IG-02-028

AUDIT 

REPORT SPACE LAUNCH INITIATIVE: PRIMARY 

REQUIREMENTS FOR A 2ND GENERATION 

REUSABLE LAUNCH VEHICLE 

September 30, 2002

 

 National Aeronautics and 

Space Administration

OFFICE OF INSPECTOR GENERAL
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Acronyms 

DOD Department of Defense 

FY Fiscal Year 

NPG NASA Procedures and Guidelines 

OMB Office of Management and Budget 

RLV Reusable Launch Vehicle 

SLI Space Launch Initiative 

 
 

September 30, 2002 

W 

TO: R/Associate Administrator for Aerospace Technology 

 AE/Chief Engineer 

 MSFC/DA01/Director, Marshall Space Flight Center 

FROM: W/Assistant Inspector General for Audits 

SUBJECT: Final Report on Audit of the Space Launch Initiative: 

 Primary Requirements for a 2nd Generation Reusable Launch Vehicle 

 Assignment Number A-01-049-00 

 Report Number IG-02-028 

 

The subject final report is provided for your information and use. Our evaluation of your 

response has been incorporated into the body of the report. We consider management’s 

proposed corrective actions responsive. The recommendations will remain open for 

reporting purposes until corrective actions are completed. Please notify us when actions 

have been completed on the recommendations, including the extent of testing performed 

to ensure corrective actions are effective. 

We appreciate the courtesies extended to the audit staff. If you have questions 

concerning the report, please contact Mr. Dennis E. Coldren, Program Director, Space 

Flight Audits, at (281) 483-4773, Ms. Clara L. Seger, Program Manager, at 

(321) 867-4715, or Mr. James W. Linville, Auditor-in-Charge, at (256) 544-0971. The 

final report distribution is in Appendix H. 

 

[original signed by] 

Alan J. Lamoreaux 

Enclosure 

cc: 

HQ/AI/Associate Deputy Administrator 

HQ/B/Acting Chief Financial Officer 

HQ/B/Comptroller 

HQ/BF/Director, Financial Management Division 

HQ/G/General Counsel 

HQ/JM/Director, Management Assessment Division 

2 
 

NASA Office of Inspector General 

IG-02-028 September 30, 2002 

 A-01-049-00 

Space Launch Initiative: 

Primary Requirements for a 

2nd Generation Reusable Launch Vehicle 

 

Introduction 

The Space Shuttle is America’s first-generation reusable launch vehicle (RLV) and has 

been NASA's primary launch vehicle for access to space for the last 20 years. The 

Shuttle currently requires a significant portion of NASA’s resources (about 22 percent of 

the $14.9 billion budget for fiscal year (FY) 2002), limiting the Agency’s ability to 

pursue other initiatives in scientific exploration and development of space. In 1994, the 

President issued the National Space Transportation Policy that made NASA responsible 

for developing the technologies needed to build an RLV that would not only reduce the 

cost of access to space but also provide increased safety and reliability. 

In 1999, NASA developed the Integrated Space Transportation Plan (Transportation 

Plan), the long-range investment strategy for the Government to accomplish its mission 

objectives. The Transportation Plan consists of three major programs: Space Shuttle 

Safety Upgrades; the Space Launch Initiative (SLI), also called the 2nd Generation RLV 

Program (Program);1 and the 3rd Generation RLV Technologies and In-Space 

Transportation System. The Transportation Plan’s comprehensive approach is based on 

national space policies, NASA’s industry-led Space Transportation Architecture Studies 

conducted from 1998 through 2000, and lessons learned from various experimental 

technology demonstrators.2 The 2nd Generation RLV Program currently represents an 

investment of about $4.85 billion for FY’s 2001 through 2006. 

The overall objective of the audit was to evaluate SLI planning and management. This 

report identifies a condition regarding determination of primary (Level 1)3

 requirements 

for the 2nd Generation RLV Program, which warrants timely action by NASA. 

 

1

The SLI originally included all of the experimental vehicle programs (for example, the X-33, X-34, and 

X-37 Programs) and the 2nd Generation RLV Program. NASA cancelled the X-33 and X-34 Programs and 

incorporated the X-37 Program into the 2nd Generation RLV Program, which now represents the SLI. 2

NASA initiated the DC-XA, X-33, X-34, and X-37 technology flight demonstrators from 1994 through 

1999. The DC-XA crashed in 1995 during flight tests. NASA cancelled the X-33 and X-34 Programs in 

March 2001 after spending more than $1 billion and concluding that the programs would not provide 

sufficient contributions to SLI technology requirements to justify their cost. 

3

Level 1 requirements specify a capability or characteristic the system or architecture must have to meet 

clearly defined needs. 
 

 

2 

We will address other SLI issues in subsequent audit reports. Details on the objectives, 

scope, and methodology are in Appendix A. A summary of prior audit work that relates 

to the SLI is in Appendix B. 

Results in Brief 

NASA approved the Level 1 requirements for the 2nd Generation RLV Program without 

properly validating them, that is, NASA did not substantiate or verify that the 

requirements were appropriate and viable. As a result, the requirements, in particular 

those for safety and affordability, may not be valid or achievable. Invalid or 

unachievable Level 1 requirements can jeopardize the development of appropriate 

lower-level requirements, cause an inappropriate architecture selection,4

 lead to cost and 

schedule growth, and produce a launch vehicle that is not commercially viable. 

 

Background 

The NASA Office of Aerospace Technology manages the Agency's space transportation 

initiatives aimed at reducing the cost and improving the safety and reliability of access to 

space. Marshall Space Flight Center (Marshall) heads the 2nd Generation RLV Program 

with support from other NASA Centers. In February 2000, the Associate Administrator 

for Aerospace Technology approved the formulation process5 for the 2nd Generation RLV 

Program. The overall goal of the Program is to substantially reduce technical and 

business risks associated with developing safe and reliable RLV’s and providing 

affordable launch operations. 

