructuring the
acquisition. Specifically, the program office has established interim
program plans guiding the contractor's work activities in 2006 and 2007
and has made progress in implementing these plans. Specifically, the
program office reported that it had completed 156 of 166 key milestones^12
during fiscal year 2006--including completing ambient and thermal vacuum
testing of the VIIRS engineering unit. Of the 10 remaining milestones
resulting from unanticipated problems in the development of VIIRS and
CrIS, 5 have since been completed, and 5 are still pending. The program
office plans to complete 222 milestones in fiscal year 2007--including
completing performance tests on the OMPS (nadir) sensor--and notes that
they are slightly ahead of plans in that they have completed 62 milestones
through January 20, 2007, which is 2 more than had been planned. Figures 7
and 8 depict the program office's progress against key milestones in
fiscal year 2006 and to date in fiscal year 2007.

^12The NPOESS program office selected key milestones from a much larger
set of ongoing and planned milestones in order to track progress.

Figure 7: Progress on Planned Milestones in Fiscal Year 2006, as of
October 1, 2006

Figure 8: Progress on Planned Milestones in Fiscal Year 2007, as of
January 20, 2007

The program office has also made progress in revising key acquisition
documents. It revised the system engineering plan, the test and evaluation
master plan, and the acquisition strategy plan, and obtained approval of
these documents by the Program Executive Officer. The program office and
contractor also developed an integrated master schedule for the remainder
of the program--beyond fiscal year 2007. This integrated master schedule
details the steps leading up to launching NPP by September 2009, launching
the first NPOESS satellite in January 2013, and launching the second
NPOESS satellite in January 2016. Near-term steps include completing and
testing the VIIRS, CrIS, and OMPS sensors; integrating these sensors with
the NPP spacecraft and completing integration testing; completing the data
processing system and integrating it with the command, control, and
communications segment; and performing advanced acceptance testing of the
overall system of systems for NPP.

However, key steps remain for the acquisition restructuring to be
completed. These steps include obtaining the approval of the Secretaries
of Commerce and Defense and the Administrator of NASA on the memorandum of
agreement among the three agencies, and obtaining the approval of the
NPOESS Executive Committee on key acquisition documents, including the
system engineering plan, the test and evaluation master plan, and the
acquisition strategy. These approvals are currently over 6 months past
due. Agency officials noted that the September 1, 2006, due date for the
key acquisition documents was not realistic given the complexity of
coordinating documents among three different agencies, but did not provide
a new estimate for when these documents would be approved.

Finalizing these documents is critical to ensuring interagency agreements
and will allow the program office to move forward in completing other
activities related to restructuring the program. These activities include
conducting an integrated baseline review with the contractor to reach
agreement on the schedule and work activities, and finalizing changes to
the NPOESS development and production contract--thereby allowing the
program office to lock down a new acquisition baseline cost and schedule.
The program office expects to conduct an integrated baseline review by May
2007 and to finalize the contract changes by July 2007. Until key
acquisition documents are finalized and approved, the program faces
increased risk that it will not be able to complete important
restructuring activities in time to move forward in fiscal year 2008 with
a new program baseline in place. This places the NPOESS program at risk of
continued delays and future cost increases.

Progress Has Been Made in Establishing an Effective NPOESS Management Structure,
but Executive Turnover Will Increase Risks, and Staffing Problems Remain

The NPOESS program has made progress in establishing an effective
management structure, but--almost a year after this structure was endorsed
during the Nunn-McCurdy certification process--the Integrated Program
Office still faces staffing problems. Over the past few years, we and
others have raised concerns about management problems at all levels of the
NPOESS program, including subcontractor and contractor management, program
office management, and executive-level management.^13 Two independent
review teams also noted a shortage of skilled program staff, including
budget analysts and system engineers. Since that time, the NPOESS program
has made progress in establishing an effective management
structure--including establishing a new organizational framework with
increased oversight by program executives, instituting more frequent
subcontractor, contractor, and program reviews, and effectively managing
risks and performance. However, DOD's plans for reassigning the Program
Executive Officer in Summer 2007 increase the program's risks.
Additionally, the program lacks a staffing process that clearly identifies
staffing needs, gaps, and plans for filling those gaps. As a result, the
program office has experienced delays in getting core management
activities under way and lacks the staff it needs to execute day-to-day
management activities.

NPOESS Program Has Made Progress in Establishing an Effective Management
Structure and Increasing Oversight Activities, but Executive Turnover Will
Increase Program Risks

The NPOESS program has made progress in establishing an effective
management structure and increasing the frequency and intensity of its
oversight activities. Over the past few years, we and others have raised
concerns about management problems at all levels of management on the
NPOESS program, including subcontractor and contractor management, program
office management, and executive-level management. In response to
recommendations made by two different independent review teams, the
program office began exploring options in late 2005 and early 2006 for
revising its management structure.

In November 2005, the Executive Committee established and filled a Program
Executive Officer position, senior to the NPOESS Program Director, to
streamline decision making and to provide oversight to the program. This
Program Executive Officer reports directly to the Executive Committee.
Subsequently, the Program Executive Officer and the Program Director
proposed a revised organizational framework that realigned division
managers within the Integrated Program Office responsible for overseeing
key elements of the acquisition and increased staffing in key areas. In
June 2006, the Nunn-McCurdy certification decision approved this new
management structure and the Integrated Program Office implemented it.
Figure 9 provides an overview of the relationships among the Integrated
Program Office, the Program Executive Office, and the Executive Committee,
as well as key divisions within the program office.

