SEPTEMBER 18, 2008 

AUDIT REPORT

REPORT NO. IG-08-030 (ASSIGNMENT NO. A-07-017-00) 

OFFICE OF AUDITS

COST ESTIMATES USED TO SUPPORT THE

FISCAL YEAR 2008 BUDGET REQUEST FOR 

NASA’S CONSTELLATION PROGRAM 

COULD HAVE BEEN BETTER DOCUMENTED

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration 

 
Final report released by: 

 signed 

Evelyn R. Klemstine 

Assistant Inspector General for Auditing 

Acronyms 

CCCC Commercial Cargo Crew Capability 

CEV Crew Exploration Vehicle 

CLV Crew Launch Vehicle 

CxP Constellation Program 

DDT&E Design, Development, Test, and Evaluation 

FMR Financial Management Requirements 

FTE Full-Time Equivalent 

GAO Government Accountability Office 

NPR NASA Procedural Requirements 

OCFO Office of the Chief Financial Officer 

OIG Office of Inspector General 

OMB Office of Management and Budget 

PA&E Program Analysis and Evaluation 

PPBE Planning, Programming, Budgeting, and Execution 

WBS Work Breakdown Structures 

WYE Work-Year Equivalent 

REPORT NO. IG-08-030 
SEPTEMBER 18, 2008 

REPORT NO. IG-08-030 

OVERVIEW

COST ESTIMATES USED TO SUPPORT THE FISCAL YEAR 2008

BUDGET REQUEST FOR NASA’S CONSTELLATION PROGRAM 

COULD HAVE BEEN BETTER DOCUMENTED

The Issue 

The NASA Office of Inspector General (OIG) conducted this audit to determine whether 

the fiscal year (FY) 2008 budget for the Constellation Program (CxP) was prepared in 

accordance with Office of Management and Budget (OMB) and NASA policy and 

whether the CxP budget request was supported by well-documented cost estimates. We 

focused our review on the five major CxP projects: the Crew Launch Vehicle, Crew 

Exploration Vehicle, Ground Operations, Commercial Crew Cargo Capability, and 

Mission Operations. The Commercial Crew Cargo Capability is considered a project 

under CxP in NASA’s 2008 budget request and in this report; however, for program 

management purposes, it is its own program and is not a project under CxP. The CxP 

projects are intended to send a new generation of explorers to the Moon, Mars, and 

beyond. The project mission for the Crew Launch Vehicle (Ares I) is to deliver a safe, 

reliable launch system for the Crew Exploration Vehicle that will take astronauts to the 

International Space Station and then to the Moon by 2020. Reliable cost estimates can 

help ensure that budget requests are adequate to meet project and program milestones and 

goals. 

NASA’s FY 2008 budget request1

 totaled $17.3 billion and included $3.1 billion 

(17.7 percent) for CxP. Budget requests for the five major CxP projects totaled 

$2.8 billion, which included $2.3 billion in direct costs. Our review covered $1.1 billion 

of those direct cost estimates. Details of the audit’s scope and methodology are in 

Appendix A. 

Results 

NASA could improve its budgeting process by providing additional guidance to ensure 

that budget requests are supported by well-documented cost estimates. We found that 

while the CxP project managers had supporting documentation for the $1.1 billion of the 

direct cost estimates that we reviewed, the majority was at the summary level and not 

sufficiently detailed. Specifically, CxP project personnel provided summary-level 

 

1 http://www1.nasa.gov/pdf/168652main NASA FY08 Budget Request.pdf, also available at 

http://www.nasa.gov/news/budget/FY2008.html; accessed August 12, 2008. 
OVERVIEW

ii REPORT NO. IG-08-030 

documentation for $914.6 million and more detailed documentation for $164.4 million. 

Although the summary-level documentation met Agency requirements for documenting 

budget requests and provided insight into the process used to estimate the direct costs, it 

did not include detailed documentation, such as the source data, calculations, and 

explanations, that would facilitate reproducing and independently evaluating the 

estimate. 

For example, project personnel for one of the five projects, Commercial Cargo Crew 

Capability, provided limited supporting documentation for that project’s FY 2008 budget 

request of $193 million in direct costs. Project personnel stated that they used market 

research and vendor quotes to develop the cost estimates that supported the budget 

request and provided summary-level documentation that illustrated various cost scenarios 

in a PowerPoint presentation. However, the summary-level data did not include detailed 

evidence to show how the cost estimates were derived by market research, company 

responses, or vendor quotes. 

A reasonable and defensible budget request should be supported and documented by 

sound cost estimates. OMB requires agencies to collect, identify, and analyze data for 

cost estimates; document cost estimates; and explain the cost estimating process used so 

that the estimate can be reproduced, allowing the quality of the estimate to be 

independently evaluated. 

NASA requirements for formulating, approving, implementing, and evaluating programs 

and projects requires cost estimates to be consistent with guidance in NASA’s “Cost 

Estimating Handbook,” 2004. The Handbook provides useful information to assist the 

NASA community in the development of reliable, comprehensive, defensible, and welldocumented cost estimates, stating that documentation for the estimates should provide 

sufficient information about how the estimate was prepared to allow an independent 

analyst to reproduce the estimate. However, the Handbook does not explain what 

constitutes sufficient information. 

Given the absence of detailed guidance on what constitutes sufficient documentation, we 

evaluated the CxP budget request against standards recommended by the Government 

Accountability Office (GAO) in its July 2007 exposure draft, “Cost Assessment Guide: 

Best Practices for Estimating and Managing Program Costs.” Although not available at 

the time the FY 2008 CxP budget request was submitted, and still in draft format as of 

August 4, 2008, the guiding principles for preparing fully documented cost estimates 

contained in the GAO Cost Guide are a compilation of best practices from across the 

Federal Government that can serve as a benchmark. 

