Space Acquisition Problems Persist

Figure 1 compares original cost estimates and current cost estimates for  the broader portfolio of major space acquisitions for fiscal years 2008  through 2013. The wider the gap between original and current estimates,  the fewer dollars DOD has available to invest in new programs. As shown  in the figure, estimated costs for the major space acquisition programs  have increased by about $10.9 billion from initial estimates for fiscal years  2008 through 2013. The declining investment in the later years is the result  of the Evolved Expendable Launch Vehicle (EELV) program no longer  being considered a major acquisition program and the cancellation and  proposed cancellation of two development efforts which would have  significantly increased DOD’s major space acquisition investment.
Figures 2 and 3 reflect differences in total life-cycle costs and unit costs  for satellites from the time the programs officially began to their most  recent cost estimate. As figure 3 notes, in several cases, DOD has had to  cut back on quantity and capability in the face of escalating costs. For  example, two satellites and four instruments were deleted from National  Polar-orbiting Operational Environmental Satellite System (NPOESS) and  four sensors are expected to have fewer capabilities. This will reduce  some planned capabilities for NPOESS as well as planned coverage.
Figure 4 highlights the additional estimated months needed to complete  programs. These additional months represent time not anticipated at the  programs’ start dates. Generally, the further schedules slip, the more DOD  is at risk of not sustaining current capabilities. For this reason, DOD began  a follow-on system effort, known as the Third Generation Infrared Satellite  to run in parallel with the Space Based Infrared System (SBIRS) program.
This fiscal year, DOD launched the second Wideband Global SATCOM  (WGS) satellite. WGS had previously been experiencing technical and  other problems, including improperly installed fasteners and data  transmission errors. When DOD finally resolved these issues, it  significantly advanced capability available to warfighters. Additionally, the  EELV program had its 23rd consecutive successful operational launch  earlier this month. However, other major space programs have had  setbacks. For example:  In September 2008, the Air Force reported a Nunn-McCurdy unit cost  breach of the critical cost growth threshold for the Advanced Extremely  High Frequency (AEHF) satellite because of cost growth brought on by  technical issues, schedule delays, and increased costs for the procurement  of a fourth AEHF satellite. The launch of the first satellite has slipped  further by almost 2 years from November 2008 to as late as September  2010. Further, the program office estimates that the fourth AEHF satellite  could cost more than twice the third satellite because some components  that are no longer manufactured will have to be replaced and production  will have to be restarted after a 4-year gap. Because of these delays, initial  operational capability has slipped 3 years—from 2010 to 2013.
The Mobile User Objective System (MUOS) communications satellite  estimates an 11-month delay—from March 2010 to February 2011—in the  delivery of on-orbit capability from the first satellite. Further, contractor  costs for the space segment have increased about 48 percent because of  the additional labor required to address issues related to satellite design  complexity, satellite weight, and satellite component test anomalies and  associated rework. Despite the contractor cost increases, the program has  been able to remain within its baseline program cost estimate.