^13 [44]GAO-06-249T ; U.S. Department of Commerce, Office of the Inspector
General, Poor Management Oversight and Ineffective Incentives Leave NPOESS
Program Well Over Budget and Behind Schedule, OIG-17794-6-0001/2006
(Washington, D.C.: May 2006). In addition, two independent teams reviewed
the NPOESS program in 2005: A NASA-led Independent Review Team
investigated problems with the VIIRS sensor and the impact on NPP, and a
DOD-led Independent Program Assessment Team assessed the broader NPOESS
program. The teams briefed the NPOESS Executive Committee on their
findings in August 2005 and November 2005, respectively.

Figure 9: Overview of New Management Structure

Operating under this new management structure, the program office
implemented more rigorous and frequent subcontractor, contractor, and
program reviews, improved visibility into risk management and mitigation
activities, and institutionalized the use of earned value management
techniques to monitor contractor performance. Specifically, program
officials and the prime contractor now review the subcontractors' cost and
schedule performance on a weekly basis. The information from these
meetings feeds into monthly government meetings with the prime contractor
to review progress against milestones, issues, and risks. Further, the
Program Director conducts monthly reviews with each technical division
lead to review the divisions' achievements, risks, and plans. Program
officials note that these frequent reviews allow information on risks to
be quickly escalated from subcontractors to contractors, to the program
component level, and to the Program Director--and they allow program
officials to better manage efforts to reduce risks. The program office
also reported that all division leads were trained in earned value
management techniques and were effectively using these techniques both to
monitor subcontractor and contractor performance on a weekly basis and to
identify potential problems as soon as possible.

In addition to these program office activities, the Program Executive
Officer implemented monthly program reviews and increased the frequency of
contacts with the Executive Committee. Specifically, the Program Executive
Officer holds monthly program management reviews where the Program
Director and program division leads (for example, those in charge of
systems engineering or ground systems) provide briefings on the program's
earned value, progress, risks, and concerns. We observed that these
briefings allow the Program Executive Officer to have direct insight into
the challenges and workings of the Integrated Program Office and allow
risks to be appropriately escalated and addressed. These meetings also
provide an open forum for managers to raise concerns and ask questions
about operational challenges. For example, when NASA officials expressed
concerns that vibration levels used during testing were higher than
necessary and were causing damage to key sensor components, the Program
Director and Program Executive Officer immediately established a forum to
discuss and mitigate this issue. The Program Executive Officer briefs the
Executive Committee in monthly letters, apprising committee members of the
program's status, progress, risks, and earned value and the Executive
Committee now meets on a quarterly basis--whereas in the recent past, we
reported that the Executive Committee had met only five times in 2
years.^14

14 [45]GAO-06-249T .

While the NPOESS program has made progress in establishing an effective
management structure, this progress is currently at risk. We recently
reported that DOD space acquisitions are at increased risk due in part to
frequent turnover in leadership positions, and we suggested that
addressing this will require DOD to consider matching officials' tenure
with the development or delivery of a product.^15 In March 2007, NPOESS
program officials stated that DOD is planning to reassign the recently
appointed Program Executive Officer in Summer 2007 as part of this
executive's natural career progression. As of March 2007, the Program
Executive Officer has held this position for 16 months. Given that the
program is currently still being restructured, and that there are
significant challenges in being able to meet critical deadlines to ensure
satellite data continuity, such a move adds unnecessary risk to an already
risky program.

NPOESS Program Has Filled Key Vacancies but Lacks A Programwide Staffing Process

The NPOESS program office has filled key vacancies in recent months but
lacks a staffing process that identifies programwide staffing requirements
and plans for filling those needed positions. Sound human capital
management calls for establishing a process or plan for determining
staffing requirements, identifying any gaps in staffing, and planning to
fill critical staffing gaps. Program office staffing is especially
important for NPOESS, given the acknowledgment by multiple independent
review teams that staffing shortfalls contributed to past problems.
Specifically, these review teams noted shortages in the number of system
engineers needed to provide adequate oversight of subcontractor and
contractor engineering activities and in the number of budget and cost
analysts needed to assess contractor cost and earned value reports. To
rectify this situation, the June 2006 certification decision directed the
Program Director to take immediate actions to fill vacant positions at the
program office with the approval of the Program Executive Officer.

Since the June 2006 decision to revise NPOESS management structure, the
program office has filled multiple critical positions, including a budget
officer, a chief system engineer, an algorithm division chief, and a
contracts director. In addition, on an ad hoc basis, individual division
managers have assessed their needs and initiated plans to hire individuals
for key positions. However, almost a year after the certification, the
program office still lacks a programwide process for identifying and
filling all needed positions. As a result, division managers often wait
months for critical positions to be filled. For example, in February 2006,
the NPOESS program estimated that it needed to hire up to 10 new budget
analysts. As of September 2006, none of these positions had been filled.
Today, program officials estimate that they only needed to fill 7 budget
analyst positions, of which 2 positions have been filled, and 5 remain
vacant. Additionally, even though the certification decision directed
immediate action to fill critical vacancies, the program still has
vacancies in 5 systems engineering positions and 10 technical manager
positions. The majority of the vacancies--4 of the 5 budget positions, 4
of the 5 systems engineering positions, and 8 of the 10 technical manager
positions--are to be provided by NOAA. NOAA officials noted that each of
these positions is in some stage of being filled--that is, recruitment
packages are being developed or reviewed, vacancies are being advertised,
or candidates are being interviewed, selected, and approved.

