GAO

United States General Accounting Office

Testimony

Before the Subcommittee on Science, Technology, and 

Space, Committee on Commerce, Science, and 

Transportation, U.S. Senate

For Release 

Expected at 

10:00 a.m., EDT

on April 29, 1999

SPACE STATION

Status of Russian 

Involvement and Cost 

Control Efforts

Statement of Allen Li, Associate Director, National Security 

and International Affairs Division

GAO/T-NSIAD-99-117

Page 1 GAO/T-NSIAD-99-117

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss our ongoing work on the 

National Aeronautics and Space Administration’s (NASA) International 

Space Station. We are currently responding to both the committee’s 

request to review the status of Russian involvement in the program and the 

subcommittee’s request to address the prime contractor’s progress in 

implementing cost control measures and NASA’s efforts to oversee the 

program’s nonprime activity. We plan to finalize our work and report on 

these issues in the next few months. Today, I will address NASA’s efforts to 

(1) develop a contingency plan to mitigate the possibility of unforeseen 

problems, including future Russian nonperformance, (2) ensure that 

Russian quality assurance and manufacturing processes are acceptable, 

and (3) control prime contract and nonprime activity costs.

Last December, NASA accomplished an important and significant step in its 

construction of the International Space Station: coupling the first two 

elements, the Functional Cargo Block and Node 1, on orbit. The 

subcommittee is well aware of the many challenges NASA has faced in 

developing and building the International Space Station. These challenges, 

which include Russia’s difficulties in meeting its commitment to deliver a 

key component on schedule and continuing U.S. prime contractor cost 

increases, have translated into schedule delays and higher program cost 

estimates to complete development. While the on orbit assembly of the 

first two elements of the space station was a noteworthy achievement, our 

ongoing work shows no abatement in the number of challenges NASA will 

face in the years to come.

Results in Brief Uncertainty regarding future Russian involvement will require NASA to 

continuously plan and implement contingency initiatives. As an 

International Space Station partner, Russia agreed to provide equipment, 

such as the Service Module; Progress vehicles to reboost the station; dry 

cargo; and related launch services throughout the station’s life. However, 

Russia’s funding problems have delayed delivery of the Service Module—

the first major Russian-funded component—and raised concerns about 

Russia’s ability to support the station during assembly and once it is 

completed. NASA is implementing a multi-faceted contingency plan to 

mitigate the risk of further delay of the Service Module and the possibility 

that Progress vehicles for reboosting the station cannot be provided by the 

Russians. The first step of this plan includes the development of the U.S.-

built Interim Control Module and modifications to the Russian-built and 
Page 2 GAO/T-NSIAD-99-117

U.S.-financed, Functional Cargo Block. In the second step, NASA is 

developing its own permanent reboosting capability. NASA’s plan also 

includes payments to the Russian Space Agency to complete near-term 

work on the Service Module, and Progress and Soyuz space vehicles. While 

the ultimate cost of NASA’s plan is uncertain at this time, the agency 

currently estimates that the cost to protect against Russian 

nonperformance will be about $1.2 billion. 

Although NASA has a contingency plan to mitigate Russian 

nonperformance, it does not have an approved overall contingency plan to 

address issues such as late delivery or loss of critical hardware. The 

agency acknowledges that the lack of an overall contingency plan is a 

program risk item. 

NASA is satisfied that Russian quality assurance and manufacturing 

standards are acceptable. However, the Service Module’s inability to meet 

current station requirements with regards to debris protection is a potential 

safety issue. The module will require improvements after it is launched to 

meet the station’s debris protection requirement. Based on the module’s 

current launch date, it will be about 3 1⁄2 years after launch before 

improvements can be completed. 

Pressures on the program’s budget continue to mount. NASA’s cost 

estimates assume assembly completion in 2004. However, the agency 

acknowledges the difficulty in maintaining that schedule. If the schedule is 

not met, total program costs for the U.S. segment of the station will 

increase further. The prime contract has experienced significant cost and 

schedule variances between the contract baseline and actual performance. 

