GAO

United States General Accounting Office

Report to Congressional Requesters

August 1999 SPACE 

TRANSPORTATION

Status of the X-33 

Reusable Launch 

Vehicle Program

GAO/NSIAD-99-176

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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-281611 Letter

August 11, 1999

The Honorable Dana Rohrabacher

Chairman

The Honorable Bart Gordon

Ranking Minority Member

Subcommittee on Space and Aeronautics

Committee on Science

House of Representatives

The purpose of the $1.3 billion X-33 Program, cosponsored by the National 

Aeronautics and Space Administration (NASA) and the Lockheed Martin 

Corporation, is to develop and demonstrate advanced technologies and 

techniques needed for future reusable launch vehicles (RLV), including 

lightweight internal fuel tanks, advanced rocket engines, a durable heat 

shield, and rapid-turnaround, low-cost operations. The X-33 vehicle will be 

a half-scale model of Lockheed Martin’s planned single-stage-to-orbit 

(SSTO) Venture Star RLV, an operational vehicle that will be based on and 

developed after the X-33. Lockheed Martin and NASA will base the 

decision to proceed with developing the Venture Star, in part, on the results 

of the X-33 Program. NASA would potentially be one of Lockheed Martin’s 

primary customers for the cargo-only flights and, at this time, is the only 

anticipated customer for passenger flights. The passenger flights would 

carry crewmembers to and from the International Space Station.

NASA and Lockheed Martin are conducting the X-33 Program under a 

cooperative agreement,1

 a financial instrument with which a government 

entity and one or more public or private organizations jointly fund and 

implement an activity to achieve common objectives. Such a partnership 

was encouraged by the National Space Transportation Policy of 1994 as a 

means of (1) establishing NASA as the lead agency for technology 

development and demonstration of reusable space transportation systems 

and (2) positioning the government and the private sector to make 

decisions on the development of an operational, reusable launch system. 

Under the X-33 cooperative agreement, NASA’s contribution is

1

 Lockheed Martin has made agreements with Allied Signal Aerospace, B.F. Goodrich Aerospace, 

Boeing-Rocketdyne Division, and Sverdrup Corporation to assist in the X-33 Program.

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$912.4 million, and the current estimate of Lockheed Martin’s and its 

industry partners’ contributions is $286.6 million.

Because of the Subcommittee’s concerns about technical difficulties 

encountered by the X-33 Program, you asked us to review the progress of 

the program. As agreed with your offices, we (1) determined whether the 

X-33 Program is meeting the cost, schedule, and performance objectives 

established in the X-33 cooperative agreement, (2) determined how NASA’s 

oversight responsibility was changed by the cooperative agreement, and 

(3) identified potential issues NASA may face as it moves toward a decision 

on whether to use Venture Star RLVs to service the International Space 

Station.

Results in Brief NASA and Lockheed Martin X-33 program managers anticipate that the 

program will achieve technical requirements such as demonstrating the 

feasibility of building large liquid hydrogen fuel tanks made of graphite 

composite material.2

 However, the program will not meet some original 

cost, schedule, and performance objectives. Problems encountered by 

Lockheed Martin while working toward the X-33 Program’s technical 

requirements have caused cost increases, delay of the test vehicle’s first 

flight, and revision of some performance objectives. The technical 

problems occurred during development and fabrication of the X-33 

vehicle’s internal fuel tanks, rocket engines, and thermal protection system, 

the three key advanced technologies the program seeks to demonstrate. 

Resolving these technical problems caused Lockheed Martin’s estimated 

contribution to grow $75 million above the original estimate of

$211.6 million, to $286.6 million. However, part of the increase will be 

borne by the government. Procurement regulations allow companies to 

recover allowable independent research and development costs by 

including them as overhead in the pricing for other government contracts. 

Thus, Lockheed Martin’s and its partners’ shares may actually be lower. In 

addition, estimated government costs for NASA civil service personnel 

working on the program not included in NASA’s X-33 program budget also 

increased. Together, these estimated costs increased from $216.9 million to

$274.3 million as of March 1999. As a result, we believe a more accurate 

representation of the estimated government’s share of the X-33 Program is 

$1.23 billion, while industry’s estimated share is $125.4 million.

2

 Graphite composite is a high strength, low-weight material used to reduce structural weight by 

replacing heavier metal components.

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As a result of the technical problems, the first flight of the X-33 vehicle was 

delayed 16 months, from March 1999 to July 2000. Importantly, this could 

delay NASA’s decision about whether to invest in space shuttle fleet 

upgrades or rely on new launch vehicles such as Venture Star. The 

technical problems and schedule constraints also resulted in changes to 

program performance objectives, including a reduction of the test flight 

speed for the X-33 vehicle.

To implement the terms of the X-33 cooperative agreement, NASA assigned 

to Lockheed Martin the leadership role in executing the X-33 Program. 

Under the agreement, NASA monitors and verifies the program’s progress 

and makes payments to Lockheed Martin when milestones are met. NASA 

also provides personnel and facilities at its field centers to perform 

technical tasks for the program under the direction of Lockheed Martin. 

An inherent characteristic of the cooperative agreement is the way in 

which NASA conducts program oversight. According to NASA’s X-33 

program manager, the agency’s oversight is different from that used for 

traditional development contracts, as it relies on insight gained from NASA 

employees working alongside Lockheed Martin personnel. NASA’s 

Advisory Council, Program Management Council, and the Office of 

Inspector General also periodically oversee the program and have reported 

technical and management problems.

Several issues will need to be evaluated before NASA decides to use 

Venture Star RLVs to support the International Space Station. First, the 

results of the X-33 Program must provide sufficient information for NASA 

to determine that the risks have been sufficiently reduced and that 

continuation of activities leading to the agency’s use of Venture Star as a 

customer is warranted. Second, even though Venture Star RLVs are 

intended to be commercially owned and operated, government financial 

incentives will likely be needed to initiate such a venture. Third, NASA 

would have to pay for either two crew modules or modifications to Venture 

Star vehicles if the crew return vehicle being developed for the 

International Space Station is chosen as a means for Venture Star to carry 

people. Fourth, because the Venture Star RLV would not carry as much 

cargo as the space shuttle, additional flights would be needed. The more 

frequent docking activities may reduce the amount of stable time available 

for some science operations.

