NASA

Office of Inspector GeneralNASA’s Management of Space Launch System Block 1B Development

August 8, 2024

IG-24-015

Office of Inspector General
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RESULTS IN BRIEF
NASA’s Management of Space Launch System
Block 1B Development
August 8, 2024

IG-24-015 (A-23-08-01-HED)

WHY WE PERFORMED THIS AUDIT
Scheduled to launch in September 2028, Artemis IV will be the first flight of NASA’s more powerful heavy-lift rocket—
the Space Launch System (SLS) Block 1B. The rocket is designed to increase the amount of cargo the SLS can deliver tothe Moon. A critical component of this upgrade is The Boeing Company’s (Boeing) development of the SLS’s new upperstage, the Exploration Upper Stage (EUS). Once completed, the EUS will give the SLS a 40 percent upgrade in capability
to send the Orion Multi-Purpose Crew Vehicle capsule and large cargos to the Moon, from 27 metric tons under
Block 1—the SLS rocket’s first iteration—to 38 metric tons with Block 1B.
The SLS Block 1B has been under development since 2014 and has faced changing technical requirements andcompeting funding priorities. These factors, along with congressional directives to accelerate the rocket’s development,
have led to increased costs and schedule delays. Originally intended for the Artemis II mission, Block 1B's first flight was
moved to Artemis IV, extending the development timeline and increasing costs. Boeing’s EUS contract has grown from$962 million to over $2 billion through 2025, contributing to the overall SLS Block 1B cost increase.
In this audit, we examined NASA’s management of the SLS Block 1B development, focusing on the EUS. To complete thiswork, we interviewed officials from NASA Headquarters, Marshall Space Flight Center, Michoud Assembly Facility(Michoud), Boeing, and the Defense Contract Management Agency (DCMA). We also reviewed NASA and contractor costand budget documentation, contracts for each SLS element, contract obligations and disbursements, Boeing financial
management reports, and Earned Value Management System (EVMS) cost estimates. Additionally, we assessed past andcurrent schedules and quality control documents for SLS core and upper stage production.

WHAT WE FOUND
While NASA requires its aerospace contractors to have quality assurance programs that comply with SAE International’sAS9100D standards on quality management systems, we found Boeing’s quality management system at Michoud does
not adhere to these standards or NASA requirements. NASA engages DCMA to conduct surveillance of Boeing’s core andupper stage manufacturing efforts at Michoud, and when deficiencies in quality are found, DCMA issues Corrective
Action Requests (CAR) to the contractor. CARs are labeled Level I through IV, with Level I the least serious deficiency.
From September 2021 to September 2023, DCMA issued Boeing 71 Level I and II CARs, as well as a draft Level III CAR.
According to DCMA officials, this is a high number of CARs for a space flight system at this stage in development andreflects a recurring and degraded state of product quality control. Boeing’s process to address deficiencies to date has
been ineffective, and the company has generally been nonresponsive in taking corrective actions when the same quality
control issues reoccur.
Quality control issues at Michoud are largely due to the lack of a sufficient number of trained and experienced
aerospace workers at Boeing. To mitigate these challenges, Boeing provides training and work orders to its employees.
Considering the significant quality control deficiencies at Michoud, we found these efforts to be inadequate. For
example, during our visit to Michoud in April 2023, we observed a liquid oxygen fuel tank dome—a critical component of
the SLS Core Stage 3—segregated and pending disposition on whether and how it can safely be used going forward due
to welds that did not meet NASA specifications. According to NASA officials, the welding issues arose due to Boeing’sinexperienced technicians and inadequate work order planning and supervision. The lack of a trained and qualified
workforce increases the risk that Boeing will continue to manufacture parts and components that do not adhere to
NASA requirements and industry standards.
We project SLS Block 1B costs will reach approximately $5.7 billion before the system is scheduled to launch in 2028.
This is $700 million more than NASA’s 2023 Agency Baseline Commitment, which established a cost and schedulebaseline at nearly $5 billion. EUS development accounts for more than half of this cost, which we estimate will increase
from an initial cost of $962 million in 2017 to nearly $2.8 billion through 2028. Boeing’s delivery of the EUS to NASA has
also been delayed from February 2021 to April 2027, and when combined with other factors, suggests the September
2028 Artemis IV launch date could be delayed as well. Factors contributing to these cost increases and schedule delays
include redirection of EUS funds to the core stage during Artemis I production, changing Artemis mission assignments,
maintaining an extended workforce 7 years more than planned, manufacturing issues, and supply chain challenges.
NASA delayed establishing the Block 1B Agency Baseline Commitment until December 2023, after 10 years ofdevelopment and much later in the project life cycle than NASA’s standard practice. Without a formal cost and schedulebaseline at critical milestones, the Agency was limited in its ability to assess adherence to budgets and timelines, andCongress and other stakeholders lacked visibility into the Block 1B’s increasing costs and schedule delays. Additionally,
Boeing Defense, Space & Security’s EVMS, used by NASA for its Stages contract to measure cost and schedule progress,
has been disapproved by the U.S. Department of Defense since 2020. DCMA has issued several Level II and III CARs forthis EVMS, including a Level III CAR related to visibility into cost, schedule, and resource needs for several Boeing
contracts, including Stages.

WHAT WE RECOMMENDED
To improve the safety and sustainability of the SLS Program, we recommended the Associate Administrator for
Exploration Systems Development Mission Directorate (ESDMD) in conjunction with the Assistant Administrator for
Procurement and the Chief, Safety and Mission Assurance: (1) coordinate with Boeing, the SLS Stages prime contractor,
to develop a quality management system training program that is compliant with AS9100D and reviewed by theappropriate NASA officials and (2) institute financial penalties for Boeing’s noncompliance with quality control
standards. To minimize the impact on the Artemis campaign’s timeline and achieve sustainability, we recommended the
Associate Administrator for ESDMD: (3) perform a detailed cost overrun analysis on Boeing’s Stages contract for EUS
development. To provide greater visibility into cost and schedule estimates for SLS upgrades, we recommended the
Associate Administrator for ESDMD: (4) coordinate with DCMA to ensure contractual compliance with EVMS clauses.
We provided a draft of this report to NASA management who concurred with three of the four recommendations anddescribed planned actions to address them. We consider the proposed actions responsive to Recommendations 1, 3,
and 4 and will close them upon completion and verification. The Agency non-concurred with Recommendation 2, andwe find its proposed actions unresponsive. Consequently, this recommendation will remain unresolved pending further
discussions with the Agency.

For more information on the NASA
Office of Inspector General and toview this and other reports visit
https://oig.nasa.gov/.

TABLE OF CONTENTS
Introduction .................................................................................................................................................. 1
Background ............................................................................................................................................... 2
Boeing’s Ineffective Quality Management System and Inexperienced Workforce Increase
Potential Risks ............................................................................................................................................ 11
Boeing’s Quality Management System for Core Stage Production at Michoud Does Not
Meet Industry Standards ........................................................................................................................ 11
Boeing’s Michoud Workforce Lacks Sufficient Aerospace Production Experience, Training,and Instruction ........................................................................................................................................ 12
SLS Block 1B Continues to Experience Cost Increases and Schedule Delays ............................................ 15
Block 1B Cost Increases and Schedule Delays Driven by EUS Development .......................................... 15
Multiple Factors Contribute to EUS Cost Increases and Schedule Delays .............................................. 16
Delayed Cost and Schedule Baseline Coupled with Boeing’s Insufficient EVMS Hinders Block 1B
Accountability and Transparency .............................................................................................................. 18
NASA Spent More than $3 Billion over 10 Years without a Cost and Schedule Baseline ....................... 18
Boeing Defense EVMS Has Been Disapproved since 2020 ..................................................................... 19
Conclusion .................................................................................................................................................. 21
Recommendations, Management’s Response, and Our Evaluation ........................................................ 22
Appendix A: Scope and Methodology ....................................................................................................... 24
Appendix B: Management’s Comments .................................................................................................... 27
Appendix C: Report Distribution................................................................................................................ 32

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Acronyms
ABC
CAR
CDR
DCMA
DOD
EUS
EVMS
IRT
JCL
KDP
NPR
OIG
SLS

Agency Baseline Commitment
Corrective Action Request
Critical Design Review
Defense Contract Management Agency
Department of Defense
Exploration Upper Stage
Earned Value Management System
Independent Review Team
Joint Cost and Schedule Confidence Level
Key Decision Point
NASA Procedural Requirements
Office of Inspector General
Space Launch System

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INTRODUCTION
Artemis IV will be the first flight of NASA’s more powerful heavy-lift rocket—the Space Launch System(SLS) Block 1B—which is designed to increase the amount of cargo the SLS can deliver to the Moon.
During the Artemis IV mission, scheduled to launch in September 2028, the SLS Block 1B must lift theOrion Multi-Purpose Crew Vehicle (Orion) capsule and its co-manifested payload, the International
Habitation Module, and put them on a path to the Moon’s orbit. There, Orion will link with the lunar
orbiting Gateway station and Human Landing System to transport astronauts from lunar orbit to the
Moon’s surface. Key to achieving this capability upgrade is The Boeing Company’s (Boeing) developmentof the SLS’s new upper stage—the Exploration Upper Stage (EUS). The EUS gives the SLS a 40 percent
upgrade in capability to send Orion and large cargos to the Moon, from 27 metric tons under Block 1—
the SLS rocket’s first iteration—to 38 metric tons for the new Block 1B system. An upgrade of thiscomplexity requires diligent oversight to ensure the contractor delivers a quality space flight systemthat meets the Agency’s requirements.
Under development since 2014, the SLS Block 1B has experienced changing technical requirements andcompeting funding priorities. Rework of critical components and previous Artemis mission launch delays
have led to increased costs and schedule delays. Furthermore, congressional direction to accelerate
Block 1B development while the Agency was focused on supporting near-term Artemis missions resulted
in a stop-start effort that also extended the timeline for Block 1B development and delayed its firstflight. Originally intended to fly as part of Artemis II (then scheduled for 2021), the Block 1B was
subsequently moved to the Artemis IV mission. This extended timeline along with supply chain
challenges have contributed to increasing Block 1B costs, with Boeing’s EUS contract growing from$962 million to over $2 billion through 2025. Further compounding the issue, for its first 10 years ofdevelopment, Congress and other stakeholders have had limited visibility into the Block 1B’s projected
costs and any risks that may impact its schedule for completion. This resulted from NASA adjusting
traditional project management procedures by delaying the establishment of its Block 1B cost andschedule baseline until December 2023.
In this audit, we examined NASA’s management of the development of the SLS Block 1B, with aparticular focus on the EUS. See Appendix A for details of the audit’s scope and methodology.