The 2nd Generation RLV Program follows a three-part strategy: 

• Invest in technology development to provide needed technologies, and reduce 

risks in order to enable full-scale development of any new systems (FY’s 2001 - 

2005). 

• Select a vehicle architecture and decide whether NASA will implement full-scale 

development of a 2nd Generation RLV (FY 2005). 

 

4

NASA will select an approach, or architecture, for providing launch and in-space propulsion to meet space 

transportation requirements. The architecture is an integrated set of segments: Earth-to-orbit and on-orbit 

vehicles, mission planning capability, ground and flight operations, and ground-based and on-orbit support 

infrastructure. 

5

All NASA programs use a process called formulation to demonstrate readiness to begin implementation. 

Formulation is an iterative activity rather than a discrete set of linear steps. Formulation starts with 

customer requirements, strategic planning goals and objectives, and an authorization to begin the process, 

which is evidenced in the formulation authorization document. 
 

 

3 

• If the Agency decides in FY 2005 to implement full-scale development 

(FY’s 2005 - 2010), then produce an operational 2nd Generation RLV by 

FY 2010.6 If not, at the end of the current formulation phase, the 2nd Generation 

RLV Program could continue formulation, be restructured, or terminated. 

Through the Program, NASA leads a team that includes the Department of Defense 

(DOD), primarily the U.S. Air Force, the aerospace industry, and academia to develop 

viable system architectures and technologies based on clearly defined system 

requirements.7

 An integral step in developing the architectures and technologies is the 

development of Level 1 requirements that reflect general launch needs that the 2nd

Generation RLV is intended to satisfy. These requirements are derived from an 

understanding of NASA, DOD, and commercial mission needs and from deficiencies in 

the existing fleet of launch vehicles. System deficiencies include inadequate space 

transportation system safety and reliability and excessive space transportation user costs. 

From the mission needs and system deficiencies, NASA developed the 2nd Generation 

RLV Program Level 1 Requirements Document (MSFC-RQMT-3221), 

September 4, 2001,8 which identifies the capabilities or characteristics the architecture 

must have to meet mission needs. Those requirements form an integral part of activities 

including systems engineering, analyses, and trade studies in accordance with the 2nd

Generation RLV Program Plan. Appendix C shows an excerpt of the Government 

Level 1 Requirements Document. The Government requirements, including 

requirements for safety (loss of crew of 1 in 10,000 missions) and affordability ($1,000 

per pound to low-Earth orbit), currently reflect only NASA requirements. DOD 

requirements may be added in the future. The document does not include commercial 

Level 1 requirements because of proprietary and/or competition-sensitive concerns.9 

 

6

The decision to implement full-scale development has slipped to late FY 2006. Also, initial operational 

capability is no longer planned for 2010 but rather for early in the next decade. 7

In February 2002, NASA and the Air Force concluded a joint Space Launch Requirements Study to 

determine how they could best coordinate efforts to meet their respective needs for a new generation of 

reusable launch systems. Marshall officials stated that, based on initial study results, the Air Force is not 

only reviewing available funding but is also considering establishing a program office similar to NASA’s 

2nd Generation RLV Program. As of September 2002, the Air Force and NASA were still exploring and 

pursuing alternatives for jointly developing a next generation RLV. The study results and future Air Force 

and NASA decisions based on the study could have a significant effect on NASA’s current Level 1 

requirements. 

8

The Associate Administrator for Aerospace Technology approved the Level 1 Requirements Document on 

November 6, 2001. 

9

Agency strategic planning has anticipated private ownership and operation of the next generation RLV, 

with NASA as a paying customer, but the feasibility of a commercial RLV depends on factors such as 

annual launch rate and market competition. These factors may not be addressed by NASA's Government 

requirements. 
 

 

4 

Validity of Level 1 Requirements 

Finding. NASA approved the Level 1 requirements for the 2nd Generation RLV Program 

without properly validating them, that is, NASA did not substantiate or verify that the 

requirements were appropriate and viable. Validation has not occurred because the 

Agency had not established guidance to ensure that the proposed requirements were 

validated prior to approval. In addition, some Agency officials viewed the requirements 

as distant objectives (stretch goals10) that would be refined over time rather than 

mandatory thresholds. Consequently, the approved requirements may not be valid or 

achievable. In particular, several NASA groups11 have questioned the validity and 

achievability of the requirements for safety (loss of crew of 1 in 10,000 missions) and 

affordability ($1,000 per pound to low-Earth orbit). Invalid or unachievable Level 1 

requirements can jeopardize development of appropriate lower-level requirements, cause 

an inappropriate architecture selection, lead to cost and schedule growth, and produce a 

launch vehicle that is not commercially viable. 

 

Guidance for Establishing Requirements 

Office of Management and Budget (OMB). OMB’s 1999 guidance12 for NASA’s 

FY 2001 budget included recommendations for the 2nd Generation RLV Program. The 

guidance states that NASA’s requirements could make or break the affordability and 

commercial compatibility of new systems. Therefore, OMB placed a high priority on 

NASA’s ensuring that premature requirements did not make final launch architecture 

options incompatible with the commercial market or affordability to NASA. According 

to OMB, trade studies13 and independent evaluations were vitally important to 

differentiate between firm requirements and potential needs that could be pursued at a 

later time or in a different way. OMB strongly recommended that NASA use its 

contractors to perform trade studies and that NASA seek an external, independent review 

to help validate requirements before making final determinations. 

NASA Guidance. NASA Procedures and Guidelines (NPG) 1000.2, “NASA Strategic 

Management Handbook,” February 2000, states that the NASA Strategic Plan articulates 

the Agency’s vision, mission, goals, and objectives. The Strategic Plan gives direction to 

 

10The Aerospace Technology Enterprise Strategic Plan, April 2001, states that the goals and objectives 

presented in the plan “stretch” beyond what is possible today, forcing the Agency to look beyond 

conventional concepts and evolutionary technologies. 11The NASA groups that questioned the requirements included the Office of Aerospace Technology, the 

Space Transportation Subcommittee of the Aerospace Technology Advisory Committee, and Program staff. 12This guidance known as a “passback” is OMB's December 6, 1999, response to NASA on the Agency's 

FY 2001 budget submission. 