We found that the CxP project managers’ documentation did not include the level of 

detail called for in either NASA’s Handbook or the GAO Cost Guide. With respect to 

the Handbook, the documentation provided by the CxP project managers did not provide 

sufficient information to allow an independent analyst to reproduce the estimates. The 

GAO Cost Guide states that the documentation should include source data and 
OVERVIEW

REPORT NO. IG-08-030 iii 

significance, clearly detailed calculations and results, and explanations of why particular 

methods and references were chosen. The Guide also states that the data in a welldocumented cost estimate must be traceable to its source. 

NASA could improve its budgeting process by adopting the standards recommended by 

the GAO Cost Guide and ensuring that budget requests incorporate cost estimates based 

on historical or actual cost data, vendor quotes, and spreadsheets with detailed 

calculations prepared by subject matter experts showing how they arrived at the cost 

estimates. Also, given that NASA programs and projects have historically experienced 

cost overruns, cost estimates with detailed, empirical data that explain the rationale for 

decisions could help minimize the risk of cost overruns by providing additional assurance 

that budget requests are adequate to achieve program and project goals. 

Management Action 

We recommended that the Associate Administrator for Program Analysis and Evaluation 

incorporate into NASA’s Cost Estimating Handbook appropriate best practices identified 

in the exposure draft of the GAO Cost Guide and require personnel to document and 

retain cost estimates used to support budget requests in a manner that explicitly identifies 

the primary methods, calculations, results, rationales or assumptions, and source data 

used to generate each estimate. We also recommended that the Constellation Program 

Manager require that budget requests be prepared using cost estimates that are 

sufficiently documented as to allow an independent cost analyst to reproduce the 

estimate. 

In response to a draft of this report issued August 12, 2008, the Associate Administrator 

for Program Analysis and Evaluation nonconcurred with our first recommendation but 

stated that NASA incorporated the best practices from the exposure draft of the GAO 

Cost Guide into its 2008 Cost Estimating Handbook. By incorporating the GAO 

standards into the Handbook, management’s actions are responsive to the 

recommendation. 

The Associate Administrator for Program Analysis and Evaluation concurred with our 

second recommendation and stated that CxP has been and will continue to apply the 

techniques and best practices outlined in NASA’s Cost Estimating Handbook. The 

techniques and best practices are in concert with the GAO Cost Guide. We consider 

management’s comments to be responsive. Both recommendations will be closed upon 

verification of management’s actions. 

SEPTEMBER 18, 2008 

REPORT NO. IG-08-030 

CONTENTS

INTRODUCTION

Background __________________________________________ 1 

Objectives ___________________________________________ 4 

RESULTS

Budget Requests Could Be Improved by Using Well-Documented 

Cost Estimates _____________________________________ 5 

APPENDIX A 

Scope and Methodology _______________________________ 15 

Review of Internal Controls _____________________________ 17 

Prior Coverage_______________________________________ 17 

APPENDIX B 

Management Comments _______________________________ 18 

APPENDIX C 

Report Distribution ___________________________________ 22 

SEPTEMBER 18, 2008 

REPORT NO. IG-08-030 1 

INTRODUCTION

Background 

Budget Process at the Program/Project Level 

Each year, the Office of Management and Budget (OMB) issues Circular No. A-11, 

“Preparation, Submission, and Execution of the Budget,” instructing Federal agencies on 

how to develop and submit their annual budgets. A reasonable budget request should be 

supported by well-documented cost estimates. OMB requires agencies to collect, 

identify, and analyze data for cost estimates; document cost estimates; and explain the 

cost estimating process used so that the estimate can be reproduced, allowing the quality 

of the estimate to be independently evaluated. 

NASA implemented the process for preparing, submitting, and executing its FY 2008 

budget in NASA Financial Management Requirements (FMR), Volume 4, “Planning, 

Programming, Budgeting, and Execution” (PPBE), July 2006. The PPBE process is a 

methodology used Agency-wide for aligning resources in a comprehensive, disciplined, 

top-down approach that focuses on translating strategy into actionable programs and 

bringing together Agency priorities and strategic outcomes within the Agency’s resource 

constraints. The PPBE process begins at the top with the Office of the Chief Financial 

Officer (OCFO) and the Office of Program Analysis and Evaluation (PA&E) preparing 

NASA’s Strategic Planning Guidance. This Guidance is a consolidated document 

containing information from NASA’s Strategic Plan, implementation plans, studies and 

assessments, and performance measures. Senior Agency officials translate the Strategic 

Planning Guidance into guidance more relevant for the program and project managers. 

The programmatic guidance details the allocation of budget control totals2

 to the 

appropriate lower levels, including programs and projects. The control totals flow down 

from Headquarters to the programs and projects, but each program or project may 

formulate its budget in any way it deems appropriate, as long as the final direct budget 

submission reflects the control total provided in the programmatic guidance. 

NASA requirements for formulating, approving, implementing, and evaluating programs 

and projects are defined in NASA Procedural Requirements (NPR) 7120.5C, “NASA 

Program and Project Management Processes and Requirements,” March 22, 2005. One 

responsibility the project manager has, as stated in the NPR, is to develop credible cost 

estimates for budget preparation. The NPR also notes that cost estimates must be 

consistent with guidance in NASA’s “Cost Estimating Handbook,” 2004. Cost 

estimating should tie costs with benefits and risks, creating causal links, which are 

 

2

 The maximum amount that program and project managers should use—i.e., the control amount—when 

developing their budget requests. 
INTRODUCTION

2 REPORT NO. IG-08-030 

essential for decision makers who must review and approve budgets. The Handbook 

states that properly estimating costs supports the budgeting process, and in order for 

NASA to support the objectives of OMB A-11, a reasonable estimate of resources is 

required. NASA’s Handbook also provides useful information to assist the NASA 

community in the development of reliable, comprehensive, defensible, and welldocumented cost estimates, stating that documentation for the estimates should provide 

sufficient information about how the estimate was prepared to allow an independent 

analyst to reproduce the estimate. However, the Handbook does not explain what 

constitutes sufficient information. 

