Space Transportation: Status of the X-33 Reusable Launch Vehicle Program
(Letter Report, 08/11/1999, GAO/NSIAD-99-176).

Pursuant to a congressional request, GAO provided information on the
status of the National Aeronautics and Space Administration's (NASA)
X-33 Program, focusing on: (1) whether the X-33 Program is meeting the
cost, schedule, and performance objectives established in the X-33
cooperative agreement; (2) how NASA's oversight responsibility was
changed by the cooperative agreement; and (3) potential issues NASA may
face as it moves toward a decision on whether to use Venture Star
reusable launch vehicles (RLV) to service the International Space
Station.

GAO noted that: (1) NASA and Lockheed Martin X-33 program managers
anticipate that the program will achieve technical requirements; (2)
however, the program will not meet some original cost, schedule, and
performance objectives; (3) problems encountered by Lockheed Martin
while working toward the X-33 Program's technical requirements have
caused cost increases, delay of the test vehicle's first flight, and
revision of some performance objectives; (4) the technical problems
occurred during development and fabrication of the X-33 vehicle's
internal fuel tanks, rocket engines, and thermal protection system, the
three key advanced technologies the program seeks to demonstrate; (5)
the estimated costs increased from $216.9 million to $274.3 million as
of March 1999; (6) the first flight of the X-33 vehicle was delayed 16
months, from March 1999 to July 2000; (7) this could delay NASA's
decision about whether to invest in space shuttle fleet upgrades or rely
on new launch vehicles such as Venture Star; (8) the technical problems
and schedule constraints also resulted in changes to program performance
objectives; (9) to implement the terms of the X-33 cooperative
agreement, NASA assigned to Lockheed Martin the leadership role in
executing the X-33 Program; (10) according to NASA's X-33 program
manager, the agency's oversight is different from that used for
traditional development contracts, as it relies on insight gained from
NASA employees working alongside Lockheed Martin personnel; (11) several
issues will need to be evaluated before NASA decides to use Venture Star
RLVs to support the International Space Station; (12) the results of the
X-33 Program must provide sufficient information for NASA to determine
that the risks have been sufficiently reduced and that continuation of
activities leading to the agency's use of Venture Star as a customer is
warranted; (13) even though Venture Star RLVs are intended to be
commercially owned and operated, government financial incentives will
likely be needed to initiate such a venture; (14) NASA would have to pay
for either two crew modules or modifications to Venture Star vehicles if
the crew return vehicle being developed for the International Space
Station is chosen as a means for Venture Star to carry people; (15)
because the Venture Star RLV would not carry as much cargo as the space
shuttle, additional flights would be needed; and (16) NASA's Fiscal Year
2000 Performance Plan does not include performance targets that
establish a clear path leading from the X-33 Program flight-test vehicle
to an operational single-stage-to-orbit vehicle.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-99-176
     TITLE:  Space Transportation: Status of the X-33 Reusable Launch
	     Vehicle Program
      DATE:  08/11/1999
   SUBJECT:  Space exploration
	     Aerospace contracts
	     Aerospace engineering
	     Schedule slippages
	     Contract oversight
	     Joint ventures
	     Cooperative agreements
	     Cost overruns
IDENTIFIER:  NASA X-33 Program
	     Venture Star Reusable Launch Vehicle
	     NASA International Space Station Alpha Program

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ns99176 GAO United States General Accounting Office

Report to Congressional Requesters

August 1999 SPACE TRANSPORTATION

Status of the X- 33 Reusable Launch Vehicle Program

GAO/NSIAD-99-176

  GAO/NSIAD-99-176

Page 1 GAO/NSIAD-99-176 Space Transportation United States General
Accounting Office

Washington, D. C. 20548 National Security and International
Affairs Division

B-281611 Letter August 11, 1999 The Honorable Dana Rohrabacher
Chairman The Honorable Bart Gordon Ranking Minority Member
Subcommittee on Space and Aeronautics Committee on Science House
of Representatives

The purpose of the $1.3 billion X- 33 Program, cosponsored by the
National Aeronautics and Space Administration (NASA) and the
Lockheed Martin Corporation, is to develop and demonstrate
advanced technologies and techniques needed for future reusable
launch vehicles (RLV), including lightweight internal fuel tanks,
advanced rocket engines, a durable heat shield, and rapid-
turnaround, low- cost operations. The X- 33 vehicle will be

a half- scale model of Lockheed Martin's planned single- stage-
to- orbit (SSTO) Venture Star RLV, an operational vehicle that
will be based on and developed after the X- 33. Lockheed Martin
and NASA will base the decision to proceed with developing the
Venture Star, in part, on the results of the X- 33 Program. NASA
would potentially be one of Lockheed Martin's primary customers
for the cargo- only flights and, at this time, is the only

anticipated customer for passenger flights. The passenger flights
would carry crewmembers to and from the International Space
Station.

NASA and Lockheed Martin are conducting the X- 33 Program under a
cooperative agreement, 1 a financial instrument with which a
government entity and one or more public or private organizations
jointly fund and implement an activity to achieve common
objectives. Such a partnership was encouraged by the National
Space Transportation Policy of 1994 as a

means of (1) establishing NASA as the lead agency for technology
development and demonstration of reusable space transportation
systems and (2) positioning the government and the private sector
to make decisions on the development of an operational, reusable
launch system. Under the X- 33 cooperative agreement, NASA's
contribution is

1 Lockheed Martin has made agreements with Allied Signal
Aerospace, B. F. Goodrich Aerospace, Boeing- Rocketdyne Division,
and Sverdrup Corporation to assist in the X- 33 Program.

Lett er

B-281611 Page 2 GAO/NSIAD-99-176 Space Transportation

$912.4 million, and the current estimate of Lockheed Martin's and
its industry partners' contributions is $286.6 million. Because of
the Subcommittee's concerns about technical difficulties
encountered by the X- 33 Program, you asked us to review the
progress of the program. As agreed with your offices, we (1)
determined whether the

X- 33 Program is meeting the cost, schedule, and performance
objectives established in the X- 33 cooperative agreement, (2)
determined how NASA's oversight responsibility was changed by the
cooperative agreement, and (3) identified potential issues NASA
may face as it moves toward a decision on whether to use Venture
Star RLVs to service the International Space Station.