The Global Positioning System (GPS) IIF satellite is now expected to be  delayed almost 3 years from its original date to November 2009. Also, the  cost of GPS IIF is now expected to be about $1.6 billion—about $870  million over the original cost estimate of $729 million. (This approximately  119 percent cost increase is not that noticeable in figures 2 and 3 because  the GPS II modernization program includes the development and  procurement of 33 satellites, only 12 of which are IIF satellites.) The Air  Force has had difficulty in the past building GPS satellites within cost and  schedule goals because of significant technical problems, which still  threaten its delivery schedule and because of challenges it faced with a  different contractor for the IIF program, which did not possess the same  expertise as the previous GPS contractor. Further, while the Air Force is  structuring the new GPS IIIA program to prevent mistakes made on the IIF  program, the Air Force is aiming to deploy the GPS IIIA satellites 3 years  faster than the IIF satellites. We believe the IIIA schedule is optimistic  given the program’s late start, past trends in space acquisitions, and  challenges facing the new contractor.
Total program cost for the SBIRS program is estimated around $12.2  billion, an increase of $7.5 billion over the original program cost, which  included 5 geosynchronous earth orbit (GEO) satellites. The first GEO  satellite has been delayed roughly 7 years in part because of poor  oversight, technical complexities, and rework. Although the program  office set December 2009 as the new launch goal for the satellite, a recent  assessment by the Defense Contract Management Agency anticipates an  August 2010 launch date, adding an additional 8 months to the previous  launch estimate. Subsequent GEO satellites have also slipped as a result of  the flight software design issues.
The NPOESS program has experienced problems with replenishing its  aging constellation of satellites and was restructured in July 2007 in  response to a Nunn-McCurdy unit cost breach of the critical cost growth  threshold. The program was originally estimated to cost about $6.5 billion  for six satellites from 1995 through 2018. The restructured program called  for reducing the number of satellites from six to four and included an  overall increase in program costs, delays in satellite launches, and  deletions or replacements of satellite sensors. Although the number of  satellites has been reduced, total costs have increased by almost 108  percent since program start. Specifically, the current estimated life cycle  cost of the restructured program is now about $13.5 billion for four  satellites through 2026. This amount is higher than what is reflected in  figure 2 as it represents the most recent GAO estimate as opposed to the  DOD estimates used in the figure. We reported last year that poor  workmanship and testing delays caused an 8-month slip in the delivery of  a complex imaging sensor. This late delivery caused a delay in the  expected launch date of a demonstration satellite, moving it from late  September 2009 to early January 2011.
This year it is also becoming more apparent that space acquisition  problems are leading to potential gaps in the delivery of critical  capabilities. For example, DOD faces a potential gap in protected military  communications caused by delays in the AEHF program and the proposed  cancellation of the TSAT program, which itself posed risks in schedule  delays because of TSAT’s complexity and funding cuts designed to ensure  technology objectives were achievable. DOD faces a potential gap in ultra  high frequency (UHF) communications capability caused by the  unexpected failures of two satellites already in orbit and the delays  resulting from the MUOS program. DOD also faces potential gaps or  decreases in positioning, navigation and timing capabilities because of late  delivery of the GPS IIF satellites and the late start of the GPS IIIA  program. There are also concerns about potential gaps in missile warning  and weather monitoring capabilities because of delays in SBIRS and  NPOESS.
Addressing gaps in any one of these areas is not a simple matter. While  there may be opportunities to build less complex “gap filler” satellites, for  example, these still require time and money that may not be readily  available because of commitments to the longer-term programs. There  may also be opportunities to continue production of “older” generation  satellites, but such efforts also require time and money that may not be  readily available and may face other challenges such as restarting  production lines and addressing issues related to obsolete parts and  materials. Further, satellites on orbit can be made to last longer by turning  power off at certain points in time, but this may also present unacceptable  tradeoffs in capability.