In July 2007, the Government Accountability Office (GAO) issued an exposure draft of 

“Cost Assessment Guide: Best Practices for Estimating and Managing Program Costs” 

(GAO-07-1134SP).3

 The purpose of the Cost Guide is to help Federal agencies 

overcome longstanding concerns about the adequacy of documentation supporting budget 

requests and create guidance for generating reliable cost estimates in compliance with 

OMB A-11. The GAO Cost Guide provides guiding principles for Government 

managers and auditors to use as they assess the credibility of a program’s cost estimate 

for budget and decisionmaking purposes. Although agencies are not required to comply 

with the Guide, it describes generally accepted best practices for ensuring credible cost 

estimates and notes the importance of documenting cost estimates. Because a reasonable 

and supportable budget is essential to a program’s efficient and timely execution, a 

competent estimate is the key foundation of a good budget. Credible cost estimates help 

program offices effectively defend budgets to Congress and OMB. Without sufficient 

documentation to support budget requests, Federal agencies are limited in their assurance 

that requests are adequate to achieve stated goals. As GAO states in the Guide: “The 

ability to generate reliable cost estimates is a critical function . . .. Without this ability, 

agencies are at risk of experiencing cost overruns, missed deadlines, and performance 

shortfalls.” 

Constellation Program 

The Constellation Program (CxP) supports NASA’s mission to pioneer the future in 

space exploration. As described in NASA’s FY 2008 budget request,4

 CxP is responsible 

for providing the capabilities essential to this mission, to include reestablishing a 

U.S. presence on the Moon, which will enable significant national aspirations, such as 

preparing for human exploration of Mars. The FY 2008 budget request for CxP was 

 

3

 GAO-07-1134SP was released for comment from August 13, 2007, through July 14, 2008. The 

methodology outlined in the Cost Guide is a compilation of best practices that Federal cost estimating 

organizations use to develop and maintain reliable cost estimates throughout the life of a program. 

4 http://www1.nasa.gov/pdf/168652main NASA FY08 Budget Request.pdf, also available at 

http://www.nasa.gov/news/budget/FY2008.html; accessed August 12, 2008. 
INTRODUCTION

REPORT NO. IG-08-030 3 

$3.1 billion, 17.7 percent of NASA’s $17.3 billion budget, divided among the following 

five projects and an “Other” category: 

• Crew Launch Vehicle (CLV)/Ares I. The project mission is to deliver a safe, 

reliable launch system that expands America’s scientific reach through space 

exploration. The Ares I project is tasked to design, develop, test, and evaluate a 

human-rated CLV composed of a solid rocket booster and a new J-2X upper stage 

engine. Ares I will feature a lift capability of 24.5 metric tons and will launch the 

Orion spacecraft that will take astronauts to the International Space Station and 

then to the Moon by 2020. 

• Crew Exploration Vehicle (CEV)/Orion. NASA’s next-generation piloted 

spacecraft is the Orion, which will be capable of transporting six astronauts to the 

International Space Station or four astronauts to the Moon and returning them 

safely to Earth. The combined crew and service modules will provide power, life 

support, and propulsion for rendezvous, orbit correction, and deorbit. 

• Ground Operations. This project consists of the launch site infrastructure 

necessary to receive, inspect, assemble, integrate, test, simulate, monitor, and 

perform launch processing operations and landing/recovery of flight hardware. 

The Ground Operations project is also engaged in defining the complete 

processing system at the launch site. Characteristics of a launch site system 

include numbers of integration cells and launch pads, launch rate capability, and 

associated life-cycle costs. 

• Commercial Cargo Crew Capability (CCCC). This project supports 

demonstration of Commercial Space Transportation Services from domestic 

companies. NASA’s Commercial Orbital Transportation Services Projects are 

designed to facilitate U.S. private industry demonstration of cargo and crew space 

transportation capabilities, with the goal of achieving reliable, cost-effective 

access to low Earth orbit. Although CCCC is considered a project under CxP in 

NASA’s 2008 budget request and in this report, for program management 

purposes, it is its own program and is not a project under CxP. 

• Mission Operations. This project will provide all mission operation capabilities 

needed to execute Constellation missions, including the systems and 

infrastructure necessary for Constellation command and control during ascent, 

descent, and mission operation execution. Mission Operations also supports the 

interoperability of control center facilities with other control centers and test sites. 

• Other. This category includes six smaller projects: Ares V, Program Integration, 

Exploration Communication and Navigation System, Advanced Development, 

Extra Vehicular Activity, and Advanced Projects. 
INTRODUCTION

4 REPORT NO. IG-08-030 

The FY 2008 budget requests for CxP projects (see Table 1) include direct costs, indirect 

costs,5

 and pass-back adjustments.6 For the five major projects, we reviewed the direct 

cost portion of the budget requests (see Table 2, page 8). The direct costs are estimated 

by NASA personnel, while indirect costs are determined by a formula and pass-back 

adjustments are outside of an agency’s control. Therefore, we did not review those costs. 

We also did not review the “Other” costs of $301.9 million. Therefore, only direct costs 

of the five major projects are discussed in this report. Also, because our review was not 

based on statistical sampling, our results cannot be projected. 

Table 1. FY 2008 Budget Requests by CxP Project 

(dollars in millions)

Project Budget Request 

CLV/Ares I $1,175.2

CEV/Orion 950.8 

Ground Operations 356.8 

CCCC 236.0 

Mission Operations 47.4 

Other 301.9 

 Total $3,068.0*

*The total does not add up because of rounding.

Objectives 

The overall audit objective was to determine whether the Constellation Program’s 

FY 2008 budget request was prepared in accordance with OMB A-11 and NASA FMR, 

Volume 4, and was supported by well-documented cost estimates. During the course of 

our audit, we reviewed NPR 7120.5C, NASA’s Cost Estimating Handbook, and the GAO 

Cost Guide because these criteria contained requirements and guidance for supporting 

budget requests with documented cost estimates. We also reviewed internal controls as 

they related to our overall audit objective. See Appendix A for details of the audit’s 

scope and methodology, our review of internal controls, and a list of prior coverage. 

 

5

 Overhead, general and administrative (G&A) costs, and shared services costs. 