Results in Brief NASA and Lockheed Martin X- 33 program managers
anticipate that the program will achieve technical requirements
such as demonstrating the feasibility of building large liquid
hydrogen fuel tanks made of graphite composite material. 2
However, the program will not meet some original cost, schedule,
and performance objectives. Problems encountered by

Lockheed Martin while working toward the X- 33 Program's technical
requirements have caused cost increases, delay of the test
vehicle's first flight, and revision of some performance
objectives. The technical problems occurred during development and
fabrication of the X- 33 vehicle's internal fuel tanks, rocket
engines, and thermal protection system, the three key advanced
technologies the program seeks to demonstrate. Resolving these
technical problems caused Lockheed Martin's estimated contribution
to grow $75 million above the original estimate of $211.6 million,
to $286.6 million. However, part of the increase will be borne by
the government. Procurement regulations allow companies to recover
allowable independent research and development costs by including
them as overhead in the pricing for other government contracts.
Thus, Lockheed Martin's and its partners' shares may actually be
lower. In addition, estimated government costs for NASA civil
service personnel working on the program not included in NASA's X-
33 program budget also

increased. Together, these estimated costs increased from $216.9
million to $274.3 million as of March 1999. As a result, we
believe a more accurate representation of the estimated
government's share of the X- 33 Program is

$1.23 billion, while industry's estimated share is $125.4 million.
2 Graphite composite is a high strength, low- weight material used
to reduce structural weight by replacing heavier metal components.

Lett er

B-281611 Page 3 GAO/NSIAD-99-176 Space Transportation

As a result of the technical problems, the first flight of the X-
33 vehicle was delayed 16 months, from March 1999 to July 2000.
Importantly, this could delay NASA's decision about whether to
invest in space shuttle fleet upgrades or rely on new launch
vehicles such as Venture Star. The technical problems and schedule
constraints also resulted in changes to program performance
objectives, including a reduction of the test flight

speed for the X- 33 vehicle. To implement the terms of the X- 33
cooperative agreement, NASA assigned to Lockheed Martin the
leadership role in executing the X- 33 Program. Under the
agreement, NASA monitors and verifies the program's progress and
makes payments to Lockheed Martin when milestones are met. NASA

also provides personnel and facilities at its field centers to
perform technical tasks for the program under the direction of
Lockheed Martin. An inherent characteristic of the cooperative
agreement is the way in

which NASA conducts program oversight. According to NASA's X- 33
program manager, the agency's oversight is different from that
used for traditional development contracts, as it relies on
insight gained from NASA employees working alongside Lockheed
Martin personnel. NASA's

Advisory Council, Program Management Council, and the Office of
Inspector General also periodically oversee the program and have
reported technical and management problems. Several issues will
need to be evaluated before NASA decides to use Venture Star RLVs
to support the International Space Station. First, the results of
the X- 33 Program must provide sufficient information for NASA to
determine that the risks have been sufficiently reduced and that
continuation of activities leading to the agency's use of Venture
Star as a customer is warranted. Second, even though Venture Star
RLVs are intended to be commercially owned and operated,
government financial incentives will likely be needed to initiate
such a venture. Third, NASA would have to pay for either two crew
modules or modifications to Venture

Star vehicles if the crew return vehicle being developed for the
International Space Station is chosen as a means for Venture Star
to carry people. Fourth, because the Venture Star RLV would not
carry as much cargo as the space shuttle, additional flights would
be needed. The more

frequent docking activities may reduce the amount of stable time
available for some science operations.

The Government Performance and Results Act of 1993 requires that
federal agencies prepare annual performance plans that establish
measurable objectives and performance targets for major programs.
NASA's Fiscal

B-281611 Page 4 GAO/NSIAD-99-176 Space Transportation

Year 2000 Performance Plan does not include performance targets
that establish a clear path leading from the X- 33 flight- test
vehicle to an operational SSTO vehicle. Ensuring that results from
the X- 33 Program

adequately support a confident decision to develop an SSTO vehicle
such as the Venture Star deserves attention in NASA's performance
plan. We provide a recommendation to that effect.

Background The X- 33 Program is a key goal of NASA's strategy to
reduce launch costs from $10,000 per pound on the space shuttle to
$1, 000 per pound to low

earth orbit by using SSTO RLVs. After a competitive conceptual
design phase, NASA, in July 1996, signed the X- 33 cooperative
agreement with Lockheed Martin for the design, development, and
flight- testing of the

company's X- 33 advanced technology demonstration vehicle. To
achieve this goal, NASA has established technical and performance
objectives for the X- 33 Program that the agency believes will
lead to development of SSTO RLVs such as Venture Star. The
technical objectives of the X- 33 Program are to develop and
demonstrate the use of lightweight composite materials for
internal liquid hydrogen fuel tanks, linear aerospike rocket
engines, a durable thermal protection system, and aircraft- like
operations. The performance objectives are to demonstrate the
technologies by flying

the X- 33 vehicle and measuring its performance characteristics.
The flight- test program requires the vehicle to make at least
five flights and meet specific performance and technical
requirements needed to validate key RLV technologies. Figure 1 is
an illustration of the planned X- 33 vehicle, and figure 2 is an
illustration of the planned Venture Star vehicle.

B-281611 Page 5 GAO/NSIAD-99-176 Space Transportation

Figure 1: Exterior Illustration of the Planned X- 33 Vehicle

Source: NASA.

B-281611 Page 6 GAO/NSIAD-99-176 Space Transportation

Figure 2: Exterior Illustration of the Planned Venture Star
Vehicle

Source: NASA.

To demonstrate the technologies and low- cost operations needed
for SSTO RLVs, the X- 33 vehicle will be flown under autopilot in
a series of suborbital flight- tests from Edwards Air Force Base
in California to the Michael Army Airfield in Utah. Longer flights
to Malmstrom Air Force Base in Montana

are also planned. The program is scheduled for completion in
December 2000.

Impact of Technical Problems on Program Cost, Schedule, and
Performance

Objectives As a result of problems encountered while working
toward the program's technical requirements, Lockheed Martin's
estimated contribution to complete the X- 33 cooperative agreement
increased. However, part of the

increase will be borne by the government. Some of Lockheed
Martin's and its industry partners' contributions could be
considered independent research and development costs and are
potentially recoverable through pricing on other government
contracts. Further, the X- 33 vehicle's

B-281611 Page 7 GAO/NSIAD-99-176 Space Transportation

flight- testing was delayed and some performance objectives were
changed. NASA and Lockheed Martin officials believe that despite
the problems, the X- 33 Program will meet its original technical
requirements and completion date in December 2000.

