NASA Facilities: Challenges to Achieving Reductions and Efficiencies
(Testimony, 09/11/96, GAO/T-NSIAD-96-238).

GAO discussed the National Aeronautics and Space Administration's (NASA)
efforts to reduce key areas of its infrastructure. GAO noted that: (1)
since fiscal year (FY) 1993, NASA budget and staffing levels have
decreased sharply, and NASA has reduced, restructured, or cancelled some
of its programs and projects; (2) NASA plans to eliminate $4 billion
worth of its facilities by the end of FY 2000, but planned facilities
reductions will not meet NASA goals or yield substantial cost
reductions; (3) NASA has had problems in evaluating some cost-reduction
opportunities because it has not thoroughly evaluated potential options,
limited the scope of consideration for consolidating aircraft
operations, performed questionable initial cost-reduction studies, made
inappropriate closure recommendations, and substantially overstated
cost-reduction estimates; (4) environmental cleanup costs could affect
future facility disposition efforts; (5) recent NASA efforts to share
facilities with the Department of Defense have not yet been very
productive; (6) NASA lacks a formal system for tracking and reporting on
the status of recommendations related to infrastructure reductions; and
(7) although NASA has made limited progress in reducing its
infrastructure, an independent process may ultimately be needed to
overcome sensitivity and cost issues.

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

 REPORTNUM:  T-NSIAD-96-238
     TITLE:  NASA Facilities: Challenges to Achieving Reductions and 
             Efficiencies
      DATE:  09/11/96
   SUBJECT:  Federal agency reorganization
             Cost control
             Federal facility relocation
             Federal downsizing
             Interagency relations
             Cost effectiveness analysis
             Space exploration

             
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Cover
================================================================ COVER


Before the Subcommittee on National Security, International Affairs,
and Criminal Justice, Committee on Government Reform and Oversight,
House of Representatives

For Release
On Delivery
Expected at
11:00 a.m.  EDT
Wednesday
September 11, 1996

NASA FACILITIES - CHALLENGES TO
ACHIEVING REDUCTIONS AND
EFFICIENCIES

Statement of Thomas J.  Schulz, Associate Director, Defense
Acquisitions Issues, National Security and International Affairs
Division

GAO/T-NSIAD-96-238

GAO/NSIAD-96-238T



Abbreviations
=============================================================== ABBREV

  DOD - x
  NASA - x

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our observations on the
National Aeronautics and Space Administration's (NASA) efforts to
reduce key areas of its infrastructure--especially facilities.\1 My
testimony focuses on (1) why NASA has to cut its infrastructure, (2)
the progress and problems experienced by NASA in achieving reductions
and efficiencies, and (3) what further efforts are needed.  It is
based principally on our recent report on the challenges NASA faces
in achieving infrastructure reductions and efficiencies.\2

NASA's infrastructure--the underlying foundation for agency
operations--includes people, facilities, equipment, business
processes, and information systems.  The NASA of the early 1990s,
which was supporting an infrastructure and programs with a projected
annual budget of more than $20 billion by the turn of the century,
does not exist anymore.  The more recent and significantly lower
out-year budget projections will result in a much smaller NASA. 
Since fiscal year 1993, NASA's planned budget and staffing levels
have decreased sharply.  For example, planned budgets for fiscal
years 1993 through fiscal year 2000 have been lowered from $122
billion to $82 billion.\3 In response, major programs, such as the
Space Station and the Earth Observing System, have been reduced and
restructured, some projects have lost their funding and have been
canceled, and infrastructure reductions are underway and further
reductions are planned. 