13Trade studies, a critical part of the systems engineering process, support decision makers by analyzing 

alternatives available to program/project managers and attempting to find solutions/designs that provide a 

better combination of cost and effectiveness. Thus trade studies provide an objective foundation for the 

selection of one or more approaches for the solution of an engineering problem. 
 

 

5 

the work of all NASA organizations and employees. The NPG assigns Enterprise14

Associate Administrators the responsibility for establishing objectives, requirements, and 

metrics for Agency programs. 

NPG 7120.5A, “NASA Program and Project Management Processes and Requirements,” 

April 3, 1998, governs formulation, approval, implementation, and evaluation of all 

NASA programs and projects and assigns the following responsibilities: 

• Associate Administrators are responsible for establishing Enterprise strategy, 

formulating programs, defining customer requirements and objectives, and 

recommending Lead Center assignments. 

 

• Lead Center Directors have full program management responsibility and 

authority. Lead Center Directors delegate program management responsibility to 

program managers. 

• Program managers are responsible for the total range of program activities 

including supporting the development and definition of detailed requirements. 

The NASA Systems Engineering Handbook, Special Publication-6105, June 1995, 

provides guidance on performing systems engineering and addresses the development of 

mission needs statements and top-level requirements. The Handbook emphasizes the 

importance of selecting appropriate program/project requirements and thereby avoiding 

the acceptance of requirements that cannot be met and the selection of design concepts 

that cannot be built, tested, maintained, and operated. 

Sufficiency of Support for Requirements 

The 2nd Generation RLV Program Office obtained the Marshall Center Director’s 

approval for the proposed Level 1 requirements and submitted them for final approval to 

the Associate Administrator for Aerospace Technology, who approved the requirements 

on November 6, 2001. However, neither the Marshall nor Headquarters officials had 

performed studies or analyses that supported the validity or appropriateness of the 

approved Level 1 safety and affordability requirements. Office of Aerospace Technology 

officials stated that program analysts were not available to perform the necessary analysis 

of the operational cost requirement ($1,000 per pound) and other requirements when the 

officials were reviewing and approving the Level 1 requirements. In addition, contractor 

trade studies did not provide anticipated documentation to support the validation or 

revision of the existing requirements. 

 

Program officials expected contractor trade studies to provide sufficient analytical 

support to enable further refinement of program requirements. The Agency issued 

 

14NASA conducts its programs through five Strategic Enterprises that constitute NASA’s primary mission 

areas: Space Science, Earth Science, Biological and Physical Research, Human Exploration and 

Development of Space, and Aerospace Technology. 
 

 

6 

NASA Research Announcement 8-27 on March 7, 2000, and subsequently awarded 

contracts totaling about $18 million for the trade studies. The announcement solicited 

proposals that were to be initiated in FY 2000 as the first step in defining system 

requirements to meet the stated safety and cost goals. In addition, the proposals were to 

identify and commence initial risk reduction activities, such as technology demonstration. 

NASA expected those activities to ultimately enable a decision on the initiation of fullscale development of a 2nd Generation RLV architecture. Program officials stated that 

the contractors provided input on risk reduction activities as requested in the 

announcement, but the contractors did not provide sufficient documentation to support 

the validation or revision of the existing requirements. 

Safety and Affordability Goals 

The approved Level 1 safety and affordability requirements for a 2nd Generation RLV are 

essentially a restatement of the goals/requirements contained in the NASA and 

Aerospace Technology Enterprise Strategic Plans,15 and other Agency documents. 

Appendix D explains the origin of the strategic goals, specifically: (1) achieve a 

probability of loss of crew for the total flight profile of a mission equal to a probability of 

1 in 10,000 or less, and (2) deliver payloads into a low-Earth circular orbit with a 

recurring operational cost of $1,000 per pound or less. 16 

 

Although Level 1 requirements should specify a capability or characteristic the system or 

architecture must have to meet clearly defined needs, some Agency officials viewed the 

approved requirements as distant objectives (stretch goals) that would be refined over 

time rather than as mandatory thresholds. Management stated that milestones in the 

2nd Generation RLV Program Integrated Master Schedule would facilitate further 

refinement of the requirements. These milestones include the initial architecture 

technology review in March 2002, the system requirements review in October 2002, and 

the nonadvocate review17 tentatively scheduled for March 2003. 

 

15NASA established a Strategic Management System to provide the information and results to fulfill the 

requirements of the Government Performance and Results Act of 1993. The system includes the NASA 

Strategic Plan, which defines Agency missions and goals. NASA’s five Enterprises also developed 

strategic plans to convey their unique strategic goals, objectives, and implementing strategies to address the 

requirements of the Agency’s primary customers. These customers include the science and education 

communities, aerospace and non-aerospace industries, Federal agencies, and others. 16The probability of a loss of crew on the Space Shuttle (entire mission profile) is currently about 1 in 265 

missions, and planned additional safety upgrades are expected to improve the probability to about 1 in 400 

missions by 2006. The goal for loss of crew of 1 in 10,000 missions is a 25-fold improvement from the 

expected crew safety of about 1 in 400 for the Space Shuttle. The goal of $1,000 per pound of payload to 

low-Earth orbit is a 10-fold improvement from the current estimated cost of about $10,000 per pound for a 

Shuttle payload. The Enterprise and Agency strategic plans currently state the goals for safety and launch 

cost in terms of improving “by a factor of ...”; earlier plans stated these goals in missions and dollars per 

pound, which is how NASA has stated the 2nd Generation RLV Program Baseline Level 1 requirements. 17The nonadvocate review is performed by a team of highly knowledgeable specialists (internal and 

external to NASA), outside the program or project’s advocacy chain, to provide the NASA Program 

Management Council with an independent verification and evaluation of the program’s or project’s 

readiness to proceed. 
 