Primary Technical Difficulties

The X- 33 Program experienced technical difficulties with each of
the three key technologies under development for the Venture Star
RLV: the internal composite liquid hydrogen fuel tanks, the linear
aerospike engines, and the

durable thermal protection system (heat shield). Figure 3 shows a
cutaway illustration of the X- 33 vehicle's major subsystems,
including the tanks, rocket engines, and heat shield. The first
major technical problem arose during fabrication of the first of
two internal composite liquid hydrogen tanks. Sections of the
tanks are made by bonding together layers of composite materials.
The sections are then bonded together to form lobes,

or quarter sections, which are, in turn, bonded together to form
the tanks. Difficulties were encountered in bonding two lobes onto
a y- shaped joint in the left- hand tank. The affected surface
layers of the lobes were repaired and reapplied to the joint.
However, during the rebonding process, the composite surface
layers of the two lobes disbonded over large portions of the
lobes. The affected lobes were removed, and two new lobes were
fabricated and are being installed on the tank. The right- hand
internal

hydrogen fuel tank did not experience such fabrication
difficulties and is currently undergoing qualification tests at
NASA's Marshall Space Flight Center.

B-281611 Page 8 GAO/NSIAD-99-176 Space Transportation

Figure 3: Cutaway Interior Illustration of the Planned X- 33
Vehicle

Source: NASA.

The second major technical problem occurred while fabricating one
of the exhaust ramps for the linear aerospike rocket engines. Ten
such ramps are being made for the program. The exhaust ramps are
made of layers of copper alloy brazed together. Impurities in the
brazing material caused the layers of one ramp to disbond during
the fabrication process. Two ramps have been produced successfully
since the problem occurred, according to NASA and Lockheed Martin
program managers.

The third technical problem occurred during fabrication of the
thermal protection system. The thermal protection system is
composed of individual heat- resistant metallic panels attached to
the bottom and leading

edges of the vehicle's exterior surfaces. The individual panels
are made by bonding together several layers of heat- resistant
materials. Difficulties encountered in bonding together the layers
of the panels during the fabrication process led to a high
rejection rate and increased the amount of time needed to make the
panels. The panel fabrication process has been improved, according
to NASA and Lockheed Martin program managers.

Composite liquid hydrogen tanks (2)

Linear aerospike rocket engines (2)

Aluminum liquid oxygen tank

Metallic thermal protection system

B-281611 Page 9 GAO/NSIAD-99-176 Space Transportation

Production of the flat panels for the bottom of the vehicle is
complete, and most of the large curved panels for the vehicle's
leading edges have been made. Bonding the layers of the smaller
curved panels, which are also used on the leading edges, has
proven to be the most difficult. These panels are

still being fabricated, but are not expected to cause further
schedule delays, according to NASA and Lockheed Martin program
managers.

Effects on Lockheed Martin's Cooperative Agreement Contributions

As of March 1999, Lockheed Martin estimated that industry's
contributions to complete the X- 33 cooperative agreement had
increased by $75 million, or 35.4 percent, from $211.6 million to
$286.6 million. The increases were due primarily to the technical
problems discussed above. 3 Table 1 shows the original and current
estimated contributions for NASA and Lockheed Martin to complete
the X- 33 Program as established in the cooperative

agreement. NASA's contribution under the cooperative agreement
remains fixed at $912. 4 million (see note b below).

Table 1: Original and Current Estimated Contributions for the X-
33 Program

b NASA's contribution to the X- 33 Cooperative Agreement is $912.4
million. The remaining $99.8 million in the program budget is for
NASA headquarters costs, related research and development
activities, and program office operations.

Lockheed Martin program officials anticipate that industry's
estimated contribution to complete the X- 33 Program under the
cooperative agreement will need to be increased between $10
million and $64 million to resolve the existing technical
problems. Lockheed Martin has not yet

formally revised the industry team's estimated contributions to
reflect any such increase. NASA and Lockheed Martin are
implementing cost

3 The allocation of cost increases associated with individual
problems is not discussed due to the proprietary nature of the
information.

Then- year dollars a in millions a Then- year dollars represent
the estimated actual value of the funds for a particular year.

July 1996 March 1999 Changes Percent changes

NASA program budget b $1,012.2 $1,012.2 0. 0 0. 0 Lockheed Martin
and industry partners' contributions 211.6 286.6 +$ 75.0 +35. 4

Total $1,223.8 $1,298.8 +$ 75.0 +6. 1

B-281611 Page 10 GAO/NSIAD-99-176 Space Transportation

reduction strategies to limit the increases by deleting some
Venture Star development tasks and reducing Lockheed Martin's X-
33 workforce. The final cost of the program will depend on the
results of Lockheed Martin's current cost- control efforts and the
cost to resolve any future technical problems.

Effects on Total Government and Net Industry Contributions

Under the terms of the cooperative agreement, NASA's contribution
to the X- 33 development program remains fixed, and Lockheed
Martin and the industry partners are responsible for all cost
growth. However, at least some cost growth may be recovered by
Lockheed Martin and the industry partners by including the costs
in their pricing for other government contracts. Further, costs
for NASA personnel working on the X- 33 Program

are paid from other NASA budgets. Thus, the government's share of
the costs for the X- 33 Program is greater than that represented
in the cooperative agreement.

First, as recognized in the agreement, Lockheed Martin and its
industry partners plan to recover portions of their contributions
by classifying them as independent research and development (IRAD)
expenses and then including them as overhead in other government
contracts. Federal acquisition regulations 4 allow companies to
recover IRAD costs by including such expenses as overhead in
pricing of other government contracts. Because Lockheed Martin has
contracts with other government agencies, such as the Department
of Defense, those agencies' budgets may bear some of these costs.
Lockheed Martin and its partners plan to recover from the
government an estimated $161.2 million of their estimated

$286.6 million contribution to the agreement. Thus, as shown in
table 2, Lockheed Martin's and the industry partners' potential
net contribution for the X- 33 Program could be as low as $125.4
million. However, an audit or review must be conducted to
determine the portion of the contributions allocable as overhead
on other government contracts. Additional increases in industry's
contributions to the X- 33 Program will also potentially

increase the amount of IRAD reimbursements the partners receive
from the government.

4 Federal Acquisition Regulation 31.205- 18 Independent Research
and Development and Bid and Proposal Costs.

B-281611 Page 11 GAO/NSIAD-99-176 Space Transportation

Table 2: Estimated Total Industry Contribution for the X- 33
Program, Factoring in Potential IRAD Reimbursements

a Industry partners' contributions to the cooperative agreement
will increase between $10 million and $64 million to resolve the
program's technical problems, according to a Lockheed Martin
official. b Government reimbursements of industry IRAD costs will
increase by an estimated $5 million to $32.5

million, depending on how much the industry partners'
contributions grow, according to a Lockheed Martin official.

Second, costs not in the X- 33 cooperative agreement or NASA's X-
33 program budget include salaries, benefits, and support services
for the government personnel working on the program at various
NASA centers. These personnel costs will be paid out of another
NASA budget account. As shown in table 3, the current estimate is
$113. 1 million as of March 1999.

The government's final share of the program's total cost also
depends on the amount of IRAD costs determined to be recoverable,
the results of Lockheed Martin's cost control efforts, and the
nature of any future technical problems.

