Lawmakers Lacerate NPOESS Program On Costs, Delays

By | May 15, 2006 | Uncategorized

By Dave Ahearn

Members of a House committee lambasted the National Polar-orbiting Operational Environmental Satellite System (NPOESS) program, citing soaring costs, schedules missed and performance fees paid to the contractor when some performance goals weren’t met.NPOESS would be a constellation of six satellites providing an environmental and climate monitoring system.

During an hours-long, heated hearing of the House Science Committee, Johnnie Frazier, the Commerce Department inspector general, stated that even through the NPOESS program is more than $3 billion over initial life-cycle cost estimates and 17 months behind schedule, the contractor has received $123 million in incentive payments, or some 84 percent of the maximum possible under the contract.

That $4.5 billion contract was awarded in 2002 to TRW Inc. (now part of Northrop Grumman [NOC]), heading a team that includes Raytheon [RTN]. A Governmental Accountability Office report predicted that price tag may swell to an eventual $9.7 billion.

Northrop Grumman stated that it is adhering to revised “interim” budget and scheduling guidelines for NPOESS.

“Since last fall, we have instituted management changes to strengthen the program and its oversight,” said a spokeswoman for Northrop Grumman Space Technology. “Since the implementation of an interim plan, we’re on schedule and on budget, and moving forward.

Although elements of the NPOESS program are “technically very, very challenging,” it still is true that there should have been more “audit-able meetings” on NPOESS problems, said retired Vice Adm. Conrad Lautenbacher, under secretary of commerce for oceans and atmosphere in the National Oceanic and Atmospheric Administration (NOAA).Also, “There were not enough independent reviews,” Lautenbacher said.

Rep. Sherwood Boehlert (R-N.Y.), the committee chairman, responded that Lautenbacher’s words sounded like “a mea culpa.” As for the program being challenging, Boehlert said, “You don’t get paid for the easy ones. You get paid for the difficult ones.” Lautenbacher said he sees that more program management reviews are needed to set the NPOESS program right.

One point where Boehlert and Lautenbacher agree is that NPOESS experience has been “an expensive lesson learned.” Still, Boehlert said, this lesson wouldn’t have been so expensive if corrective action had been taken sooner.

Rep. Bart Gordon, the ranking Democrat from Tennessee, termed the Frazier findings “bizarre,” and accused NOAA of “poor management oversight” where the program is permitted to slump behind schedule “and well over budget.”

On the original $4.5 billion contract award, Frazier said that “NPOES was more than $3 billion over budget.”

That, he said, threw the NPOESS program into breach of the Nunn-McCurdy Act.

Nunn-McCurdy mandates that Congress be notified if a program exceeds original cost estimates by 15 percent or more, and says that a defense program can be halted if costs are 25 percent or more above original estimates unless the secretary of defense certifies that the program is essential to national security, more cost-effective alternatives don’t exist, and a new cost estimate is reasonable. Because the Department of Defense (DOD) and NOAA jointly support the NPOESS program, withdrawal of DOD from its financing would impose “a devastating impact given that DOD provides half the program’s funding,” according to Frazier. As well, NASA is involved in the program.

Frazier said it is unclear at this point how the Nunn-McCurdy review will end.

He pointed to “two overarching management and contract weaknesses that contributed to the unchecked cost and schedule overruns.” First, he said, officials didn’t challenge optimistic assessments as to just how problems with a sensor, the Visible/Infrared Imager Radiometer Suite (VIIRS), would affect the overall NPOESS program.

Second, there were “excessive” award fees for the contractor, despite problems in the program.

That’s not how award fees are supposed to work, Frazier said. “Award fees are supposed to motivate a contractor to strive for excellence,” he said.

But with NPOESS, despite “ongoing, significant delays and cost overruns, the prime contractor received close to the maximum fee amounts for the first five billing periods,” or “an average 90 percent of available incentive payments.”

Only when the sixth billing period was reached was contractor performance rated unsatisfactory, Frazier reported. And even then, “the prime” contractor, Northrop, “received 48 percent of the potential fee amount–$10.7 million.” Frazier found that troubling.

“These payments appear excessive and reflect an award fee plan whose evaluation criteria do not sufficiently focus on the completion of the most critical or high-risk tasks,” Frazier asserted.

In sum, the award fee system “allows incentive payments for poor performance and, by rolling over unearned fee amounts from one period to another, gives the contractor multiple opportunities to earn incentive dollars.”

Also, the system leaves too much discretionary authority in the hands of a “fee determining official.” Frazier asserted. Stepping back and viewing the broader picture, however, Frazier said the payments in the NPOESS program aren’t unique.

“This is not an anomaly,” Frazier said. “In this community [of contractors and agencies], this often happens.”

Rep. David Wu (D-Ore.) repeatedly attempted to get Lautenbacher to say that the NPOESS woes mean that some capabilities planned for the satellites will have to be jettisoned to save money, at least for the time being, with those capabilities to be added to the satellites later. Wu said those costs are being pushed into the out years. But Lautenbacher insistently declined to do so. While it might be that “you cannot buy the program that was originally forecast” with money likely to be available, Lautenbacher declined to state just how this crunch will be resolved.

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