^15GAO, Space Acquisitions: Improvements Needed in Space Acquisitions and
Keys to Achieving Them, [46]GAO-06-626T (Washington, D.C.: Apr. 6, 2006).

The program office attributes its staffing delays to not having the right
personnel in place to facilitate this process--and did not even begin to
develop a staffing process--until November 2006. Program officials noted
that the tri-agency nature of the program adds unusual layers of
complexity to the hiring and administrative functions because each agency
has its own hiring and performance management rules. In November 2006, the
program office brought in an administrative officer who took the lead in
pulling together the division managers' individual assessments of needed
staff--currently estimated to be 25 vacant positions--and has been working
with the division managers to refine this list. This new administrative
officer plans to train division managers in how to assess their needs and
to hire needed staff and to develop a process by which evolving needs are
identified and positions are filled. However, there is as yet no date set
for establishing this basic programwide staffing process.

As a result of the lack of a programwide staffing process, there has been
an extended delay in determining what staff are needed and in bringing
those staff on board--which has resulted in delays in performing core
management activities such as establishing the program office's cost
estimate and bringing in needed contracting expertise. Additionally, until
a programwide staffing process is in place, the program office risks not
having the staff it needs to execute day-to-day management activities.

Methodology Supporting the June 2006 Cost and Schedule Estimate Was Reliable,
but Recent Events Could Increase Program Costs

In June 2006, DOD certified a restructured NPOESS program that was
estimated to cost $11.5 billion for the acquisition portion of the
program^16 and scheduled to launch the first satellite in 2013. The Office
of the Secretary of Defense's Cost Analysis Improvement Group (cost
analysis group)--the independent cost estimators charged with developing
the estimate for the acquisition portion of the program--used an
acceptable methodology to develop this estimate. When combined with an
estimated $1 billion for operations and support after launch, this brings
the program life cycle cost to $12.5 billion. Recent events, however,
could further increase program costs or delay schedules. Specifically, the
program continues to experience technical problems on key sensors, and
costs and schedules will be adjusted during negotiations on contract
changes. The NPOESS program office is developing its own cost estimate to
refine the one developed in June 2006 that it will use to negotiate
contract changes. A new baseline cost will be established once the
contract is finalized.

Certified Program Estimates Were Developed Using an Acceptable Methodology

The cost and schedule estimate for the restructured NPOESS program was
developed by DOD's cost analysis group using an acceptable methodology.
Cost-estimating organizations throughout the federal government and
industry use certain key practices--related to planning, conducting, and
reporting the estimate--to ensure a sound estimate. Table 6 lists the
elements of a sound cost estimating methodology. In addition, to ensure
the validity of the data assumptions that go into the estimate, leading
organizations use actual historical costs and seek an independent
validation of critical cost drivers.

^16The acquisition portion of the program includes satellite development,
production, and launch. It does not include operations and support costs
after launch.

Table 6: Elements of a Sound Cost Estimating Methodology

Source: GAO analysis of leading practices.

DOD's cost analysis group used an acceptable methodology in developing the
NPOESS cost estimate in that they planned, conducted, and reported the
estimate consistent with leading practices. The cost analysis group's cost
estimating approach was largely driven by the program's principal "ground
rule" to maintain the continuity of weather data without a gap.
Specifically, the cost analysis group assessed two risks: (1) the
uncertainty of the health of the current polar-satellite constellation and
(2) the uncertainty of when the new satellite system could be delivered
(including the time needed to evaluate new satellites once in orbit). The
resulting analysis showed that the restructured NPOESS system could be
delivered and the first satellite launched by 2013 with a high level of
confidence in maintaining satellite data continuity.^17

To determine specific costs, the group used the existing work breakdown
structure employed by the program office as the basis for performing its
work. This work breakdown structure consists of seven major elements,
including ground systems; spacecraft; sensors; assembly, integration and
test; system engineering/contractor program management; government program
management; and launch.

^17The cost analysis group determined that there was a 90 percent
confidence level that there would be no weather coverage gap.

The cost analysis group also took steps to ensure the validity of the data
that went into the estimate. For each element, the cost analysis group
visited all major contractor sites to collect program data including

           o schedule (including the original, rebaselined, and current
           schedules, and risks affecting the current schedule);
           o current staffing profile by month;
           o the history of staffing used;
           o the qualifications of people charging the program;
           o the program's technical approaches;
           o system diagrams;
           o bills of materials;
           o funding profile; and
           o the contractor's program legacy (a justification that the
           contractor has worked on similar projects in the past and that the
           contractor should be able to adapt that knowledge to the current
           work).

           The cost analysis group also compared this data with contractor
           labor rates from the Defense Contract Management Agency and
           obtained NASA's validation of the costs associated with the most
           significant cost driver, the VIIRS sensor.