Then- year dollars in millions

July 1996 March 1999 Changes Percent changes

Total contribution to cooperative agreement $211.6 $286.6 a +
$75.0 + 35. 4 Potential government IRAD reimbursement 121.7 161.2
b + 39. 5 + 32. 5

Net industry contribution $89.9 $125.4 + $35.5 + 39. 5

B-281611 Page 12 GAO/NSIAD-99-176 Space Transportation

Table 3: Estimated Total Government Costs for the X- 33 Program,
Factoring in Potential IRAD Reimbursement and Personnel Costs

a Independent research and development b Government reimbursements
of Lockheed Martin and its partners' IRAD costs will increase by
an estimated $5 million to $32.5 million, depending on how much of
the estimated $10 million to $64 million cost increase is
realized, according to a Lockheed Martin official. c These costs
are estimates through completion of the program and include
salaries, benefits, training, and travel costs.

First Test Flight Delays Problems encountered during fabrication
of the engines and one of the internal liquid hydrogen fuel tanks
led to a 16- month delay of the first test flight of the X- 33
vehicle, from March 1999 to July 2000. However, the program's
December 2000 completion date remains unchanged. Lockheed

Martin has maintained the original X- 33 Program completion date
by reducing Venture Star design and development work that the
company had planned to accomplish during the X- 33 Program. Table
4 shows the original date for the first flight and subsequent
changes and the associated delay of the first flight date.
Although problems in fabricating the thermal protection system
panels delayed delivery milestones of the panels, the

delay did not cause a delay in the first flight schedule because
the schedule had already been delayed by the engine and fuel tank
problems.

Then- year dollars in millions

X- 33 Cost elements July 1996 March 1999 Changes Percent changes

NASA X- 33 program budget $1,012.2 $1, 012. 2 $0. 0 0. 0 Potential
government reimbursement of industry IRAD a costs

121.7 161. 2 b + 39. 5 + 32. 5 Government personnel costs c 95.2
113. 1 + 17. 9 +18. 8

Sub- totals of government costs outside X- 33 budget 216.9 274. 3
+ 57. 4 + 26. 5

Total government costs $1,229.1 $1, 286. 5 + $57. 4 +4. 7

B-281611 Page 13 GAO/NSIAD-99-176 Space Transportation

Table 4: X- 33 Program Schedule Changes

a For the left- hand fuel tank. The delivery date for the right-
hand tank was May 1999. b For the second of two flight engines. c
For delivery of both engines.

Delays in the X- 33 Program may affect NASA's investment plans for
future space- launch programs, including decisions on whether and
when to upgrade the space shuttle fleet or rely on a new launch
vehicle, such as the Venture Star RLV. NASA originally planned to
decide in 2000 whether to upgrade the space shuttle fleet and, if
so, which upgrades to implement. NASA now plans to make its
recommendations for a future space transportation investment
strategy as part of the fiscal year 2001 budget process, which
starts in the later part of 2000.

Performance Objectives Revised

Technical problems and schedule constraints led Lockheed Martin
and NASA to change two X- 33 Program objectives and flight- test
milestones. First, Lockheed Martin and NASA chose to use an
internal liquid oxygen tank made of aluminum for the X- 33
vehicle, instead of the lightweight composite materials used for
the internal liquid hydrogen tank. Schedule constraints early in
the program led Lockheed Martin to exercise its option under the
cooperative agreement to use an internal oxygen tank made of
aluminum instead of the lightweight composite materials used for
the internal liquid hydrogen tank. An operational Venture Star RLV
will likely require a lightweight composite liquid oxygen tank to
reduce the vehicle's

weight and achieve SSTO operations. The X- 33 Program plans to
demonstrate the primary elements of this technology by building a
small- scale 10- foot- diameter composite liquid oxygen tank that
will be tested on the ground.

Second, the test flight speed objective was reduced from Mach 5 15
to Mach 13.8. According to Lockheed Martin and NASA X- 33 program
managers, the maximum flight- test speed was reduced because the
detailed

design phase of the program determined that the vehicle's
projected weight

Program milestones Original milestone date First revised date
Second revised date Third revised date

Liquid H 2 tank delivery complete Dec. 1997 Oct. 1998 Mar. 1999
July 1999 a Aerospike engines delivery complete Aug. 1998 b Feb.
1999 Sept. 1999 Oct. 1999 c First X- 33 flight- test Mar. 1999
July 1999 Dec. 1999 July 2000

B-281611 Page 14 GAO/NSIAD-99-176 Space Transportation

would exceed design requirements and prevent it from reaching Mach
15. After reviewing the vehicle's design and the technical
objectives for the flight- tests, a panel of experts convened by
NASA concluded that the flight- test technical objectives could be
achieved at a lower speed. Lockheed Martin and NASA program
officials told us that weight reduction measures have already been
incorporated into the preliminary design of the Venture Star RLV
to meet the vehicle weight requirements.

The weight reduction measures are based on lessons learned
designing and building the X- 33 test vehicle. One of the weight-
saving modifications is to attach the Venture Star vehicle's
thermal protection system panels directly

to the vehicle's interior structure and fuel tanks, eliminating
the weight of the attachment structures used on the X- 33 vehicle.
Other weight- reducing modifications for the Venture Star RLVs
include lighter weight composite and ceramic engine components and
composite internal liquid oxygen tanks. Although the composite and
ceramic components have not been demonstrated, NASA and Lockheed
Martin plan to reduce the technical risks of providing these
technologies for the Venture Star RLVs through

ground- based demonstrations during the X- 33 Program. In addition
to the revised performance objectives, the scheduled length of the
X- 33 flight- test program was reduced from 10 to 3 months, and
the original single program flight- test milestone and payment
schedule were changed so that there are now three flight- test
milestones and payments.

The original flight- test program required Lockheed Martin to
obtain specific technical data and demonstrate rapid and efficient
aircraft- like operations in 15 test flights over a 10- month
period. Upon completion of these objectives, NASA was to pay the
company a $75- million payment for

successfully completing the flight- test program. The current
program plan provides for a $60- million payment after the
technical data and vehicle operations objectives are achieved, and
the vehicle has flown at least five

flights. After the initial flight- test objectives have been
achieved, NASA will pay the company $10 million if it completes
five more flights, and another $5 million if it completes the last
five flights. According to NASA's X- 33 program manager, the
additional flights will further demonstrate rapid and low- cost
RLV operations and build investors' confidence that privately
financed RLVs are feasible.

5 Mach numbers represent speed measured as units of the speed of
sound, which is 741 miles per hour at sea level. For example, Mach
2 equals 1, 482 miles per hour.