The prime contractor’s estimate of overrun at completion has been 

increased several times and currently stands at $986 million. At the same 

time, the nonprime portion of the program—activities related to science 

facilities and ground and vehicle operations—is also experiencing cost 

increases. In 1994, the nonprime component of the program’s development 

budget was $8.5 billion; today, it is over $12.4 billion. The increase is due 

largely to added scope and schedule slippage. The agency has begun to 

subject the nonprime area to increased scrutiny, and modifications are 

being made to a centralized database of potential risk areas to include the 

identification of the cost of such risks. These actions could potentially 

improve the agency’s ability to manage future cost growth. 
Page 3 GAO/T-NSIAD-99-117

NASA Contingency 

Planning

Because of Russia’s continuing funding problems, NASA developed a 

multi-faceted contingency plan to mitigate the risk of further delay of the 

Service Module and the possibility that a reboost capability cannot be 

provided by the Russians. Payments to Russia for the completion of the 

Service Module have also been made. Although NASA has developed a 

strategy to deal with Russian nonperformance, it has not completed an 

overall contingency plan to address a broader range of potential problems.

Russian Nonperformance 

Contingency Plan Has 

Multiple Steps

Beginning in late 1995, NASA became increasingly concerned about 

Russia’s ability to meet its space station commitments. The greatest 

concern at the time was that the Service Module would be delayed due to 

shortfalls in Russian funding. Later, those delays were acknowledged, and 

the scheduled delivery of the Service Module slipped by 8 months. 

Subsequently, Russia’s continued funding problems caused additional 

slippage. 

NASA responded by developing a plan to address Russian nonperformance. 

The first step, which has been underway since early 1997, is designed to 

protect against further Service Module delays and includes the 

development of the U.S.-built Interim Control Module and modifications to 

the Russian-built and U.S.-financed Functional Cargo Block. 

The second step includes the development of a U.S. capability to provide 

permanent reboost and attitude control. Russia is responsible for 

providing Progress vehicles, dry cargo, and related launch services 

throughout the station’s life. Because of Russia’s continuing funding 

problems, NASA began focusing on the development of a U.S. capability to 

provide similar functions. Key elements of this second step include the 

development of a propulsion module, shuttle modifications, and 

construction of logistics carriers at an estimated cost of about $740 million. 

The propulsion module is the most expensive component of the new 

hardware. While there has been some uncertainty regarding this 

component, NASA currently estimates that the propulsion module could 

cost at least $550 million. The agency estimates that the other 

components—shuttle modifications to permit reboosting of the station and 

logistics carriers to carry dry cargo on the shuttle—will cost about $90 and 

$100 million, respectively. 

To mitigate the risk of Russian nonperformance in the near term, the 

second step of the plan also includes transfer payments to the Russian 
Page 4 GAO/T-NSIAD-99-117

Space Agency to complete near-term work on the Service Module and 

Progress and Soyuz space vehicles. A $60-million payment was made in 

1998 and additional funds may be provided in 1999. In return for the $60-

million payment, NASA will receive 4,000 hours of Russian crew research 

time and stowage volume in the Russian segment of the station. According 

to program officials, the cost of research time on the Mir space station was 

used as the basis for the negotiation.

NASA is monitoring the flow of funds resulting from the transfer. In 

October 1998, officials began reviewing Russian contracts related to the 

Service Module and launch vehicles to confirm that purchase orders were 

in place. In November 1998, NASA officials began reviewing Russian 

disbursement documentation to determine the amount of transferred funds 

that had been released to suppliers. NASA officials said they found no 

evidence to date of U.S. funds being used for purposes other than those 

covered in the terms of the transfer. We did not independently verify 

NASA’s finding. 

NASA also plans to provide, if needed, $100 million to the Russian Space 

Agency in 1999 in return for goods and services. In testimony given before 

the House Science Committee on February 24, 1999, the NASA 

Administrator stated that no decision will be made regarding further 

transfers without assessments of progress in the following three areas: 

(1) Service Module launch schedule, (2) the future disposition of the Mir 

space station, and (3) status of other Russian hardware and launch vehicle 

commitments. According to NASA, it is extremely problematic for Russia 

to support commitments to both Mir and the International Space Station. 