           Since schedule was the primary uncertainty factor in the cost
           analysis, it also was the driver of overall costs. Specifically,
           the cost analysis group took its risk-adjusted schedule durations
           for the major cost elements and adjusted the contractor-submitted
           manning profiles accordingly. They then used NPOESS historical
           data on labor rates and materials to calculate the cost of these
           elements.

           Consistent with DOD practice, the cost analysis group established
           its cost estimate at a 50 percent confidence level.^18 However,
           cost analysts could not provide an upper limit for potential cost
           growth, explaining that the program contains "failsafe" measures
           to use alternative technologies (such as using legacy systems) if
           schedules are delayed and costs increase. As a result, cost
           analysts reported that they have a high level of confidence that
           acquisition costs will not exceed $11.5 billion--but a lower level
           of confidence that the configuration of sensors will remain
           unchanged.
			  
^18A 50 percent level of confidence indicates that NPOESS has a 50 percent
chance that the restructured program (as defined in the Nunn-McCurdy
certification decision) will be delivered as planned at the acquisition
cost of $11.5 billion.

           Recent Events Could Lead to Increased Program Costs or Delayed
			  Schedules

           While the June 2006 cost estimate for the acquisition portion of
           the program was reasonable at the time it was made, several recent
           events could cause program life cycle costs to grow or schedules
           to be delayed. Specifically, the program continues to experience
           technical problems on key sensors. The CrIS sensor being developed
           for the NPP satellite suffered a major structural failure in
           October 2006. A failure review board is currently working to
           resolve the root causes of the failure. While program officials
           note that they should be able to cover costs related to
           investigating the problem, the full cost and schedule to fix the
           sensor is not yet known. Also, VIIRS development, which has been
           the program's primary cost driver, is not yet complete and
           continues to be a high-risk development. This too, could lead to
           higher final program costs or delayed schedules.

           Program costs are also likely to be adjusted during upcoming
           negotiations on contract changes. The NPOESS program office is
           developing its own cost estimate to refine the one developed in
           June 2006. Program officials plan to use this revised cost
           estimate to negotiate contract changes. A new baseline cost will
           be established once the contract is finalized--an event that the
           Program Director expects to occur by July 2007.
			  
			  Major Program Segments Are Under Development, but Significant Risks
			  Remain

           Major segments of the NPOESS program--the space segment, the
           ground systems segment, and the launch segment--are under
           development; however, significant problems have occurred and risks
           remain. The program office is aware of these risks and is working
           to mitigate them, but continued problems could affect the
           program's overall cost and schedule. Given the tight time frames
           for completing key sensors, integrating them on the NPP
           spacecraft, and getting the ground-based data processing systems
           developed, tested, and deployed, it will be important for the
           NPOESS Integrated Program Office, the Program Executive Office,
           and the Executive Committee to continue to provide close oversight
           of milestones and risks.
			  
			  Space Segment--Progress Made, but Key Sensors Continue to Face
			  Major Risks

           The space segment includes the sensors and the spacecraft. Four
           sensors are of critical importance--VIIRS, CrIS, OMPS, and
           ATMS--because they are to be launched on the NPP satellite.
           Initiating work on another sensor, the Microwave imager/sounder,
           is also important because this new sensor--replacing the cancelled
           CMIS sensor--will need to be developed in time for the second
           NPOESS satellite launch. Over the past year, the program made
           progress on each of the sensors and the spacecraft. However, two
           sensors, VIIRS and CrIS, have experienced major problems. The
           status of each of the components of the space segment is described
           in table 7.


Table 7: Status of Selected Components of the Space Segment, as of April
2007

Source: GAO analysis of NPOESS Integrated Program Office data.

^aThe three problems are (1) band-to-band co-registration, an issue in
which band registration shifts with different temperatures; (2)
cross-talk, which involves information from sensor cells leaking into
other cells; and (3) line-spread function issues, in which the
instrument's focus changes with changes in temperature.

  Earned Value Data Show Problems on the Space Segment

Earned value management tools are used to compare the value of work
accomplished with the work expected during a given time period, and any
differences are measured in cost and schedule variances. The NPOESS space
segment experienced negative cost and schedule variances between January
2006 and January 2007 (see fig. 10).

Figure 10: Cumulative Cost and Schedule Variance for the NPOESS Space
Segment over a 13-Month Period

From January 2006 to January 2007, the contractor exceeded cost targets
for the space segment by $17 million--which is 4 percent of the space
segment budget for that time period. Similarly, the contractor was unable
to complete $14.6 million worth of work in the space segment. The main
factors in the cost and schedule variances were due to underestimation of
the scope of work, pulling resources from lower priority tasks to higher
priority items, and unforeseen design issues on key sensors. For example,
VIIRS continued to experience negative cost variance trends due to
unplanned efforts, which included refurbishing and recertifying the VIIRS
calibration chamber, completing the testing of the engineering design
unit, and resolving a problem with the testing equipment needed to adjust
VIIRS' temperature during a key test.