A NASA with fewer personnel, fewer missions, and reduced funding
needs to work in a more integrated manner with fewer facilities and
should be able to consolidate or close some of them.  NASA knows it
has excess capacity in its facilities, and it plans to eliminate $4
billion worth of its facilities by the end of fiscal year 2000.\4
NASA has made some progress in downsizing its facilities and
personnel infrastructure, but its actions to date and barriers to
further progress indicate that (1) NASA still has a long way to go
and (2) it may not be able to successfully downsize infrastructure,
especially facilities, on its own.  Currently planned facilities
reductions will not meet NASA's reduction goal nor yield substantial
cost reductions.  In addition, NASA has had problems in evaluating
some cost-reduction opportunities; environmental cleanup costs could
affect future facility disposition efforts; and its recent efforts to
share facilities with the Department of Defense (DOD) have not yet
been very productive.  Finally, closing facilities, relocating
activities, and consolidating operations in fewer locations with
fewer employees have been slowed by parochial concerns about the
effects of such actions on missions, personnel, and local
communities.  These concerns have been exacerbated by perceptions of
the lack of fairness and impartiality in the decision-making process. 

NASA also faces another set of challenges before it can decrease the
size of its planned workforce to about 17,500 by fiscal year 2000. 
As we reported to Senator John Glenn last month,\5 NASA needs to
effectively plan for major workforce uncertainties, including the
potential for a possible reduction-in-force, plans to shift program
management from the Washington, D.C., headquarters, and the
management of the space shuttle at Kennedy Space Center by a single
contractor. 

Because of the controversy that surrounds any major decision, NASA
should make objective and well-supported closure and consolidation
decisions after fairly and thoroughly considering reasonable
alternatives.  However, NASA has not always done so.  NASA personnel
have (1) not thoroughly evaluated potential larger cost-reduction
options, (2) limited the scope of consideration for consolidation,
(3) performed questionable initial cost-reduction studies, (4) made
inappropriate closure recommendations, and (5) substantially
overstated cost-reduction estimates. 

In the past, we have expressed concerns about NASA's ability to
accurately and independently develop cost estimates to support its
decisions on new and ongoing programs and projects.\6 Just recently,
the NASA Inspector General\7 and management have been discussing the
structure needed to conduct independent, impartial, and technically
credible systems analysis and program evaluation. 

NASA decided to consolidate its wide area telecommunications networks
at one field center without thoroughly evaluating other
cost-reduction options, and it initially excluded about 40 percent of
its supercomputers from its consolidation study.  Moreover, the NASA
Inspector General questioned the scope and quality of NASA's analyses
supporting its plan to consolidate aircraft operations.  In other
cases, NASA projected hundreds of millions of dollars in
cost-reduction opportunities that ultimately proved to be invalid
because the underlying figures and assumptions were unrealistic or
insupportable. 

We should also note that NASA's progress in reducing its facilities
infrastructure will be affected by its ongoing actions to identify
the extent of the costs for cleaning up environmental contamination
at many of its facilities and by its success in identifying and
pursuing cost-sharing opportunities in the future.  We were
encouraged to recently learn that NASA intends to complete a policy
statement by the end of 1996 to address the issue of potential
responsible parties at NASA facilities requiring environmental
remediation. 

Last year, NASA extended its search for infrastructure efficiencies
outside the agency.  It teamed with DOD to study how the two agencies
could significantly reduce their operation costs and improve mission
effectiveness and efficiency through increased cooperation and
sharing.  Study teams, referred to as integrated product teams, began
work in September 1995 in seven areas.  We monitored three teams: 
major facilities, space launch activities, and base/center support
and services.  However, the recently completed studies of space
launch and other major facilities did not recommend specific facility
consolidations or closures or identify cost reductions.  They did
reconfirm there are cost-reduction opportunities and identified
barriers to accomplishing consolidations and closures, including
differences in each agency's cost accounting systems, practices, and
standards. 

NASA and DOD officials also identified another, more generic factor
that potentially limits the extent of closures and consolidation: 
the "old paradigm"--that is, each NASA and DOD center or laboratory
wants to protect its ability to maintain technical expertise and
competence.  Some personnel have realized the need for greater
sharing or dependence on the other organization's technical
capabilities.  However, recommending facility consolidations or
closures was still difficult since such actions were "too politically
sensitive" and could result in near-term costs increases, rather than
cost reductions. 