While the ultimate cost of the contingency plan to address Russian 

nonperformance is uncertain at this time, NASA currently estimates that it 

will be about $1.2 billion. To help pay some of the costs of Russian 

contingency requirements, the program transferred $110 million from the 

space station research budget with the expectation that the funds would be 

replaced in the out-years. According to program officials, recent assembly 

sequence delays made it possible to delay planned research expenditures 

to later in the development program. According to NASA, station research 

programs will be impacted as a consequence. Preliminary assessments 

show that it may be necessary to delay the number of flight research 

investigators assigned to station work, and defer some research activities. 
Page 5 GAO/T-NSIAD-99-117

Overall Contingency Plan 

Not Yet Approved

NASA has identified the lack of an overall contingency plan as a program 

risk item. In response, the station program has drafted a plan to address 

issues such as late delivery or loss of critical hardware, but it has not fully 

costed out all contingencies.

The absence of cost estimates has already caused some uncertainty. For 

example, NASA’s recent decision to develop a U.S. capability to reboost the 

station requires that it develop a propulsion module. NASA initially relied 

on a contractor quote to estimate the cost of this capability, but 

subsequently refined its propulsion module requirement, resulting in a 

much higher cost estimate. Some of this uncertainty could have been 

avoided had a fully costed contingency plan been in place. According to 

program officials, the higher priority items included in the overall 

contingency plan will ultimately be costed, and the final plan should be 

approved later this year. 

Quality and Safety of 

Russian Segment

NASA is satisfied that Russian quality assurance and manufacturing 

processes are acceptable. However, NASA and the Russian Space Agency 

will need to continue working together to improve Russian hardware to 

meet orbital debris protection requirements. 

Comparison of Quality 

Assurance Standards

NASA believes Russia’s attention to quality is comparable to that of the 

United States. The agency’s conclusion is based on a combination of 

review of standards and on-site observations. In early 1994, NASA 

undertook an assessment of Russian quality standards. Over a 2-year 

period, it reviewed over 265 standards and documents and concluded that 

the key standards used by Russia were acceptable. Also, when the 

U.S.-financed Functional Cargo Block was being built in Russia, tools 

available to NASA’s prime contractor to assess Russian manufacturing 

quality included technical surveys, test assessments, and test witnessing. 
Page 6 GAO/T-NSIAD-99-117

Safety Impact of Inadequate 

Orbital Debris Protection 

NASA defines the space station’s requirement to withstand orbital debris 

impacts in terms of the likelihood of not being penetrated.1 When Russia 

entered the program as a full partner, it assumed responsibility for a 

significant amount of hardware. At that time, space station partners agreed 

to an 81-percent probability of not being penetrated by orbital debris, for 

the 10-year period beginning on the initial station launch. Subsequently, the 

requirement was reduced to 76 percent, in part, because of assembly 

sequence revisions and configuration changes that increased the station’s 

surface area. When the current performance of Russian-funded hardware 

is included, the station cannot meet this requirement.

NASA and the Russian Space Agency are working on strategies to improve 

Russian components’ debris protection performance. This includes adding 

shielding to hardware components on orbit, studying penetration effects, 

and developing repair techniques and procedures. The most pressing issue 

is protecting the Russian-funded Service Module from debris. Under the 

current schedule, it will be launched about 3 1⁄2 years before installation of 

needed protective shielding can be completed.

NASA’s International Space Station Safety Review Panel is assessing debris 

protection and other Service Module design characteristics. For example, 

according to NASA, the module will not operate fully in a depressurized 

environment. Such a situation could occur after impact with orbital debris, 

and could require the crew’s evacuation. In addition, according to NASA, 

the Service Module’s windows do not meet the requirements applied to 

other station components and are more vulnerable in the event of debris 

impact. Estimated costs to correct these deficiencies have not been fully 

developed. We will continue to monitor these issues as part of our ongoing 

work. 