B-281611 Page 15 GAO/NSIAD-99-176 Space Transportation

The changes to the X- 33 flight- test program were made in order
to reduce the risk that Lockheed Martin would receive no payment
if the company achieved all of the technical and operational
objectives but did not complete all of the planned 15 test
flights. The required technical data will be obtained by
observing, recording, and analyzing the vehicle's behavior

during and after the test flights. Demonstration of aircraft- like
operations requires that the X- 33 vehicle fly one 2- day
turnaround flight and two consecutive 7- day turnaround flights.
Although the scheduled flight- test program is now only 3 months
long, flight- tests will continue longer if needed to achieve
program objectives, according to NASA's X- 33 program

manager. NASA's and Lockheed Martin's Financial and Oversight
Roles

According to NASA program officials, the X- 33 cooperative
agreement establishes a partnership business relationship between
NASA and Lockheed Martin. Changes to the cooperative agreement
require bilateral agreement. The agreement assigns to Lockheed
Martin responsibility for managing and implementing the X- 33
Program but also permits substantial involvement of NASA personnel
in performing various program technical tasks at NASA centers,
under the direction of Lockheed Martin. NASA's

oversight of the X- 33 Program is different from that used for
traditional government contracts, as it relies on insight gained
from NASA employees working alongside Lockheed Martin personnel.
Lockheed Martin and NASA

Financial Obligations and Roles

NASA used a cooperative agreement instead of a traditional
contract, in part, to reduce its financial risk by capping its
contribution. Through the agreement, NASA seeks to facilitate the
creation and commercialization of a low- cost space- launch
service industry, of which NASA would be a major customer. The
cooperative agreement defines each party's roles and
responsibilities in conducting the program. Lockheed Martin is to
provide 22.1 percent of the funding, define the X- 33 vehicle's
technical and

performance requirements, and, with inputs from its industry
partners and NASA, design and build the vehicle. Lockheed Martin
will also conduct flight- tests of the X- 33 vehicle and decide
with NASA whether to build a

fleet of two operational Venture Star RLVs. This decision will be
based, in part, on criteria developed by the Office of Science and
Technology Policy, the Office of Management and Budget, NASA, and
Lockheed Martin.

B-281611 Page 16 GAO/NSIAD-99-176 Space Transportation

Agreement Establishes Oversight Approach An inherent
characteristic of the cooperative agreement is the way in

which NASA conducts oversight of Lockheed Martin's work on the X-
33 Program. The cooperative agreement enables NASA to obtain
insight into the program, according to the NASA program manager.
In traditional research and development contracts, NASA sends
personnel to contractor facilities to perform an extensive review
of whether the contractor performed its assigned tasks in
accordance with contract specifications. Under the X- 33
cooperative agreement, insights are gained through NASA

technical personnel working alongside personnel from Lockheed
Martin and other industry partners. This ongoing involvement in
the work enables NASA to obtain real- time and detailed insight
into program activities. As an example, NASA's X- 33 program
manager cited the situation where NASA became aware that layers of
one lobe of the X- 33 vehicle's internal composite hydrogen fuel
tank had unbonded on December 24, 1998, the day after the problem
occurred in Sunnyvale, California. NASA's primary oversight
activities for the X- 33 Program consist of program office
monitoring of Lockheed Martin's progress in meeting program
milestones and verifying that the company has achieved the
milestone performance requirements specified in the cooperative
agreement before payments are made. NASA's Advisory Council,
Program Management Council, and Office of Inspector General also
provide program oversight.

NASA's X- 33 program office has taken specific oversight actions
in response to problems with the program. For example, since the
cooperative agreement provides that milestone payments are made
only after performance criteria have been met, independent of when
the milestones are scheduled for completion, the program office
withholds all subsequent payments until satisfactory
accomplishment of the performance criteria. In another case, after
several requests to Lockheed Martin for action, the program office
notified Lockheed Martin that the agency planned to withhold
$500,000 from all subsequent milestone payments because the
company's system integration work on the X- 33 Program was
inadequate. According to NASA's X- 33 program manager, Lockheed
Martin complied with NASA's request to strengthen the

program's system integration function by creating a system
engineer position in its program office at the same level as the
program manager. The NASA Advisory Council performs periodic
reviews of the X- 33 Program. Members of the NASA Advisory Council
are volunteers appointed by NASA. The Council reports to the NASA
Administrator. At a

B-281611 Page 17 GAO/NSIAD-99-176 Space Transportation

recent meeting, 6 Council members discussed concerns about (1)
whether there was a clear growth path leading from the X- 33
flight- test vehicle to an operational SSTO vehicle and (2) NASA's
lack of funding to pursue the shuttle/ space station programs and
SSTO development at the same time.

The Program Management Council is NASA's senior agency review
board and oversees planning, implementation, and management of all
major NASA programs. NASA's Associate Deputy Administrator chairs
the

Council, and senior executives of NASA's functional and staff
offices are members. In its most recent review of the X- 33
Program, the Council's review team concluded, among other things,
that (1) due to technical

problems, the program may not be able to meet its technical and
performance objectives within current funding and schedule plans;
(2) if the program does not achieve its technical and performance
objectives, the program may not be able to support an informed
decision on the viability of a near- term SSTO RLV; and (3) the
program should be completed because of the value provided by the
program's planned demonstration of several

first- of- a- kind technologies as a system. In a recent audit
report 7 on the X- 33 cooperative agreement, the NASA Office of
Inspector General found that the agreement had provided NASA with
certain benefits, including faster program initiation and greater
management flexibility. However, the report also attributed a
number of program management problems to the agreement, including
lack of full and prompt compliance with some NASA management
procedures, inaccurate internal reporting of some program costs,
incomplete government property reports, and uncertainty concerning
ownership of the X- 33 vehicle. In a written response to a draft
of the Inspector General's audit report, NASA's Office of
Aerospace Technology concurred with all nine recommendations in
the report. In response to NASA's comments, the Office of
Inspector

General stated that the agency's planned and implemented actions
were generally responsive to seven of the nine recommendations and
that it would request additional comments and information
concerning the remaining two recommendations.

6 NASA Advisory Council Meeting Report Minutes, December 3- 4,
1998. 7 Audit Report: X- 33 Cooperative Agreement, NASA Office of
Inspector General, IG- 99- 019, Mar. 29, 1999.

B-281611 Page 18 GAO/NSIAD-99-176 Space Transportation

Issues Facing NASA If Venture Star Is Used to Support the
International Space Station

Before NASA decides to use Venture Star RLVs to support the space
station, it will need to evaluate (1) whether adequate progress
has been made in reducing risks by resolving the technical
challenges to developing an operational RLV; (2) what government
financial incentives, such as loan guarantees, may be needed to
assist in developing an operational fleet of Venture Star RLVs;
(3) what NASA's costs would be to build at least two

crew modules for a RLV to carry crews to and from the space
station; and (4) what the effects would be on the maintenance and
operation of the space station and its science experiments.

