GAO Flails Soaring Space Programs Costs In Report To Key Members Of Congress

By | June 5, 2006 | Uncategorized

Deep flaws in space programs cause them to run far over cost estimates and trail well behind schedule, with a risk that they may not perform as required, flaws that could be remedied with better program management, the Government Accountability Office (GAO) reported.

These weaknesses involve real money, given that space programs together total about $7 billion yearly in Department of Defense (DOD) outlays, the GAO noted.

The government watchdog agency assessed a series of the programs, including the Transformational Satellite Communications System (TSAT) by The Boeing Co. [BA] and Lockheed Martin Corp. [LMT]; the Space Based Infrared System (SBIRS)-High by Lockheed with a significant role by Northrop Grumman Corp. [NOC]; the Evolved Expendable Launch Vehicle (EELV) program by Lockheed and Boeing; the Advanced Extremely High Frequency Satellite program by Lockheed, and more.

GAO produced the report for Sen. Jeff Sessions (R-Ala.), chairman of the Senate Armed Services Committee strategic forces subcommittee, and Sen. Bill Nelson of Florida, ranking Democrat on the panel.

One salient finding: cost overruns aren’t an exception, or even a frequent occurrence. Rather, overruns are the rule, marring most of the space programs.

“Actual costs for nearly every major space acquisition we review each year as part of our annual weapon system assessment have greatly exceeded earlier estimates–a clear indication that programs consistently underestimate costs,” the GAO disclosed.

In just one example of how program flaws can be expensive for taxpayers, GAO examined the National Polar-orbiting Operational Environmental Satellite System (NPOESS), a military-government asset that could aid in spotting weather problems such as hurricanes.

GAO estimated that NPOESS grew from $5.9 billion in August 2002 to nearly $8 billion in September 2005. That’s a 35.6 percent jump, in a department where laws require reporting 15 percent cost overruns and provide that a 25 percent overrun can, possibly, lead to program cancellation.

A Commerce Department inspector general report sees an even more spectacular jump, from an earlier $4.5 billion contract award in 2002 to TRW Inc. (now part of Northrop Grumman), to an eventual $9.7 billion. Raytheon Co. [RTN] also is playing a key role in NPOESS. (Please see Space & Missile Defense Report, Monday, May 15, 2006.)

Worrisome as the cost overruns, schedule failures and systems glitches may be, perhaps the most troubling point here is GAO finding that all of this doesn’t need to happen.

“Despite its growing investment in space … DOD’s space system acquisitions have experienced problems over the past several decades that have driven up costs by hundreds of millions, even billions, of dollars; stretched schedules by years; and increased performance risks” GAO reported.

And this has real-world consequences of men and women in uniform not receiving capabilities they require.

“In some cases, capabilities have not been delivered to the warfighter after decades of development,” the watchdog agency found.

Why?

Just as the problems are manifold, so too are the causes, the report stated.

In talks with managers of space programs, GAO found they identified these as key reasons for cost overruns, schedule delays and platform shortcomings:

  • funding instability (cited by about 36 percent of the managers),
  • requirements instability (13 percent),
  • staffing problems (8 percent),
  • excessive oversight (7 percent), and
  • inexperienced leadership (7 percent).

One reason that costs of a program may soar is that the original cost estimate may have been low-balled to gain administration and congressional approval of the program, concealing its true likely price.

This was borne out in the GAO survey of space program managers.

“Although the majority of respondents to our survey believed that the initial baselines of their programs were reasonable, a significant group, about 24 percent, responded that their program parameters were not reasonable at the start,” the report stated.

Another common move in programs with huge cost increases over original outlay estimates is to move the goalposts, a tactic called rebaselining, where officials say that a platform has been so altered by added gadgets that it merits a higher price tag.

GAO reported that “45 program managers responded that their program had been rebaselined one or more times for cost and schedule increases.”

Further, in the survey of managers, “18 percent said one or more key technologies fell below best practice standards for maturity,” meaning that programs were moving forward predicated on an expectation that needed technologies would be ready, even though they were not mature when the programs began.

To be sure, the GAO says that the Air Force has taken steps to resolve this problem.

For example, the air service “has recently taken steps to put [its TSAT] program on a more executable track by reducing its expectations in the level of sophistication for the first two satellites so that it can meet its schedule goals,” the GAO observed.

Further, the Air Force “is also holding off entering product development of the first increment until critical technologies are proven. If the Air Force adheres to this commitment for TSAT and applies it to Space Radar, as it has also informally committed to do, then it would be addressing some of the obstacles.”

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