Space Station:

Deteriorating Cost and Schedule Performance Under the Prime Contract

T-NSIAD-97-262: Published: Sep 18, 1997. Publicly Released: Sep 18, 1997.

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Louis J. Rodrigues
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Pursuant to a congressional request, GAO examined the cost and schedule status of the International Space Station.

GAO noted that: (1) in its June 1997 testimony, GAO noted that the cost and schedule performance under the prime contract had been consistently worsening for some time; (2) GAO pointed out that between January 1995 and April 1997, the costs associated with the schedule slippage had increased from a value of $43 million to $129 million; (3) during that same period, the variance between the actual cost to complete specific work and the budget for that work had gone from a cost underrun of $27 million to a cost overrun of $291 million; (4) as of July 1997, the costs associated with the schedule slippage had increased further to $135 million and the cost overrun had increased to $355 million; (5) the rate of decline for the cost variance is especially worrisome because it has shown no particular inclination to lessen; (6) the schedule deterioration has been much less severe, with minor upticks in the variance in April and July; (7) the relative difference is at least partly explained by the National Aeronautics and Space Administration's (NASA) statement that much of the cost growth is due to overtime and additional staff being used in an effort to maintain schedule; (8) the prime contractor's estimate of the cost overrun at completion was recently increased from $278 million to $600 million; (9) NASA's concern about the prime contractor's performance is evident in its award fee decision for the 6 month period that ended March 1997; (10) although the prime contractor was eligible for nearly $34 million in award fee, NASA concluded that the contractor's performance did not warrant any award fee; (11) the recent increase in the estimated cost overrun at completion has also potentially reduced the prime contractor's incentive award by $48 million over the remainder of the contract; (12) the prime contractor is implementing a corrective action plan that it believes will improve the performance of the entire contractor team, including changes in personnel, hiring additional software engineers and managers, committing funds for a software integration test facility, and presenting a cost control strategy to NASA that includes organizational streamlining and transferring some roles to NASA; and (13) NASA and the prime contractor agree that costs are going to continue to increase beyond the current variance.

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