NASA: Major Management Challenges (Testimony, 07/24/97,
GAO/T-NSIAD-97-178).

GAO discussed the major management challenges currently facing the
National Aeronautics and Space Administration (NASA), focusing on: (1)
the NASA programs and activities GAO sees as priorities for possible
congressional action and oversight; and (2) how the Government
Performance and Results Act could help in addressing the major
management challenges that NASA faces.

GAO noted that: (1) NASA has identified the major overall challenge it
faces, to manage a world-class research and development agency for
aeronautics and space science and technology in an environment of
diminishing resources; (2) NASA has reduced its program plans
substantially over the past several years to align them better with
likely budgets; (3) however, recent plans for balancing the federal
budget may require NASA to absorb additional reductions; (4) to help
adjust its programs to likely budgets, NASA began a number of years ago
to develop and refine a strategic plan and strategic planning process;
(5) key laws, such as the Government Performance and Results Act of 1993
and the Chief Financial Officers Act of 1990, are intended to provide a
framework for congressional oversight of agency strategic planning and
management to accomplish goals; (6) NASA's strategic planning provides
an appropriate starting point for discussing many of the management
challenges the agency faces; (7) overall, GAO sees 11 challenges for
NASA management; (8) these challenges fall into two categories, three
that require immediate attention and eight that warrant "watchful
waiting," or more routine, periodic oversight; (9) a primary distinction
between the two categories is that the management challenges in GAO's
first category may require congressional action to help resolve; and
(10) at the Committee's request, GAO provided information several months
ago on all 11 challenges.

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

 REPORTNUM:  T-NSIAD-97-178
     TITLE:  NASA: Major Management Challenges
      DATE:  07/24/97
   SUBJECT:  Interagency relations
             Cost control
             Strategic planning
             Space exploration
             Aerospace research
             Congressional oversight
             Unobligated budget balances
             Budget administration
             Total obligational authority
IDENTIFIER:  NASA Space Station Program
             NASA Earth Observing System
             
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Cover
================================================================ COVER


Before the Committee on Commerce, Science, and Transportation, U.S. 
Senate

For Release on Delivery
Expected at
9:30 a.m., EDT
Thursday,
July 24, 1997

NASA - MAJOR MANAGEMENT CHALLENGES

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

GAO/T-NSIAD-97-178

GAO/NSIAD-97-178T


(707263)


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

  DOD - Department of Defense
  NASA - National Aeronautics and Space Administration

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

Mr.  Chairman and Members of the Committee: 

We are pleased to be here to discuss the major management challenges
currently facing the National Aeronautics and Space Administration
(NASA).  We have previously testified before you regarding similar
management challenges affecting other major federal agencies under
this Committee's jurisdiction.  Our testimony today will (1)
highlight the NASA programs and activities we see as priorities for
possible congressional action and oversight and (2) discuss how the
Government Performance and Results Act could help in addressing the
major management challenges that NASA faces. 


   SUMMARY
---------------------------------------------------------- Chapter 0:1

NASA has identified the major overall challenge it faces:  to manage
a world-class research and development agency for aeronautics and
space science and technology in an environment of diminishing
resources.  NASA has reduced its program plans substantially over the
past several years to align them better with likely budgets. 
However, recent plans for balancing the federal budget may require
NASA to absorb additional reductions. 

To help adjust its programs to likely budgets, NASA began a number of
years ago to develop and refine a strategic plan and strategic
planning process.  As you have heard from prior witnesses in this
series of hearings, key laws, such as the Government Performance and
Results Act of 1993 and the Chief Financial Officers Act of 1990, are
intended to provide a framework for congressional oversight of agency
strategic planning and management to accomplish goals.  NASA's
strategic planning provides an appropriate starting point for
discussing many of the management challenges the agency faces. 

Overall, we see 11 challenges for NASA management.  These challenges
fall into two categories:  three that require immediate attention and
eight that warrant "watchful waiting," or more routine, periodic
oversight.  A primary distinction between the two categories is that
the management challenges in our first category may require
congressional action to help resolve.  At the Committee's request, we
provided information several months ago on all 11 challenges.  We
understand that this information will be made part of the record of
these hearings.  Therefore, we will briefly summarize only a few of
the challenges today. 


   MANAGEMENT CHALLENGES THAT MAY
   REQUIRE CONGRESSIONAL ACTION
---------------------------------------------------------- Chapter 0:2

The management challenges that may require congressional action are

  -- controlling space station costs,

  -- managing budget carryover balances, and

  -- streamlining management of test facilities. 


      CONTROLLING SPACE STATION
      COSTS
-------------------------------------------------------- Chapter 0:2.1

We are currently conducting a follow-up review to our report and
testimony last year on the continuing cost control difficulties in
the space station program.\1 Last month, we testified before the
Science, Technology, and Space Subcommittee on the program's
worsening cost control problems.\2 At that time, we discussed the
current and prospective adverse cost impacts of the Russian Service
Module delay and noted that the cost and schedule performance of the
station's prime contractor continues to deteriorate unabated. 