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BackgroundNASA’s Moon to Mars Program seeks to return humans to the Moon using a combination of heavy-liftrockets from the Agency and its commercial partners to propel the Orion, Gateway, and Human Landing
System to lunar orbit. 1 The SLS Block 1 is the first iteration of NASA’s heavy-lift rocket that will be usedon the first three Artemis missions; this version of the rocket can transport 27 metric tons—the weightof Orion—to the Moon. Artemis I, launched in November 2022, was the first uncrewed flight of theintegrated SLS/Orion system. It flew on a trajectory that included a series of orbits around the Moonand ended with the successful return of the Orion capsule to Earth. The second mission and first crewed
flight—Artemis II, scheduled for 2025—will also orbit the Moon and prepare the way for Artemis III in
2026. In this third mission, the Orion capsule will dock directly to Space Exploration Technologies Corp.’s(SpaceX) Human Landing System in lunar orbit to transport astronauts to and from the Moon’s surface.
Subsequent Artemis mission goals include a longer-term presence on the Moon that incorporates theuse of the Gateway station in lunar orbit, ground infrastructure on the lunar surface such as a habitat,and surface transportation like a lunar rover. To accomplish these goals, the Agency requires an upgrade
to the SLS—the Block 1B. 2 NASA will debut this more powerful rocket as part of the Artemis IV mission
in 2028. In preparation for Artemis IV, the Gateway’s initial elements—the Power and Propulsion
Element and Habitation and Logistics Outpost—will be launched into lunar orbit, along with multiple
SpaceX Starships. 3 Then, the SLS Block 1B will launch the Orion spacecraft and its co-manifested
International Habitat to the Moon’s orbit. 4 There, Orion will link with the Gateway and Human Landing
System to transport astronauts from lunar orbit to the Moon’s surface. See Figure 1 for Artemis IV’s
mission profile.

1

The Moon to Mars Program focuses on hardware development, mission integration, and risk management for programs
critical to NASA’s exploration approach that uses Artemis missions to the Moon to prepare for human missions to Mars.
This includes the SLS rocket, Orion spacecraft, supporting ground systems, Human Landing Systems, spacesuits, and thelunar orbiting Gateway station.

2

Besides Block 1B, NASA intends to produce a third version of the SLS—the Block 2—which will be another upgrade in therocket's space flight systems to include more powerful solid rocket boosters.

3

The Power and Propulsion Element will power and propel the Gateway in orbit while the Habitation and Logistics Outpost
will provide a docking location for the Orion capsule and living and working spaces for crewmembers staying less than
30 days.

4

The International Habitation Module, or International Habitat, will dock between NASA’s Habitation and Logistics Outpost
module and the Orion capsule. Provided by NASA’s partners the European Space Agency and Japan Aerospace Exploration
Agency, the International Habitat includes crew living quarters that will house life support systems, cameras, and scientificresearch facilities.

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Figure 1: Planned Artemis IV Mission Profile (as of March 2024)

Source: NASA Office of Inspector General (OIG) presentation of Agency data.
Note: Power and Propulsion Element (PPE), Habitation and Logistics Outpost (HALO), Human Landing System (HLS), Space
Launch System (SLS), Exploration Upper Stage (EUS), and International Habitat (I-Hab).

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The SLS Block 1B can transport 38 metric tons to the Moon and is powered during launch by the corestage’s four RS-25 engines and two solid rocket boosters. 5 The Block 1B’s more powerful upper stage,
the EUS, with its four RL10 engines, will replace the Block I’s Interim Cryogenic Propulsion Stage with
its one RL10 engine. Figure 2 shows a breakout of the elements of the SLS Block 1B rocket.
Figure 2: Space Launch System Block 1B Elements

Source: NASA OIG presentation of Agency information.

The SLS Block 1B, including the EUS, is currently in the final design and fabrication phase ofdevelopment. Boeing is the prime contractor for EUS development and production while Aerojet
Rocketdyne provides the RL10 engines. In addition, Dynetics is providing a new stage adapter—the
Universal Stage Adapter—that will connect the EUS to the Orion spacecraft. The Block 1B upgrade teamhas completed several required project life-cycle reviews, including its Critical Design Review (CDR) in
2023, and is fabricating the core stage and EUS fuel tanks at NASA’s Michoud Assembly Facility

5

The SLS rocket delivers propulsion in stages to send the Orion spacecraft and its cargo to the Moon for the Artemis missions.
At liftoff, the core stage—which stores liquid hydrogen and liquid oxygen and the systems that feed the stage’s four RS-25
engines—and twin solid rocket boosters fire to propel the SLS off the launch pad into low Earth orbit. Once in orbit, theupper stage provides the in-space propulsion to set the spacecraft on a precise trajectory to the Moon.

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(Michoud). 6 NASA is also planning a Green Run test for Artemis IV’s EUS and its RL10 engines at Stennis
Space Center in 2025. 7 Figure 3 shows the current timeline for Block 1B development.
Figure 3: NASA’s Block 1B Development Timeline (as of July 2024)

Source: NASA OIG presentation of Agency data.

6

Reviews include the (1) System Requirements Review to evaluate whether functional and performance requirements for thesystem are responsive to the program’s requirements on the project and can be achieved; (2) System Definition Review toevaluate the credibility and responsiveness of the proposed system architecture to program requirements and constraints
including available resources; (3) Preliminary Design Review to evaluate the planning, technical, cost, and schedule baselines
developed during the project’s formulation and assess the preliminary design to determine if the project is sufficiently
mature to begin final design and fabrication; and (4) Critical Design Review to evaluate the ability of the project’s design tomeet mission requirements with appropriate margins and acceptable risk within defined project constraints including
available resources.

7

During the Green Run test, the EUS is mounted on a test stand and its four RL10 engines fired to simulate an actual launch.
The test is designed to check the combined system’s compatibility and functionality.

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NASA estimates that SLS Block 1B costs will total nearly $5 billion, including the first flight of the EUS
during Artemis IV. This includes development of new systems—the EUS, Universal Stage Adapter, andPayload Adapter—as well as software modifications and integration with the core stage and boosters. It
does not include the costs for the boosters, Core Stage 4, and the RS-25 engines. According to the
Agency, the obligated funds spent on Block 1B development from fiscal year 2014 through fiscal year
2023 and NASA’s projected total costs for the next five fiscal years total nearly $5 billion.

NASA Program and Project Management
Guidance for managing NASA programs and projects, controlling development costs, and congressional
reporting requirements are described in U.S. law, namely Title 51. 8 The Agency implements its major
activities through NASA Procedural Requirements (NPR) in accordance with Title 51, including federal
requirements on transparency and accountability. Specifically, NASA manages the SLS under
NPR 7120.5F, NASA Space Flight Program and Project Management Requirements, with the goal ofdeveloping and successfully executing cost-effective and efficient programs and projects. 9
NASA divides the program and project life cycle into two main phases: Formulation and Implementation(see Figure 4). Subsequent life-cycle phases within Formulation (Phases A and B) and Implementation(Phases C through F) allow the Agency to progress to the next major milestone in the program or
project. The readiness of a program or project to continue to the next phase of the life cycle isdetermined at various “gates” or Key Decision Points (KDP). Within Phases A through F, multiple
life-cycle reviews must be met to satisfy KDP requirements and move to the next phase. During the
Formulation Phase, the Agency emphasizes defining the complexity and scope of the program or projectand increasing understanding of programmatic requirements.
Figure 4: NASA Program and Project Life Cycle

Source: NASA OIG presentation of information contained in NPR 7120.5F.
Note: Preliminary Design Review (PDR) and Agency Baseline Commitment (ABC).

8

Public Law 111-314 (2010) is known as Title 51 of the United States Code, “National and Commercial Space Programs.”
Title 51 created specific controls for NASA programs with a life-cycle cost over $250 million including a requirement toprovide Congress a Major Program Annual Report. The annual report must include a Baseline Report that, at a minimum,
gives an estimate of the life-cycle cost for the program including a detailed breakout of the development cost and program
reserves as well as an estimate of the annual costs until development is completed.

9

NPR 7120.5F, NASA Space Flight Program and Project Management Requirements w/Change 3 (August 3, 2021).