The Government Performance and Results Act of 1993 requires that federal 

agencies prepare annual performance plans that establish measurable 

objectives and performance targets for major programs. NASA’s Fiscal 
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Year 2000 Performance Plan does not include performance targets that 

establish a clear path leading from the X-33 flight-test vehicle to an 

operational SSTO vehicle. Ensuring that results from the X-33 Program 

adequately support a confident decision to develop an SSTO vehicle such 

as the Venture Star deserves attention in NASA’s performance plan. We 

provide a recommendation to that effect.

Background The X-33 Program is a key goal of NASA’s strategy to reduce launch costs 

from $10,000 per pound on the space shuttle to $1,000 per pound to low 

earth orbit by using SSTO RLVs. After a competitive conceptual design 

phase, NASA, in July 1996, signed the X-33 cooperative agreement with 

Lockheed Martin for the design, development, and flight-testing of the 

company’s X-33 advanced technology demonstration vehicle. To achieve 

this goal, NASA has established technical and performance objectives for 

the X-33 Program that the agency believes will lead to development of 

SSTO RLVs such as Venture Star. The technical objectives of the X-33 

Program are to develop and demonstrate the use of lightweight composite 

materials for internal liquid hydrogen fuel tanks, linear aerospike rocket 

engines, a durable thermal protection system, and aircraft-like operations. 

The performance objectives are to demonstrate the technologies by flying 

the X-33 vehicle and measuring its performance characteristics. The 

flight-test program requires the vehicle to make at least five flights and 

meet specific performance and technical requirements needed to validate 

key RLV technologies. Figure 1 is an illustration of the planned X-33 

vehicle, and figure 2 is an illustration of the planned Venture Star vehicle.
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Figure 1: Exterior Illustration of the Planned X-33 Vehicle

Source: NASA.
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Figure 2: Exterior Illustration of the Planned Venture Star Vehicle

Source: NASA.

To demonstrate the technologies and low-cost operations needed for SSTO 

RLVs, the X-33 vehicle will be flown under autopilot in a series of suborbital 

flight-tests from Edwards Air Force Base in California to the Michael Army 

Airfield in Utah. Longer flights to Malmstrom Air Force Base in Montana 

are also planned. The program is scheduled for completion in December 

2000.

Impact of Technical 

Problems on Program 

Cost, Schedule, and 

Performance 

Objectives

As a result of problems encountered while working toward the program’s 

technical requirements, Lockheed Martin’s estimated contribution to 

complete the X-33 cooperative agreement increased. However, part of the 

increase will be borne by the government. Some of Lockheed Martin’s and 

its industry partners’ contributions could be considered independent 

research and development costs and are potentially recoverable through 

pricing on other government contracts. Further, the X-33 vehicle’s 
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flight-testing was delayed and some performance objectives were changed. 

NASA and Lockheed Martin officials believe that despite the problems, the 

X-33 Program will meet its original technical requirements and completion 

date in December 2000.

Primary Technical 

Difficulties

The X-33 Program experienced technical difficulties with each of the three 

key technologies under development for the Venture Star RLV: the internal 

composite liquid hydrogen fuel tanks, the linear aerospike engines, and the 

durable thermal protection system (heat shield). Figure 3 shows a cutaway 

illustration of the X-33 vehicle’s major subsystems, including the tanks, 

rocket engines, and heat shield. The first major technical problem arose 

during fabrication of the first of two internal composite liquid hydrogen 

tanks. Sections of the tanks are made by bonding together layers of 

composite materials. The sections are then bonded together to form lobes, 

or quarter sections, which are, in turn, bonded together to form the tanks. 

Difficulties were encountered in bonding two lobes onto a y-shaped joint in 

the left-hand tank. The affected surface layers of the lobes were repaired 

and reapplied to the joint. However, during the rebonding process, the 

composite surface layers of the two lobes disbonded over large portions of 

the lobes. The affected lobes were removed, and two new lobes were 

fabricated and are being installed on the tank. The right-hand internal 

hydrogen fuel tank did not experience such fabrication difficulties and is 

currently undergoing qualification tests at NASA’s Marshall Space Flight 

Center.
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Figure 3: Cutaway Interior Illustration of the Planned X-33 Vehicle

Source: NASA.

The second major technical problem occurred while fabricating one of the 

exhaust ramps for the linear aerospike rocket engines. Ten such ramps are 

being made for the program. The exhaust ramps are made of layers of 

copper alloy brazed together. Impurities in the brazing material caused the 

layers of one ramp to disbond during the fabrication process. Two ramps 

have been produced successfully since the problem occurred, according to 

NASA and Lockheed Martin program managers.

The third technical problem occurred during fabrication of the thermal 

protection system. The thermal protection system is composed of 

individual heat-resistant metallic panels attached to the bottom and leading 

edges of the vehicle’s exterior surfaces. The individual panels are made by 

bonding together several layers of heat-resistant materials. Difficulties 

encountered in bonding together the layers of the panels during the 

fabrication process led to a high rejection rate and increased the amount of 

time needed to make the panels. The panel fabrication process has been 

improved, according to NASA and Lockheed Martin program managers. 

Composite liquid

hydrogen tanks (2)

Linear aerospike

rocket engines (2)

Aluminum

liquid

oxygen tank

Metallic thermal

protection

system
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Production of the flat panels for the bottom of the vehicle is complete, and 

most of the large curved panels for the vehicle’s leading edges have been 

made. Bonding the layers of the smaller curved panels, which are also used 

on the leading edges, has proven to be the most difficult. These panels are 

still being fabricated, but are not expected to cause further schedule 

delays, according to NASA and Lockheed Martin program managers.

Effects on Lockheed 

Martin’s Cooperative 

Agreement Contributions

As of March 1999, Lockheed Martin estimated that industry’s contributions 

to complete the X-33 cooperative agreement had increased by $75 million, 

or 35.4 percent, from $211.6 million to $286.6 million. The increases were 

due primarily to the technical problems discussed above.3

 Table 1 shows 

the original and current estimated contributions for NASA and Lockheed 

Martin to complete the X-33 Program as established in the cooperative 

agreement. NASA’s contribution under the cooperative agreement remains 

fixed at $912.4 million (see note “b” below).