According to NASA and DOD officials, a process similar to the one
used by the Defense Base Closure and Realignment Commission may
ultimately be needed to overcome the sensitivity and cost issues. 
Given NASA's limited progress to date, further opportunities to
reduce facilities infrastructure, and the agency's lack of control
over some barriers to further reductions, we would endorse the idea
of having such a process if continuing efforts fail to show
significant progress soon. 

The base/center support and services team, which was responsible for
recommending ways to increase cooperation in base/center support and
services, found over 500 existing support arrangements and identified
additional cooperative opportunities.  It identified changes to
activities at several NASA locations, and it expects such changes to
lower the agencies' costs by millions of dollars.  However, the team
cited specific barriers, such as different negotiated wage rates for
support service contractors, which could require paying the higher
rate, thereby substantially or totally offsetting consolidation cost
reductions.  In other cases, merging certain activities could
complicate procurements in small and disadvantaged business set-aside
programs.  However, the team said that many more sharing arrangements
are possible and should be included in follow-on studies. 

Overall, about a dozen studies related to NASA's facilities'
infrastructure have been conducted over the last 6 years, and many
recommended ways to improve the effectiveness of the nation's
aeronautics and space facilities.  We reviewed the status of over 100
of the recommendations to determine to what extent they had been
implemented and found that most had been fully or partially
implemented or were scheduled to be implemented.  However, it was
difficult for us to ascertain the implementation status for the
recommendations we reviewed because NASA did not have a formal system
to track and report on the status of most recommendations related to
infrastructure reductions.  While NASA has essentially been
responsive to past studies, projected decentralization and downsizing
of program management will require a more systematic means of
monitoring the results of ongoing and future studies.  Such studies
are likely to be in more detail and thus require more time to
complete than those undertaken to date, and they will include joint
efforts with other agencies, such as DOD.  Under such circumstances,
a monitoring and tracking system would help NASA management measure
the progress of closure and consolidation studies, ensure timely
implementation of their recommendations, and demonstrate its
continuing interest in achieving efficiencies. 

In conclusion, despite some progress in reducing its infrastructure,
NASA faces formidable challenges to successfully reaching its budget
goals through fiscal year 2000.  Ultimately, if NASA cannot find
sufficient infrastructure cost reductions to meet these goals, the
agency will likely have to once again adjust its programs--stretching
out, reducing the scope, terminating existing efforts, and/or
postponing new initiatives.  Even with NASA's management commitment
to meeting goals without making such adjustments, the environment
confronting the agency will not allow it to readily overcome the many
barriers it faces.  This is why we believe that NASA should submit a
plan to Congress on how to meet the fiscal year 2000 infrastructure
targets.  Based on that plan and any further progress by NASA,
Congress could consider establishing an independent process to
facilitate closure and consolidation of NASA facilities. 


--------------------
\1 NASA defines facilities as land, buildings, structures,
permanently located trailers, and other real property improvements,
including utility systems and collateral equipment that is
essentially integrated into the facility. 

\2 NASA Infrastructure:  Challenges to Achieving Reductions and
Efficiencies (GAO/NSIAD-96-187, Sept.  9, 1996). 

\3 As indicated in the Administration's fiscal year 1996 budget
request. 

\4 The $4 billion represents the current replacement value, which is
the acquisition cost of facilities, excluding land, plus the cost of
collateral equipment and incremental book value changes escalated to
the current year using a 20-city average cost index for buildings. 

\5 NASA Personnel:  Challenges to Achieving Workforce Reductions
(GAO/NSIAD-96-176, Aug.  2, 1996). 

\6 Space Programs:  NASA's Independent Cost Estimating Capability
Needs Improvement (GAO/NSIAD-93-73, Nov.  5, 1992). 

\7 Assessment of the Relocation of NASA Independent Program
Evaluation and Assessment Activities to Langley Research Center, NASA
Office of Inspector General, Inspections and Assessments (July 8,
1996). 


-------------------------------------------------------- Chapter 0:0.1

This concludes my prepared statement, Mr.  Chairman.  I would be
happy to respond to any questions you or the Members of the
Subcommittee may have at this time. 


*** End of document. ***