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For example, the life-cycle gate that allows the program or project to proceed from Phase B in
Formulation to Phase C, the start of Implementation, is KDP-C. Known as the Decision Memorandum
for Implementation, KDP-C requires program and project managers to document the life-cycle costand schedule estimates, which become the Agency Baseline Commitment (ABC). 10 The ABC is thecost and schedule baseline against which progress and performance are measured throughout the
Implementation Phase. This is also the only official baseline for a program or project sent to Congress
and the Office of Management and Budget.
After the ABC is established, the program or project progresses from the Formulation Phase to the
Implementation Phase and prepares for the CDR, the life-cycle review that determines if the design issufficiently mature for final design and fabrication. Flexibility in the timing, number, and content of thelife-cycle reviews is allowed as long as equivalent information—such as the ABC resulting from KDP-C—
is provided at each KDP to satisfy its requirements. Under federal law and NPR 7120.5F, development
cost growth exceeding 15 percent requires official notification to Congress, whereas any growth moresignificant than 30 percent requires a rebaseline. 11 NASA is required to notify Congress in the event ofa rebaseline, and congressional reauthorization is necessary to continue the program or project.
In addition, a Joint Cost and Schedule Confidence Level (JCL) is required for all single-project programs
at KDP-C, regardless of life-cycle cost. 12 A JCL is a probabilistic analysis of cost and schedule to measure
the likelihood of completing the remaining work on time and at the budgeted levels. In accordancewith NPR 7120.5F, the Exploration Systems Development Mission Directorate must plan and budget
single-project programs based on a 70 percent JCL or confidence level, meaning a 70 percent likelihoodthat the cost and schedule will be completed within budget and on time or as approved by the Decision
Authority.
An Earned Value Management System (EVMS) is an additional tool NASA uses to assess program andproject cost and schedule performance with timely and accurate data for effective decision-making. 13
Earned value management measures program and project progress by integrating technical, cost,schedule, and risk management data at a work performance level. NPR 7120.5F requires single-projectprograms and projects with an estimated life-cycle cost greater than $250 million to perform earned
value management for all in-house and contracted portions of the work as soon as the contract begins
to develop its Work Breakdown Structures and Integrated Master Schedules. 14 NASA requires an EVMS

10 A life-cycle review is complete when the governing Agency Program Management Council and Decision Authority—the

NASA Associate Administrator or delegated Mission Directorate Associate Administrator—sign the Decision Memorandum.

11 51 U.S.C. § 30104(e) and (f). A rebaseline is the process that results in a change to a program’s or project’s ABC.
12 Single-project programs generally have long development and operational lifetimes and represent a large investment ofAgency resources. Multiple organizations or agencies contribute to them. Single-project programs have one project andimplement their program objectives and requirements through one of two management approaches: (1) separate programand project structures or (2) a combined structure.

13 Use of an EVMS to assess program and project cost and schedule performance is required by Federal Acquisition Regulation

Subpart 34.2, Earned Value Management System (2019) and NPR 7120.5F.

14 A Work Breakdown Structure identifies the hardware, software, services, and all other deliverables required to achieve an

end project objective. The purpose of a Work Breakdown Structure is to subdivide the project’s work content into
manageable segments to facilitate planning and control of cost, schedule, and technical content. It identifies the total projectwork to be performed, including all in-house work by NASA as well as all work by contractors, international partners,
universities, and other performing entities. An Integrated Master Schedule is the complete, time-phased schedule necessary
to accomplish a program or project that incorporates all activities and planned work, including contractor and subcontractor
efforts, as well as the necessary resources and associated budgets.

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on cost-type and fixed-price incentive contracts for development and production work, including workfor flight and ground support systems. 15 For contracts and subcontracts valued at $20 million but lessthan $50 million, compliance with EVMS industry standards is determined by the cognizant contracting
officer. 16 For contracts and subcontracts valued at $50 million or more, the contractor must have an
EVMS in compliance with industry standards as determined by the cognizant federal agency.
A certified EVMS ensures contractor performance measurement data provided to NASA is valid,accurate, and timely to support informed decision-making. It also allows NASA to plan contract scope tocompletion; integrate the contract's cost, schedule, and technical aspects into a detailed baseline plan;
objectively measure progress; and forecast achievement of milestones. The Integrated Program
Management Data and Analysis Report is the contractor’s primary means of communicating
contractually required earned value management-related data to the government.
The Defense Contract Management Agency (DCMA) typically reviews EVMS plans and verifies continued
compliance with industry guidelines. 17 However, NASA can conduct a compliance review of acontractor’s EVMS plans at the time the contract is awarded if the EVMS is nonexistent or determined
to be noncompliant with EVMS guidelines. According to the NASA Federal Acquisition Regulation
Supplement, if the contractor does not correct all deficiencies identified in the review, the contracting
officer may take remedial action, which may include but is not limited to, a reduction in fee in the eventof noncompliance. 18

SLS Quality Management System and Quality Assurance
Responsibilities
NASA’s aerospace contractors are required to have a quality assurance program that complies with SAE
International’s AS9100D, Quality Management Systems—Requirements for Aviation, Space, and Defense
Organizations. 19 These standards are designed to produce a quality space flight system that meets
customer requirements and applicable statutory and regulatory requirements. NASA has prescribedaerospace standards for quality management in the SLS Block 1B element contracts. For example, in its
Stages contract with Boeing to provide the core stages for Artemis I and II and the EUS for Artemis IV,

15 A cost-type contract reimburses the contractor for all legitimate expenses up to a set limit plus additional payment to allow

for a profit. A fixed-price incentive contract provides for adjusting profit and establishing the final contract price byapplication of a formula based on the relationship of the total final negotiated cost to the total target cost.

16 Electronic Industries Alliance Standard 748, Earned Value Management Systems, is the standard for U.S. Department of

Defense (DOD) earned value management programs and was adopted in August 1999 for application to major defense
acquisition programs, including NASA. The standard helps provide integrated program management information using theorganization’s resources and an EVMS to meet the needs of a project.

17 Electronic Industries Alliance Standard 748. A part of DOD, DCMA is responsible for determining EVMS compliance. NASA

has a Memorandum of Understanding with DCMA for EVMS acceptance and surveillance. Under this agreement, DCMA is
expected to provide NASA with evidence supporting its acceptance of a contractor’s EVMS.

18 NASA Federal Acquisition Regulation Supplement 1852.234-2(b), Earned Value Management System (2015).
19 SAE International is a global association of more than 128,000 engineers and related technical experts in the aerospace,automotive, and commercial vehicle industries with a focus on life-long learning and voluntary consensus standards
development. AS9100D, Quality Management Systems—Requirements for Aviation, Space, and Defense Organizations(September 20, 2016), includes International Organization for Standardization ISO 9001:2015 quality management system
requirements and specifies additional aviation, space, and defense industry requirements, definitions, and notes. Specifically,
Chapter 10, Improvement, states the organization shall determine and select opportunities for improvement and implement
any necessary actions to meet customer requirements and enhance customer satisfaction.

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NASA requires that the contractor’s quality management system shall comply with AS9100D standards.
To determine whether the quality management system complies with these standards, the contractor
supports the government’s post-award verification audit of its quality management system to assess
compliance with AS9100D and supplemental requirements imposed by SLS-RQMT-014, Space Launch
System Program Safety and Mission Assurance Requirements. 20
NASA’s Office of Safety and Mission Assurance is responsible for development, implementation, andoversight of agency-wide safety, reliability, assurance, and space environment sustainability policies andprocedures, including fostering early integration and life cycle implementation of quality assurance into
NASA's programs and operations. DCMA assists NASA by providing quality assurance specialists at
Boeing manufacturing facilities located at Michoud and Kennedy Space Center (Kennedy). Along with
NASA officials and third-party registrars, DCMA specialists monitor the contractor’s compliance withquality management system procedures. 21
At Michoud, DCMA has approximately 30 employees working 24 hours a day, seven days a week,
overseeing core stage and EUS production. Core stage production, including installation of the RS-25
engines for Artemis I and II, was completed at Michoud. However, beginning with the production for
Artemis III, NASA will ship the core stage’s components from Michoud to Kennedy for final assembly.
The engine section structure is shipped first, followed by the remaining four of five major stage
elements that are preassembled at Michoud. At Kennedy’s Vehicle Assembly Building, these elements
will be vertically integrated with the engine section and the RS-25 engines installed in the core stage.
While the engines are installed, Kennedy’s quality assurance specialists will perform surveillance. 22
Upon completion of its Green Run testing at Stennis Space Center, the EUS will also be shipped toKennedy and stacked with the other elements of the SLS in the Vehicle Assembly Building. 23
When deficiencies in quality are found, DCMA—in consultation with NASA—issues Corrective Action
Requests (CAR) to the contractor. DCMA identifies the contractual nonconformity and the severity ofthe deficiency by labeling the CAR Level I through IV, with Level I the least serious (see Figure 5). In
response, the contractor must take action to correct the deficiencies, and for Level II and above, reply
in writing to DCMA of the corrective action taken. Levels III and IV are the most serious issues which
require notification to the contractor’s top management due to repeated, uncorrectednonconformances and can involve reductions in contract payments, or in the case of a Level IV,
suspension of payments. Because Level III and IV CARs are subject to potential contracting actions,
DCMA submits a draft CAR to the SLS Program to determine the appropriate course of action before
issuing the CAR to the contractor.