Unplanned efforts for CrIS that attributed to the negative cost and
schedule variances included additional time required for testing and
material management. The schedule variances for VIIRS and CrIS were mainly
due to resources being pulled from other areas to support higher priority
tasks, extended testing and testing delays, management changes, and
improper material handling. Further, there is a high likelihood that CrIS
will continue to experience cost and schedule variances against the fiscal
year 2007 interim program plan until the issues that caused its structural
failure are addressed.

  Program Office Is Monitoring Sensor Risks and Evaluating Options

Program officials regularly track risks associated with various NPOESS
components and work to mitigate them. Having identified both VIIRS and
CrIS as high risk, OMPS as a moderate risk, and the other components as
low risk, the program office is working closely with the contractors and
subcontractors to resolve sensor problems.

Program officials have identified work-arounds that will allow them to
move forward in testing the VIIRS engineering unit and have approved the
flight unit to proceed to a technical readiness review milestone in May
2007. Regarding CrIS, as of March 2007, a failure review board identified
root causes of its structural failure, identified plans for resolving
them, and initiated inspections of sensor modules and subsystems for
damage. An agency official reported that there is sufficient funding in
the fiscal year 2007 program office's and contractor's management reserve
funds to allow for troubleshooting both VIIRS and CrIS problems. However,
until the CrIS failure review board fully determines the amount of rework
that is necessary to fix the problems, it is unknown if additional funds
will be needed or if the time frame for CrIS' delivery will be delayed.
According to agency officials, CrIS is not on the program schedule's
critical path, and there is sufficient schedule margin to absorb the time
it will take to conduct a thorough failure review process.

Managing the risks associated with the development of VIIRS and CrIS are
of particular importance because these are to be demonstrated on the NPP
satellite currently scheduled for launch in September 2009. Additionally,
any delay in the NPP launch date could affect the overall NPOESS program
because the success of the program depends on the lessons learned in data
processing and system integration from the NPP satellite.

Ground Segment--Progress Has Been Made, but Work Remains

Development of the ground segment--which includes the interface data
processing system, the ground stations that are to receive satellite data,
and the ground-based command, control, and communications system--is under
way and on track. However, important work pertaining to developing the
algorithms that translate satellite data into weather products within the
integrated data processing segment remains to be completed. Table 8
describes each of the components of the ground segment and identifies the
status of each. Additionally, appendix II provides an overview of
satellite data processing algorithms.

Table 8: Status of Ground Segment Components

Source: GAO analysis of NPOESS Integrated Program Office data.

Ground Segment Cost and Schedule Are on Track; Work and Risks Remain

Using contractor-provided data, our analysis indicates cost and schedule
performance on key elements of the NPOESS ground segment were generally on
track or positive against the fiscal year 2006 and 2007 interim program
plans. For the IDPS component, the contractor completed slightly less work
than planned and finished slightly under budget. This caused cost and
schedule variances of less than 1 percent off of expectations. (see fig.
11). For the command, control, and communications component, the
contractor was able to outperform its planned targets by finishing under
budget by $3 million (6.2 percent of the budget for this time period) and
by completing $31,000 (less than 1 percent) worth of work beyond what was
planned (see fig. 12).

Figure 11: Cumulative Cost and Schedule Variance for the NPOESS IDPS
Development over a 13-Month Period

Figure 12: Cumulative Cost and Schedule Variance for the NPOESS Command,
Control, and Communications Segment over a 13-Month Period

  Program Office Has Plans to Address IDPS Risks

The NPOESS program office plans to continue to address risks facing IDPS
development. Specifically, the IDPS team is working to reduce data
processing delays by seeking to limit the number of data calls, improve
the efficiency of the data management system, increase the efficiency of
the algorithms, and increase the number of processors. The program office
also developed a resource center consisting of a logical technical
library, a data archive, and a set of analytical tools to coordinate,
communicate, and facilitate the work of algorithm subject matter experts
on algorithm development and calibration/validation preparations. Managing
the risks associated with the development of the IDPS system is of
particular importance because this system will be needed to process NPP
data.

Launch Segment--NPP Launch Preparation Has Begun, while NPOESS Launch Planning
Remains a Future Event

Different agencies are responsible for launching NPP and NPOESS. NASA is
responsible for the NPP launch and began procuring the launch vehicle for
NPP in August 2006. Program officials expect to have it delivered by July
2009, less than 2 months before the scheduled NPP launch in September
2009.

The NPOESS Integrated Program Office is responsible for launching the
NPOESS satellites. According to program officials, the Air Force is to
procure launch services for the program through DOD's Evolved Expendable
Launch Vehicle contract. These services are to be procured by January
2011, 2 years before the first scheduled launch.

Conclusions

NPOESS restructuring is well under way, and the program has made progress
in establishing an effective management structure. However, key steps
remain in restructuring the acquisition, including completing important
acquisition documents such as the system engineering plan, the acquisition
program baseline, and the memorandum of agreement documenting the three
agencies' roles and responsibilities. Until these key documents are
finalized, the program is unable to finalize plans for restructuring the
program. Additionally, the program office continues to have difficulty
filling key positions and lacks a programwide staffing process. Until the
program establishes an effective and repeatable staffing process, it will
have difficulties in identifying and filling its staffing needs in a
timely manner. Having insufficient staff in key positions impedes the
program office's ability to conduct important management and oversight
activities, including revising cost and schedule estimates, monitoring
progress, and managing technical risks. The program faces even further
challenges if DOD proceeds with plans to reassign the Program Executive
Officer this summer. Such a move would add unnecessary risk to an already
risky program.