 

7 

Guidance Needed for Validating Requirements 

NASA had not established guidance for the preparation of necessary support 

documentation and proper validation of proposed program requirements. Guidance, such 

as that developed by the DOD, is needed to ensure that an appropriate authority validates 

requirements prior to their approval. 

DOD Instruction. DOD Instruction 5000.2, “Operation of the Defense Acquisition 

System,” January 4, 2001, establishes a management framework for translating mission 

needs and technological opportunities, based on validated mission needs and 

requirements, into stable, affordable, and well-managed acquisition programs. The 

process includes validation of mission needs and requirements and specifies that the 

appropriate requirements authority shall validate requirements documents. 

NASA Guidance. In accordance with NPG 7120.5A, Enterprise Associate 

Administrators are responsible for defining requirements, and program managers are 

responsible for supporting the development and definition of detailed requirements. The 

NPG however does not address the validation of requirements including the timeliness of 

analysis and adequacy of supporting documentation. 

Similarly, although the NASA Systems Engineering Handbook, Special 

Publication-6105, provides some guidance on the development of mission needs 

statements and top-level requirements, the Handbook does not provide specific guidance 

on the process of validating proposed Level 1 requirements. The Handbook also does not 

contain guidance for program/project managers on the preparation of supporting 

documentation and on the development of the rationale for justifying the appropriateness 

of proposed requirements. 

Concerns About the Requirements 

Several NASA groups, both internal and external, have expressed concerns about the 

validity and achievability of the Level 1 requirements for the 2nd Generation RLV 

Program. 

NASA Officials. NASA Headquarters and Marshall officials expressed concerns to us 

about the feasibility of current requirements primarily because of the magnitude of 

technology improvement needed to achieve them. Specifically, because they were 

concerned about both the validity of the affordability requirement of $1,000 per pound to 

low-Earth orbit and the metric (dollars per pound) used, Office of Aerospace Technology 

officials did not approve proposed Level 1 requirements until Marshall agreed to initiate 

a review of the affordability requirement and to consider restating it.18 In addition, 

during the coordination of a draft of the NASA 2000 Strategic Plan, concerns by a senior 

Headquarters official about the $1,000 per pound cost goal led to a temporary change in 

 

18Office of Aerospace Technology officials stated they were most concerned about use of the dollars per 

pound metric because of the need to provide numerous qualifiers such as launch rate, payload type, target 

orbit, etc. 
 

 

8 

the affordability goal to $2,000 per pound. The Office of Aerospace Technology did not 

agree with a $2,000 per pound goal and decided that it should remain $1,000 per pound 

because it was the original stretch goal that was intended to be aggressive to promote 

revolutionary technology development. 

Program Office officials also had concerns about the feasibility of the proposed 

affordability requirement. They explained that after NASA awarded the contracts under 

NASA Research Announcement 8-30, the contractors requested that the Program Office 

provide a set of NASA-approved, top-level requirements as a baseline to work toward. 

Because of an overriding concern about a possible contractor work stoppage, Program 

Office officials considered it necessary to establish official program requirements. 

Therefore, despite concerns about the Level 1 requirements, the Program Office, the 

Marshall Center Director, and the Associate Administrator, Office of Aerospace 

Technology approved them. 

Space Transportation Advisory Subcommittee. NASA established the Space 

Transportation Subcommittee of the Aerospace Technology Advisory Committee19 to 

provide independent oversight of the Agency’s Space Transportation programs. The 

subcommittee challenged the achievability of the Program’s requirements during the 

November 2000 and October 2001 meetings of the committee. Minutes of the meetings 

included statements that the Program’s requirements were not realistic and were 

impossible to meet in a 2nd Generation RLV and that the existing requirements 

documents should be cancelled.20 The subcommittee provided written reports that 

addressed these concerns to the committee and to the NASA Advisory Council. 

Program Office Technical Staff. The Program Office’s technical staff identified 

numerous risks to achieving the Level 1 requirements for safety and affordability and 

entered them in the Program's risk management database.21 As of December 2001, the 

staff had identified 279 risks, of which at least 110 were risks to achieving the Program’s 

safety, reliability, and affordability requirements. 

 

19The committee consists of 15 to 25 members and 75 to 153 associate members with a balanced 

representation from industry, academia, and Government. The members have recognized knowledge and 

expertise in scientific, technological, and programmatic fields relevant to Aerospace transportation. 20NASA had previously issued a requirements document for the 2nd Generation Space Transportation 

Architecture in August 1999 and had included goals in the 2nd Generation RLV Program Formulation 

Authorization document in February 2000. Both documents included the safety and affordability 

requirements/goals that the Agency subsequently approved in November 2001 as Level 1 requirements. 21The risk management database is a computerized repository used to warehouse, plan, track, and report 

program risks. All personnel associated with the Program have the responsibility and authority to identify 

risks. The risk originator develops the risk statement, risk context, and initial estimates for the likelihood, 

consequence, and timeframe of the risk. 
 

 

9 

The following table shows three validated22 Program risks with a high-risk exposure.23

Safety and Affordability Risks With a High-Risk Exposure 

 Risk 

Number2 

 Risk Title Risk Statement1 

 1 Crew Escape Systems Given the current state of the art in crew escape systems 

and the current reliability of main propulsion systems, the 

possibility exists that the Level 1 requirement of 1 in 

10,000 loss of crew may not be met. 

 6 Lightweight, Low-Cost

Composite Cryotanks3 

Because the current state of the art for lightweight, low-cost 

cryotank composite materials is inadequate, the possibility 

exists that the Level 1 requirement of $1,000 per pound 

launch cost may not be met. 