20 The scope of the post-award verification audit is tailored based on certification and registration status and coordinated withthe contractor prior to scheduling the audit. NASA SLS-RQMT-014, Revision E, Space Launch System Program Safety andMission Assurance Requirements (November 16, 2017).

21 A third-party registrar is an independent organization that certifies a contractor’s quality management system has beenassessed and approved against the provisions of SAE International’s quality management standards and requirements.

22 Surveillance consists of activities to review and analyze contractor plans, financials, schedules, policies, procedures, systems,

processes, process outputs, products, and services. Surveillance includes reviews to determine adequacy (when applicable)
and compliance to contractual, statutory, regulatory, or contractor requirements. Surveillance activities apply primarily topost-award activities but may apply to some pre-award activities as well.

23 The first EUS is being built at Michoud but will undergo testing at Stennis Space Center before being shipped to Kennedy.

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Figure 5: DCMA Corrective Action Request Levels

Source: NASA OIG presentation of DCMA CAR information.

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BOEING’S INEFFECTIVE QUALITY MANAGEMENTSYSTEM AND INEXPERIENCED WORKFORCEINCREASE POTENTIAL RISKS
Boeing’s Quality Management System for Core Stage
Production at Michoud Does Not Meet Industry
Standards
NASA requires its aerospace contractors to have quality assurance programs that comply with AS9100D
standards. However, we found that Boeing’s quality management system at Michoud does noteffectively adhere to industry standards or NASA requirements, resulting in production delays to the SLS
core and upper stages and increased risk to the integrated spacecraft. To ensure Boeing’s quality
management system meets AS9100D standards, the Agency engages DCMA to conduct surveillance of
Boeing’s core and upper stage manufacturing efforts at Michoud. According to DCMA officials, Boeing’s
process for addressing contractual noncompliance has been ineffective, and the company has generally
been nonresponsive in taking corrective actions when the same quality control issues reoccur.
We analyzed 2 years of DCMA CAR reports (September 2021 to September 2023) that detailed Boeing’s
nonconformances with AS9100D found during quality control surveillance and the performance ofgovernment-mandated inspections. 24 During this period, DCMA reported Boeing was issued 71 Level I
and Level II CARs, of which 24 were the more serious Level II CARs. According to DCMA officials, thisis a high number of CARs for a space flight system at this stage in development. For example, in
September 2021, a Level II CAR noted that foreign object debris was identified inside the SLS Core
Stage 2 liquid hydrogen fuel tank. 25 DCMA found contamination of metal shavings, Teflon, and otherdebris on and underneath the entry platform and ladder assembly on the forward dome panels inside of
the tank. Foreign object debris can damage hardware and potentially injure flight crew when entrapped
within crewed flight articles. DCMA concluded that Boeing’s foreign object debris clean-as-you-go policy
did not comply with AS9100D, Section 8.5.1, “the provision for the prevention, detection, and removalof foreign objects.” 26 The liquid hydrogen fuel tank was subsequently cleaned, reinspected, and found tomeet standards.

24 Government mandatory inspection points are points in the workflow at which the government executes a quality assurance

surveillance activity that must be completed before continuing the production flow. The surveillance activity can include anengineering documentation review, a product inspection, a process witness, or review of verification data.

25 Foreign object debris is a substance, debris, or article alien to the hardware that would potentially cause damage. Examples

include metal shavings, wire clippings, construction debris, dropped tools or fasteners, oil drips, and water spills. Flight pieceparts can be debris if they are dropped or lost in flight hardware where they do not belong.

26 Clean-as-you-go is an operations approach in which an area is cleaned after each planned operation and before the end ofeach work shift to remove unnecessary items and prevent damage from foreign object debris.

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Furthermore, in May 2023, the NASA Stages Chief Safety Officer asked DCMA to draft a Level III CAR toconsolidate the data from 20 stamp warranty Level I and II CARs issued to Boeing from January 2022 toApril 2023, where the company’s corrective actions were inadequate to prevent further recurrence.
Stamp warranty is a critical process where a company inspector certifies that all work instructions havebeen complied with. For example, Boeing officials incorrectly approved hardware processing underunacceptable environmental conditions, accepted and presented damaged seals to NASA for inspection,and used outdated versions of work orders. DCMA also found that Boeing personnel made numerous
administrative errors through changes to certified work order data without proper documentation andretention of historical information necessary to trace the changes. DCMA reported that it continued toissue multiple Level I and II CARs for stamp warranty issues over the 11-month period while the Level III
CAR remained in a draft status.
NASA ultimately decided not to issue a Level III CAR. However, in an effort to correct the identified
stamp warranty issues, NASA continues to use alternate corrective action methods including Monthly
Management Reviews, Contractual Areas of Emphasis, a Technical Directive Letter, and feedback to the
Performance Evaluation Board. 27 Nonetheless, according to both DCMA and NASA Safety and Mission
Assurance officials, the unusually high number of stamp warranty CARs reflects the seriousness of thenonconformity, and changing certified work order data without retention of historical information could
increase the risk to the flight vehicle. With the large number of nonconformances identified during the
manufacturing process and Boeing’s ineffective quality management system, we are concerned thatcritical nonconformities may not be identified and corrected.
As part of the Agency’s ongoing efforts to streamline production for the Artemis campaign, startingwith core stage production for Artemis III, NASA has moved assembly of the engine section’s internal
components from Michoud to Kennedy. This move, while strategically intended to improve assembly
processes, introduces additional complexities and potential risks to the SLS production line according
to DCMA officials at Michoud. For example, the production processes developed over the past 10 years
at Michoud are being established at Kennedy, where Boeing has relocated some of its production
workforce. In addition, NASA plans to delegate surveillance duties currently performed by DCMA to acontractor that provides inspections and surveillance for projects at this facility. While we appreciate
the Agency’s efforts to improve SLS assembly processes, these changes introduce uncertainties andpotential inconsistencies into the oversight and quality control processes.

Boeing’s Michoud Workforce Lacks Sufficient Aerospace
Production Experience, Training, and Instruction
According to Safety and Mission Assurance officials at NASA and DCMA officials at Michoud, Boeing’s
quality control issues are largely caused by its workforce having insufficient aerospace production
experience. Michoud officials stated that it has been difficult to attract and retain a contractor
workforce with aerospace manufacturing experience in part due to Michoud’s geographical locationin New Orleans, Louisiana, and lower employee compensation relative to other aerospace competitors.
27 Monthly Management Reviews are meetings conducted by NASA management to assess the status of the SLS, identify

challenges, and make informed decisions. Contractual Areas of Emphasis are critical provisions identified by NASA and its
contractors, such as Boeing, that are essential for SLS success, encompassing quality control standards, safety protocols,
technical specifications adherence, and delivery schedule compliance. Technical Directive Letters are issued to the contractor
to furnish additional instruction. The Performance Evaluation Board works with the SLS Program to evaluate contractor
performance and determine award fees.

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Safety and Mission Assurance officials advised that Boeing provides training and work orders to its
employees to mitigate the challenges associated with an inexperienced workforce and help ensurethat its workers comply with quality control standards. However, given the significant quality control
deficiencies discussed above and our observations during a site visit to Michoud, we found both these
efforts to be inadequate. 28
For example, during our visit to Michoud in April 2023, we observed quality control issues with the
production of the SLS Core Stage 3 liquid oxygen fuel tank dome for Artemis III. Specifically, we saw thatthe dome was segregated and pending disposition due to welds that did not meet NASA specifications(see Figure 6). DCMA reported that Boeing wrote a nonconformance for the dome. The company iscurrently evaluating the dome to determine whether and how it can safely be used going forward.
The liquid oxygen tank dome is a critical component of Core Stage 3, and according to NASA officials,
the welding issues arose due to Boeing’s inexperienced technicians and inadequate work order planningand supervision.
Figure 6: Improperly Welded Core Stage 3 Liquid Oxygen Tank Dome at the Michoud
Assembly Facility (April 26, 2023)

Source: Manufacturing Technical Solutions, Inc.

Boeing is working to establish a more robust hands-on training program, including model-based
instructions and a mock-up of the EUS equipment shelf that houses avionics and flight computers.
However, it is too early to determine if the new training alone will result in a notable decrease in
28 According to AS9100D, Section 7.2, Competence, the organization shall (a) determine the necessary competence of person(s)doing work under its control that affects the performance and effectiveness of the quality management system; (b) ensurethat these persons are competent on the basis of appropriate education, training, or experience; (c) where applicable, takeactions to acquire the necessary competence and evaluate the effectiveness of the actions taken; and (d) retain appropriate
documented information as evidence of competence.

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nonconformances and CARs issued. According to a NASA official, further quality assurance challenges
related to the workforce stem from work instructions that lack explicit details on how to perform thetask and with what tools. Some technicians reported they had to hunt through layers of documentation
to identify required instructions and documentation of work history and key decisions related to thehardware. Especially with inexperienced technicians, the challenge of finding and interpreting deficient
work orders increases the risk of stamp warranty violations and quality control deficiencies.
The lack of a trained and qualified workforce increases the risk that the contractor will continue tomanufacture parts and components that do not adhere to NASA requirements and industry standards.
While NASA has processes in place to assess, document, and mitigate identified nonconformances toensure that risks are well understood, communicated, and dispositioned, the rework of parts andcomponents can contribute to increased costs and schedule delays for the SLS core and upper stages. 29
For example, Boeing’s unsatisfactory welding operations at Michoud, a critical path item in EUS
development, resulted in fuel tanks that did not meet the required specifications and caused a 7-monthdelay in EUS completion. Moreover, quality control deficiencies, if not identified and corrected, could
increase safety risk to the integrated spacecraft.