Under the current plan, NASA will launch the Service Module by granting a 

waiver at the time of launch and correcting the debris protection deficiency 

on orbit. NASA believes it is appropriate to maintain the Service Module’s 

launch schedule because (1) the module adds capabilities that would 

otherwise be unavailable and (2) the risk is acceptable. NASA’s analysis 

shows that the estimated probability of a Service Module debris 

1

 The chance of debris colliding with a spacecraft relates directly to the size and orbital lifetime of the 

spacecraft. NASA calculates overall capability to withstand debris impacts by determining the product 

of the capabilities of the individual components. For example, when Russia entered the program, the 

resulting overall capability of the combined U.S. and Russian segments was 81 percent (0.9 times 0.9). 
Page 7 GAO/T-NSIAD-99-117

penetration prior to the planned augmentation is low. Also, due to the 

relatively small surface area of the windows, NASA believes the likelihood 

of a problem caused by a window puncture is very small.

Prime Contract and 

Nonprime Activity 

Costs

Difficulties in maintaining cost and schedule performance under the prime 

contract have prompted substantial contractor and program office 

attention. There are now some indications of similar problems in the 

nonprime portion of the program, which includes activities related to 

science facilities, ground and vehicle operations, and launch processing. 

This is problematic because nonprime activity comprises more than 

50 percent of total estimated development costs and about 70 percent of 

remaining development costs. Program officials have now increased their 

oversight of nonprime activity, identifying this activity’s potential cost and 

schedule growth as a program concern. In addition, the program recently 

addressed deficiencies in its centralized risk management database to 

better focus on cost issues in both the prime and nonprime areas.

Prime Contract Cost 

Growth 

On a number of occasions in the past several years, we have reported and 

testified on the cost and schedule status of the prime contract.2

 We have 

pointed out that cost growth began almost immediately after the contract 

was awarded and that it posed an ongoing challenge to program managers 

from a budgetary standpoint. We noted that the program had penalized the 

prime contractor in terms of both award and incentive fee largely because 

of the contractor’s problems in controlling and reporting costs.

Cost variances were eventually reflected in the prime contractor’s estimate 

of overrun at completion, although its reluctance to do so in a timely 

fashion was criticized by NASA program managers. At about the same time 

as our last cost control report, the contractor undertook a number of 

initiatives designed to help reverse the trend of ever increasing cost 

growth.

2

Space Station: Cost Control Difficulties Continue (GAO/NSIAD-96-135, July 17, 1996); Space Station:

Cost Control Difficulties Continue (GAO/T-NSIAD-96-210, July 24, 1996); Space Station: Cost Control

Problems Continue to Worsen (GAO/T-NSIAD-97-177, June 18, 1997); Space Station: Cost Control

Problems Are Worsening (GAO/NSIAD-97-213, Sept. 16, 1997); Space Station: Deteriorating Cost and

Schedule Performance Under the Prime Contract (GAO/T-NSIAD-97-262, Sept. 18, 1997); and Space

Station: Cost Control Problems (GAO/T-NSIAD-98-54, Nov. 5, 1997). 
Page 8 GAO/T-NSIAD-99-117

Cost control initiatives implemented by the prime contractor included 

organizational restructuring and staff reductions. The organizational 

changes involved consolidating subcontractor activities and streamlining 

the managerial oversight of the program’s three geographic manufacturing 

bases. The staff reduction initiative involved establishing target personnel 

levels based on the achievement of hardware delivery milestones. 

In February 1997, the prime contractor reported a peak staffing level of 

7,040 equivalent personnel. In March 1999, the prime contractor reported a 

level of 4,396, a 38-percent drop. However, NASA has cited problems with 

the current skill mix. For example, according to NASA, the lack of 

adequate skills has adversely affected both assembly and qualification 

testing schedules. NASA has identified the retention of critical skills, such 

as software engineers, as a top program risk that is worsening over time.

Despite the implementation of cost control initiatives, the prime contract 

continues to experience monthly cost and schedule variances. In June 

1998, the estimate of overrun at completion was $783 million and by April 

1999, it had increased to $986 million. According to the prime contractor, 

most of the latest growth was attributable to additional overhead costs, 

software and hardware development problems, and the need to increase its 

funding reserves.

Increased Oversight of 

Nonprime Activities

Since 1995, the prime contract effort has received considerable attention 

and oversight from program managers. Recently, the agency has begun to 

subject the nonprime area to increased scrutiny, and some problem areas 

are being identified. In 1994, the nonprime component of the program’s 

development budget was $8.5 billion. By early 1999, it had increased to 

over $12.4 billion. According to NASA officials, much of that increase is 

attributable to schedule slippage. In addition, the program has increased in 

scope. For example, since 1994, the program has added $1.2 billion to 

address the consequences of Russian fiscal problems. 