	Underlying Reasons for Cost and Schedule Growth

Our past work has identified a number of causes behind the cost growth  and related problems, but several consistently stand out. First, on a broad  scale, DOD starts more weapon programs than it can afford, creating a  competition for funding that encourages low cost estimating, optimistic  scheduling, overpromising, suppressing bad news, and, for space  programs, forsaking the opportunity to identify and assess potentially  more executable alternatives. Programs focus on advocacy at the expense  of realism and sound management. Invariably, with too many programs in  its portfolio, DOD is forced to continually shift funds to and from  programs—particularly as programs experience problems that require  additional time and money to address. Such shifts, in turn, have had costly,  reverberating effects.
Second, DOD has tended to start its space programs too early, that is,  before it has the assurance that the capabilities it is pursuing can be  achieved within available resources and time constraints. This tendency is  caused largely by the funding process, since acquisition programs attract  more dollars than efforts concentrating solely on proving technologies.  Nevertheless, when DOD chooses to extend technology invention into  acquisition, programs experience technical problems that require large  amounts of time and money to fix. Moreover, when this approach is  followed, cost estimators are not well positioned to develop accurate cost  estimates because there are too many unknowns. Put more simply, there is  no way to accurately estimate how long it would take to design, develop,  and build a satellite system when critical technologies planned for that  system are still in relatively early stages of discovery and invention.
While our work has consistently found that maturing technologies before  program start is a critical enabler of success, it is important to keep in  mind that this is not the only solution. Both the TSAT and the Space Radar  development efforts, for example, were seeking to mature critical  technologies before program start, but they faced other risks related to the  systems’ complexity, affordability, and other development challenges.  Ultimately, Space Radar was cancelled and DOD has proposed the  cancellation of TSAT. Last year, we cited the MUOS program’s attempts to  mature critical technologies before program start as a best practice, but  the program has since encountered technical problems related to design  issues and test anomalies.
Third, programs have historically attempted to satisfy all requirements in a  single step, regardless of the design challenge or the maturity of the  technologies necessary to achieve the full capability. DOD has preferred to  make fewer but heavier, larger, and more complex satellites that perform a  multitude of missions rather than larger constellations of smaller, less  complex satellites that gradually increase in sophistication. This has  stretched technology challenges beyond current capabilities in some cases  and vastly increased the complexities related to software. Programs also  seek to maximize capability because it is expensive to launch satellites. A  launch using a medium- or intermediate-lift evolved expendable launch  vehicle, for example, would cost roughly $65 million.
Fourth, several of today’s high-risk space programs began in the late  1990s, when DOD structured contracts in a way that reduced government  oversight and shifted key decision-making responsibility onto contractors.  This approach—known as Total System Performance Responsibility, or  TSPR—was intended to facilitate acquisition reform and enable DOD to  streamline its acquisition process and leverage innovation and  management expertise from the private sector. Specifically, TSPR gave a  contractor total responsibility for the integration of an entire weapon  system and for meeting DOD’s requirements. However, because this  reform made the contractor responsible for day-to-day program  management, DOD did not require formal deliverable documents—such as  earned value management reports—to assess the status and performance  of the contractor. The resulting erosion of DOD’s capability to lead and  manage the space acquisition process magnified problems related to  requirements creep and poor contractor performance. Further, the  reduction in government oversight and involvement led to major  reductions in various government capabilities, including cost-estimating  and systems-engineering staff. The loss of cost-estimating and systems- engineering staff in turn led to a lack of technical data needed to develop  sound cost estimates.

	Observations on the Space Industrial Base

We have not performed a comprehensive review of the space industrial  base, but our prior work has identified a number of pressures associated  with contractors that develop space systems for the government that have  hampered the acquisition process. Many of these have been echoed in  other studies conducted by DOD and congressionally chartered  commissions.
We and others have reported that industry—including both prime  contractors and subcontractors—has been consolidated to a point where  there may be only one company that can develop a needed capability or a  specific component for a satellite system. In the view of DOD and  industry officials we have interviewed, this condition has enabled  contractors to hold some programs hostage and has made it difficult to  inject competition into space programs. We also have identified cases  where space programs experienced unanticipated problems resulting from  consolidations in the supplier base. For example, contractors took cost- cutting measures that reduced the quality of parts. In the case of GPS IIF,  contractors lost key technical personnel as they consolidated development  and manufacturing facilities, causing inefficiencies in the program.
In addition, space contractors are facing workforce pressures similar to  those experienced by the government, that is, there is not enough  technical expertise to develop highly complex space systems. A number of  studies have found that both industry and the U.S. government face  substantial shortages of scientists and engineers and that recruitment of  new personnel is difficult because the space industry is one of many  sectors competing for the limited number of trained scientists and  engineers. Security clearance requirements make competing for talented  personnel even more difficult for military and intelligence space programs  as opposed to civil space programs.
In a 2006 review of space cost estimating, we also found that the  government has made erroneous assumptions about the space industrial  base when it started the programs that are experiencing the most  challenges today. In a review for this subcommittee, for instance, we  found that the original contracting concept for the EELV program was for  the Air Force to piggyback on the anticipated launch demand of the  commercial sector. Furthermore, the Air Force assumed that it would  benefit financially from competition among commercial vendors.  However, the commercial demand never materialized, and the government  decided to bear the cost burden of maintaining the industrial base in order  to maintain launch capability, and assumed savings from competition were  never realized.