Table 1: Original and Current Estimated Contributions for the X-33 Program 

b

NASA’s contribution to the X-33 Cooperative Agreement is $912.4 million. The remaining $99.8 

million in the program budget is for NASA headquarters costs, related research and development 

activities, and program office operations.

Lockheed Martin program officials anticipate that industry’s estimated 

contribution to complete the X-33 Program under the cooperative 

agreement will need to be increased between $10 million and $64 million to 

resolve the existing technical problems. Lockheed Martin has not yet 

formally revised the industry team’s estimated contributions to reflect any 

such increase. NASA and Lockheed Martin are implementing cost 

3

 The allocation of cost increases associated with individual problems is not discussed due to the 

proprietary nature of the information.

Then-year dollarsa in millions

a Then-year dollars represent the estimated actual value of the funds for a particular year.

July 1996 March 1999 Changes

Percent

changes

NASA program budgetb $1,012.2 $1,012.2 0.0 0.0

Lockheed Martin and industry 

partners’ contributions

211.6 286.6 +$75.0 +35.4

Total $1,223.8 $1,298.8 +$75.0 +6.1
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reduction strategies to limit the increases by deleting some Venture Star 

development tasks and reducing Lockheed Martin’s X-33 workforce. The 

final cost of the program will depend on the results of Lockheed Martin’s 

current cost-control efforts and the cost to resolve any future technical 

problems.

Effects on Total 

Government and Net 

Industry Contributions

Under the terms of the cooperative agreement, NASA’s contribution to the 

X-33 development program remains fixed, and Lockheed Martin and the 

industry partners are responsible for all cost growth. However, at least 

some cost growth may be recovered by Lockheed Martin and the industry 

partners by including the costs in their pricing for other government 

contracts. Further, costs for NASA personnel working on the X-33 Program 

are paid from other NASA budgets. Thus, the government’s share of the 

costs for the X-33 Program is greater than that represented in the 

cooperative agreement.

First, as recognized in the agreement, Lockheed Martin and its industry 

partners plan to recover portions of their contributions by classifying them 

as independent research and development (IRAD) expenses and then 

including them as overhead in other government contracts. Federal 

acquisition regulations4

 allow companies to recover IRAD costs by 

including such expenses as overhead in pricing of other government 

contracts. Because Lockheed Martin has contracts with other government 

agencies, such as the Department of Defense, those agencies’ budgets may 

bear some of these costs. Lockheed Martin and its partners plan to recover 

from the government an estimated $161.2 million of their estimated

$286.6 million contribution to the agreement. Thus, as shown in table 2, 

Lockheed Martin’s and the industry partners’ potential net contribution for 

the X-33 Program could be as low as $125.4 million. However, an audit or 

review must be conducted to determine the portion of the contributions 

allocable as overhead on other government contracts. Additional increases 

in industry’s contributions to the X-33 Program will also potentially 

increase the amount of IRAD reimbursements the partners receive from the 

government.

4

 Federal Acquisition Regulation 31.205-18—Independent Research and Development and Bid and 

Proposal Costs.
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Table 2: Estimated Total Industry Contribution for the X-33 Program, Factoring in 

Potential IRAD Reimbursements

a

Industry partners’ contributions to the cooperative agreement will increase between $10 million and 

$64 million to resolve the program’s technical problems, according to a Lockheed Martin official.

b

Government reimbursements of industry IRAD costs will increase by an estimated $5 million to $32.5 

million, depending on how much the industry partners’ contributions grow, according to a Lockheed 

Martin official.

Second, costs not in the X-33 cooperative agreement or NASA’s X-33 

program budget include salaries, benefits, and support services for the 

government personnel working on the program at various NASA centers. 

These personnel costs will be paid out of another NASA budget account. 

As shown in table 3, the current estimate is $113.1 million as of March 1999. 

The government’s final share of the program’s total cost also depends on 

the amount of IRAD costs determined to be recoverable, the results of 

Lockheed Martin’s cost control efforts, and the nature of any future 

technical problems.

Then-year dollars in millions

July 1996 March 1999 Changes

Percent

changes

Total contribution to cooperative 

agreement $211.6 $286.6a + $75.0 + 35.4

Potential government IRAD 

reimbursement 121.7 161.2b + 39.5 + 32.5

Net industry contribution $89.9 $125.4 + $35.5 + 39.5
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Table 3: Estimated Total Government Costs for the X-33 Program, Factoring in 

Potential IRAD Reimbursement and Personnel Costs

a

Independent research and development

b

Government reimbursements of Lockheed Martin and its partners’ IRAD costs will increase by an 

estimated $5 million to $32.5 million, depending on how much of the estimated $10 million to $64 

million cost increase is realized, according to a Lockheed Martin official.

c

These costs are estimates through completion of the program and include salaries, benefits, training, 

and travel costs.

First Test Flight Delays Problems encountered during fabrication of the engines and one of the 

internal liquid hydrogen fuel tanks led to a 16-month delay of the first test 

flight of the X-33 vehicle, from March 1999 to July 2000. However, the 

program’s December 2000 completion date remains unchanged. Lockheed 

Martin has maintained the original X-33 Program completion date by 

reducing Venture Star design and development work that the company had 

planned to accomplish during the X-33 Program. Table 4 shows the original 

date for the first flight and subsequent changes and the associated delay of 

the first flight date. Although problems in fabricating the thermal 

protection system panels delayed delivery milestones of the panels, the 

delay did not cause a delay in the first flight schedule because the schedule 

had already been delayed by the engine and fuel tank problems.

Then-year dollars in millions

X-33 Cost elements July 1996 March 1999 Changes

Percent

changes

NASA X-33 program budget $1,012.2 $1,012.2 $0.0 0.0

Potential government 

reimbursement of industry 

IRADa

 costs

 121.7 161.2b + 39.5 + 32.5

Government personnel costsc 95.2 113.1 + 17.9 +18.8

Sub-totals of government 

costs outside X-33 budget

216.9 274.3 + 57.4 + 26.5

Total government costs $1,229.1 $1,286.5 + $57.4 +4.7
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Table 4: X-33 Program Schedule Changes

a

For the left-hand fuel tank. The delivery date for the right-hand tank was May 1999.

b

For the second of two flight engines.

c

For delivery of both engines.