6

 OMB’s notification to agencies of budget, management, and policy decisions following its analysis and 

review of all agency budget submissions. 
RESULTS

REPORT NO. IG-08-030 5 

BUDGET REQUESTS COULD BE 

IMPROVED BY USING 

WELL-DOCUMENTED 

COST ESTIMATES

NASA could improve its budgeting process by providing additional guidance to 

ensure that budget requests are supported by well-documented cost estimates. We 

found that while the CxP project managers had supporting documentation for the 

$1.1 billion of direct cost estimates that we reviewed, the majority ($914.6 million) 

was at the summary level and not sufficiently detailed. Although the summary-level 

documentation, such as PowerPoint slides featuring cost overviews, met Agency 

requirements for documenting budget requests and provided insight into the process 

used to estimate the direct costs, it did not include detailed documentation, such as 

the source data, calculations, and explanations. As stated in NASA’s Handbook, the 

documentation should provide sufficient information to facilitate reproducing and 

independently evaluating the cost estimate. 

We found that the five project managers maintained minimal documentation for the 

cost estimates used to support their budget requests because the type of documents or 

the depth of related analysis needed is not specified in OMB and NASA requirements. 

Given the absence of specific guidance, we evaluated the CxP budget request against 

standards of the GAO Cost Guide. We found that the CxP project managers’ 

documentation did not include the level of detail called for by GAO. 

Although the GAO Cost Guide was not available at the time the FY 2008 CxP 

budget request was submitted, NASA could improve its budgeting process by 

adopting the Guide’s recommended standards and ensuring that budget requests 

incorporate well-documented cost estimates, which could help minimize the risk of 

cost overruns by providing additional assurance that budget requests are adequate to 

achieve program and project goals. 

Federal and NASA Requirements and Guidance 

Numerous requirements, policies, and guidance govern the annual budget process at 

NASA. OMB issues requirements for all Federal agencies to follow in the preparation of 

their annual budget submission to the President. NASA provides guidance for preparing 

annual budgets in its FMR, NPRs, and Cost Estimating Handbook. The GAO Cost Guide 

details best practices for Federal agencies to follow in documenting and preparing 

credible cost estimates to support budget requests and decisionmaking. 

OMB Requirement. The June 2006 edition of OMB A-11 provides requirements for 

preparing the FY 2008 budget submission. OMB A-11 instructs Federal agencies on how 
RESULTS

6 REPORT NO. IG-08-030 

to develop and submit their annual budgets and requires agencies to collect, identify, and 

analyze data for cost estimates; document cost estimates; and explain the cost estimating 

process, allowing the quality of the estimate to be independently evaluated. Appendix 9 

of the “Capital Programming Guide,” a supplement to OMB A-11, states that program 

personnel should document cost estimates and that the documentation should explain the 

cost estimating process used and how the cost estimates were prepared so that the quality 

of the estimate can be determined. OMB requires thoroughly documented data, including 

any adjustments made, so that an audit trail is established for verification purposes. 

NASA Requirements and Guidance. NASA’s requirements and guidance are provided 

in NASA FMR, Volume 4; NPR 7120.5C; and NASA’s Cost Estimating Handbook. 

Volume 4 of the NASA FMR details the PPBE process, which was established to assist 

NASA program and project staff to implement the requirements in OMB A-11 for 

preparing, submitting, and executing budgets. The PPBE process uses a methodology for 

aligning resources in a comprehensive, disciplined, top-down approach that focuses on 

translating strategy into actionable programs and bringing together Agency priorities and 

strategic outcomes. 

NPR 7120.5C defines the management requirements for formulating, approving, 

implementing, and evaluating NASA programs and projects. Section 3.2.2.1 states that 

the project manager and the team should develop credible cost estimates for budget 

preparation. Further, this section states that good cost estimation is a critical capability 

needed to ensure the credibility of the project’s resource and financial decisionmaking 

and, in the larger view, the credibility of NASA’s financial management system. The 

NPR also states that cost estimating should be consistent with the Cost Estimating 

Handbook. 

Although NASA’s Cost Estimating Handbook does not provide actual policy guidance or 

project requirements, it provides useful information on developing credible cost 

estimates. The Handbook states that properly estimating costs supports the budgeting 

process, and in order for NASA to support the objectives of OMB A-11, a reasonable 

estimate of resources is required. Task 10 in Chapter 5, Section 5.3, “Estimate,” provides 

information on how to document cost estimates. The Handbook states that the objective 

of documenting cost estimates is to capture, in a continuous fashion, from project 

initiation through completion, the life-cycle cost. Specifically, the purpose of the 

documentation is to provide written justification for the cost estimate. The final cost 

estimate should provide sufficient detail about how the estimate was developed so that 

independent analysts—or other review team members—can reproduce the estimate. The 

Handbook also states that the means by which each part of an estimate has been derived 

must be fully explained. 

GAO Guidance. The GAO Cost Guide states that certain best practices should be 

followed if accurate and credible cost estimates are to be developed. It states that a 

reasonable and supportable budget is essential to a program’s efficient and timely 
RESULTS

REPORT NO. IG-08-030 7 

execution and that a competent estimate is the key foundation of a good budget. The 

Cost Guide states that an estimate is thoroughly documented if it includes source data and 

significance, clearly detailed calculations and results, and explanations of why particular 

methods and references were chosen. The Guide also states that the data in a welldocumented cost estimate must be traceable to its source. Well-documented cost 

estimates are considered high-quality cost estimates for several reasons. First, thorough 

documentation is essential for validating and defending a cost estimate. Second, 

documenting the estimate in detail provides enough information so that someone 

unfamiliar with the program could easily recreate or update it. Third, good 

documentation helps with analyzing changes in program costs and contributes toward the 

collection of cost data that can be used to support future estimates. Finally, a welldocumented cost estimate is essential if an effective independent review is to ensure that 

the estimate is valid and credible. The documentation should explicitly identify the 

primary methods, calculations, results, rationales or assumptions, and source data used to 

generate each cost estimate. The Guide states that data sources should also be 

documented. Examples of data sources include basic accounting records, historical 

databases, subject matter experts, contractor estimates, cost proposals, and research 

papers. 

