Space Station:

Cost Control Problems Are Worsening

NSIAD-97-213: Published: Sep 16, 1997. Publicly Released: Sep 16, 1997.

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Jack L. Brock, Jr
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Pursuant to a congressional request, GAO provided information on the International Space Station (ISS), which is being developed by the United States and others, focusing on: (1) Russia's performance problems and the National Aeronautics and Space Administration's (NASA) reaction to them, including the additional cost and cost risk assumed by NASA; (2) cost and schedule experience under the prime contract; and (3) the status of and outlook for the program's financial reserves. GAO also identified actions taken by NASA to keep the space station program's funding within certain limits through the completion of the station's assembly.

GAO noted that: (1) in May 1997, NASA revised the space station assembly sequence and schedule to accommodate delays in the production and delivery of the Service Module; (2) this revision occurred after more than a year of speculation regarding Russia's ability to fund its space station manufacturing commitments; (3) to help mitigate the adverse effects of the Russians' performance problems and address the possibility that such problems would continue, NASA developed and began implementing step 1 of a three-step contingency plan; (4) NASA has budgeted an additional $300 million from other NASA activities for the space station program to cover the hardware cost under step 1; (5) NASA will also incur other costs under step 1 that have not yet been estimated; (6) significant additional cost growth could occur in the station program if NASA has to implement steps 2 and 3 of its contingency plan; (7) the cost and schedule performance of the station's prime contractor has continued to steadily worsen; (8) from April 1996 to July 1997, the contract's cost overrun quadrupled to $355 million, and the estimated cost to get the contract back on schedule increased by more than 50 percent to $135 million; (9) so far, NASA and prime contractor efforts have not stopped or significantly reversed the continuing deterioration; (10) the station program's financial reserves have also significantly deteriorated, principally because of program uncertainties and cost overruns; (11) the near-term reserve posture is in particular jeopardy, and the program may require additional funding over and above the remaining reserves before the completion of station assembly; (12) to date, NASA has taken a series of actions to keep the program from exceeding its funding limitations and financial reserves; (13) NASA is accounting for these actions in ways that enable it to report its continuing compliance with the funding limitations; (14) however, to show continuing compliance in some cases, NASA has had to redefine the portion of the program subject to the funding limitations; (15) thus, the value of the current limitations as a funding control mechanism is questionable; (16) since GAO's June 1997 testimony, further cost and schedule problems have materialized and NASA has acknowledged that the potential for cost growth in the program has increased; and (17) GAO believes the program has reached the point where the Congress may wish to review the entire program.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The House Science Committee conducted a hearing on June 24, 1998. The purpose of the hearing was to review recent work by GAO and NASA's Cost Assessment and Validation (CAV) Team and to address the direction of the space station program. This hearing provided a forum for a thorough review of the program, but the issues raised by the CAV were left unresolved, pending NASA's budgetary response to the CAV findings. The agency's FY2000 budget submission included additional funds for the space station program based on the CAV findings. In addition, the Senate Committee on Commerce, Science, and Transportation, Subcommittee on Science, Technology, and Space held a hearing on April 29, 1999, providing a forum for discussion of space station budget issues after the FY2000 submission.

    Matter: After more complete estimates of the cost and schedule impacts of ongoing and planned changes to the program are available, the Congress may wish to consider reviewing the space station program. This 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. In view of the expected availability of revised cost estimates, the first opportunity for such a review would be in conjunction with NASA's fiscal year 1999 budget request.

  2. Status: Closed - Implemented

    Comments: The imposition of funding caps was suggested as part of an overall matter for consideration, which included a full congressional review of the program first. In subsequent years, the Congress has included funding cap language in draft authorization bills, but has failed to pass authorization legislation (as of September 15, 2000).

    Matter: At the end of the review, if the Congress decides to continue the space station program, it may wish to consider, after consultation with NASA, reestablishing funding limitations that include firm criteria for measuring compliance.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: NASA concurred with this recommendation. In its response to congressional committees, NASA noted that the funding cap "is no longer operative." The letter explains that NASA submitted an FY1998 request to Congress for an additional $430 million over the $2,121.3 million originally requested for FY1998, increasing the total request to $2,551.3 million. Congress ultimately approved $2,351.3 million, which, according to NASA, "essentially eliminated the funding cap for the space station program."

    Recommendation: The Administrator, NASA, with the concurrence of the Office of Management and Budget, should direct the space station program to discontinue the use of the current funding limitations.

    Agency Affected: National Aeronautics and Space Administration


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