Delays in the X-33 Program may affect NASA’s investment plans for future 

space-launch programs, including decisions on whether and when to 

upgrade the space shuttle fleet or rely on a new launch vehicle, such as the 

Venture Star RLV. NASA originally planned to decide in 2000 whether to 

upgrade the space shuttle fleet and, if so, which upgrades to implement. 

NASA now plans to make its recommendations for a future space 

transportation investment strategy as part of the fiscal year 2001 budget 

process, which starts in the later part of 2000.

Performance Objectives 

Revised

Technical problems and schedule constraints led Lockheed Martin and 

NASA to change two X-33 Program objectives and flight-test milestones. 

First, Lockheed Martin and NASA chose to use an internal liquid oxygen 

tank made of aluminum for the X-33 vehicle, instead of the lightweight 

composite materials used for the internal liquid hydrogen tank. Schedule 

constraints early in the program led Lockheed Martin to exercise its option 

under the cooperative agreement to use an internal oxygen tank made of 

aluminum instead of the lightweight composite materials used for the 

internal liquid hydrogen tank. An operational Venture Star RLV will likely 

require a lightweight composite liquid oxygen tank to reduce the vehicle’s 

weight and achieve SSTO operations. The X-33 Program plans to 

demonstrate the primary elements of this technology by building a 

small-scale 10-foot-diameter composite liquid oxygen tank that will be 

tested on the ground.

Second, the test flight speed objective was reduced from Mach5

 15 to

Mach 13.8. According to Lockheed Martin and NASA X-33 program 

managers, the maximum flight-test speed was reduced because the detailed 

design phase of the program determined that the vehicle’s projected weight 

Program milestones Original milestone date First revised date Second revised date Third revised date

Liquid H2 tank delivery 

complete

Dec. 1997 Oct.1998 Mar.1999 July 1999a

Aerospike engines delivery 

complete

Aug.1998b Feb.1999 Sept.1999 Oct.1999c

First X-33 flight-test Mar.1999 July 1999 Dec.1999 July 2000
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would exceed design requirements and prevent it from reaching Mach 15. 

After reviewing the vehicle’s design and the technical objectives for the 

flight-tests, a panel of experts convened by NASA concluded that the 

flight-test technical objectives could be achieved at a lower speed. 

Lockheed Martin and NASA program officials told us that weight reduction 

measures have already been incorporated into the preliminary design of the 

Venture Star RLV to meet the vehicle weight requirements.

The weight reduction measures are based on lessons learned designing and 

building the X-33 test vehicle. One of the weight-saving modifications is to 

attach the Venture Star vehicle’s thermal protection system panels directly 

to the vehicle’s interior structure and fuel tanks, eliminating the weight of 

the attachment structures used on the X-33 vehicle. Other weight-reducing 

modifications for the Venture Star RLVs include lighter weight composite 

and ceramic engine components and composite internal liquid oxygen 

tanks. Although the composite and ceramic components have not been 

demonstrated, NASA and Lockheed Martin plan to reduce the technical 

risks of providing these technologies for the Venture Star RLVs through 

ground-based demonstrations during the X-33 Program.

In addition to the revised performance objectives, the scheduled length of 

the X-33 flight-test program was reduced from 10 to 3 months, and the 

original single program flight-test milestone and payment schedule were 

changed so that there are now three flight-test milestones and payments. 

The original flight-test program required Lockheed Martin to obtain 

specific technical data and demonstrate rapid and efficient aircraft-like 

operations in 15 test flights over a 10-month period. Upon completion of 

these objectives, NASA was to pay the company a $75-million payment for 

successfully completing the flight-test program. The current program plan 

provides for a $60-million payment after the technical data and vehicle 

operations objectives are achieved, and the vehicle has flown at least five 

flights. After the initial flight-test objectives have been achieved, NASA will 

pay the company $10 million if it completes five more flights, and another 

$5 million if it completes the last five flights. According to NASA’s X-33 

program manager, the additional flights will further demonstrate rapid and 

low-cost RLV operations and build investors’ confidence that privately 

financed RLVs are feasible.

5

 Mach numbers represent speed measured as units of the speed of sound, which is 741 miles per hour 

at sea level. For example, Mach 2 equals 1,482 miles per hour.
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The changes to the X-33 flight-test program were made in order to reduce 

the risk that Lockheed Martin would receive no payment if the company 

achieved all of the technical and operational objectives but did not 

complete all of the planned 15 test flights. The required technical data will 

be obtained by observing, recording, and analyzing the vehicle’s behavior 

during and after the test flights. Demonstration of aircraft-like operations 

requires that the X-33 vehicle fly one 2-day turnaround flight and two 

consecutive 7-day turnaround flights. Although the scheduled flight-test 

program is now only 3 months long, flight-tests will continue longer if 

needed to achieve program objectives, according to NASA’s X-33 program 

manager.

NASA’s and Lockheed 

Martin’s Financial and 

Oversight Roles

According to NASA program officials, the X-33 cooperative agreement 

establishes a partnership business relationship between NASA and 

Lockheed Martin. Changes to the cooperative agreement require bilateral 

agreement. The agreement assigns to Lockheed Martin responsibility for 

managing and implementing the X-33 Program but also permits substantial 

involvement of NASA personnel in performing various program technical 

tasks at NASA centers, under the direction of Lockheed Martin. NASA’s 

oversight of the X-33 Program is different from that used for traditional 

government contracts, as it relies on insight gained from NASA employees 

working alongside Lockheed Martin personnel. 