Improving Supporting Documentation 

For the five project budgets we reviewed, the project personnel provided summary-level 

data regarding the assumptions, risks, estimating rationales, and cost estimating processes 

used for the budget requests. They did not provide source data, such as spreadsheets, 

vendor quotes, or subject matter expert calculations, to further support the cost estimates. 

Project personnel provided summary-level data for $914.6 million of the $1.1 billion 

reviewed. Project personnel stated that the documentary evidence they prepared satisfied 

Agency requirements for documenting budget requests. NASA’s guidance states that the 

documentation for the estimates should contain sufficient information for an independent 

analyst to reproduce the estimate but does not specify the types of information required 

nor the level of detail. Because of the discretion allowed by OMB A-11 and the NASA 

guidance, we evaluated the CxP budget request against standards of the GAO Cost 

Guide. By following the Guide’s best practices, NASA could improve its budgeting 

process by documenting its cost estimates with more detailed support. The detailed 

support should include the methods, calculations, and source data used to develop the 

cost estimates. By grounding cost estimates with detailed, empirical data that explains 

the rationale for estimation decisions, NASA can enhance its assurance that budget 

requests are adequate to finance the CxP and minimize the risk of project overruns. 

The projects that we reviewed used work breakdown structures (WBS)—a management 

device to define and assign program tasks—to define and organize the scope of the 

project. Therefore, we based our audit work on the WBS. We used two key criteria to 

select WBS for review: WBS with high dollar value and WBS that included a mix of 

labor, travel, and procurement costs. The amounts that we examined accounted for 
RESULTS

8 REPORT NO. IG-08-030 

approximately 50 percent of the $2.3 billion of direct costs estimated for the five CxP 

projects. However, because our selection was not based on statistical sampling, our 

results cannot be projected. 

Table 2 summarizes the results of our review. The direct costs estimates are from 

the projects’ budget submissions to CxP. The project managers had supporting 

documentation for all of the amounts that we reviewed, some at the summary level 

and some sufficiently detailed, as shown in Table 2. 

Table 2. Analysis of Five CxP Projects’ FY 2008 Budget Requests 

(dollars in millions)

Project

Estimate of 

Direct Costs

Submitted to CxP

Amount of 

Estimate 

 Reviewed 

Summary 

 Support 

Sufficient

 Support 

CLV/Ares I $1,009.0 $ 539.9 $539.6 $ 0.3 

CEV/Orion 815.3 211.3 102.9 108.4 

Ground Operations 290.4 113.9 61.3 52.6 

CCCC 193.0 193.0 193.0 0 

Mission Operations 33.6 20.9 17.8 3.1 

 Total $2,341.3 $1,079.0 $914.6 $164.4 

Crew Launch Vehicle (CLV/Ares I). The CLV project’s FY 2008 budget submissions 

to CxP totaled $1 billion. Project personnel provided a breakout of the submission by 

WBS, Center, and cost element. We chose two WBS totaling $539.9 million to review 

and determine whether sufficient support existed for the cost estimates. 

Project personnel provided summary-level support for most of the $539.9 million. That 

support included a breakout of full-time equivalent (FTE) staff, work-year equivalents 

(WYEs),7

 and procurement and travel costs as well as information about their estimation 

rationale and assumptions. For $0.3 million, project personnel provided detailed source 

data (vendor quotes), but could not provide source data for the remaining $539.6 million. 

Although they stated that they based the cost estimates on historical data, they could not 

provide documentation of the actual historical data to verify their rationale. 

Cost estimates prepared to support budget requests using GAO best practices would have 

included detailed information on the specific historical costs discussed and the rationale 

for the calculations used to adjust the historical data to arrive at the estimates. 

 

7

 Contract staff working a full work year. 
RESULTS

REPORT NO. IG-08-030 9 

Crew Exploration Vehicle (CEV)/Orion. The CEV project’s FY 2008 budget 

submissions to CxP totaled $815.3 million, consisting of prime (contractor) and 

non-prime (in-house) cost estimates. We chose five WBS valued at $211.3 million to 

determine whether there was adequate support for the cost estimates. The prime, or 

contractor, cost estimates consisted of design, development, test, and evaluation 

(DDT&E) costs. The non-prime cost estimates consisted of DDT&E and costs for 

NASA management oversight. 

Project personnel provided sufficient support for $108.4 million of prime costs. The 

CEV is a new project in the early stages of developing cost estimates, and at the time the 

project formulated its budget request, it had not yet awarded any contracts for its prime 

costs. Therefore, to generate prime cost estimates, project personnel used the NASA Air 

Force Cost Model, a software application used by the U.S. Air Force when estimating the 

cost of new projects, a product NASA had previously used to estimate the costs for new 

projects. For CEV, the model was used to calculate costs based on data from past 

programs, such as Apollo and Gemini. CEV project personnel provided a demonstration 

of the model and the various components used to calculate the costs. For example, 

project personnel demonstrated how the model uses Shuttle subassemblies to estimate 

similar components for CEV. They provided screen shots (printouts of the computer 

screen) from the model and explained how they applied factors such as complexity, 

weight, class, and inflation to the estimates. 

Project personnel did not provide similarly detailed support for $102.9 million of nonprime costs. Project personnel provided summary-level support; which included 

PowerPoint presentations showing content descriptions, estimating rationale, and 

assumptions; however, they did not provide detailed information showing the 

calculations used to arrive at the cost estimates. Although the summary-level data 

provided background information on the estimating process, the source data behind the 

estimates lacked detailed evidence. The CEV project office based the majority of the 

non-prime cost estimates on the professional opinion of subject matter experts but did not 

document the rationale for their decisions. For instance, we requested the source data to 

support the estimated number of FTEs for one particular WBS. Project personnel stated 

that subject matter experts derived the estimates based on prior experience from other 

projects. However, the subject matter experts did not document how the experience 

related to this project or how they used the prior history to calculate the estimates. 