Confidence That X- 33 Results Support RLV Development Decision

In 1995 the Office of Science and Technology Policy, the Office of
Management and Budget, and NASA jointly established criteria to be
used in deciding whether the government should proceed beyond the
X- 33 Program to support development of an operational SSTO
Venture Star RLV. These criteria include (1) demonstration of the
X- 33 Program's technical

objectives, including technical traceability 8 to Venture Star;
(2) demonstration that a cooperative government/ industry
technology development program can be successful and efficient;
and

(3) establishment of acceptable business arrangements between
government and industry that facilitate the development and
operation of the next generation of space- launch systems. The
criteria envision that the timing of NASA's decision to use the
Venture Star coincides, at the end of the decade, with decisions
on funding for space shuttle investments needed to continue
operations through 2012. The specific technical criteria for
proceeding beyond the X- 33 Program include requirements that the
NASA and industry team use a flight- test vehicle to demonstrate
technologies that are scalable to potential SSTO RLV
configurations. These configurations include the basic booster
design, reusable internal composite or metallic tanks and primary
structures, reusable and durable thermal protection system
materials, and operational concepts.

NASA's Advisory Council has raised concerns that there may not be
a clear growth path leading from the X- 33 flight- test vehicle to
an operational SSTO vehicle. We share this concern.

8 Traceability in this case means that X- 33 technologies and
operational techniques can provide some of the risk reduction
needed to eventually build and fly full- scale operational Venture
Star RLVs.

B-281611 Page 19 GAO/NSIAD-99-176 Space Transportation

The Government Performance and Results Act directs that federal
agencies promulgate annual performance plans that describe (1) the
agency's performance goals and measures, (2) the strategies and
resources to

achieve these goals, and (3) procedures to verify and validate
reported performance. NASA's Fiscal Year 2000 Performance Plan
states that the overall objective of the X- 33 Program is to
revolutionize space- launch capabilities. The plan also states
that the program will demonstrate technologies that (1) are
traceable to a mass fraction of less than 10 percent of empty
vehicle weight that is required for future RLVs, (2) validate key
aerothermodymanic environments, (3) enable the X- 33 vehicle to
fly faster than Mach 13.8, (4) allow the vehicle to perform one 2-
day turnaround flight and consecutive 7- day turnaround flights,
and

(5) enable the vehicle to be maintained by a 50- person ground
crew. The combined results are intended to reduce technical risk
in the full- scale development of an operational RLV. However, the
only measurable performance target associated with the X- 33
Program in the plan is to conduct flight- testing of the X- 33
vehicle. No further targets are identified

that would provide an indication that NASA can successfully
demonstrate that it is on a growth path leading from the X- 33
flight- test vehicle to an operational SSTO vehicle.

Government Incentives for Venture Star Vehicles

NASA and Lockheed Martin foresee that the federal government may
need to provide financial incentives before Lockheed Martin can
begin building Venture Star RLVs. Government incentives could be
needed to enable Lockheed Martin to secure affordable private-
sector financing of the estimated $7.2- billion cost of building
two RLVs and begin flight operations. Borrowing costs for the
Venture Star might be relatively high because investors would
require a high rate of return due to the technical risks

inherent in building a new space- launch vehicle. Government
incentives could take several forms, including loan guarantees, or
NASA- funded technology development efforts.

If technical risks are not sufficiently reduced by the X- 33
Program, additional NASA funding may be needed for further
technology development of critical technologies to be used in
future RLVs, including the Venture Star. For example, if the X- 33
Program has not sufficiently developed the technologies needed for
an operational RLV, NASA could

approve a limited extension of the program to address technical
uncertainties. Further, NASA already plans to fund future research
and development programs for RLV technologies. NASA's technology

B-281611 Page 20 GAO/NSIAD-99-176 Space Transportation

development efforts to mature SSTO and RLV technologies include
the Future- X and Advanced Space Transportation Programs.

Requirement for Venture Star Crew Modules

Lockheed Martin plans to build Venture Star RLVs that initially
carry only cargo and begin flights in 2005. Lockheed Martin is
designing the Venture Star vehicles primarily to meet the needs of
potential commercial customers who want to launch satellites.
However, because much of

Lockheed Martin's Venture Star projected revenues will come from
servicing the International Space Station, the company is
exploring design modifications that would enable the vehicles to
carry four or five crewmembers. According to NASA's X- 33 program
manager, if the agency chooses to use Venture Star RLVs to service
the International Space Station, NASA would need to obtain either
two crew modules, at an estimated cost between $900 million and
$1. 2 billion, to be carried in the

Venture Star cargo bay or two crew transfer/ return vehicles being
developed for the International Space Station. 9 According to
Lockheed Martin, the Venture Star vehicle would automatically
rendezvous and dock with the space station, allowing new
crewmembers to board the space station and disembarking
crewmembers to return to Earth with the vehicle. The company plans
to initiate Venture Star passenger service in 2007. Before
passenger services could begin, the Venture Star vehicles would
have to be evaluated and certified to meet NASA's human space
flight safety requirements.

Effect of Venture Star on Space Station Operations

If NASA decides to use Venture Star RLVs for space station
servicing missions, disruptions to the station's operations may
increase because of the more frequent dockings by Venture Star
vehicles. The agency's current projections show that between two
and three Venture Star flights would be required to replace each
space shuttle resupply mission because the space

shuttle can carry heavier payloads. The space station requires
replenishment of supplies such as propulsion fuel, spare parts,
food, water, air, and science experiments. Periodic replacement of
station crewmembers is also required. NASA currently plans to use
an average of five shuttle flights per year to resupply the
station and to have some of its partners provide an average of
eight 9 The crew return vehicle for the International Space
Station is being considered as an alternative passenger
accommodation that would be attached to the exterior of the
Venture Star RLVs.

B-281611 Page 21 GAO/NSIAD-99-176 Space Transportation

resupply flights per year to the station on other launch vehicles.
Additional resupply flights would likely be required to provide
the people and materials needed to solve technical problems that
may arise aboard the space station.

Each space shuttle can carry 34,200 pounds of cargo, including up
to seven people, to the space station. However, in servicing the
International Space Station, a Venture Star RLV would be able to
carry 25,800 pounds of cargo

or three to four people and a small amount of cargo. Also, NASA
plans to use shuttle crewmembers on the resupply flights to
perform maintenance of the station. According to NASA X- 33
program officials, Venture Star RLVs would have to make two to
three flights to provide as much cargo, as many people, or as much
maintenance support to the space station as a

single shuttle flight. The actual number of flights would depend
on the mix of cargo, people, and maintenance operations required
for a particular mission.