Lockheed Martin and NASA 

Financial Obligations and 

Roles

NASA used a cooperative agreement instead of a traditional contract, in 

part, to reduce its financial risk by capping its contribution. Through the 

agreement, NASA seeks to facilitate the creation and commercialization of 

a low-cost space-launch service industry, of which NASA would be a major 

customer. The cooperative agreement defines each party’s roles and 

responsibilities in conducting the program. Lockheed Martin is to provide 

22.1 percent of the funding, define the X-33 vehicle’s technical and 

performance requirements, and, with inputs from its industry partners and 

NASA, design and build the vehicle. Lockheed Martin will also conduct 

flight-tests of the X-33 vehicle and decide with NASA whether to build a 

fleet of two operational Venture Star RLVs. This decision will be based, in 

part, on criteria developed by the Office of Science and Technology Policy, 

the Office of Management and Budget, NASA, and Lockheed Martin.
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Agreement Establishes 

Oversight Approach

An inherent characteristic of the cooperative agreement is the way in 

which NASA conducts oversight of Lockheed Martin’s work on the X-33 

Program. The cooperative agreement enables NASA to obtain insight into 

the program, according to the NASA program manager. In traditional 

research and development contracts, NASA sends personnel to contractor 

facilities to perform an extensive review of whether the contractor 

performed its assigned tasks in accordance with contract specifications. 

Under the X-33 cooperative agreement, insights are gained through NASA 

technical personnel working alongside personnel from Lockheed Martin 

and other industry partners. This ongoing involvement in the work enables 

NASA to obtain real-time and detailed insight into program activities. As an 

example, NASA’s X-33 program manager cited the situation where NASA 

became aware that layers of one lobe of the X-33 vehicle’s internal

composite hydrogen fuel tank had unbonded on December 24, 1998, the 

day after the problem occurred in Sunnyvale, California.

NASA’s primary oversight activities for the X-33 Program consist of 

program office monitoring of Lockheed Martin’s progress in meeting 

program milestones and verifying that the company has achieved the 

milestone performance requirements specified in the cooperative 

agreement before payments are made. NASA’s Advisory Council, Program 

Management Council, and Office of Inspector General also provide 

program oversight.

NASA’s X-33 program office has taken specific oversight actions in 

response to problems with the program. For example, since the 

cooperative agreement provides that milestone payments are made only 

after performance criteria have been met, independent of when the 

milestones are scheduled for completion, the program office withholds all 

subsequent payments until satisfactory accomplishment of the 

performance criteria. In another case, after several requests to Lockheed 

Martin for action, the program office notified Lockheed Martin that the 

agency planned to withhold $500,000 from all subsequent milestone 

payments because the company’s system integration work on the X-33 

Program was inadequate. According to NASA’s X-33 program manager, 

Lockheed Martin complied with NASA’s request to strengthen the 

program’s system integration function by creating a system engineer 

position in its program office at the same level as the program manager.

The NASA Advisory Council performs periodic reviews of the X-33 

Program. Members of the NASA Advisory Council are volunteers 

appointed by NASA. The Council reports to the NASA Administrator. At a 
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recent meeting,6 Council members discussed concerns about (1) whether 

there was a clear growth path leading from the X-33 flight-test vehicle to an 

operational SSTO vehicle and (2) NASA’s lack of funding to pursue the 

shuttle/space station programs and SSTO development at the same time.

The Program Management Council is NASA’s senior agency review board 

and oversees planning, implementation, and management of all major 

NASA programs. NASA’s Associate Deputy Administrator chairs the 

Council, and senior executives of NASA’s functional and staff offices are 

members. In its most recent review of the X-33 Program, the Council’s 

review team concluded, among other things, that (1) due to technical 

problems, the program may not be able to meet its technical and 

performance objectives within current funding and schedule plans; (2) if 

the program does not achieve its technical and performance objectives, the 

program may not be able to support an informed decision on the viability of 

a near-term SSTO RLV; and (3) the program should be completed because 

of the value provided by the program’s planned demonstration of several 

first-of-a-kind technologies as a system.

In a recent audit report7

 on the X-33 cooperative agreement, the NASA 

Office of Inspector General found that the agreement had provided NASA 

with certain benefits, including faster program initiation and greater 

management flexibility. However, the report also attributed a number of 

program management problems to the agreement, including lack of full and 

prompt compliance with some NASA management procedures, inaccurate 

internal reporting of some program costs, incomplete government property 

reports, and uncertainty concerning ownership of the X-33 vehicle. In a 

written response to a draft of the Inspector General’s audit report, NASA’s 

Office of Aerospace Technology concurred with all nine recommendations 

in the report. In response to NASA’s comments, the Office of Inspector 

General stated that the agency’s planned and implemented actions were 

generally responsive to seven of the nine recommendations and that it 

would request additional comments and information concerning the 

remaining two recommendations. 

6

 NASA Advisory Council Meeting Report Minutes, December 3-4, 1998.

7

 Audit Report: X-33 Cooperative Agreement, NASA Office of Inspector General, IG-99-019,

Mar. 29, 1999.
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Issues Facing NASA If 

Venture Star Is Used to 

Support the 

International Space 

Station

Before NASA decides to use Venture Star RLVs to support the space station, 

it will need to evaluate (1) whether adequate progress has been made in 

reducing risks by resolving the technical challenges to developing an 

operational RLV; (2) what government financial incentives, such as loan 

guarantees, may be needed to assist in developing an operational fleet of 

Venture Star RLVs; (3) what NASA’s costs would be to build at least two 

crew modules for a RLV to carry crews to and from the space station; and 

(4) what the effects would be on the maintenance and operation of the 

space station and its science experiments.

Confidence That X-33 

Results Support RLV 

Development Decision

In 1995 the Office of Science and Technology Policy, the Office of 

Management and Budget, and NASA jointly established criteria to be used 

in deciding whether the government should proceed beyond the X-33 

Program to support development of an operational SSTO Venture Star RLV. 

These criteria include (1) demonstration of the X-33 Program’s technical 

objectives, including technical traceability8

 to Venture Star;

(2) demonstration that a cooperative government/industry technology 

development program can be successful and efficient; and

(3) establishment of acceptable business arrangements between 

government and industry that facilitate the development and operation of 

the next generation of space-launch systems. The criteria envision that the 

timing of NASA’s decision to use the Venture Star coincides, at the end of 

the decade, with decisions on funding for space shuttle investments needed 

to continue operations through 2012. The specific technical criteria for 

proceeding beyond the X-33 Program include requirements that the NASA 

and industry team use a flight-test vehicle to demonstrate technologies that 

are scalable to potential SSTO RLV configurations. These configurations 

include the basic booster design, reusable internal composite or metallic 

tanks and primary structures, reusable and durable thermal protection 

system materials, and operational concepts. 