NASA has recently undertaken a number of initiatives to improve its 

oversight of nonprime activity. The initiatives include requiring periodic 

evaluations similar to award fee evaluations of each activity and increasing 

visibility through high-level reviews. In October 1998, station officials held 

a formal review of activities funded outside the prime contract. This 

review was held at the program level and involved representatives from 

nonprime activities. Subsequent reviews were elevated to the Johnson 
Page 9 GAO/T-NSIAD-99-117

Space Center Director level, an indication of the attention now being given 

to this area.

The program has identified and is currently assessing a number of 

nonprime activities in which cost, schedule, or technical problems are 

possible. These areas include research, operations, and vehicle facilities. 

Nonprime activities now account for a larger portion of the station’s 

development budget than the prime contractor activities, meaning that the 

budgetary impact of unforeseen cost growth could be significant. NASA 

considers the resolution of nonprime issues a top concern. We will 

continue to monitor nonprime activity status as part of our ongoing work. 

Cost estimates assume that assembly of the station will be completed in 

2004. NASA has acknowledged the difficulty in maintaining that schedule. 

If the schedule is not met, total program costs will increase further. 

Risk Management Database 

Inadequacies

One mechanism that can help managers deal with cost risks is a thorough 

risk management plan. Ideally, such a plan forces managers to identify and 

cost out all major program risks and then develop remedies for risk areas.

We found that the station program’s centralized database of potential risk 

areas did not capture all risk items or quantify the impacts of cost-driving 

risk items it did capture. As a result, the database fails to give program 

managers sufficient insight and early warning into many emerging problem 

areas. For example, the current database, while identifying retention of 

critical skills as a major program risk, does not identify the potential cost 

impact of losing key personnel. Regarding nonprime risk, the database 

included government-furnished equipment integration as a major risk item, 

but did not provide cost impact information. 

Recognizing the inadequacy of the current database, the former station 

program manager directed the Program Risk Assessment Board to 

scrutinize all existing risks for cost impacts. He emphasized the importance 

of early identification of risk. We will continue to monitor progress in this 

area during our ongoing work.

Conclusions NASA and its partners have successfully begun the International Space 

Station assembly, a noteworthy achievement. However, many of the 

program’s greatest challenges lie ahead. NASA’s most immediate challenge 
Page 10 GAO/T-NSIAD-99-117

is to protect against Russian nonperformance. To do so, the agency is 

implementing a contingency plan that provides financial assistance to the 

Russian Space Agency and develops additional U.S. hardware. The total 

cost of this plan is estimated at about $1.2 billion. In addition, when NASA 

finalizes its overall contingency plan and identifies how it will address 

issues such as late delivery or loss of critical hardware, additional costs 

may be identified. 

NASA and the Russian Space Agency will have to work together to resolve 

potential safety issues involving the Service Module. These issues relate to 

protection against orbital debris. Estimated costs of the improvements that 

must be made after the Service Module is on orbit have not been fully 

developed. 

The estimated cost of completing the U.S. segment continues to rise. The 

current estimated overrun under the prime contract is $986 million and 

nonprime costs have increased by $3.9 billion due primarily to schedule 

slippage and increased scope of work. To its credit, NASA has now begun 

to refine and improve its mechanisms for identifying and mitigating costs 

risks in the program. However, given the uncertainties and risks remaining 

through assembly completion, cost control will remain a tremendous 

challenge.

Mr. Chairman, this concludes our statement. We will be happy to answer 

any questions you or members of the Subcommittee may have.

(707418) Letr
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the 

following address, accompanied by a check or money order made 

out to the Superintendent of Documents, when necessary, VISA and 

MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are 

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and 

testimony. To receive facsimile copies of the daily list or any list 

from the past 30 days, please call (202) 512-6000 using a touchtone 

phone. A recorded menu will provide information on how to obtain 

these lists.

For information on how to access GAO reports on the INTERNET, 

send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at: 

http://www.gao.gov
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Mail

Postage & Fees Paid

GAO

Permit No. GI00