 10 Power Systems Given the current state of the art of power systems in the 

areas of fault tolerant power architecture, nontoxic power 

generation, advanced peak power source, energy storage, 

and distribution, the possibility exists that the Level 1 

requirements of 1 in 10,000 loss of crew and cost goal of 

$1,000 per pound may not be met. 

1

The “Risk Information Sheet” includes a risk statement that explains the risk. 2

A sequential risk number is assigned to each identified risk in the database. 3

Cryotanks are fuel tanks capable of maintaining liquid oxygen and/or hydrogen at extremely low 

temperatures--at least 160 degrees below 0 degrees Celsius. 

We recognize that establishing appropriate requirements will not eliminate all risks on a 

program. On the other hand, not ensuring the appropriateness and viability of 

requirements can significantly increase programmatic risks. 

Programmatic Effects of Requirements 

Invalid or unachievable Level 1 requirements can jeopardize development of appropriate 

lower-level requirements, cause an inappropriate architecture selection, lead to cost and 

schedule growth, and produce a launch vehicle that is not commercially viable. 

Lower-Level Requirements. Level 1 requirements form the basis for more detailed 

requirements in program and project documents, which, in turn, provide a framework for 

management decisions and activities. NPG 7120.5A states that requirements 

management entails the decomposition of higher-level requirements into implementable 

packages and communication of the more specific requirements to the implementing 

projects that 

 

22Validated risks are those that have been approved by the Program and project risk management boards. 23Risk exposure, the product of the likelihood and consequence of occurrence, is used to classify and 

prioritize risks for reporting and management purposes. The Program classifies the risk level as high, 

moderate, or low.
 

 

10 

support the Program. Therefore, inappropriate Level 1 requirements can lead to 

inappropriate Levels 2 and 3 requirements in the Program’s and projects’ systems 

requirements documents. 

Architecture Selection. The current Level 1 requirements reflect general launch needs 

that the 2nd Generation RLV is intended to satisfy. Level 1 requirements dictate the 

architectural design leading to full-scale development of the 2nd Generation RLV. The 

process of assessing the cost and performance trade-offs of the 2nd Generation RLV 

architecture will lead to a set of Level 2 system requirements that will further define the 

2nd Generation RLV architecture requirements. If the current Level 1 requirements are 

inappropriate, any resulting architectural design also could be inappropriate. 

 

Cost and Schedule. If the cost-per-pound (affordability) requirement of $1,000 is 

unrealistically low, because of the technology advances needed to reach such a 

requirement, it may not be achievable under the current cost and schedule constraints. 

Similarly, if the launch cost requirement is unnecessarily low compared to the projected 

market prices of competitive launchers over the next 2 decades, cost and schedule would 

be adversely affected again. In either case, additional funds and time would be required 

to meet requirements that are unrealistic or inappropriate. 

 

Competitive Vehicle. Besides a manned version of the 2nd Generation RLV, the 

Program may develop an unmanned version. An unmanned vehicle would compete with 

expendable launch vehicles, which are becoming less costly. If the cost per pound of 

$1,000 is higher than the average cost per pound on commercial expendable launch 

vehicles, then the 2nd Generation RLV would not be competitive. Although NASA 

officials expected the current trend of reduced launch costs to continue, it is not clear 

how much launch costs for expendable launch vehicles will decrease in the next 2 

decades when a 2nd Generation RLV may be operational. This uncertainty contributes to 

the difficulty in establishing an appropriate affordability requirement for the 2nd

Generation RLV. Appendix E contains details on current and expected payload launch 

costs. 

Conclusion 

In view of the lack of analytical support for the baseline Level 1 requirements and the 

acknowledged concerns of cognizant officials, NASA’s approval of the requirements was 

premature. Because of the questionable validity of the two primary Program 

requirements, safety and affordability, NASA should verify the appropriateness and 

achievability of the baseline Level 1 requirements and revise them, if necessary. We 

acknowledge that the Agency’s plans for review may eventually lead to more refined 

requirements.24 However, the requirements at any given time should be supportable. 

 

24On May 2, 2002, Program and Marshall officials approved Revision A to the baseline Level 1 

requirements and submitted it to NASA Headquarters for final approval. The proposed revision would 

reduce the safety and affordability requirements, making them much more achievable. 
 

 

11 

Recommendations, Management’s Response, and Evaluation of 

Response 

1. The Associate Administrator for Aerospace Technology, in coordination with 

the Marshall Center Director, should promptly perform analyses to support the 

validation or revision of the Level 1 requirements for the 2nd Generation RLV 

Program. 

Management’s Response. Concur. The Office of Aerospace Technology approved 

proposed Level 1 Requirements prior to completion of detailed analyses needed to 

determine their validity and achievability. Management recognized there were 

deficiencies in the process for approving the initial Level 1 requirements and has 

instituted a more thorough validation process for the current iteration of the requirements, 

Revision A. The Program is performing further analyses of the Level 1 requirements. 

Additionally, the Agency identified the Executive Council as the requirements 

discrepancy resolution forum. These actions should be completed along with the planned 

completion of the SLI Systems Requirements Review in March 2003. The complete text 

of management’s response is in Appendix F. 

Evaluation of Management's Response. Management’s planned actions are responsive 

to the intent of the recommendation. The recommendation is resolved but will remain 

undispositioned and open until agreed-to corrective actions are completed. 

Management’s response included additional comments to the finding in the report. We 

address selected management comments in Appendix G. 

2. The NASA Chief Engineer should establish and include in Agency directives 

(NPG 7120.5A, Special Publication-6105, and the NPG on Systems Engineering 

currently under development) guidance that: 

• requires the approval authority to verify that proposed requirements are 

appropriate and reasonably achievable within available resources before 

approving the requirements, 

• specifies responsibility and requirements for preparing supporting 

documentation and for validating proposed requirements, and 

• requires Enterprises and Centers to establish appropriate implementing 

guidance and procedures. 