NASA’s Advisory Council has raised concerns that there may not be a clear 

growth path leading from the X-33 flight-test vehicle to an operational 

SSTO vehicle. We share this concern.

8

 Traceability in this case means that X-33 technologies and operational techniques can provide some of 

the risk reduction needed to eventually build and fly full-scale operational Venture Star RLVs.
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The Government Performance and Results Act directs that federal agencies 

promulgate annual performance plans that describe (1) the agency’s 

performance goals and measures, (2) the strategies and resources to 

achieve these goals, and (3) procedures to verify and validate reported 

performance. NASA’s Fiscal Year 2000 Performance Plan states that the 

overall objective of the X-33 Program is to revolutionize space-launch 

capabilities. The plan also states that the program will demonstrate 

technologies that (1) are traceable to a mass fraction of less than

10 percent of empty vehicle weight that is required for future RLVs, 

(2) validate key aerothermodymanic environments, (3) enable the X-33 

vehicle to fly faster than Mach 13.8, (4) allow the vehicle to perform one 

2-day turnaround flight and consecutive 7-day turnaround flights, and

(5) enable the vehicle to be maintained by a 50-person ground crew. The 

combined results are intended to reduce technical risk in the full-scale 

development of an operational RLV. However, the only measurable 

performance target associated with the X-33 Program in the plan is to 

conduct flight-testing of the X-33 vehicle. No further targets are identified 

that would provide an indication that NASA can successfully demonstrate 

that it is on a growth path leading from the X-33 flight-test vehicle to an 

operational SSTO vehicle.

Government Incentives for 

Venture Star Vehicles

NASA and Lockheed Martin foresee that the federal government may need 

to provide financial incentives before Lockheed Martin can begin building 

Venture Star RLVs. Government incentives could be needed to enable 

Lockheed Martin to secure affordable private-sector financing of the 

estimated $7.2-billion cost of building two RLVs and begin flight operations. 

Borrowing costs for the Venture Star might be relatively high because 

investors would require a high rate of return due to the technical risks 

inherent in building a new space-launch vehicle. Government incentives 

could take several forms, including loan guarantees, or NASA-funded 

technology development efforts.

If technical risks are not sufficiently reduced by the X-33 Program, 

additional NASA funding may be needed for further technology 

development of critical technologies to be used in future RLVs, including 

the Venture Star. For example, if the X-33 Program has not sufficiently 

developed the technologies needed for an operational RLV, NASA could 

approve a limited extension of the program to address technical 

uncertainties. Further, NASA already plans to fund future research and 

development programs for RLV technologies. NASA’s technology 
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development efforts to mature SSTO and RLV technologies include the 

Future-X and Advanced Space Transportation Programs.

Requirement for Venture 

Star Crew Modules 

Lockheed Martin plans to build Venture Star RLVs that initially carry only 

cargo and begin flights in 2005. Lockheed Martin is designing the Venture 

Star vehicles primarily to meet the needs of potential commercial 

customers who want to launch satellites. However, because much of 

Lockheed Martin’s Venture Star projected revenues will come from 

servicing the International Space Station, the company is exploring design 

modifications that would enable the vehicles to carry four or five 

crewmembers. According to NASA’s X-33 program manager, if the agency 

chooses to use Venture Star RLVs to service the International Space 

Station, NASA would need to obtain either two crew modules, at an 

estimated cost between $900 million and $1.2 billion, to be carried in the 

Venture Star cargo bay or two crew transfer/return vehicles being 

developed for the International Space Station.9

 According to Lockheed 

Martin, the Venture Star vehicle would automatically rendezvous and dock 

with the space station, allowing new crewmembers to board the space 

station and disembarking crewmembers to return to Earth with the vehicle. 

The company plans to initiate Venture Star passenger service in 2007. 

Before passenger services could begin, the Venture Star vehicles would 

have to be evaluated and certified to meet NASA’s human space flight safety 

requirements.

Effect of Venture Star on 

Space Station Operations

If NASA decides to use Venture Star RLVs for space station servicing 

missions, disruptions to the station’s operations may increase because of 

the more frequent dockings by Venture Star vehicles. The agency’s current 

projections show that between two and three Venture Star flights would be 

required to replace each space shuttle resupply mission because the space 

shuttle can carry heavier payloads.

The space station requires replenishment of supplies such as propulsion 

fuel, spare parts, food, water, air, and science experiments. Periodic 

replacement of station crewmembers is also required. NASA currently 

plans to use an average of five shuttle flights per year to resupply the 

station and to have some of its partners provide an average of eight 

9

 The crew return vehicle for the International Space Station is being considered as an alternative 

passenger accommodation that would be attached to the exterior of the Venture Star RLVs.
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resupply flights per year to the station on other launch vehicles. Additional 

resupply flights would likely be required to provide the people and 

materials needed to solve technical problems that may arise aboard the 

space station.

Each space shuttle can carry 34,200 pounds of cargo, including up to seven 

people, to the space station. However, in servicing the International Space 

Station, a Venture Star RLV would be able to carry 25,800 pounds of cargo 

or three to four people and a small amount of cargo. Also, NASA plans to 

use shuttle crewmembers on the resupply flights to perform maintenance 

of the station. According to NASA X-33 program officials, Venture Star 

RLVs would have to make two to three flights to provide as much cargo, as 

many people, or as much maintenance support to the space station as a 

single shuttle flight. The actual number of flights would depend on the mix 

of cargo, people, and maintenance operations required for a particular 

mission.

The Venture Star would then require more docking and undocking 

operations, potentially disrupting some scientific activities aboard the 

space station. Operations that may be performed on the space station, 

including the growth of large inorganic and protein crystals, would require 

that the station be stable and relatively free of vibrations. Docking and 

undocking operations create vibrations. Although NASA plans to provide 

stable periods between resupply missions, more frequent docking and 

undocking operations would reduce the amount of stable time available for 

conducting scientific operations.