	Actions Needed to Address Space and Weapon Acquisition Problems

Over the past decade, we have identified best practices that DOD space  programs can benefit from. DOD has taken a number of actions to address  the problems on which we have reported. These include initiatives at the  department level that will affect its major weapons programs, as well as  changes in course within specific Air Force programs. Although these  actions are a step in the right direction, additional leadership and support  are still needed to ensure that reforms that DOD has begun will take hold.
Our work—which is largely based on best practices in the commercial  sector—has recommended numerous actions that can be taken to address  the problems we identified. Generally, we have recommended that DOD  separate technology discovery from acquisition, follow an incremental  path toward meeting user needs, match resources and requirements at  program start, and use quantifiable data and demonstrable knowledge to  make decisions to move to next phases. We have also identified practices  related to cost estimating, program manager tenure, quality assurance,  technology transition, and an array of other aspects of acquisition program  management that space programs could benefit from. Table 1 highlights  these practices.
Several of these practices could also benefit the space industrial base. For  instance, applying an evolutionary approach to development would likely  provide a steadier pipeline of government orders and thus enable suppliers  to maintain their expertise and production lines. More realistic cost  estimating and full funding would reduce funding instability, which could  reduce fits and starts that create planning difficulties for suppliers. Longer  tenure and more authority for program managers would provide more  continuity in relationships between the government and its suppliers.
DOD is attempting to implement some of these practices for its major  weapon programs. For example, as part of its strategy for enhancing the  roles of program managers in major weapon system acquisitions, the  department has established a policy that requires formal agreements  among program managers, their acquisition executives, and the user  community that set forth common program goals. These agreements are  intended to be binding and to detail the progress a program is expected to  make during the year and the resources the program will be provided to  reach these goals. DOD is also requiring program managers to sign tenure  agreements so that their tenure will correspond to the next major  milestone review closest to 4 years. Over the past few years, DOD has also  been testing portfolio management approaches in selected capability  areas—command and control, net-centric operations, battlespace  awareness, and logistics—to facilitate more strategic choices for resource  allocation across programs.
Within the space community, cost estimators from industry and agencies  involved in space have been working together to improve the accuracy and  quality of their estimates. In addition, on specific programs, actions have  been taken to prevent mistakes made in the past. For example, on the GPS  IIIA program, the Air Force is using an incremental development  approach, where it will gradually meet the needs of its users; using military  standards for satellite quality; conducting multiple design reviews;  exercising more government oversight and interaction with the contractor  and spending more time at the contractor’s site; and using an improved  risk management process. On the SBIRS program, the Air Force acted to  strengthen relationships between the government and the SBIRS  contractor team, and to implement more effective software development  practices as it sought to address problems related to the systems flight  software system. Correspondingly, DOD’s Office of the Under Secretary of  Defense for Acquisition, Technology, and Logistics is asking space  programs passing through milestone reviews to take specific measures to  better hold contractors accountable through award and incentive fees, to  require independent technology readiness assessments at particular points  in the acquisition process, and to hold requirements stable.
Furthermore, the Air Force, U.S. Strategic Command, and other key  organizations have made progress in implementing the Operationally  Responsive Space (ORS) initiative. This initiative encompasses several  separate endeavors with a goal to provide short-term tactical capabilities  as well as identifying and implementing long-term technology and design  solutions to reduce the cost and time of developing and delivering simpler  satellites in greater numbers. ORS provides DOD with an opportunity to  work outside the typical acquisition channels to more quickly and less  expensively deliver these capabilities. In 2008, we found that DOD has  made progress in putting a program management structure in place for  ORS as well as executing ORS-related research and development efforts,  which include development of low-cost small satellites, common design  techniques, and common interfaces.