By far, the greatest future cost growth risk NASA faces in the space
station program is posed by the potential continuation of the Russian
government's poor performance.  NASA recently began to implement the
first step of a three-step recovery plan for addressing this problem. 
Step 1 includes adjusting the space station program to the 8-month
delay in the availability of the Service Module and providing up to
$300 million in additional fiscal year 1997 and 1998 funding to help
provide backup capability if the Service Module delivery were to slip
by as much as another year.  NASA will decide later this year on
whether to initiate step 2.  If that step becomes necessary, the
primary activity would be to permanently replace the Service Module's
power, control, and habitation capabilities at an estimated cost of
$750 million.  The need for step 3, which would involve space station
resupply missions using the space shuttle or other launch systems,
does not have to be decided until next year.  NASA has not estimated
the cost of step 3, but the cost would be considerable.  Other areas
of cost risk and cost growth also affect the program, including the
added cost of achieving the assembly complete milestone due to the
initial Service Module delay, continued prime contractor cost control
problems, and new integrated testing requirements. 

All of these areas of cost growth and cost risk, if realized, could
add billions of dollars to the cost of the space station program. 
However, NASA will not have cost estimates for several of these areas
before the Congress completes action on NASA's funding request for
fiscal year 1998.  After this information becomes available, the
Congress may wish to consider reviewing the space station program. 
Such a review could focus on reaching agreement with the executive
branch on the future scope and cost level for a station program that
merits continued U.S.  government support. 


--------------------
\1 Our current follow-up review is being done at the request of
Senator Bumpers and Representative Dingell.  Our report and testimony
last year were entitled:  Space Station:  Cost Control Difficulties
Continue (GAO/NSIAD-96-135, July 17, 1996) and (GAO/T-NSIAD-96-210,
July 24, 1996). 

\2 Space Station:  Cost Control Problems Continue to Worsen
(GAO/T-NSIAD-97-177, June 18, 1997). 


      MANAGING BUDGET CARRYOVER
      BALANCES
-------------------------------------------------------- Chapter 0:2.2

Last summer, we reported and testified on the wide range of budget
carryover balances among NASA's programs and the high balances
carried by some of them.\3 NASA said it would improve the management
of carryover balances and reduce their size.  However, the actual
carryover balance at the end of fiscal year 1996 was about $4.5
billion-- $1 billion higher than estimated by NASA halfway through
the fiscal year.  This balance was well above the carryover balance
level suggested by a NASA internal study.  That study said that a
carryover balance equivalent to
3 months of budget authority should be the threshold.  NASA's
carryover balance at the end of fiscal year 1996 exceeded this
threshold by over $1 billion. 

NASA's internal study also recommended a series of actions to reduce
and better manage carryover balances.  NASA has made progress in
implementing the recommendations.  However, it is too early to tell
what impact NASA's actions will have on its balances.  NASA is
currently predicting that its carryover balance at the end of fiscal
year 1997 will be significantly lower.  However, some individual
programs still plan to carry over large portions of their budgets. 
Unless NASA demonstrates that it can control its carryover balances
or justifies the large carryover balances seen in some programs, the
Congress may wish to use excess carryover balances to help meet
NASA's request for new obligational authority. 


--------------------
\3 NASA Budget:  Carryover Balances for Selected Programs
(GAO/NSIAD-96-206, July 16, 1996) and (GAO/T-NSIAD-96-207, July 18,
1996). 


      STREAMLINING MANAGEMENT OF
      TEST FACILITIES
-------------------------------------------------------- Chapter 0:2.3

NASA and the Department of Defense (DOD) separately manage a variety
of similar test facilities, such as rocket propulsion test stands and
wind tunnels.  Last year, NASA and DOD teams were directed to find
ways to reduce investment and increase the effectiveness and
efficiency of six types of aerospace facilities.  The teams
recommended the formation of NASA and DOD alliances to continue
cooperation in these areas. 

Although NASA has suggested the national management of wind tunnels
and NASA and DOD recently signed an agreement in principle to move in
that direction, overall progress in establishing and initiating
operations of the alliances has been uneven.  Most of the alliances
did not organize or meet at all during the past year, and only one
has contributed to an investment-related decision. 

Despite a commitment to increased cooperation, NASA and DOD are
separately evaluating consolidation of selected test facilities
without the participation of the other agency.  In some areas, the
separate search for external customers could result in NASA and DOD
facilities competing against each other.  This situation is most
likely in the area of rocket engine test facilities, which each
agency has in excess of its existing and likely future requirements. 
In a September 1996 testimony, we said that NASA might need outside
help in reducing its facilities.\4 We have not seen anything since
that time to change our basic view.  As a result, we still believe
that the Congress may wish to consider an independent means to
determine an appropriate mix of aerospace test facilities
governmentwide. 