Conclusions The X-33 Program is intended to provide Lockheed Martin and NASA with 

sufficient data to decide whether the technical challenges to develop an 

operational RLV can be resolved. The importance NASA attaches to this 

program is reflected in the agency’s over $1 billion commitment to the X-33 

Program. After the X-33 Program is completed, Lockheed Martin, with 

input from NASA, will decide whether to build and operate at least two 

Venture Star SSTO RLVs. NASA hopes to realize significant savings by 

using Venture Star RLVs instead of space shuttles to service the 

International Space Station. However, before a decision can be made, key 

issues need to be evaluated, specifically: (1) whether X-33 Program results 

provide the confidence that risks have been reduced to proceed with the 

development of the Venture Star, (2) whether and how much government 

financial incentives would be needed to develop the Venture Star, (3) what 

NASA’s cost to develop passenger modules for Venture Star would be, and 
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(4) how the adverse effects on station operations and maintenance would 

be mitigated.

Ensuring that X-33 Program results adequately support a confident 

decision to develop Venture Star deserves attention in NASA’s performance 

plan. In particular, the plan would be strengthened if it recognizes the 

importance of securing an indication that the agency is (1) on a growth 

path leading from the X-33 flight-test vehicle to an operational RLV and

(2) making progress toward its objective of significantly reducing launch 

costs.

Recommendation In light of NASA’s large investment in the X-33 Program and the important 

role the program plays in NASA’s future plans, we recommend that the 

NASA Administrator include in the agency’s Fiscal Year 2001 Performance 

Plan performance targets for the X-33 Program that establish a clear path 

leading from the X-33 flight-test vehicle to an operational RLV and show 

progress toward meeting the agency’s objective of significantly reducing 

launch costs.

Agency Comments and 

Our Evaluation

NASA’s Associate Deputy Administrator provided written comments on a 

draft of this report. NASA concurred with our recommendation that more 

specific and measurable performance targets for the X-33 Program should 

be included in the agency’s performance plans. NASA also stated it had 

some significant differences in opinion and summarized its positions on 

several issues. For example, NASA commented on the impact of X-33 flight 

test delays on decisions associated with investing in space shuttle 

upgrades; the allocation of IRAD costs and the extent they will be 

reimbursable; and the achievement of program performance objectives. 

NASA commented that while there are delays to the flight-test program, the 

overall X-33 Program remains within the original schedule. As a result, 

NASA stated that flight delays should not impact decisions associated with 

investing in space shuttle upgrades. In the draft report provided to NASA 

for comment, we stated that delays in the X-33 Program may affect NASA's 

investment plans for future space-launch programs, including decisions on 

whether and when to upgrade the space shuttle fleet or rely on a new 

launch vehicle. We continue to believe that the possibility of such an 

impact still exists. As indicated in this report, one of the key issues facing 

NASA is whether X-33 Program results provide confidence that risks have 
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been reduced. We believe that the feasibility of transferring the key 

technologies demonstrated on the X-33 to an RLV such as the Venture Star 

cannot be adequately known until flights have been completed and results 

analyzed. That will be a challenge with a flight-test program that has been 

reduced from 10 to 3 months.

With regards to the IRAD issue, NASA made two points. First, the agency 

stated that costs contributed by contractors under cost-shared cooperative 

agreements with any federal agency are allowable IRAD costs as long as 

the costs would have been allowed under federal regulations. 

Consequently, NASA commented that Lockheed Martin is not receiving a 

unique benefit. Second, NASA stated that the inference cannot be drawn 

that Lockheed Martin, or its partners, may recover most of their 

contributions; and that an audit is needed to ascertain the portion of the 

contributions allocable to government contracts. Regarding the first point 

made by NASA, we do not suggest that the contractor is receiving a unique 

benefit. Rather, our purpose in identifying IRAD costs and estimated 

reimbursements is to provide clarification on the total estimated costs that 

will be incurred by the government beyond that identified in the X-33 

cooperative agreement. As to the second point, our intent was to identify 

the estimated contribution that will be made by Lockheed Martin and its 

partners factoring in potential reimbursement of industry IRAD costs. We 

agree that inference should not be drawn that Lockheed Martin, or its 

partners, will recover most of their costs; and that actual reimbursement 

will require an audit or review to ascertain the portion of the contribution 

allocable to government contracts. We have modified the text to reflect the 

need for such an audit.

NASA also commented that it is inappropriate to imply that the X-33 

performance objectives have been reduced. The agency stated that the 

initial objectives were embodied in the cooperative agreement notice used 

to initiate the program. NASA stated that specific technical and operations 

technology requirements identified were (1) a minimum of fifteen X-33 

flights under main rocket power, (2) a minimum of two flights that meet or 

exceed a Mach number of 15, (3) demonstration of a 7-day turnaround on a 

minimum of three consecutive flights, and (4) demonstration of a 2-day 

turnaround at least once. NASA indicated that specific technical criteria 

were later established in May 1998. At that time, NASA determined that 

such criteria could be satisfied at a lower Mach number. Changes were 

also made, NASA further stated, to break up the flight program into three 

blocks. We believe the report accurately presents the history and status of 

these X-33 program performance objectives. In discussing the impact of 
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Page 24 GAO/NSIAD-99-176 Space Transportation

technical problems on the X-33 Program performance objectives, our 

report identifies both the allowable change to an aluminum liquid oxygen 

tank and the reduction in flight speed. Our report is consistent with 

NASA's position. We clearly state that the X-33 Program may demonstrate 

the technical, operations, and business feasibility of a SSTO RLV, but at a 

lower speed. In addition, our report provides information regarding the 

breaking up of the flight program and associated payment conditions. 

NASA also provided technical comments that we incorporated where 

appropriate. NASA’s written comments and our full evaluation are 

presented in appendix I.