The Venture Star would then require more docking and undocking
operations, potentially disrupting some scientific activities
aboard the space station. Operations that may be performed on the
space station,

including the growth of large inorganic and protein crystals,
would require that the station be stable and relatively free of
vibrations. Docking and undocking operations create vibrations.
Although NASA plans to provide stable periods between resupply
missions, more frequent docking and undocking operations would
reduce the amount of stable time available for conducting
scientific operations.

Conclusions The X- 33 Program is intended to provide Lockheed
Martin and NASA with sufficient data to decide whether the
technical challenges to develop an

operational RLV can be resolved. The importance NASA attaches to
this program is reflected in the agency's over $1 billion
commitment to the X- 33 Program. After the X- 33 Program is
completed, Lockheed Martin, with input from NASA, will decide
whether to build and operate at least two

Venture Star SSTO RLVs. NASA hopes to realize significant savings
by using Venture Star RLVs instead of space shuttles to service
the International Space Station. However, before a decision can be
made, key issues need to be evaluated, specifically: (1) whether
X- 33 Program results provide the confidence that risks have been
reduced to proceed with the development of the Venture Star, (2)
whether and how much government financial incentives would be
needed to develop the Venture Star, (3) what NASA's cost to
develop passenger modules for Venture Star would be, and

B-281611 Page 22 GAO/NSIAD-99-176 Space Transportation

(4) how the adverse effects on station operations and maintenance
would be mitigated.

Ensuring that X- 33 Program results adequately support a confident
decision to develop Venture Star deserves attention in NASA's
performance plan. In particular, the plan would be strengthened if
it recognizes the importance of securing an indication that the
agency is (1) on a growth path leading from the X- 33 flight- test
vehicle to an operational RLV and

(2) making progress toward its objective of significantly reducing
launch costs.

Recommendation In light of NASA's large investment in the X- 33
Program and the important role the program plays in NASA's future
plans, we recommend that the NASA Administrator include in the
agency's Fiscal Year 2001 Performance Plan performance targets for
the X- 33 Program that establish a clear path leading from the X-
33 flight- test vehicle to an operational RLV and show progress
toward meeting the agency's objective of significantly reducing
launch costs.

Agency Comments and Our Evaluation

NASA's Associate Deputy Administrator provided written comments on
a draft of this report. NASA concurred with our recommendation
that more specific and measurable performance targets for the X-
33 Program should be included in the agency's performance plans.
NASA also stated it had some significant differences in opinion
and summarized its positions on

several issues. For example, NASA commented on the impact of X- 33
flight test delays on decisions associated with investing in space
shuttle upgrades; the allocation of IRAD costs and the extent they
will be reimbursable; and the achievement of program performance
objectives.

NASA commented that while there are delays to the flight- test
program, the overall X- 33 Program remains within the original
schedule. As a result, NASA stated that flight delays should not
impact decisions associated with investing in space shuttle
upgrades. In the draft report provided to NASA for comment, we
stated that delays in the X- 33 Program may affect NASA's
investment plans for future space- launch programs, including
decisions on

whether and when to upgrade the space shuttle fleet or rely on a
new launch vehicle. We continue to believe that the possibility of
such an impact still exists. As indicated in this report, one of
the key issues facing NASA is whether X- 33 Program results
provide confidence that risks have

B-281611 Page 23 GAO/NSIAD-99-176 Space Transportation

been reduced. We believe that the feasibility of transferring the
key technologies demonstrated on the X- 33 to an RLV such as the
Venture Star cannot be adequately known until flights have been
completed and results

analyzed. That will be a challenge with a flight- test program
that has been reduced from 10 to 3 months.

With regards to the IRAD issue, NASA made two points. First, the
agency stated that costs contributed by contractors under cost-
shared cooperative agreements with any federal agency are
allowable IRAD costs as long as the costs would have been allowed
under federal regulations.

Consequently, NASA commented that Lockheed Martin is not receiving
a unique benefit. Second, NASA stated that the inference cannot be
drawn that Lockheed Martin, or its partners, may recover most of
their contributions; and that an audit is needed to ascertain the
portion of the contributions allocable to government contracts.
Regarding the first point made by NASA, we do not suggest that the
contractor is receiving a unique benefit. Rather, our purpose in
identifying IRAD costs and estimated reimbursements is to provide
clarification on the total estimated costs that will be incurred
by the government beyond that identified in the X- 33 cooperative
agreement. As to the second point, our intent was to identify the
estimated contribution that will be made by Lockheed Martin and
its

partners factoring in potential reimbursement of industry IRAD
costs. We agree that inference should not be drawn that Lockheed
Martin, or its partners, will recover most of their costs; and
that actual reimbursement will require an audit or review to
ascertain the portion of the contribution allocable to government
contracts. We have modified the text to reflect the need for such
an audit.

NASA also commented that it is inappropriate to imply that the X-
33 performance objectives have been reduced. The agency stated
that the initial objectives were embodied in the cooperative
agreement notice used to initiate the program. NASA stated that
specific technical and operations technology requirements
identified were (1) a minimum of fifteen X- 33 flights under main
rocket power, (2) a minimum of two flights that meet or exceed a
Mach number of 15, (3) demonstration of a 7- day turnaround on a
minimum of three consecutive flights, and (4) demonstration of a
2- day

turnaround at least once. NASA indicated that specific technical
criteria were later established in May 1998. At that time, NASA
determined that such criteria could be satisfied at a lower Mach
number. Changes were also made, NASA further stated, to break up
the flight program into three blocks. We believe the report
accurately presents the history and status of these X- 33 program
performance objectives. In discussing the impact of

B-281611 Page 24 GAO/NSIAD-99-176 Space Transportation

technical problems on the X- 33 Program performance objectives,
our report identifies both the allowable change to an aluminum
liquid oxygen tank and the reduction in flight speed. Our report
is consistent with NASA's position. We clearly state that the X-
33 Program may demonstrate the technical, operations, and business
feasibility of a SSTO RLV, but at a lower speed. In addition, our
report provides information regarding the breaking up of the
flight program and associated payment conditions.

NASA also provided technical comments that we incorporated where
appropriate. NASA's written comments and our full evaluation are
presented in appendix I.