Legislation introduced in recent years has also focused on improving  space and weapon acquisitions. In February, the Senate Committee on  Armed Services introduced an acquisition reform bill which contains  provisions that could significantly improve DOD’s management of space  programs. For instance, the bill focuses on increasing emphasis on  systems engineering and developmental testing, instituting earlier  preliminary design reviews, and strengthening independent cost estimates  and technology readiness assessments. Taken together, these measures  could instill more discipline in the front end of the acquisition process  when it is critical for programs to gain knowledge. The bill also requires  greater involvement by the combatant commands in determining  requirements and requiring greater consultation among the requirements,  budget, and acquisition processes. In addition, several of the bill’s  sections, as currently drafted, would require in law what DOD policy  already calls for, but it is not being implemented consistently in weapon  programs. Last week, the House Committee on Armed Services announced  it would be introducing a bill to similarly reform DOD’s system for  acquiring weapons by providing for, among other things, oversight early in  product development and for appointment of independent officials to  review acquisition programs. However, we did not have time to assess the  bill for this statement.
The actions that the Air Force and Office of the Secretary of Defense have  been taking to address acquisition problems are good steps. But, there are  still more, significant changes to processes, policies, and support needed  to ensure reforms can take hold. In particular, several studies have  recently concluded that there is a need to strengthen leadership for  military and intelligence space efforts. The Allard Commission reported  that responsibilities for military space and intelligence programs are  scattered across the staffs of the DOD and the Intelligence Community and  that it appears that “no one is in charge” of national security space. The  HPSCI expressed similar concerns in its report, focusing specifically on  difficulties in bringing together decisions that would involve both the  Director of National Intelligence and the Secretary of Defense. Prior  studies, including those conducted by the Defense Science Board and the  Commission to Assess United States National Security Space Management  and Organization (Space Commission) have identified similar problems,  both for space as a whole and for specific programs. While these studies  have made recommendations for strengthening leadership for space  acquisitions, no major changes to the leadership structure have been made  in recent years. In fact, an “executive agent” position within the Air Force  that was designated in 2001 in response to a Space Commission  recommendation to provide leadership has not been filled since the last  executive resigned in 2007.
In addition, more actions may be needed to address shortages of  personnel in program offices for major space programs. We recently  reported that personnel shortages at the EELV program office have  occurred particularly in highly specialized areas, such as avionics and  launch vehicle groups. Program officials stated that 7 of 12 positions in the  engineering branch for the Atlas group were vacant. These engineers work  on issues such as reviewing components responsible for navigation and  control of the rocket. Moreover, only half the government jobs in some  key areas were projected to be filled. These and other shortages in the  EELV program office heightened concerns about DOD’s ability to use a  cost-reimbursement contract acquisition strategy for EELV since that  strategy required greater government attention to the contractor’s  technical, cost, and schedule performance information. In previous  reviews, we cited personnel shortages at program offices for TSAT as well  as for cost estimators across space. While increased reliance on contractor  employees has helped to address workforce shortages, it could ultimately  create gaps in areas of expertise that could limit the government’s ability  to conduct oversight.
Further, while actions are being undertaken to make more realistic cost  estimates, programs are still producing schedule estimates that are  optimistic and promising that they will not miss their schedule goals. The  GPS IIIA program, for example, began 9 months later than originally  anticipated because of funding delays, but the delivery date remained the  same. The schedule is 3 years shorter than the one achieved so far on GPS  IIF. We recognize that the GPS IIIA program has built a more solid  foundation for success than the IIF, which offers the best course to deliver  on time, but setting an ambitious schedule goal should not be the Air  Force’s only measure for mitigating potential capability gaps. Last year, we  also reported that the SBIRS program’s revised schedule estimates for  addressing software problems appeared too optimistic. For example,  software experts, independent reviewers, as well as the government  officials we interviewed agreed that the schedule was aggressive, and the  Defense Contract Management Agency has repeatedly highlighted the  schedule as high risk.