In addition, the likelihood exists that there will be further cost
increases and schedule delays because of technical problems on key sensors
and pending contract negotiations. Major program segments--including the
space and ground segments--are making progress in their development and
testing. However, two critical sensors have experienced problems and are
considered high risk, and risks remain in developing and implementing the
ground-based data processing system. Given the tight time frames for
completing key sensors, integrating them, and getting the ground-based
data processing systems developed, tested, and deployed, continued close
oversight of milestones and risks is essential to minimize potential cost
increases and schedule delays.

Recommendations for Executive Action

Because of the importance of effectively managing the NPOESS program to
ensure that there are no gaps in the continuity of critical weather and
environmental observations, we are making recommendations to the
Secretaries of Defense and Commerce and to the Administrator of NASA to
ensure that the responsible executives within their respective
organizations approve key acquisition documents, including the memorandum
of agreement among the three agencies, the system engineering plan, the
test and evaluation master plan, and the acquisition strategy, as quickly
as possible but no later than April 30, 2007.

We are also recommending that the Secretary of Defense direct the Air
Force to delay reassigning the recently appointed Program Executive
Officer until all sensors have been delivered to the NPOESS Preparatory
Program; these deliveries are currently scheduled to occur by July 2008.

We are also making two additional recommendations to the Secretary of
Commerce. We recommend that the Secretary direct the Undersecretary of
Commerce for Oceans and Atmosphere to ensure that NPOESS program
authorities develop and implement a written process for identifying and
addressing human capital needs and for streamlining how the program
handles the three different agencies' administrative procedures, and
establish a plan for immediately filling needed positions.

Agency Comments and Our Evaluation

We received written comments on a draft of this report from the Deputy
Secretary of the Department of Commerce (see app. III), the Deputy
Assistant Secretary for Networks and Information Integration of the
Department of Defense (see app. IV), and the Deputy Administrator of the
National Aeronautics and Space Administration (see app. V). All three
agencies agreed that it was important to finalize key acquisition
documents in a timely manner, and DOD proposed extending the due dates for
the documents to July 2, 2007. Because the NPOESS program office intends
to complete contract negotiations by July 4, 2007, we remain concerned
that any further delays in approving the documents could delay contract
negotiations and thus increase the risk to the program.

In addition, the Department of Commerce agreed with our recommendation to
develop and implement a written process for identifying and addressing
human capital needs and to streamline how the program handles the three
different agencies' administrative procedures. The department also agreed
with our recommendation to plan to immediately fill open positions at the
NPOESS program office. Commerce noted that NOAA identified the skill sets
needed for the program and has implemented an accelerated hiring model and
schedule to fill all NOAA positions in the NPOESS program. The department
also stated that the Program Director will begin presenting the detailed
staffing information at monthly program management reviews, including
identifying any barriers and recommended corrective actions. Commerce also
noted that NOAA has made NPOESS hiring a high priority and has documented
a strategy--including milestones--to ensure that all 20 needed positions
are filled by June 2007.

DOD did not concur with our recommendation to delay reassigning the
Program Executive Officer, noting that the NPOESS System Program Director
responsible for executing the acquisition program would remain in place
for 4 years. The Department of Commerce also noted that the Program
Executive Officer position is planned to rotate between the Air Force and
NOAA. Commerce also stated that a selection would be made prior to the
departure of the current Program Executive Officer to provide an overlap
period to allow for knowledge transfer and ensure continuity.

However, over the last few years, we and others (including an independent
review team and the Commerce Inspector General) have reported that
ineffective executive-level oversight helped foster the NPOESS program's
cost and schedule overruns. We remain concerned that reassigning the
Program Executive at a time when NPOESS is still facing critical cost,
schedule, and technical challenges will place the program at further risk.

While it is important that the System Program Director remain in place to
ensure continuity in executing the acquisition, this position does not
ensure continuity in the functions of the Program Executive Officer. The
current Program Executive Officer is experienced in providing oversight of
the progress, issues, and challenges facing NPOESS and coordinating with
Executive Committee members, as well as DOD authorities responsible for
executing Nunn-McCurdy requirements. Additionally, while the Program
Executive Officer position is planned to rotate between agencies, the
memorandum of agreement documenting this arrangement is still in draft and
should be flexible enough to allow the current Program Executive Officer
to remain until critical risks have been addressed.

Further, while Commerce plans to allow a period of overlap between the
selection of a new Program Executive Officer and the departure of the
current one, time is running out. The current Program Executive Officer is
expected to depart in early July 2007 and, as of mid-April 2007, a
successor has not yet been named. NPOESS is an extremely complex
acquisition, involving three agencies, multiple contractors, and advanced
technologies. There is not sufficient time to transfer knowledge and
develop the sound professional working relationships that the new Program
Executive Officer will need to succeed in that role. Thus, we remain
convinced that given NPOESS's current challenges, reassigning the current
Program Executive Officer at this time would not be appropriate.

All three agencies also provided technical comments, which we have
incorporated in this report as appropriate.