29 We did not independently assess these processes as part of this review.

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SLS BLOCK 1B CONTINUES TO EXPERIENCECOST INCREASES AND SCHEDULE DELAYSBlock 1B Cost Increases and Schedule Delays Driven by
EUS Development
We project the SLS Program’s Block 1B development costs will reach approximately $5.7 billion before
the system is scheduled to launch in 2028. This is $700 million more than the Block 1B cost and schedulebaseline, or Agency Baseline Commitment (ABC), that NASA formally established in December 2023 atnearly $5 billion. The EUS accounts for more than half of the cost of Block 1B development. We estimate
EUS development costs will reach nearly $2.8 billion through 2028, roughly three times the initiallyagreed-upon cost of $962 million in 2017.
Given the workforce Boeing needs to complete remaining work on the EUS through its expected delivery
to NASA in 2027 and the Agency’s subsequent integration and testing efforts leading up to a 2028
launch, we project Block 1B annual costs will remain at 2023 levels through at least 2026 before tapering
off in the out years until the Stages contract closes out. NASA officials disagree with our analysis andexpect a reduction in Boeing’s workforce will result in reduced labor costs—an outcome the Agency is
still evaluating. 30 It is our view, as we previously reported, that development costs for large space flightprograms increase rather than decrease once integration and testing occur and new problems are
identified. 31 Regardless, NASA’s fiscal year 2024 SLS Program budget projections do not account for the
additional funds needed for EUS development in fiscal years 2024 through 2027. Without additional
funding, scheduled work will continue to be pushed into subsequent years as has been the case for the
EUS over the last decade, leading to further cost increases and schedule delays. This has alreadycontributed to $200 million in cost overruns on Boeing’s Stages contract for the EUS for Artemis IV—
with more expected.
Boeing’s delivery of the EUS to NASA has been postponed 6 years from an initial February 2021 dateestablished in 2016 to April 2027 (see Figure 7). NASA is currently tracking EUS schedule risks anddevelopment challenges that could lead to further delays. 32 For example, as of October 2023, the EUS
stage controller—command and control hardware and software needed for the EUS Green Run test—
and avionics have potential risks which could extend the delivery up to an additional 14 months.
Although development of Block 1B is not on the Artemis IV critical path, further delays in earlier Artemis

30 We were not able to independently verify the Agency’s claims that Boeing plans to reduce its workforce.
31 NASA Office of Inspector General (OIG), NASA's Management of the Space Launch System Stages Contract (IG-19-001,

October 10, 2018).

32 NASA originally planned to use off-the-shelf Interim Cryogenic Propulsion Stages for the first two Artemis missions; however,Congress directed the Agency to develop and utilize the EUS, initially planned for use on the SLS Block 1B, instead for
Artemis II. For a period of time, the Agency focused on building the EUS to satisfy the direction of Congress, but in
October 2018 NASA directed Boeing to shift resources from EUS production to complete the core stage for Artemis I after
numerous delays and challenges, and the Agency shifted use of the EUS to Artemis IV.

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missions combined with potential EUS delivery delays and pending development milestones suggest theArtemis IV launch, planned for September 2028, may be delayed as well. 33
Figure 7: Exploration Upper Stage Schedule Slips (as of December 2023)

Source: NASA OIG presentation of Agency data.

Multiple Factors Contribute to EUS Cost Increases and
Schedule Delays
Development of the EUS for the SLS Block 1B has been marked by a host of interrelated challenges,
which have led to significant cost increases and schedule delays:•

Redirection of EUS Funding to Core Stage Development. During Artemis I production, Boeing’s
contract funds for the core stage ran out before completion of the work because the company
underestimated the complexity of the project. As a result, funding meant for the EUS was
redirected to the core stage. This ultimately led to a nearly one-year delay in EUS workand an additional $4 billion in funding to Boeing to cover the costs for the core stage
development work.

33 The critical path refers to the sequential path of tasks in a schedule that represents the longest overall duration from thepresent time through project completion. Any slippage of these tasks will increase the project’s duration. In the case of
Artemis IV, completion of the Mobile Launcher 2—the ground structure that will be used to assemble, process, transport tothe launch pad, and launch the SLS/Orion system—is the critical path with completion of the International Habitat as thesecondary driver.

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•Changing Mission Dates. The SLS Program has grappled with the effects of changing
requirements from Congress as to which Artemis mission the Block 1B should first fly. This has
resulted in a mission assignment shift from Artemis II to Artemis IV once Congress agreed with
NASA’s change to a later date. These changing mission dates posed costly challenges to theProgram's development timeline, such as the reallocation of resources, increased impact ofhigher inflation rates, and contract revisions involving contractors and suppliers.

•

Maintaining EUS Workforce. A significant factor contributing to the high costs of the Block 1B
upgrade has been sustaining an EUS workforce over the past 10 years. The EUS workforce will
have worked on the system for 14 years by the time of the projected first flight—an effort
intended to be completed in 7 years. From February to August 2023, Boeing spent on average$26 million a month on its EUS workforce, contractors, and related costs. We expect Boeing tocontinue this level of spending on workforce hours until it delivers the EUS to NASA in 2027 due
to major outstanding schedule milestones such as software installation, liquid oxygen fuel tankinstallation, Forward Adapter integration and testing, and final integrated functional testing.

•Boeing’s Manufacturing Issues. Multiple Boeing manufacturing issues necessitated costly andtime-consuming rework of critical components. These issues span from production inefficiencies
to workforce and quality control deficiencies discussed earlier in this report. As noted earlier,
Boeing’s unsatisfactory welding operations resulted in a 7-month delay in EUS completion.

•

Supply Chain Challenges. A variety of supply chain issues related to component sourcing,material acquisition, and supplier management resulted in schedule setbacks and increased
costs of materials and components. 34 According to NASA officials, many supply chain challenges
were exacerbated by Boeing’s late negotiations and contract agreements with its suppliers.

34 In 2023 we reported on challenges in NASA’s management and visibility into its supply chain necessary to meet its Artemis

goals. NASA OIG, NASA’s Management of the Artemis Supply Chain (IG-24-003, October 19, 2023).

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DELAYED COST AND SCHEDULE BASELINECOUPLED WITH BOEING’S INSUFFICIENTEVMS HINDERS BLOCK 1B ACCOUNTABILITY
AND TRANSPARENCY
NASA Spent More than $3 Billion over 10 Years withouta Cost and Schedule Baseline
Despite spending over $3 billion since 2014, NASA continued to develop the SLS Block 1B upgrade andits associated capabilities without a required ABC until December 2023. 35 According to the ABC, thecapability upgrade will be ready by January 2028 at a cost of nearly $5 billion. The ABC is a criticalpart of NASA’s program and project management, serving as the cost and schedule baseline against
which progress and performance are measured throughout the Implementation Phase and is the only
official baseline sent to Congress and the Office of Management and Budget. Without this ABC, theability to effectively monitor and manage the cost and schedule for the SLS Block 1B upgrade wassignificantly hindered.
NASA considers the Block 1B to be a capability upgrade from the first version of the SLS rather thana new single-project program or separate project. To date, the Block 1B has incurred costs of over
$3 billion, which exceeds NASA’s threshold to be classified as a Category 1 project. 36 As such, it issubject to NPR 7120.5F requirements applicable to single-project programs and capability upgrades. 37
Specifically, capability upgrades that meet the criteria for a major project must adhere to the standard
project life cycle and develop an ABC. Therefore, the Block 1B's ABC must be distinct from the SLS
Program's overall Phase E (the operations and sustainment phase) cost estimate, reflecting its status
and financial scope as a major project. NASA maintains that tracking costs on a mission-by-mission basis
is not the only sufficient mechanism for ensuring accountability and transparency nor does the Agency
believe that such mission-level commitments are required by NASA policy or law.
To NASA’s credit, the SLS Program Plan did acknowledge that while the Exploration Upper Stage andAssociated Capabilities is not a standalone project, a Joint Cost and Schedule Confidence Level (JCL)based ABC must be developed to fund the design, development, testing, and evaluation of the Block 1

35 NPR 7120.5F.
36 According to NPR 7120.5F, projects are classified as Category 1 if any of the following are applicable: a life-cycle cost of morethan $2 billion, the inclusion of significant radioactive material onboard the spacecraft and/or launch vehicle, or if the systembeing developed is for human space flight.

37 According to NPR 7120.5F, upgrades that meet the criteria for a major project shall be treated as projects and produce an

ABC that is different from the overall SLS Program’s Phase E (operations and sustainment) cost estimate.