Cost estimates prepared to support budget requests using GAO best practices would have 

included documentation such as spreadsheets and calculations from the subject matter 

experts that linked their previous experience with the current cost estimates. 

Ground Operations. The FY 2008 budget submissions to CxP for Ground Operations 

totaled $290.4 million. We requested support for $113.9 million, which included 

$52.6 million of material costs for the Mobile Launch Platform and $36.7 million of 

material costs for the Vehicle Assembly Building High Bay 3 area. We also requested 

support for $24.6 million of labor costs consisting of 66 FTEs and 105 WYE positions. 
RESULTS

10 REPORT NO. IG-08-030 

The project personnel provided sufficient support for the Mobile Launch Platform 

material budget of $52.6 million. The support consisted of schedules, assumptions, and 

spreadsheets capturing the calculations used to derive the estimated costs. 

Project personnel provided summary-level support for the remaining $61.3 million of the 

cost estimates ($36.7 million for Vehicle Assembly Building material costs and 

$24.6 million for labor costs). For the $36.7 million, project personnel provided a 

summary-level breakdown for selected budget items and stated that they had more 

detailed documentation; however, they were unable to provide further detailed 

documentation or source data beyond the summary-level breakdown. For the 

$24.6 million, project personnel provided some support for $15.7 million; however, the 

support they provided was limited. We could not trace the labor costs detailed in the 

spreadsheets back to the budget submission. Project personnel explained that the 

differences resulted from reducing the number of FTEs in the initial estimates; however, 

no rationale or calculations were provided as documentation for the reduction. Project 

personnel also did not provide any supporting documentation for the remaining 

$8.9 million of labor costs. Consequently, we considered the support for the 

$24.6 million of labor costs of limited benefit. 

Cost estimates prepared to support budget requests using GAO best practices would have 

included source documentation such as historical cost data or vendor quotes for the 

material costs and spreadsheets detailing the rationale and calculations for the reductions 

in labor costs. 

Commercial Cargo Crew Capability (CCCC). The CCCC project’s FY 2008 budget 

submissions to CxP totaled $193 million. We reviewed the entire amount because the 

project personnel did not have the budget broken out by WBS. Project personnel 

verbally explained that the cost estimates included procurement, travel, and labor costs. 

Project personnel provided limited supporting documentation for the $193 million. 

Specifically, project personnel explained that they derived the cost estimates by 

performing market research and soliciting vendor quotes from various companies by 

using Requests for Information. Project personnel provided summary-level 

documentation that illustrated various cost scenarios in a PowerPoint presentation. The 

summary-level data did not include detailed evidence to show how the estimates were 

derived by market research, company responses, or vendor quotes. 

Cost estimates prepared to support budget requests using GAO best practices would have 

included source documentation to show all parameters, assumptions, descriptions, 

methods, and calculations used to develop a cost estimate, such as company responses 

and vendor quotes. 

Mission Operations. The FY 2008 budget submissions to CxP for Mission Operations 

totaled $33.6 million. We chose three WBS from the budget submission valued at 

$20.9 million to determine whether sufficient support existed for the cost estimates. 
RESULTS

REPORT NO. IG-08-030 11 

Project personnel provided sufficient supporting documentation for $3.1 million. The 

documentation included a description of the task/function requirements, the estimating 

rationale used, and the possible impact of a funding reduction. Project personnel also 

provided spreadsheets detailing the calculations of the estimates. 

Project personnel provided some support for the remaining $17.8 million. They verbally 

explained the rationale for the costs; however, they did not document the calculations 

used to arrive at the cost estimates. For example, we reviewed the estimates for a 

training simulator system engineering team that would aid in developing the architecture, 

requirements, and acquisition planning for the Mission Control Center. Project personnel 

could not provide details or calculations to show how they derived the number of staff 

estimated for the team. Subject matter experts derived the estimates based on their 

professional opinion; however, they did not document the rationale or calculations used. 

Cost estimates prepared to support budget requests using GAO best practices would have 

included source documentation such as spreadsheets and subject matter expert 

calculations showing how they derived the estimates. 

Benefit of Improved Budget Support 

Cost estimating is an integral part of the Federal budget preparation process, and support 

for the cost estimates needs to be sufficiently detailed to ensure the reliability of the 

estimates. In Senate Report 110-397, “Departments of Commerce and Justice, Science, 

and Related Agencies Appropriations Bill, 2009,” the Senate Appropriations Committee 

expressed its concern about NASA’s documentation, stating: 

The Committee continues to be disappointed in the lack of detail provided in NASA’s 

fiscal year 2009 congressional budget justification document. Budget justifications 

are critical to the Committee’s ability to make informed decisions concerning the 

administration’s funding requests and must be submitted in a format with the greatest 

level of detail possible. NASA has made an incremental change in providing 

additional details in their budget justification, but the agency has not complied fully 

with the direction in Public Law 110-161 which specifically asked for funding levels 

by directorate, theme, program, project, and activity. NASA has yet to disclose such 

data in its budget material provided to the Committee as prescribed in the law, and 

the Committee insists that NASA comply with the law in future budget submissions. 

Supporting budget requests with cost estimates based on actual and historical evidence 

could help minimize the risk of cost overruns by providing additional assurance that 

budget requests are adequate to achieve program and project goals. Similarly, historical 

cost data provide a baseline for estimating future costs and budget modifications. 

Without sufficient documentation of source data used for cost estimates, managers cannot 

determine whether budget requests are reasonable to support the program or project nor 

can they be assured that they are safeguarding the public’s interests and avoiding project 

overspending. NASA programs and projects have historically experienced cost overruns. 

NASA’s FY 2009 budget request reported cost overruns, as required by the NASA 
RESULTS

12 REPORT NO. IG-08-030 

Authorization Act of 2005, showing that 4 out of 12 new NASA programs are over 

budget by 15 percent or more. Improved cost estimates could reduce NASA’s risk of 

cost overruns, missed deadlines, and performance shortfalls. 