Management’s Response. Concur. The Office of the Chief Engineer will attempt to 

incorporate the recommended guidance into the revision of NPG 7120.5 now being 

drafted. If unable to accomplish this, interim guidance will be issued not later than 

March 2003, pending publication of the next revision of the NPG (published in 

approximately October 2003). 
 

 

12 

Evaluation of Management's Response. Management's planned actions are responsive 

to the recommendation. Management stated during our discussions that more detailed, 

implementing guidance on requirements validation will be included in the new Systems 

Engineering NPG now being drafted and scheduled for publication in October 2003. 

The recommendation is resolved but will remain undispositioned and open until 

corrective actions are completed. 

 
13

Appendix A. Objectives, Scope, and Methodology 

Objectives

The overall objective was to evaluate Space Launch Initiative (SLI) planning and 

management. Specifically, we planned to assess the adequacy of: 

• requirements determination and program planning, including metrics for 

measuring and reporting progress; 

• decision criteria for major milestones; 

• program schedule and funding, including planned reserves; and 

• plans for risk reduction and related metrics.

This report identifies a condition regarding requirements determination that warrants 

timely action by NASA management. Conditions relative to the other objectives may be 

addressed in a separate report as needed. 

Scope and Methodology 

The audit included a review of Government and Agency guidance for strategic planning 

and program management. We reviewed NASA and Enterprise Strategic Plans and SLI 

Program documents. In addition, we interviewed program officials to understand the 

objectives and current status of the program. We did not assess the reliability of 

computer-processed data, because we did not rely on it to achieve our objectives.

Management Controls Reviewed 

We reviewed the following management controls: 

• Office of Management and Budget Circular A-11, “Preparation and Submission 

of Budget Estimates,” revised November 11, 2001. 

• NASA Procedures and Guidelines (NPG) 1000.2, “NASA Strategic Management 

Handbook,” February 2000, enables the Agency to establish strategy, make 

decisions, allocate resources, and manage programs safely, effectively, and 

efficiently. 
14

Appendix A 

• NPG 7120.5A, “NASA Program and Project Management Processes and 

Requirements,” April 3, 1998, governs formulation, approval, implementation, 

and evaluation of all NASA programs and projects. 

• MSFC-HDBK-3173, “Project Management and System Engineering Handbook,” 

May 30, 2001, provides the basic processes and general guidance for the life 

cycle of all programs and projects managed at Marshall Space Flight Center 

(Marshall). 

We determined that management controls for determining primary requirements for 

programs and projects needed to be strengthened as discussed in the report. 

 

Audit Field Work 

We performed field work for this portion of the audit from July 2001 through June 2002 

at NASA Headquarters and Marshall. We conducted the audit in accordance with 

generally accepted government auditing standards. 
15

Appendix B. Summary of Prior Audit Coverage 

The Office of Inspector General has issued four reports that relate to the audit work on 

the Space Launch Initiative. These reports are summarized below (see also 

www.hq.nasa.gov/office/oig/hq/issuedaudits.html). 

IG-01-021, “X-37 Technology Demonstrator Project Management,” March 30, 

2001. The X-37 vehicle is an advanced technology flight demonstrator that NASA will 

use as a platform for flight experiments to validate and mature technologies that lower 

the cost and improve the performance of future Earth-to-orbit or in-space transportation 

systems. We found several weaknesses in NASA’s project management and 

recommended that corrective actions be taken to address inadequate planning and 

funding for X-37 launch requirements, use of a tailored Earned Value Management 

System25 by the contractor, and deficiencies in risk management by NASA officials. 

Management concurred and has initiated or completed corrective actions on all 

13 recommendations. 

IG-00-029, “X-34 Technology Demonstrator,” March 30, 2000. The $200 million 

X-34 Project was one of several existing and planned technology demonstrator 

(X-Vehicle) programs the Agency pursued to mature technologies needed for the 

next-generation reusable launch vehicle. To evaluate NASA’s planned use of X-34 

technologies, we reviewed strategic planning and the role the X-34 was to play in 

meeting Agency Space Transportation technology requirements. We recommended that 

NASA improve strategic planning, complete program documentation in a timely manner, 

revalidate flight test requirements, and eliminate unnecessary flight tests or engines. 

Management concurred and has initiated or completed corrective actions on the 16 

recommendations. 

IG-99-052, “X-33 Cost Estimating Processes,” September 24, 1999. NASA used a 

cooperative agreement with a commercial firm for Phase II of the X-33 program to 

design, build, and fly a test vehicle. NASA did not prepare an independent Government 

cost evaluation to assess cost reasonableness and cost risk for the program. Further, 

NASA did not include a risk analysis to quantify technical and schedule uncertainties. 

We recommended that NASA improve its evaluation processes to ensure that 

decisionmakers are provided complete and accurate information, that sufficient resources 

are available, and that the final price is fair and reasonable. Further, the X-33 Program’s 

estimate to complete should be updated to reflect cost uncertainties and determine how 

remaining work will be funded. Management concurred with all four recommendations 

and has completed corrective actions on three recommendations.26 

 

25NASA Policy Directive 9501.3, "Earned Value Performance Management," revised August 3, 2002, 

establishes the requirement to apply earned value performance management to significant NASA contracts 

to ensure that contractor management systems provide the contractor and the Government project managers 

with accurate data to make responsible decisions. 