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evolution to Block 1B. 38 NASA officials, however, deferred the establishment of an ABC for the SLS
Block 1B until after its Critical Design Review (CDR)—the life-cycle review evaluating the design’s ability
to meet mission requirements within defined program and project constraints, including available
resources—in November 2022, citing difficulties in accurately predicting manufacturing costs. While
this decision was based on lessons learned from cost estimation challenges with the SLS Block 1, it
circumvents NASA's project management policies designed to avoid excessive delays and budget
overruns. Typically, the baseline is established before conducting the CDR. As such, the absence of
established cost and schedule baselines raises questions about whether the Agency had all the key
information needed to properly conduct the CDR.
To this point, an Independent Review Team (IRT) raised concerns about the Agency’s readiness for the
CDR. Specifically, the team found deficiencies with the Block 1B upgrade during its assessment in thelead-up to and at the November 2022 CDR Board review. The IRT identified shortcomings in six of nine
critical criteria for a successful CDR, highlighting issues such as inadequate risk margins and the lack of
a comprehensive testing approach. The IRT also made several requests for action to the SLS Program
to address these issues. The IRT did not, however, assess cost and schedule criteria related to the JCL
during this time due to receiving data later than expected.
A final IRT evaluation in May 2023 concluded that while the SLS Program made significant progress on
addressing CDR requirements, and sufficient plans were in place to close the remaining requests foraction, the SLS Block 1B upgrade still lacked flight software and JCL-based cost and schedule metrics.
Nevertheless, the Agency proceeded with the CDR closeout in May 2023. Five months later, a post-CDR
assessment by the IRT found the JCL model was sufficiently mature to establish the ABC, and in
November 2023, the Agency held a separate CDR for Block 1B flight software.
In December 2023, the SLS Program completed its Block 1B ABC after 10 years of development with nobaseline and much later in the project life cycle than NASA’s standard practice. Without a formal costand schedule baseline at critical junctures, such as before the CDR, the Agency was limited in its ability
to assess adherence to budgets and timelines and stakeholders lacked visibility into the Block 1B’s
estimated cost and schedule.

Boeing Defense EVMS Has Been Disapproved since 2020
Using a certified Earned Value Management System (EVMS) is a critical part of program and project
management, serving as a key tool to measure cost and schedule progress, and is required on all NASAprojects with a life-cycle cost greater than $250 million. 39 However, we found that Boeing Defense,
Space & Security (Boeing Defense)—the division of Boeing responsible for defense and aerospacecontracts—has struggled for years with its EVMS, which has been in a disapproved status by the
U.S. Department of Defense (DOD) since 2020. Multiple agencies that use Boeing Defense’s EVMS are
impacted by DOD’s disapproved status including NASA and its Stages contract.

38 The SLS Program Plan is the controlling document defining the programmatic and management processes of the SLS Programand is considered a live document—able to be updated, as necessary, when funding or other significant changes impact theplan’s content. The Exploration Upper Stage and Associated Capabilities include the EUS and its four RL10 engines, theUniversal Stage Adapter, the Payload Adapter, and other engineering, integration, and management tasks.

39 NPR 7120.5F.

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For a DOD contractor’s EVMS to be disapproved, a DOD contracting officer must determine the existing
EVMS has one or more significant deficiencies as defined in Electronic Industries Alliance Standard 748.
The DOD contracting officer may then use discretion to disapprove the EVMS and withhold payments.
DCMA has issued several Level II and III CARs related to material deficiencies in Boeing Defense’s EVMS,
including deficiencies in identifying management reserves, maintaining estimates at completion, andmaintaining the baseline. In particular, DCMA issued a Level III CAR to Boeing Defense in late 2020,
notifying them of several material deficiencies in their EVMS—which impacted NASA’s Stages contract
with Boeing—including visibility into cost, schedule, and resource needs for the contract’s remaining
work. DCMA requested Boeing Defense correct the significant deficiencies or provide a corrective action
plan. DCMA also withheld requests for payment on a small percentage of the affected DOD contracts
until Boeing implemented an effective plan.
While Boeing has begun implementing corrective actions to address its EVMS deficiencies impacting the
SLS Program, there remains one active Level III EVMS CAR and one Level II EVMS CAR, both undergoingthe verification and validation process that is not expected to be complete until late 2024. Until then,Boeing’s EVMS cannot produce meaningful data that can be used to make informed decisions andproduce credible forecasts. According to NASA contracting officials, Boeing cannot produce a realistic
baseline delivery date for the EUS due to continuing deficiencies in its EVMS. In August 2023, NASA sent
Boeing a letter noting that performance concerns observed during core stage development havecontinued during work on the EUS and offered corrective solutions such as optimizing manufacturing
techniques and increasing labor efficiencies. As of March 2024, Boeing had not responded to this letter.
NASA officials are also engaging with other users of Boeing Defense’s EVMS and reviewing options tobetter evaluate the company’s performance.

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CONCLUSION
The Block 1B version of the SLS provides a 40 percent upgrade in the amount of cargo that can betransported to the Moon using NASA’s heavy-lift rocket. This upgraded capability is needed to achieve
NASA’s Artemis goals, with the Block 1B’s first mission transporting both the International Habitat andastronauts to the Moon during Artemis IV. Despite progress to date, expected delivery of the EUS hasslipped 6 years as cost and schedule rebaselines for the contract were ongoing, and original contract
costs more than doubled to over $2 billion. As the result of multiple production issues, we expect costs
for the Block 1B to increase significantly, reaching approximately $5.7 billion by 2028. Further, given theworkforce needed to complete remaining work on the EUS and subsequent integration and testing
efforts leading up to a 2028 launch, we project that annual costs will remain higher than NASA has
currently budgeted, likely leading to further delays.
Given the importance of the SLS Block 1B to NASA’s future Artemis crewed missions, it is critical that the
Agency effectively manage this development effort. However, we found an array of issues that could
hinder SLS Block 1B’s readiness for Artemis IV including Boeing’s inadequate quality management
system, escalating costs and schedules, and inadequate visibility into the Block 1B’s projected costs. For
example, we found that Boeing’s quality management system does not meet industry standards in corestage production at Michoud. Given Boeing’s quality management and its related workforce challenges,
we are concerned these factors could potentially impact the safety of the SLS and Orion spacecraft
including its crew and cargo.
In December 2023, the SLS Program completed its Block 1B ABC after 10 years of development with nobaseline and much later in the project life cycle than NASA’s standard practice. The absence of a formal
cost and schedule baseline at critical junctures, such as before the CDR, contributed to a lack of visibility
and challenges in the Agency’s ability to assess progress and adherence to cost and timelines. As wehave repeatedly reported, it is critical that NASA establish timely, credible, complete, and transparent
cost and schedule estimates from which it can measure success and be accountable to Congress andother stakeholders. In the end, failure to address these issues may not only hinder the Block 1B’s
readiness for Artemis IV but also have a cascading impact on the overall sustainability of the Artemis
campaign and NASA’s deep space human exploration efforts.

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RECOMMENDATIONS, MANAGEMENT’S RESPONSE,
AND OUR EVALUATION
To improve the safety and sustainability of the SLS Program, we recommended the Associate
Administrator for Exploration Systems Development Mission Directorate in conjunction with theAssistant Administrator for Procurement and the Chief, Safety and Mission Assurance:
1.

Coordinate with Boeing, the SLS Stages prime contractor, to develop a quality management
system training program that is compliant with AS9100D and reviewed by the appropriate
NASA officials.

2.

Institute financial penalties for Boeing’s noncompliance with quality control standards.

To minimize the impact on the Artemis campaign’s timeline and achieve sustainability, we
recommended the Associate Administrator for Exploration Systems Development Mission Directorate:
3.

Perform a detailed cost overrun analysis on Boeing’s Stages contract for EUS development.

To provide greater visibility into cost and schedule estimates for SLS upgrades, we recommended the
Associate Administrator for Exploration Systems Development Mission Directorate:
4.

Coordinate with DCMA to ensure contractual compliance with EVMS clauses.

We provided a draft of this report to NASA management who concurred with three of the fourrecommendations and described planned actions to address them. We consider the proposed actions
responsive to Recommendations 1, 3, and 4 and will close them upon completion and verification.
The Agency non-concurred with Recommendation 2, and we find its proposed actions unresponsive.
Consequently, this recommendation will remain unresolved pending further discussions with the
Agency. Recommendation 2 addresses the need to institute financial penalties for Boeing’s
noncompliance with quality control standards. In its response, NASA stated that the OIG's
recommendation falls "outside the bounds of the contract." The Agency further noted that it already has
the authority to enforce quality control standards through existing contractual vehicles. We agree thatthese contractual mechanisms may be a sufficient means for imposing financial penalties. Our
recommendation was written to allow the Agency latitude to use the most appropriate mechanisms
practicable to impose financial penalties on Boeing for not complying with required quality control
standards.
Management’s comments are reproduced in Appendix B. Technical comments provided by management
and revisions to address them have been incorporated as appropriate.

Major contributors to this report include Ridge Bowman, Human Exploration Audits Director;
Kevin Fagedes, Assistant Director; Deanna Lee, Assistant Director; Moriah Lee; Tyler Mitchell;
Rachel Pierre; Robert Rose; Michele Schaeffer; and Lauren Suls.