NPR 7120.5C requires cost estimates to be consistent with guidance in NASA’s 

Handbook, and the Handbook provides useful information to assist the NASA 

community in the development of reliable, comprehensive, defensible, and welldocumented cost estimates. The Handbook states that documentation for the estimates 

should provide sufficient information about how the estimate was prepared to allow an 

independent analyst to reproduce the estimate, but the Handbook does not explain what 

constitutes sufficient information. 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response 

Recommendation 1. The Associate Administrator for Program Analysis and Evaluation 

should incorporate into NASA’s Cost Estimating Handbook appropriate best practices 

identified in the exposure draft of the GAO Cost Guide and require personnel to document 

and retain cost estimates used to support budget requests in a manner that explicitly 

identifies the primary methods, calculations, results, rationales or assumptions, and source 

data used to generate each estimate. 

Management’s Response. The Associate Administrator for Program Analysis and 

Evaluation nonconcurred with our recommendation. However, NASA has included the 

proposed exposure draft GAO Cost Guide standards into the Agency’s 2008 Cost 

Estimating Handbook. The Associate Administrator stated that the proposed standards in 

the GAO Cost Guide apply to improvement of point-in-time estimates but are not directly 

pertinent to the documentation of annual budget development. While properly 

documented cost estimates are a key component of the process of budget formulation, 

cost estimates are only one of a number of inputs that are evaluated in forming a program 

budget. The budgeting process cannot be considered as a point-in-time exercise in 

optimization; rather, it is updated every year, comparing the most recent cost estimates 

with available resources and determining the best plan given the most recent information. 

This underscores the limitations of cost estimates assessed at a single point in time; early 

in development, estimates are based on immature program requirements and uncertain 

budget availability. The relevant guidance to assess CxP’s FY 2008 budget was 

embodied in OMB A-11, the FY 2008 Strategic Planning Guidance, and the 

Programmatic Resource Guidance. The Associate Administrator further stated that 

NASA project and program cost estimates are routinely independently evaluated by 

Standing Review Boards and reconciled by senior management as part of the process 

required by NPR 7120.5D, “NASA Space Flight Program and Project Requirements,” 

March 5, 2007. 
RESULTS

REPORT NO. IG-08-030 13 

Evaluation of Management’s Response. The Associate Administrator’s comments are 

responsive because the GAO standards have been incorporated into the 2008 Cost 

Estimating Handbook. However, we take exception with NASA’s characterization of the 

GAO Cost Guide as “not directly pertinent to the documentation of annual budget 

development.” We believe the standards set forth in the GAO Cost Guide provide 

guidance on documenting cost estimates and, if followed, would enhance the credibility 

of NASA’s cost estimates used to support budget requests. We acknowledge that cost 

estimation is a process that serves multiple purposes. The exposure draft of the GAO 

Cost Guide states that one of the main purposes of cost estimates is to support the budget 

process by providing estimates of funding required to efficiently execute a program. 

Cost estimates are necessary for Government programs for many reasons: supporting 

decisions about whether to fund one program over another, developing annual budget 

requests, and evaluating resource requirements at key decision points. Moreover, having 

a realistic estimate of projected costs makes for effective resource allocation, and it 

increases the probability of a program’s success. The recommendation is resolved and 

will be closed upon verification of management’s actions. 

Recommendation 2. The Constellation Program Manager should require that budget 

requests be prepared using cost estimates that are sufficiently documented as to allow an 

independent cost analyst to reproduce the estimate. 

Management’s Response. The Associate Administrator of Program Analysis and 

Evaluation concurred, stating that CxP continues to be committed to producing high 

quality cost estimates for managing its program and projects. NASA has developed 

several initiatives to improve cost estimating and management within the Agency, one 

example is the NASA Cost Estimating Handbook. The Handbook describes cost 

estimating as it should be applied to NASA projects and provides information on cost 

estimating and analysis practices. CxP has been and will continue to apply the 

techniques and best practices outlined in the NASA Cost Estimating Handbook. The 

techniques and best practices are in concert with the GAO Cost Guide. 

Evaluation of Management’s Response. Management’s comments are responsive. The 

recommendation is resolved and will be closed upon verification of management’s 

actions. 

APPENDIXES

REPORT NO. IG-08-030 15 

APPENDIX A 

Scope and Methodology 

We performed this audit from August 2007 through July 2008 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. 

We performed fieldwork at Johnson Space Center, Kennedy Space Center, Marshall Space 

Flight Center, and NASA Headquarters. We selected five major CxP projects to review: 

Crew Launch Vehicle, Crew Exploration Vehicle, Ground Operations, Commercial Crew 

Cargo Capability, and Mission Operations. We reviewed the information in the “National 

Aeronautics and Space Administration President’s FY 2008 Budget Request” and in the 

CxP projects’ submissions for that document. The five projects’ FY 2008 budget requests 

for direct costs totaled over $2.3 billion. For each of the five projects, we requested copies 

of the budget submissions that project personnel provided to the Constellation Program 

Office. The project offices provided us the direct costs broken out by WBS. We reviewed 

the entire budget for CCCC and, for the other four projects, we selected between two and 

five WBS with the highest dollar value to maximize the amount of the overall budget 

included for review (see Table 3). We also selected WBS that had a mix of labor, travel, 

and procurement costs. 

Table 3. WBS and Amounts Reviewed 

(dollars in millions)

Project

Number of WBS 

 Reviewed 

Amount 

Reviewed

CLV/Ares I 2 $ 539.9 

CEV/Orion 5 211.3 

Ground Operations 3a 113.9 

CCCC —b 193.0 

Mission Operations 3 20.9 

 Total 13 $1,079.0 

a

 Portions of 3 WBS were reviewed (totaling $113.9). 

b

 The CCCC budget was not broken out by WBS. 
APPENDIX A 

16 REPORT NO. IG-08-030 

We requested detailed support for the cost estimates and reviewed the documentation 

provided by CxP project personnel. For all of the amounts that we reviewed, CxP project 

personnel provided overall summary documentation, such as PowerPoint presentations 

that contained labor, procurement, and travel costs. Because that documentation did not 

provide the level of detail needed to adequately support the estimates, we requested 

additional documentation. CxP project personnel provided additional documentation that 

was sufficiently detailed for $164.4 million of the $1,079 million that we reviewed. 