26 Although NASA cancelled the X-33 and X-34 Programs and incorporated the X-37 Program into the 2nd

Generation RLV Program (see footnotes 1 and 2), many recommendations in the related audit reports 

remain valid because they relate to systemic weaknesses rather than specific project weaknesses. 
16

Appendix B 

IG-99-001, “X-33 Funding Issues,” November 3, 1998. We evaluated NASA’s X-33 

funding concept to determine whether it adversely affected Agency reports and financial 

statements and whether it complied with congressionally mandated fund controls 

including the Anti-deficiency Act. NASA did not record obligations of funds in a timely 

manner, resulting in potential violations of fiscal statute. The Marshall Space Flight 

Center (Marshall) had unrecorded year-end obligations, costs, and liabilities totaling 

$22 million in fiscal year 1996 and $34 million in fiscal year 1997. We recommended 

that NASA review the funding and payment practices used on the X-33 Program and 

perform corrective actions to ensure that Marshall and Agency year-end financial reports 

accurately disclose the financial status of the X-33 program, including any contingent 

liabilities. NASA concurred with the two recommendations but has not completed 

corrective actions. 
17

Appendix C. Government Level 1 Requirements

NASA developed Level 1 requirements for the 2nd Generation Reusable Launch Vehicle 

from an understanding of NASA, DOD, and commercial mission needs, and from 

deficiencies in the existing fleet of launch vehicles. NASA published these requirements 

in the Level 1 requirements document, effective September 4, 2001. An excerpt of the 

document, Section 7.0, “Government Level 1 Requirements” follows: 

[A10] Comply with all applicable NASA, Department of Defense 

(DOD), and civil flight safety requirements as defined in [A11] through 

[A14] and in accordance with the Human Rating Requirements, JSC –

28354, as applicable. 

[A11] Assure public safety. 

[A12] Achieve a probability of loss of crew for the total flight profile 

of a mission. 

a. Threshold — must equal a probability of 1/10,000 or less. 

b. Objective— should equal a probability of 1/10,000 or less. 

[A13] Assure safety of personnel on the ground (transportation 

employees and customers). 

[A14] Assure safety of high value assets. 

[A30] Deliver payloads into a low-earth circular orbit, as 

described in the NASA Design Reference Missions document. 

a. Threshold — must provide a recurring operational cost of 

$1,000/pound or less. 

b. Objective — should provide a launch price of $1,000/pound or 

less. 

[A40] Achieve a probability of loss of mission throughout the design 

life of the 2nd Generation RLV [reusable launch vehicle] architecture. 

a. Threshold — must provide a probability of 1/100 or less. 

b. Objective — should provide a probability of 1/200 or less. 

[A50] Provide the capability of supporting the Government missions 

defined in section 6.0 above. 

a. Threshold — must provide the capability of performing all primary 

missions at IOC [initial operating capability]. 

b. Objective — should provide the capability of performing secondary 

missions at IOC. 

[A60] Achieve a probability of launching a Government payload 

within its scheduled launch opportunity. 

a. Threshold — must exceed a 90-percent probability that a payload 

will be launched within its specified opportunity.

b. Objective — should exceed a 95-percent probability that a payload 

will be launched within its specified opportunity. 
18

Appendix C 

[A70] Provide a growth path to support the Government secondary 

missions that cannot be supported initially. 

[A80] Provide an evolutionary growth path that will enable the future 

commercial development of space.

[A90] Provide a viable growth path to support the Government 

evolutionary mission to enable the future human and robotic 

exploration of space by FY 2017. 

[A100] Provide an evolutionary growth path to support future DOD 

launch needs.
19

Appendix D. Origin of Safety and Affordability Requirements 

The Level 1 safety and affordability requirements for a 2nd Generation Reusable Launch 

Vehicle (RLV), approved in November 2001 by the NASA Office of Aerospace 

Technology, are essentially a restatement of the goals contained in the Agency and 

Enterprise Strategic Plans (see footnote 15), the requirements established for the 

Integrated Space Transportation Plan, and the major goals contained in the Program 

Formulation Authorization Document. Marshall Space Flight Center and NASA 

Headquarters officials had no documented support for the appropriateness and 

achievability of the goals/requirements contained in all of the documents above. 

Agency Strategic Goals. Agency strategic goals for safety and affordability, 

characterized as “stretch” goals, were established by a former NASA Administrator 

based on a vision for safe and affordable access to space. NASA officials stated that the 

affordability goal (reducing the cost of access to space from $10,000 to $1,000 per pound 

to low-Earth orbit) was established in the mid-1990’s by the NASA Administrator as a 

target. Officials maintained that the affordability goal was always recognized as an 

optimistic, “stretch” goal that might not be achievable in the near term. Similarly, 

officials stated that the Agency’s safety goal (loss of crew of 1 in 10,000 missions) was 

established by the Administrator in 1999. 

Integrated Space Transportation Plan Level 1 Requirements. In August 1999, the 

NASA Chief Engineer issued a Level 1 Requirements document for the 2nd Generation 

Space Transportation Architecture. The purpose of the document was to establish 

Level 1 requirements for the Integrated Space Transportation Plan and for conducting 

associated tasks for Phase III of the NASA Space Transportation Architecture Studies. 

This effort represented the initial step in requirements/systems definition, technology 

prioritization, and technology development for the Integrated Space Transportation Plan. 

The document included requirements for safety (loss of crew of 1 in 10,000 missions) 

and affordability (reduce the cost of payloads to low-Earth orbit from $10,000 to $1,000 

per pound) that NASA officials stated were based primarily on the Space Transportation 

goals presented in the Agency and Enterprise Strategic Plans. 

Program Formulation Authorization. The Associate Administrator for Aerospace 

Technology issued the 2nd Generation RLV Program Formulation Authorization 

document, February 10, 2000, to begin the formulation process. The formulation 

authorization document includes safety and affordability goals that are consistent with 

the Agency and Enterprise Strategic Plans. 
20

**Details of payload launch costs information omitted**
21

Appendix F. Management’s Response 

 
22

Appendix F 

See Appendix G,

OIG Comment 1 

See Appendix G, 

OIG Comment 1 

See Appendix G,

OIG Comment 2 

See Appendix G,

OIG Comment 3 

See Appendix G,

OIG Comment 2 
23

Appendix F 

See Appendix G,

OIG Comment 4 
24

Appendix G. Evaluation of Management's Comments 

The Office of Aerospace Technology response (see Appendix F) included comments 

relative to the finding in the report. Our evaluation of those comments follows: 

Management's Comments. Management agreed that analytically validated Level 1 

Requirements are critical for development/acquisition programs. However, the SLI 

Program is a unique, focused technology development effort responsible for establishing 

Level 1 Requirements through an iterative process. The SLI Program does not fit within 

a standard Agency program mold and, therefore, latitude should be afforded during this 

unique requirements definition phase. 