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IG-24-015 22

If you have questions about this report or wish to comment on the quality or usefulness of this report,
contact Laurence Hawkins, Audit Operations and Quality Assurance Director, at 202-358-1543 orlaurence.b.hawkins@nasa.gov.
Digitally signed by George
Scott
Date: 2024.08.07
15:10:30 -04'00'

George A. Scott
Deputy Inspector GeneralNASA Office of Inspector General

IG-24-015 23

APPENDIX A: SCOPE AND METHODOLOGYAppendix A

We performed this audit from August 2023 through May 2024 in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the audit to obtainsufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings andconclusions based on our audit objectives.
This report is the second in a series of audits examining NASA’s development of space flight systems for
its Artemis IV and future missions. In this report we evaluated NASA’s development cost, schedule, andperformance of the SLS Block 1B, with a particular focus on the EUS. Our review included interviews with
officials at NASA Headquarters, Marshall Space Flight Center, Boeing, and DCMA. As part of our work
published in the Office of Inspector General’s October 2023 report on the Exploration Production andOperations Contract, we visited the Michoud Assembly Facility in New Orleans, Louisiana, to observe
SLS core stage and EUS production and incorporated the information we learned into this report asappropriate. 40
To assess Boeing’s cost and schedule performance for developing the Block 1B core stage and EUS,
we reviewed SLS Program, NASA Office of the Chief Financial Officer, and contractor cost and budget
documentation. We also reviewed past and current budget planning documents from the SLS Stages
Element Office and SLS Program. Additionally, we reviewed Boeing’s financial management reports
and EVMS cost estimates. We analyzed the Stages Element Office and Boeing Stages contract obligations
and disbursements through NASA’s financial accounting system. We also examined NASA’s program
management policies and internal and external EVMS requirements. To determine the status of Boeing’sStages contract, we interviewed NASA contracting officers from the Marshall Office of Procurement;
officials from the SLS Program, Planning, and Control Office; and managers from the Stages Element
Office. To establish baseline costs for each SLS element, we examined the contract files for the major
SLS contracts—Stages, Stages Production and Evolution Contract, Boosters Production and Operations
Contract, RS-25 Restart and Production, RL10 Engines, and Universal Stage Adapter.
Additionally, we reviewed past and current schedules to assess whether Boeing was meeting its
schedule milestones and goals. Specifically, we reviewed contract milestones, past and current
Integrated Master Schedules, and quarterly program status reviews. We also interviewed Boeing andNASA Technical Management Personnel at Michoud to gain their perspective on whether they will beable to meet current schedule milestones for the Block 1B.
Due to several nonconformances in current SLS Block 1B production, we reviewed quality control
documents for SLS core and upper stage production and interviewed DCMA and NASA Safety andMission Assurance representatives. We also interviewed NASA personnel from the Exploration Systems
Development Mission Directorate, Office of the Chief Engineer, and Office of Procurement tounderstand the quality, costs, development issues, and contractual options for applying financial
penalties resulting from quality and performance issues related to core and upper stage production.

40 NASA OIG, NASA’s Transition of the Space Launch System to a Commercial Services Contract (IG-24-001, October 12, 2023).

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Appendix A

Assessment of Data Reliability
We used computer-processed data to perform this audit, and that data was used to support ourfindings, conclusions, and recommendations materially. We reviewed and analyzed NASA cost data forfiscal years 2007 through 2023 in NASA’s financial accounting system for the entire SLS Program, each
SLS Element Office, and each contract—Stages, Stages Production and Evolution Contract, Boosters
Production and Operations Contract, RS-25 Restart and Production, RL10 Engines, and Universal Stage
Adapter. The data derived from the financial accounting system was previously tested and found to bereliable. We also compared our results with data provided by the SLS Program in the form of briefing
charts and Excel spreadsheets, and to monthly and quarterly contractor financial management reports
for each contract. No discrepancies were noted. We determined the data was sufficiently reliable andcould be used to support our audit objectives.
Additionally, DCMA provided information from the CAR module of its Product Data Reporting and
Evaluation Program—Automated Information System. We reviewed the details of DCMA’s CAR reports
and compared them to documentation confirming the number of records and content of selectedrecords in the CAR reports. No discrepancies were noted. We determined the data was sufficiently
reliable for the purpose of quantifying and describing quality management issues within the SLS Block 1B
manufacturing process.

Review of Internal Controls
We evaluated the internal controls associated with NASA’s management of SLS Block 1B development,
specifically their cost, schedule, and performance during production at Michoud, as well as theevaluation of program controls. In addition, we reviewed program documents designed to manage cost,schedule, and performance for the production of the core stage, EUS, boosters, RS-25 and RL10 engines,
and Universal Stage Adapter. The control weaknesses we found were identified and discussed in thisreport. Our recommendations, if implemented, will improve the identified control weaknesses.
However, because our review was limited to these internal control components and underlying
principles, it may not have disclosed all internal control deficiencies that may have existed at the timeof this audit.

Prior Coverage
During the last 5 years, the NASA Office of Inspector General and Government Accountability Officehave issued 22 reports of significant relevance to the subject of this report. Reports can be accessed athttps://oig.nasa.gov/audits/ and https://www.gao.gov, respectively.

NASA Office of Inspector General
Key Challenges Facing NASA’s Artemis Campaign (Testimony-2024, January 17, 2024)
NASA’s Management of the Artemis Supply Chain (IG-24-003, October 19, 2023)
NASA’s Transition of the Space Launch System to a Commercial Services Contract (IG-24-001,
October 12, 2023)
NASA’s Management of the Space Launch System Booster and Engine Contracts (IG-23-015,
May 25, 2023)

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Appendix A

2022 Report on NASA's Top Management and Performance Challenges (MC-2022,
November 2022)
NASA’s Management of the Mobile Launcher 2 Contract (IG-22-012, June 9, 2022)
NASA’s Cost Estimating and Reporting Practices for Multi-Mission Programs (IG-22-011, April 7, 2022)
NASA’s Management of the Artemis Missions (IG-22-003, November 15, 2021)
Artemis Status Update (IG-21-018, April 19, 2021)
NASA's Management of the Gateway Program for Artemis Missions (IG-21-004, November 10, 2020)
NASA's Management of Its Acquisition Workforce (IG-21-002, October 27, 2020)
NASA’s Management of the Orion Multi-Purpose Crew Vehicle Program (IG-20-018, July 16, 2020)
NASA's Management of Space Launch System Program Costs and Contracts (IG-20-012, March 10, 2020)

Government Accountability OfficeNASA Artemis Programs: Lunar Landing Plans Are Progressing, but Challenges Remain (GAO-24-107249,
January 17, 2024)
Space Launch System: Cost Transparency Needed to Monitor Program Affordability (GAO-23-105609,
September 7, 2023)
NASA: Assessments of Major Projects (GAO-23-106021, May 31, 2023)
NASA Lunar Programs: Improved Mission Guidance Needed as Artemis Complexity Grows(GAO-22-105323, September 8, 2022)
NASA: Lessons from Ongoing Major Projects Could Improve Future Outcomes (GAO-22-105709,
February 9, 2022)
NASA Lunar Programs: Significant Work Remains, Underscoring Challenges to Achieving Moon Landingin 2024 (GAO-21-330, May 26, 2021)
High-Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas(GAO-21-119SP, March 2, 2021)
NASA Human Space Exploration: Significant Investments in Future Capabilities Require Strengthened
Management Oversight (GAO-21-105, December 15, 2020)
NASA Human Space Exploration: Persistent Delays and Cost Growth Reinforce Concerns overManagement of Programs (GAO-19-377, June 19, 2019)NASA Office of Inspector General

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Appendix B

Appendix B: Management’s Comments
National Aeronautics and Space Administration
Mary W. Jackson NASA Headquarters
Washington, DC 20546-0001

Reply to Attn of:

Exploration Systems Development Mission Directorate
TO:

Assistant Inspector General for Audits

FROM:

Associate Administrator for Exploration Systems Development Mission
Directorate

SUBJECT: Agency Response to OIG Draft Report, “NASA’s Management of Space
Launch System Block 1B Development” (A-23-08-01-HED)
The National Aeronautics and Space Administration (NASA) appreciates the opportunity toreview and comment on the Office of Inspector General (OIG) draft report entitled, “NASA’s
Management of Space Launch System Block 1B Development” (A-23-08-01-HED), dated
June 24, 2024.
With the first crewed Artemis mission in lunar orbit clearly on the horizon, NASA programsin the Exploration Systems Development Mission Directorate (ESDMD) are tasked with oneof humanity’s most challenging and unique endeavors: to send human explorers into deep
space as a means of enabling discovery, scientific progress, and inspiration. The mandate to
do so is not one taken lightly by the Agency. The Space Launch System (SLS) Program,
responsible for the development of the launch vehicles that will ultimately enable the returnof astronauts to the lunar surface, is structured and managed to ensure these responsibilities
are met and goals fulfilled.
ESDMD acknowledges the crucial role played by the OIG in assessing instances of waste,fraud, or abuse within the Federal Government. ESDMD is dedicated to transparency andaccountability. The Agency’s goal is to fully cooperate with the OIG, providing access to all
relevant information and documentation necessary for their audits, evaluations, andinvestigations. As OIG notes in Appendix A of the report, ESDMD has been audited
22 times in the past five years regarding this subject matter. During this specific audit,
ESDMD provided 366 products, attended 7 requested meetings, and participated in 17 hours
of interviews. Altogether, this activity incurred an estimated 140 hours of work by our
ESDMD team. This commitment to transparency underscores our dedication to upholding
the highest standards of integrity and ethics in all aspects of our work.
In this draft report, the OIG examined NASA’s management of the SLS Block 1Bdevelopment, focusing on the Exploration Upper Stage (EUS). The OIG found that The
Boeing Company’s (Boeing) quality management system at NASA’s Michoud Assembly
Facility (Michoud) does not adhere to SAE International’s AS9100D standards on quality
NASA Office of Inspector General