Scope and Methodology

To determine whether the X- 33 Program is meeting its original
cost, schedule, and performance objectives, we interviewed
officials at NASA headquarters, NASA's Marshall Space Flight
Center, Huntsville, Alabama, and at the NASA X- 33 program office
at Palmdale, California. We also spoke with Lockheed Martin
officials at the company's X- 33 program office at Palmdale. To
determine how NASA's oversight responsibility was changed by the
cooperative agreement, we interviewed officials at NASA
headquarters, the X- 33 program office, and Lockheed Martin
officials at the

company's X- 33 program office. We reviewed the X- 33 cooperative
agreement, regulations concerning NASA's use of a cooperative
agreement for the X- 33 Program, NASA and Lockheed Martin
documents pertaining to

the management and execution of the X- 33 Program, and reports
issued by the NASA Office of Inspector General and the NASA
Advisory Council. To identify potential issues facing NASA if the
agency decides to use Venture

Star RLVs to service the International Space Station, we
interviewed officials at NASA's Headquarters; Langley Research
Center, Hampton, Virginia; and the X- 33 program office. We also
spoke with Lockheed Martin officials at the company's X- 33
program office. We reviewed NASA

planning documents pertaining to the space shuttle and
International Space Station programs. We did not attempt to verify
the data provided by NASA and Lockheed Martin. We conducted our
review from November 1998 to June 1999 in accordance with
generally accepted government auditing standards.

Unless you publicly announce its contents earlier, we plan no
further distribution of this report until 14 days from its issue
date. At that time, we will send copies to the Chairmen and
Ranking Minority Members of the

Page 25 GAO/NSIAD-99-176 Space Transportation

Senate Committee on Commerce, Science and Transportation; the
Subcommittee on Science, Technology and Space, Senate Committee on
Commerce, Science and Transportation; and the House Committee on
Science. We will also send copies to the Administrator of NASA and
the Director of the Office of Management and Budget. We will also
make

copies available to other interested parties on request. Please
contact me at (202) 512- 4841 if you or your staff have any
questions concerning this report. Key contributors to this
assignment were Jerry Herley, Jeffery Webster, and Lorene Sarne.

Allen Li Associate Director Defense Acquisitions Issues

Page 26 GAO/NSIAD-99-176 Space Transportation

Appendix I Comments From the National Aeronautics and Space
Administration Appendi x I

Note: GAO comments supplementing those in the report text appear
at the end of this appendix.

See p. 22.

Appendix I Comments From the National Aeronautics and Space
Administration

Page 27 GAO/NSIAD-99-176 Space Transportation

See p. 22 & comment 1, p. 33.

See p. 23 & comment 2, p. 33.

See comment 3, p. 33.

Appendix I Comments From the National Aeronautics and Space
Administration

Page 28 GAO/NSIAD-99-176 Space Transportation

See comment 4, p. 33. See p. 23 & comment 5, p. 33.

Appendix I Comments From the National Aeronautics and Space
Administration

Page 29 GAO/NSIAD-99-176 Space Transportation

See comment 6, p. 34. See comment 7, p. 34.

Appendix I Comments From the National Aeronautics and Space
Administration

Page 30 GAO/NSIAD-99-176 Space Transportation

See p. 22. No comment. See comment 7, p. 34.

Appendix I Comments From the National Aeronautics and Space
Administration

Page 31 GAO/NSIAD-99-176 Space Transportation Let t er

Appendix I Comments From the National Aeronautics and Space
Administration

Page 32 GAO/NSIAD-99-176 Space Transportation

Appendix I Comments From the National Aeronautics and Space
Administration

Page 33 GAO/NSIAD-99-176 Space Transportation

The following are GAO's evaluations of the National Aeronautics
and Space Administration's (NASA) letter dated July 1, 1999.

GAO Comments 1. We continue to believe that flight delays may
affect NASA's investment plans for future space- launch programs.
As indicated in this report, one of the key issues facing NASA is
whether X- 33 Program results provide confidence that risks have
been reduced. We believe that the feasibility of transferring the
key technologies demonstrated on the X- 33 to an RLV such

as the Venture Star cannot be adequately known until flights have
been completed and results analyzed; and that it will be
challenging to do so in a flight- test program which has been
reduced from 10 to 3 months.

2. We agree with NASA's point that Lockheed Martin is not
receiving a unique benefit. Our purpose in identifying IRAD costs
and estimated reimbursements is to provide clarification on the
total estimated costs that will be incurred by the government
beyond that identified in the X- 33 cooperative agreement,
including potential reimbursement of industry IRAD costs. We also
agree with NASA that inference should not be drawn that Lockheed
Martin, or its partners, will recover most of their costs; actual
reimbursement will be subject to an audit or review to ascertain
the portion of the contribution allocable to government contracts.
We have modified the text to reflect the need for such an audit.

3. We agree that NASA has historically excluded personnel costs
from its research and development program budgets. Our purpose is
to report as completely as possible the government's total costs
for the X- 33 Program. Thus, costs for NASA's personnel working on
the X- 33 Program are

included in our report. 4. We revised the text to include the
points raised in NASA's comments. 5. We believe the report
accurately presents the history and status of these X- 33 program
performance objectives. In discussing the impact of technical
problems on the X- 33 Program performance objectives, our report
identifies both the allowable change to an aluminum liquid oxygen
tank and

the reduction in flight speed. Our report is consistent with
NASA's position. We clearly state that the X- 33 Program may
demonstrate the technical, operations, and business feasibility of
a SSTO RLV, but at a lower speed. In addition, we provide similar
information with regards to the breaking up of the flight program
and associated payment conditions.

Appendix I Comments From the National Aeronautics and Space
Administration

Page 34 GAO/NSIAD-99-176 Space Transportation

6. As noted in our report, NASA currently plans to make five
shuttle flights per year to the station, and each shuttle flight
can carry 34, 200 pounds of payload (supplies and personnel) to
the space station. Our report also notes that Venture Star RLVs
will be able to carry an estimated 25, 800 pounds of payload to
the space station, must carry supplies and passengers on separate
flights while shuttles can carry both on a single flight, and will
have fewer on- orbit operational capabilities than the shuttle.
NASA

officials estimate that between two and three Venture Star flights
will be required to replace each shuttle flight. Further, NASA's
space station planning document, titled Requirements Data Set for
ISS (International Space Station) Crew and Cargo Carriers for
Reusable Launch Vehicle (RLV) Phase A Study (December 16, 1998)
identifies RLV impacts on science

operations as a potential concern. We, therefore, believe that the
additional 5 to 10 annual Venture Star docking operations could
potentially impact science operations now scheduled to occur
during quiet periods between five annual shuttle docking
operations. We believe the potential for disruptions will be
determined, in part, by the number and scheduling of

resupply flights. Given those uncertainties at this time, we
continue to believe that science operations may be affected. We
changed the text to reflect the potential net effect that the
amount of stable time available for conducting scientific
operations may be reduced.

7. We revised the text to incorporate these comments as
appropriate.

(707362) Let t er

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