	Concluding Remarks

In conclusion, senior leaders managing DOD’s space portfolio are working  in a challenging environment. There are pressures to deliver new,  transformational capabilities, but problematic older satellite programs  continue to cost more than expected, constrain investment dollars, pose  risks of capability caps, and thus require more time and attention from  senior leaders than well-performing efforts. Moreover, military space is at  a critical juncture. While there are concerns about the United States losing  its competitive edge in the development of space technology, there are  critical capabilities that are at risk of falling behind their current level of  service. To best mitigate these circumstances and put future programs on  a better path, DOD needs to focus foremost on sustaining current  capabilities and preparing for potential gaps. In addition, there is still a  looming question of how military and intelligence space activities should  be organized and led. From an acquisition perspective, what is important  is that the right decisions are made on individual programs, the right  capability is in place to manage them, and there is someone to hold  accountable when programs go off track.
Madam Chairman, this concludes my prepared statement. I would be  happy to answer any questions you or members of the subcommittee may  have at this time.

	Contacts and Acknowledgments

For further information about this statement, please contact Cristina  Chaplain at (202) 512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Pubic Affairs may be found on the  last page of this statement. Individuals who made key contributions to this  statement include Art Gallegos, Assistant Director; Greg Campbell; Maria  Durant; Arturo Holguin; Laura Holliday; Rich Horiuchi; Sylvia Schatz; and  Peter Zwanzig.

Appendix I: Scope and Methodology

In preparing this testimony, we relied on our body of work in space  programs, including previously issued GAO reports on assessments of  individual space programs, common problems affecting space system  acquisitions, and the Department of Defense’s (DOD) acquisition policies.  We relied on our best practices studies, which comment on the persistent  problems affecting space acquisitions, the actions DOD has been taking to  address these problems, and what remains to be done. We also relied on  work performed in support of our 2009 annual weapons system  assessment. The individual reviews were conducted in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

Summary:
Why GAO Did This Study

Despite a growing investment in space, the majority of large-scale acquisition programs in the Department of Defense's (DOD) space portfolio have experienced problems during the past two decades that have driven up cost and schedules and increased technical risks. The cost resulting from acquisition problems along with the ambitious nature of space programs have resulted in cancellations of programs that were expected to require investments of tens of billions of dollars. Along with the cost increases, many programs are experiencing significant schedule delays--as much as 7 years--resulting in potential capability gaps in areas such as positioning, navigation, and timing; missile warning; and weather monitoring. This testimony focuses on (3) the condition of space acquisitions, (1) causal factors, (2) observations on the space industrial base, and (4) recommendations for better positioning programs and industry for success. In preparing this testimony, GAO relied on its body of work in space and other programs, including previously issued GAO reports on assessments of individual space programs, common problems affecting space system acquisitions, and DOD's acquisition policies.

What GAO Found

Estimated costs for major space acquisition programs have increased by about $10.9 billion from initial estimates for fiscal years 2008 through 2013. As seen in the figure below, in several cases, DOD has had to cut back on quantity and capability in the face of escalating costs. Several causes behind the cost growth and related problems consistently stand out. First, DOD starts more weapon programs than it can afford, creating a competition for funding that encourages, among other things, low cost estimating and optimistic scheduling. Second, DOD has tended to start its space programs before it has the assurance that the capabilities it is pursuing can be achieved within available resources. GAO and others have identified a number of pressures associated with the contractors that develop space systems for the government that have hampered the acquisition process, including ambitious requirements, the impact of industry consolidation, and shortages of technical expertise in the workforce. Although DOD has taken a number of actions to address the problems on which GAO has reported, additional leadership and support are still needed to ensure that reforms that DOD has begun will take hold.