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Appendix B

management systems or the Agency’s requirements. The OIG also reported on SLS Block
1B’s cost increases and schedule delays.
Specifically, the OIG states that it found an array of issues that could hinder SLS Block 1B’s
readiness for Artemis IV including potential safety risks, escalating costs and schedules, andinadequate visibility into the Block 1B’s projected costs, resulting in costs for Block 1B toincrease significantly and reach approximately $5.7 billion by 2028. Additionally, the OIG
states its view that Boeing’s quality management system does not meet industry standards incore stage productions at Michoud. The OIG also states its view that the absence of a formal
cost and schedule baseline contributed to a lack of transparency and challenges in NASA’s
ability to assess progress and adherence to cost and timelines.
The OIG states it is concerned that, with the large number of nonconformances identified
during the manufacturing process at Michoud and Boeing’s ineffective quality management
system, critical nonconformities may not be identified and corrected. OIG notes concern
specifically with the quality control deficiencies and asserts that this could “increase safety
risk to the integrated spacecraft.” While it is recognized that the contractor has encounteredquality issues, it is important to avoid making assumptions that this will result in substandard
parts being used in the spacecraft. NASA maintains specific processes to ensure quality
issues are not flowed to flight hardware. NASA closely monitors its contractors through avariety of mechanisms to ensure they meet the Agency’s standards and requirements. This
includes regular reviews of contractor performance, financial audits, and quality inspectionsof hardware, facilities, and processes.
NASA is dedicated to ensuring that its workforce and associated contractors are qualified andproperly trained to ensure the safety of its missions. This includes employing project
managers and technical experts who work closely with contractors to provide guidance andensure compliance with contractual obligations. NASA holds all its programs to the highest
technical and programmatic standard levied on the spaceflight community, and ESDMD
bears the responsibility of equipping Artemis astronauts with safe, reliable hardware toenable the most ambitious of engineering and scientific goals.
The aerospace industry is facing significant supply chain disruptions, similar to, and in somecases in a more acute scale, to the broader economic supply chain issues. These disruptions
have been exacerbated by various factors, including labor shortages, transportation delays,
and raw material shortages. These disruptions have had a profound impact on the aerospaceindustry, leading to production delays, increased costs, and challenges in meeting customer
demand. ESDMD’s buying power is decreasing each year and escalating. These unforeseenchallenges, including technical issues, are all contributing factors to cost and schedule
impacts. NASA is working to adapt through proactive management strategies andunderstanding the interconnected factors shaping the aerospace market’s dynamics.
NASA continues to recognize OIG’s critical role in promoting Artemis accountability andtransparency. NASA is committed to meeting the Agency Baseline Commitment (ABC).
The delay in the ABC reflects NASA’s commitment to thorough planning, risk management,
and stakeholder engagement to maximize the likelihood of mission success. By taking theNASA Office of Inspector General

IG-24-015 | 28

Appendix B

time to address technical, budgetary, and stakeholder considerations, NASA aims to ensurethat its projects are well-positioned for success and deliver value to the Nation and the world.
NASA uses an array of tools to track quality, progress, and performance against cost andschedule targets, which include, but are not limited to, Government mandatory inspection
points, project-level cost and schedule joint confidence level informed commitments(including for major developmental upgrades), independent reviews at major life-cycle
reviews and associated key decision points, documented and configuration-controlled
mission definition baselines, risk assessments, independent Agency financial auditing(including a thirteenth consecutive unmodified or “clean” audit opinion in 2023), andAgency-led baseline performance and major program reviews. There are also independent
reviews by the NASA Advisory Council, Aerospace Safety Advisory Panel, and various
other ongoing reviews from Governmental oversight entities. This rigorous monitoringhelps NASA maintain accountability and quality in its programs and projects.
NASA’s commitment to Artemis IV and beyond is underscored by its dedication to
exploration, innovation, collaboration, and public engagement. By building on theachievements of previous lunar missions and leveraging cutting-edge technologies andpartnerships, NASA aims to establish a sustainable human presence on the Moon and propel
humanity toward new frontiers of space exploration.
The OIG makes four recommendations addressed to the Associate Administrator (AA) for
ESDMD.
Specifically, the OIG recommends the AA for ESDMD, in conjunction with the Assistant
Administrator for Procurement and the Chief, Safety and Mission Assurance:
Recommendation 1: Coordinate with Boeing, the SLS Stages prime contractor, to develop
a quality management system training program that is compliant with AS9100D andreviewed by the appropriate NASA officials.
Management’s Response: NASA concurs. The SLS Stages contract contains therequirements associated with quality management systems compliant with AS9100D in
EUS Statement of Work paragraph 5. The SLS Program, in consultation with the Officeof Safety and Mission Assurance, will enforce the contract requirements as well as workwith Boeing and Michoud, to confirm that Boeing implements a quality management
system training program that is compliant with AS9100D for the development of SLS.
Estimated Completion Date: July 31, 2025.
Recommendation 2: Institute financial penalties for Boeing’s noncompliance with quality
control standards.
Management’s Response: NASA non-concurs. NASA interprets this recommendation
to be directing NASA to institute penalties outside the bounds of the contract. There are
already authorities in the contract, such as award fee provisions, which enable financial
ramifications for noncompliance with quality control standards. Further, quality issues
NASA Office of Inspector General

IG-24-015 | 29

Appendix B

and noncompliances are documented in the Contractor Performance Assessment
Reporting System. For anything beyond this, OIG’s broad recommendation appears
inconsistent with NASA Procedural Requirements 8735.2C, Hardware Quality Assurance
Program Requirements for Programs and Projects, the Federal Acquisition Regulation(FAR) subparts 46.1 – 46.8, and the NASA FAR Supplement (NFS), which all specify
processes for addressing any nonconformances with quality control standards. Instituting
financial penalties outside the bounds of the contract subverts the control process of thecontract.

NASA considers noncompliance with quality control standards as a part of its award fee
evaluation process, consistent with contract terms and applicable laws. The Agency’s
Office of Procurement, Office of the General Counsel, Chief Program Management
Officer, the Office of the Chief Financial Officer, and Mission Directorate representatives
continue to explore and evaluate options for addressing quality control nonconformances,in a manner consistent with existing NASA policies and applicable laws.
Estimated Completion Date: N/A
In addition, the OIG recommends the AA for ESDMD:
Recommendation 3: Perform a detailed cost overrun analysis on Boeing’s Stages contract
for EUS development.
Management’s Response: NASA concurs. The contract’s Limitation of Funds clauserequires notification when the contractor believes it will be in a cost overrun position.
The SLS Program evaluates the prime contractor’s performance continuously andprepares independent assessments of the contractor’s schedule, cost, risk, and technicalprogress. On a quarterly basis, the SLS Program evaluates the estimate to complete.
Estimated Completion Date: December 31, 2024.
Recommendation 4: Coordinate with the Defense Contract Management Agency (DCMA)
to ensure contractual compliance with Earned Value Management System (EVMS) clauses.
Management’s Response: NASA concurs. The SLS Program maintains robust
relations with DCMA, engaging in regular meetings to thoroughly review and discuss
contract status and performance. The contract clause NFS 1852.234-2 states that NASAwill ensure that the requirements are enforced. Although Boeing’s EVMS is disapprovedby DCMA, NASA will continue to ensure compliance with the terms and conditions of
the contract.
SLS commits to conducting monthly reviews with DCMA representatives to rigorously
ensure that all proposed corrective action plans are implementable and there are no
additional costs to the SLS Program. It is worth noting that the Boeing EVMS
compliance is an issue extant throughout numerous Government contracts and crossing
several Government agencies. NASA will work the Boeing EVMS issues to the extent
that they apply to the Agency-specific contracts.
NASA Office of Inspector General

IG-24-015 | 30

Appendix B

Estimated Completion Date: October 31, 2024.
We have reviewed the draft report for information that should not be publicly released. As aresult of this review, we have identified information that should not be publicly released andhave communicated such to the OIG.
Once again, thank you for the opportunity to review and comment on the subject draft report.
If you have any questions or require additional information regarding this response, pleasecontact Christine Solga at (202) 358-1238.
signed by
CATHERINE Digitally
CATHERINE KOERNER
2024.07.24
KOERNER Date:
15:14:27 -05'00'

Catherine A. Koernercc:
Chief, Safety and Mission Assurance/Mr. Deloach
Assistant Administrator for Procurement/Ms. Smith Jackson

NASA Office of Inspector General

IG-24-015 | 31

APPENDIX C: REPORT DISTRIBUTION

Appendix C

National Aeronautics and Space Administration
Administrator
Deputy Administrator
Associate Administrator
Chief of Staff
Associate Administrator for Exploration Systems Development Mission Directorate
Assistant Administrator for Procurement
Chief, Safety and Mission Assurance
Moon to Mars Program Manager
Space Launch System Program Manager

Non-NASA Organizations and Individuals
Office of Management and Budget
Deputy Associate Director, Climate, Energy, Environment, and Science Division
Government Accountability OfficeDirector, Contracting and National Security Acquisitions
The Boeing Company

Congressional Committees and Subcommittees, Chair andRanking Member
Senate Committee on Appropriations
Subcommittee on Commerce, Justice, Science, and Related Agencies
Senate Committee on Commerce, Science, and Transportation
Subcommittee on Space and Science
Senate Committee on Homeland Security and Governmental Affairs
House Committee on Appropriations
Subcommittee on Commerce, Justice, Science, and Related Agencies
House Committee on Oversight and Accountability
Subcommittee on Government Operations and the Federal Workforce
House Committee on Science, Space, and Technology
Subcommittee on Investigations and Oversight
Subcommittee on Space and Aeronautics(Assignment No. A-23-08-01-HED)

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