1. OIG Comments. Although we understand the circumstances that led to the approval 

of the initial Level 1 Requirements in November 2001, we maintain our position that 

such approval was premature in the absence of adequate supporting documentation and a 

thorough validation process. Further, the iterative nature of the requirements 

development process during program formulation is typical of Agency programs and is 

not unique to the 2nd Generation RLV Program. Therefore, we reemphasize that approval 

of each Level 1 Requirements iteration should be based on an adequate supporting 

documented analysis by the Program and projects. The documentation is essential in 

order for the requirements approving authority to perform an effective review and 

validation of proposed requirements. 

 

Management's Comments. The audit report questions the lack of analysis supporting 

the validity and achievability of the approved requirements. It is the position of the 

Office of Aerospace Technology that the level of analysis performed by the Space 

Transportation Architecture Studies, and contractors under two NASA research 

announcements was adequate to support the conditional approval of the Level 1 

Requirements in November 2001 as an initial starting point in developing final 

requirements. Further, contractors were leery of investing resources toward this effort 

without a firm NASA-level commitment. 

2. OIG Comments. Our primary concern with the initially approved Program Level 1 

Requirements was the lack of a credible supporting analysis for the safety and 

affordability requirements. The analysis identified by management does not provide 

sufficient support for validation and approval of the Level 1 requirements. Further, 

although responsible Agency officials acknowledged their concerns about the validity of 

the proposed requirements, neither their level of confidence nor the conditional nature of 

the Office of Aerospace Technology approval was evident in the requirements document. 

When such concerns exist, we believe requirements approval authorities should disclose 

their level of confidence in achieving the proposed requirements and state in the 

requirements document the conditional nature of their approval. Program and project 

Appendix G 
25

managers may be reluctant to make such candid disclosures, but it is critically important 

to ensure that subsequent programmatic decisions are valid. Finally, the need to obtain 

contractor participation does not justify issuance of an unsupported requirements 

document. 

Management's Comments. The focus in the early phase of the Program was simply to 

significantly reduce cost and increase reliability of a 2nd Gen RLV rather than to specify a 

level of improvement. Therefore, providing the best information available at the time 

presented little if no risk to the Agency. 

3. OIG Comments. Because of the level of concern that existed both within and outside 

the Agency regarding the validity of the initial Program requirements, we do not consider 

the data used by NASA as the best information available. Program requirements such as 

safety and affordability are directed to projects and subsequently to contractors that make 

cost and schedule decisions based on these requirements. Further, approving unrealistic 

requirements without documentation to show they are reasonably achievable with 

existing resources can create false expectations by the Congress and by Agency 

stakeholders. Therefore, we believe the approval of unvalidated and unrealistic 

requirements creates significant programmatic and credibility risk to the Agency. 

 

Management's Comments. Management decided not to relax the payload cost 

requirement of $1,000/lb. to $2,000/lb. in response to concerns by a senior Headquarters 

official. Management explained that the rationale for rejecting the request was not the 

value of the requirement as much as it was the nebulous nature of the metric itself that 

necessitates qualifiers such as launch rate, payload type, target orbit, etc. 

4. OIG Comments. Based on subsequent discussions with Agency officials, we revised 

the wording in the audit report to reflect the management’s clarification.
26

Appendix H. Report Distribution 

National Aeronautics and Space Administration (NASA) Headquarters 

HQ/A/Administrator 

HQ/AE/Chief Engineer 

HQ/AI/Associate Deputy Administrator 

HQ/B/Acting Deputy Chief Financial Officer 

HQ/B/Comptroller 

HQ/BF/Director, Financial Management Division 

HQ/G/General Counsel 

HQ/J/Assistant Administrator for Management Systems 

HQ/JM/Director, Management Assessment Division 

HQ/L/Assistant Administrator for Legislative Affairs 

HQ/R/Associate Administrator for Aerospace Technology 

NASA Advisory Officials 

Chair, NASA Advisory Council 

Chair, Aeronautics and Space Transportation Technology Advisory Committee 

NASA Centers 

JSC/AA/Director, Johnson Space Center 

KSC/AA/Director, Kennedy Space Center 

KSC/CC/Chief Counsel, Kennedy Space Center 

MSFC/DAO1/Director, Marshall Space Flight Center 

Non-NASA Federal Organizations and Individuals 

Assistant to the President for Science and Technology Policy 

Deputy Associate Director, Energy and Science Division, Office of Management and 

Budget 

Branch Chief, Science and Space Programs Branch, Energy and Science Division, Office 

of Management and Budget 

Managing Director, Acquisition and Sourcing Management Team, General Accounting 

Office 

Senior Professional Staff Member, Senate Subcommittee on Science, Technology, and 

Space 
27

Appendix H 

Chairman and Ranking Minority Member – Congressional Committees and 

Subcommittees 

Senate Committee on Appropriations 

Senate Subcommittee on VA, HUD, and Independent Agencies 

Senate Committee on Commerce, Science, and Transportation 

Senate Subcommittee on Science, Technology, and Space 

Senate Committee on Governmental Affairs 

House Committee on Appropriations 

House Subcommittee on VA, HUD, and Independent Agencies 

House Committee on Government Reform 

House Subcommittee on Government Efficiency, Financial Management and 

 Intergovernmental Relations 

House Subcommittee on Technology and Procurement Policy 

House Committee on Science 

House Subcommittee on Space and Aeronautics, Committee on Science 

Congressional Member 

Honorable Pete Sessions, U.S. House of Representatives 
NASA Assistant Inspector General for Audits 

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Major Contributors to the Report 

Dennis E. Coldren, Program Director, Space Flight Audits 

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