As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time, we will send copies of this report to
interested congressional committees, the Secretary of Commerce, the
Secretary of Defense, the Administrator of NASA, the Director of the
Office of Management and Budget, and other interested parties. In
addition, this report will be available at no charge on our Web site at
http://www.gao.gov.

If you have any questions on matters discussed in this report, please
contact me at (202) 512-9286 or by e-mail at [email protected]. Contact
points for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix VI.

David A. Powner
Director, Information Technology Management Issues

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) evaluate the National Polar-orbiting
Operational Environmental Satellite System (NPOESS) program office's
progress in restructuring the acquisition; (2) evaluate the program
office's progress in establishing an effective management structure; (3)
assess the reliability of the new life cycle cost estimate and proposed
schedule; and (4) identify the status and key risks facing the program's
major segments (the launch, space, data processing, and ground control
segments) and evaluate the adequacy of the program's efforts to mitigate
these risks.

To evaluate the NPOESS program office's progress in restructuring the
acquisition program, we reviewed the program's Nunn-McCurdy certification
decision memo and program documentation including status briefings and
milestone progress reports. We also interviewed program office officials
and attended conferences and senior-level management program review
meetings to obtain information on the program's acquisition restructuring.

To evaluate the program office's progress in establishing an effective
management structure, we reviewed the Nunn-McCurdy decision memo for the
program, as well as program documentation and briefings. We assessed the
status of efforts to implement recommendations regarding the program's
management structure, including the work of the team responsible for
reviewing the management structure under the Nunn-McCurdy review. We also
analyzed the program office's organizational charts and position
vacancies. Finally, we interviewed officials responsible for reviewing the
management structure of the program under Nunn-McCurdy, attended
senior-level management review meetings to obtain information related to
the program's progress in establishing and staffing the new management
structure, and interviewed program office officials responsible for human
capital issues to obtain clarification on plans and goals for the new
management structure.

To assess the reliability of the new life cycle cost estimate and proposed
schedule, we analyzed the Office of the Secretary of Defense's Cost
Analysis Improvement Group's (cost analysis group) cost estimating
methodology and the assumptions used to develop its independent cost
estimate. Specifically, we assessed the cost estimating group's
methodology against 12 best practices recognized by cost-estimating
organizations within the federal government and industry for the
development of reliable cost estimates. These best practices are also
contained in a draft version of our cost guide, which is currently being
developed by GAO cost experts. We also assessed cost- and schedule-related
data, including the work breakdown structure and detailed schedule risk
analyses to determine the reasonableness of the cost analysis group's
assumptions. We also interviewed cost analysis group officials to obtain
clarification on cost and schedule estimates and their underlying
assumptions. Further, we interviewed program officials to identify any
assumptions that may have changed.

To identify the status and key risks facing the program's major segments
(the launch, space, data processing, and ground control segments) and to
evaluate the adequacy of the program's efforts to mitigate these risks, we
reviewed the program's Nunn-McCurdy certification decision memo and other
program documentation. We analyzed briefings and monthly program
management documents to determine the status and risks of the key program
segments. We also analyzed earned value management data obtained from the
contractor to assess the contractor's performance to cost and schedule. We
reviewed cost reports and program risk management documents and
interviewed program officials to determine the program segments' risks
that could negatively affect the program's ability to maintain the current
schedule and cost estimates. We also interviewed agency officials from the
National Aeronautics and Space Administration (NASA), the National Oceanic
and Atmospheric Administration (NOAA), the Department of Defense (DOD),
and the NPOESS program office to determine the status and risks of the key
program segments. Finally, we observed senior-level management review
meetings and attended conferences to obtain information on the status of
the NPOESS program.

We performed our work at the NPOESS Integrated Program Office and at DOD,
NASA, and NOAA offices in the Washington, D.C., metropolitan area between
July 2006 and April 2007 in accordance with generally accepted government
auditing standards.

Appendix II: Overview of Satellite Data Processing Algorithms and the
Calibration and Validation Process

Algorithms are sets of instructions, expressed mathematically, that
translate satellite sensor measurements into usable information. In the
NPOESS program, government contractors are responsible for algorithm
development; the program office is responsible for independently
validating the algorithms. Scientists develop these algorithms, which are
then written as computer code to be incorporated into the interface data
processing system (IDPS) operational system. The NPOESS ground system uses
three primary types of algorithms:

           o Algorithms to develop raw data records "unpack" the digital
           packets received by the antennas/IDPS (the ones and zeros) and
           sent from the satellite, associate the data with the information
           about the satellite's location and, finally, translate it back
           into the data it was when it started at the sensor.
           o Algorithms used to develop sensor and temperature data records
           allow the on-ground users to understand what the sensor saw. It
           translates the information from the sensor into a measure of the
           various forms of energy (e.g., brightness, temperature, radiance).
           o Algorithms used to produce the weather products called
           environmental data records (EDR) are crosscutting. They combine
           various data records, as well as other data, in order to produce
           measures useful to scientists. Additionally, EDRs can be
           "chained"--that is, the output of one EDR algorithm will become an
           input into the next EDR algorithm. To illustrate, cloud
           detection/mask is an important "base" EDR because many EDRs, like
           sea surface temperature, are only calculated when clouds are not
           present. Figure 13 shows the flow of the data and algorithms.