--------------------
\4 NASA Infrastructure:  Challenges to Achieving Reductions and
Efficiencies (GAO/T-NSIAD-96-238, Sept.  11, 1996.)


   MANAGEMENT CHALLENGES REQUIRING
   PERIODIC OVERSIGHT
---------------------------------------------------------- Chapter 0:3

Our watchful waiting category covers the following eight management
challenges: 

  -- overseeing space shuttle operations,

  -- reducing Earth Observing System cost,

  -- helping develop new launch system technologies,

  -- preserving an adequate workforce while downsizing,

  -- developing a fully integrated financial management system,

  -- determining environmental liability,

  -- overseeing contract management activities, and

  -- improving information technology management. 

Many of these challenges represent long and difficult undertakings,
and some of them are in the early stages of development or
implementation.  Some of the challenges make total or substantive
changes in the way NASA has traditionally done business.  Examples
include having a contractor operate the space shuttle under greatly
reduced NASA supervision, researching and developing launch system
technology under a cooperative agreement with the private sector,
focusing contracts more on performance and outcomes rather than
process, and implementing information technology management
improvements. 

This group of challenges also involves providing new, needed
capabilities for managing data.  Examples include organizing NASA's
business and management practices to help implement a fully
integrated financial management system and organizing and
disseminating Earth Observing System data. 

Finally, the impacts of two of the challenges on NASA's future human
and financial resources are not currently well understood.  These
challenges involve determining future workforce downsizing impacts on
research or safety and establishing the level of financial liability
for environmental cleanup. 

By suggesting that watchful waiting is an appropriate oversight
strategy at this time for this group of management issues, we are not
implying that these issues are trouble free.  In fact, some of them
are currently encountering developmental difficulties.  For example,
the development of the information systems portion of the Earth
Observing System is currently behind schedule.  The failure to
adequately manage these challenges could adversely affect NASA's
ability to achieve its goals.  To illustrate, risks could increase if
NASA loses too many highly skilled employees too soon or if NASA's
contractors are unable to successfully adapt to, and adequately
perform in, their new roles in developing and operating space
transportation systems.  Any such threat would warrant immediate
congressional attention and potential congressional action. 


   FURTHER OBSERVATIONS ON
   POSSIBLE SOLUTIONS
---------------------------------------------------------- Chapter 0:4

To this point, we have specifically suggested that increased
congressional oversight is necessary to help NASA deal with its
current management challenges and that adequately addressing several
challenges may require congressional action.  In a more general
context, the consultative framework of the Government Performance and
Results Act, other recent laws intended to improve federal government
management, and NASA's strategic planning process provide an
opportunity to obtain a better understanding of what goals NASA
programs are supposed to achieve and how they are progressing toward
those goals. 

Now may be an appropriate time to start focusing on a crucial element
required by the Results Act--the development and application of
performance measures that are linked to clear, focused, and
measurable goals--especially as they relate to those NASA programs
that currently or prospectively face challenging problems.  For
example, the essential questions to be answered about the space
station program could be (1) whether it has priorities and clearly
understood measures for goals, such as advancing human exploration of
space, advancing science and technology, establishing U.S. 
leadership in international cooperation in space, and managing a
complex program in a timely and cost-effective manner and (2) whether
these goals are the appropriate ones.  Similar questions need to be
asked about every other NASA program. 

Neither the Congress nor NASA should expect effective management
performance or clear program outcomes without well understood and
agreed-upon goals.  Unless goals are well defined, it is more
difficult to assess the impact of, and develop a consensus on dealing
with, significant events, such as Russia's performance problems
associated with the space station.  The Results Act provides an
opportunity to discuss and agree on goals, their relative priorities,
and measurements of progress toward them. 

We have previously reported that establishing goals and measuring
performance in a research and development environment, such as
NASA's, are very difficult.\5 NASA's goals must necessarily be
ambitious to keep the agency on the cutting edge of science and
technology.  However, setting high goals carries an increased risk of
failure.  For the Results Act to function fully and effectively for
NASA, it is vital that there be a common understanding of the
agency's specific goals among the key parties--NASA, the
administration, and the Congress.  Ultimately, improved management
can be both a cause and a product of working toward mutually agreed,
focused goals that are supported by an adequate commitment of
resources. 


--------------------
\5 Measuring Performance:  Strengths and Limitations of Research
Indicators (GAO/RCED-97-91, Mar.  21, 1997.)


-------------------------------------------------------- Chapter 0:4.1

This concludes my prepared statement, Mr.  Chairman.  We will be
happy to respond at this time to any questions you or members of the
Committee may have. 


*** End of document. ***