We interviewed key project, program, and Exploration Systems Mission Directorate 

personnel as well as PA&E and OCFO staff to determine their roles and responsibilities 

in the budget formulation process and whether they were issued budget formulation 

guidance. 

Specifically, we requested data to determine whether 

• PA&E and OCFO issued and disseminated guidance to appropriate Mission 

Directorates, 

• the Exploration Systems Mission Directorate issued and disseminated guidance to 

the Constellation Program Office, and 

• the Constellation Program Office issued and disseminated guidance to its project 

offices. 

We reviewed the following documents relating to budget formulation: 

• OMB Circular No. A-11, “Preparation, Submission, and Execution of the 

Budget,” June 2006 

• OMB Capital Programming Guide, Version 2.0, “Supplement to OMB Circular 

A-11, Part 7: Planning, Budgeting, and Acquisition of Capital Assets,” June 2006 

• Exposure Draft, “Cost Assessment Guide: Best Practices for Estimating and 

Managing Program Costs” (GAO-07-1134SP, July 2007) 

• “GAO Standards for Internal Control in the Federal Government” 

(GAO/AIMD-00-21.3.1, November 1999) 

• NASA FMR, Volume 4, “Planning, Programming, Budgeting, and Execution,” 

July 2006 

• NPR 7120.5C, “NASA Program and Project Management Processes and 

Requirements,” March 22, 2005 

• NASA’s “Cost Estimating Handbook,” 2004 

Use of Computer-Processed Data. We did not use computer-processed data to perform 

this audit.
APPENDIX A 

REPORT NO. IG-08-030 17 

Review of Internal Controls 

We evaluated whether CxP had internal controls in place to ensure its budget request was 

adequately supported. We asked the project managers of the five major CxP projects that 

we reviewed what internal control mechanisms were in place at the project level in 

FY 2006 during the FY 2008 PPBE budget formulation process to ensure that cost 

estimates used to support the budget request were adequately documented. We also 

asked CxP project managers to identify the internal controls in place and provide 

evidence that they were in place and functioning effectively. In addition, we searched 

NASA budget-related guidance to determine whether the guidance identified a system of 

internal controls for preparing and reviewing budgets at the project and program levels 

and whether the system was sufficient to ensure that cost estimates were supported by 

adequate documentation. As discussed in this report, the budget process could be 

improved. Our recommendations, if implemented, will improve the controls over the 

budget formulation process. 

Prior Coverage 

During the last 5 years, GAO and the NASA OIG have issued five reports of particular 

relevance to the subject of this report. Unrestricted reports can be accessed over the 

Internet at http://www.gao.gov (GAO) and http://oig.nasa.gov/audits/reports/FY08/

(NASA). 

Government Accountability Office

“NASA: Agency Has Taken Steps Toward Making Sound Investment Decisions for 

Ares I But Still Faces Challenging Knowledge Gaps” (GAO-08-51, October 2007) 

“NASA: Long-Term Commitment to and Investment in Space Exploration Program 

Requires More Knowledge” (GAO-06-817R, July 17, 2006) 

“Space Shuttle: Costs for Hubble Servicing Mission and Implementation of Safety 

Recommendations Not Yet Definitive” (GAO-05-34, November 2004) 

“NASA: Lack of Disciplined Cost Estimating Processes Hinders Effective Program 

Management” (GAO-04-642, May 2004) 

National Aeronautics and Space Administration

“Failures in Cost Estimating and Risk Management Weaknesses in Prior Space Launch 

Initiative” (IG-03-023, September 29, 2003) 
APPENDIX B 

18 REPORT NO. IG-08-030 

MANAGEMENT COMMENTS
APPENDIX B 

REPORT NO. IG-08-030 19 
APPENDIX B 

20 REPORT NO. IG-08-030 
APPENDIX B 

REPORT NO. IG-08-030 21 
APPENDIX C 

22 REPORT NO. IG-08-030 

REPORT DISTRIBUTION

National Aeronautics and Space Administration 

Administrator 

Deputy Administrator 

Chief of Staff 

Associate Administrator for Exploration Systems 

Constellation Program Manager 

Associate Administrator for Program Analysis and Evaluation 

Chief Financial Officer 

Non-NASA Organizations and Individuals 

Office of Management and Budget 

Deputy Associate Director, Energy and Science Division 

Branch Chief, Science and Space Programs Branch 

Government Accountability Office 

Director, Defense, State, and NASA Financial Management, Office of Financial 

Management and Assurance 

Director, NASA Issues, Office of Acquisition and Sourcing Management 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member 

Senate Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies 

Senate Committee on Commerce, Science, and Transportation 

Subcommittee on Space, Aeronautics, and Related Sciences 

Senate Committee on Homeland Security and Governmental Affairs 

House Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies 

House Committee on Oversight and Government Reform 

Subcommittee on Government Management, Organization, and Procurement 

House Committee on Science and Technology 

Subcommittee on Investigations and Oversight 

Subcommittee on Space and Aeronautics 
Major Contributors to the Report: 

Daniel Devlin, Director, Financial and Institutional Management Directorate 

Mark Benson, Auditor 

Daniel Birnbaum, Auditor 

Mike Bruns, Auditor 

Tekla Szelong, Auditor 

Bobbie Wells, Auditor 

Elizabeth Shifflett, Report Process Manager 

REPORT NO. IG-08-030 23 
SEPTEMBER 18, 2008 

REPORT No. IG-08-030 

OFFICE OF AUDITS

OFFICE OF INSPECTOR GENERAL

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Visit http://oig.nasa.gov/audits/reports/FY08 to obtain additional copies of this report, or contact the 

Assistant Inspector General for Auditing at 202-358-1232. 

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usefulness of this report, please send your comments to Ms. Jacqueline White, Director of Special 

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Ideas and requests can also be mailed to: 

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Washington, DC 20546-0001 

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