Figure 13: Satellite Data Processing Algorithms

A corollary to algorithm development is the calibration and validation
process. According to a senior algorithm scientist, in this process, once
the satellite has been launched, scientists verify that the sensors
accurately report what ground conditions are. For example, one EDR from
the visible/infrared imager radiometer suite (VIIRS) is "ocean color."
Once the sensor is in orbit, scientists can compare the results that the
VIIRS sensor reports on ocean color with the known results from sensors on
ocean buoys that also measure ocean color in select locations. Then, if
the sensors do not accurately report the ground conditions, scientists can
calibrate, or "tweak," the algorithms used to develop sensor, temperature,
and environmental data records to report on ground conditions more
accurately.

According to an agency official, fully calibrating a simple sensor once it
has been launched can take approximately a year. A more complicated sensor
can take 18 months to 2 years (see fig. 14).

Figure 14: Describes the High-Level Calibration and Validation Process

Appendix III: Comments from the Department of Commerce

Appendix IV: Comments from the Department of Defense

Appendix V: Comments from the National Aeronautics and Space
Administration

Appendix VI: GAO Contact and Staff Acknowledgments

GAO Contact

David A. Powner, (202) 512-9286, or [email protected]

Staff Acknowledgments

In addition to the contact named above, Colleen Phillips, Assistant
Director; Carol Cha; Neil Doherty; Nancy Glover; Kathleen S. Lovett; Karen
Richey; and Teresa Smith made key contributions to this report.

(310821)

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Highlights of [55]GAO-07-498 , a report to congressional requesters

April 2007

POLAR-ORBITING OPERATIONALENVIRONMENTAL SATELLITES

Restructuring Is Under Way, but Technical Challenges and Risks Remain

The National Polar-orbiting Operational Environmental Satellite System
(NPOESS) is a tri-agency acquisition--managed by the Departments of
Commerce and Defense and the National Aeronautics and Space
Administration--which experienced escalating costs, schedule delays, and
technical difficulties. These factors led to a June 2006 decision to
restructure the program thereby decreasing the program's complexity,
increasing its estimated cost to $12.5 billion, and delaying the first two
satellites by 3 to 5 years. GAO was asked to (1) assess progress in
restructuring the acquisition, (2) evaluate progress in establishing an
effective management structure, (3) assess the reliability of the cost and
schedule estimate, and (4) identify the status and key risks facing the
program's major segments. To do so, GAO analyzed program and contractor
data, attended program reviews, and interviewed program officials.

[56]What GAO RecommendsGAO recommends that the appropriate executives
approve key acquisition documents, the Secretary of Defense delay
reassigning the Program Executive, and the Secretary of Commerce ensure
that program authorities identify and address staffing needs. Agency
officials agreed with all of the recommendations except delaying the
Program Executive's reassignment. GAO believes that proceeding with this
reassignment would increase program risks.

The NPOESS program office has made progress in restructuring the
acquisition by establishing and implementing interim program plans guiding
the contractors' work activities in 2006 and 2007; however, important
tasks leading up to finalizing contract changes remain to be completed.
Executive approvals of key acquisition documents are about 6 months
late--due in part to the complexity of navigating three agencies' approval
processes. Delays in finalizing these documents could hinder plans to
complete contract negotiations by July 2007 and could keep the program
from moving forward in fiscal year 2008 with a new program baseline.

The program office has also made progress in establishing an effective
management structure by adopting a new organizational framework with
increased oversight from program executives and by instituting more
frequent and rigorous program reviews; however, plans to reassign the
recently appointed Program Executive Officer will likely increase the
program's risks. Additionally, the program lacks a process and plan for
identifying and filling staffing shortages, which has led to delays in key
activities such as cost estimating and contract revisions. Until this
process is in place the NPOESS program faces increased risk of further
delays.

The methodology supporting a June 2006 independent cost estimate with the
expectation of initial satellite launch in January 2013 was reliable, but
recent events could increase program costs and delay schedules.
Specifically, the program continues to experience technical problems on
key sensors and program costs will likely be adjusted during upcoming
negotiations on contract changes. A new baseline cost and schedule
reflecting these factors is expected by July 2007.

Development and testing of major NPOESS segments--including key sensors
and ground systems--are under way, but significant risks remain. For
example, while work continues on key sensors, two of them experienced
significant problems and are considered high risk (see table).
Additionally, while progress has been made in reducing delays in the data
processing system, work remains in refining the algorithms needed to
translate sensor observations into useable weather products. Given the
tight time frames for completing this work, it will be important for
program officials and executives to continue to provide close oversight of
milestones and risks.

Key NPOESS Components and Corresponding Risk Levels

Source: GAO analysis of NPOESS Integrated Program Office data.

References

Visible links
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-06-573T
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-06-249T
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-04-1054
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-03-987T
  39. http://www.gao.gov/cgi-bin/getrpt?GAO-02-684T
  40. http://www.gao.gov/cgi-bin/getrpt?GAO-03-987T
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-04-1054
  42. http://www.gao.gov/cgi-bin/getrpt?GAO-06-249T
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-06-573T
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-06-249T
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-06-249T
  46. http://www.gao.gov/cgi-bin/getrpt?GAO-06-626T
  55. http://www.gao.gov/cgi-bin/getrpt?GAO-07-498
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