Scope and 

Methodology

To determine whether the X-33 Program is meeting its original cost, 

schedule, and performance objectives, we interviewed officials at NASA 

headquarters, NASA’s Marshall Space Flight Center, Huntsville, Alabama, 

and at the NASA X-33 program office at Palmdale, California. We also 

spoke with Lockheed Martin officials at the company’s X-33 program office 

at Palmdale. To determine how NASA’s oversight responsibility was 

changed by the cooperative agreement, we interviewed officials at NASA 

headquarters, the X-33 program office, and Lockheed Martin officials at the 

company’s X-33 program office. We reviewed the X-33 cooperative 

agreement, regulations concerning NASA’s use of a cooperative agreement 

for the X-33 Program, NASA and Lockheed Martin documents pertaining to 

the management and execution of the X-33 Program, and reports issued by 

the NASA Office of Inspector General and the NASA Advisory Council. To 

identify potential issues facing NASA if the agency decides to use Venture 

Star RLVs to service the International Space Station, we interviewed 

officials at NASA’s Headquarters; Langley Research Center, Hampton, 

Virginia; and the X-33 program office. We also spoke with Lockheed Martin 

officials at the company’s X-33 program office. We reviewed NASA 

planning documents pertaining to the space shuttle and International Space 

Station programs. We did not attempt to verify the data provided by NASA 

and Lockheed Martin.

We conducted our review from November 1998 to June 1999 in accordance 

with generally accepted government auditing standards.

Unless you publicly announce its contents earlier, we plan no further 

distribution of this report until 14 days from its issue date. At that time, we 

will send copies to the Chairmen and Ranking Minority Members of the 
Page 25 GAO/NSIAD-99-176 Space Transportation

Senate Committee on Commerce, Science and Transportation; the 

Subcommittee on Science, Technology and Space, Senate Committee on 

Commerce, Science and Transportation; and the House Committee on 

Science. We will also send copies to the Administrator of NASA and the 

Director of the Office of Management and Budget. We will also make 

copies available to other interested parties on request.

Please contact me at (202) 512-4841 if you or your staff have any questions 

concerning this report. Key contributors to this assignment were Jerry 

Herley, Jeffery Webster, and Lorene Sarne.

Allen Li

Associate Director

Defense Acquisitions Issues
Page 26 GAO/NSIAD-99-176 Space Transportation

Appendix I

Comments From the National Aeronautics 

and Space Administration ApenIdxi

Note: GAO comments 

supplementing those in the 

report text appear at the end 

of this appendix.

See p. 22.
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 27 GAO/NSIAD-99-176 Space Transportation

See p. 22 &

comment 1, p. 33.

See p. 23 &

comment 2, p. 33.

See comment 3, p. 33.
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 28 GAO/NSIAD-99-176 Space Transportation

See comment 4, p. 33.

See p. 23 &

comment 5, p. 33.
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 29 GAO/NSIAD-99-176 Space Transportation

See comment 6, p. 34.

See comment 7, p. 34.
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 30 GAO/NSIAD-99-176 Space Transportation

See p. 22.

No comment.

See comment 7, p. 34.
Appendix I

Comments From the National Aeronautics 

and Space Administration

Lert Page 31 GAO/NSIAD-99-176 Space Transportation
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 32 GAO/NSIAD-99-176 Space Transportation
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 33 GAO/NSIAD-99-176 Space Transportation

The following are GAO’s evaluations of the National Aeronautics and Space 

Administration’s (NASA) letter dated July 1, 1999.

GAO Comments 1. We continue to believe that flight delays may affect NASA’s investment 

plans for future space-launch programs. As indicated in this report, one of 

the key issues facing NASA is whether X-33 Program results provide 

confidence that risks have been reduced. We believe that the feasibility of 

transferring the key technologies demonstrated on the X-33 to an RLV such 

as the Venture Star cannot be adequately known until flights have been 

completed and results analyzed; and that it will be challenging to do so in a 

flight-test program which has been reduced from 10 to 3 months.

2. We agree with NASA’s point that Lockheed Martin is not receiving a 

unique benefit. Our purpose in identifying IRAD costs and estimated 

reimbursements is to provide clarification on the total estimated costs that 

will be incurred by the government beyond that identified in the X-33 

cooperative agreement, including potential reimbursement of industry 

IRAD costs. We also agree with NASA that inference should not be drawn 

that Lockheed Martin, or its partners, will recover most of their costs; 

actual reimbursement will be subject to an audit or review to ascertain the 

portion of the contribution allocable to government contracts. We have 

modified the text to reflect the need for such an audit.

3. We agree that NASA has historically excluded personnel costs from its 

research and development program budgets. Our purpose is to report as 

completely as possible the government’s total costs for the X-33 Program. 

Thus, costs for NASA’s personnel working on the X-33 Program are 

included in our report.

4. We revised the text to include the points raised in NASA’s comments.

5. We believe the report accurately presents the history and status of these 

X-33 program performance objectives. In discussing the impact of technical 

problems on the X-33 Program performance objectives, our report 

identifies both the allowable change to an aluminum liquid oxygen tank and 

the reduction in flight speed. Our report is consistent with NASA’s position. 

We clearly state that the X-33 Program may demonstrate the technical, 

operations, and business feasibility of a SSTO RLV, but at a lower speed. In 

addition, we provide similar information with regards to the breaking up of 

the flight program and associated payment conditions. 
Appendix I

Comments From the National Aeronautics 

and Space Administration

Page 34 GAO/NSIAD-99-176 Space Transportation

6. As noted in our report, NASA currently plans to make five shuttle flights 

per year to the station, and each shuttle flight can carry 34,200 pounds of 

payload (supplies and personnel) to the space station. Our report also 

notes that Venture Star RLVs will be able to carry an estimated 25,800 

pounds of payload to the space station, must carry supplies and passengers 

on separate flights while shuttles can carry both on a single flight, and will 

have fewer on-orbit operational capabilities than the shuttle. NASA 

officials estimate that between two and three Venture Star flights will be 

required to replace each shuttle flight. Further, NASA’s space station 

planning document, titled Requirements Data Set for ISS (International 

Space Station) Crew and Cargo Carriers for Reusable Launch Vehicle (RLV) 

Phase A Study (December 16, 1998) identifies RLV impacts on science 

operations as a potential concern. We, therefore, believe that the 

additional 5 to 10 annual Venture Star docking operations could potentially 

impact science operations now scheduled to occur during quiet periods 

between five annual shuttle docking operations. We believe the potential 

for disruptions will be determined, in part, by the number and scheduling of 

resupply flights. Given those uncertainties at this time, we continue to 

believe that science operations may be affected. We changed the text to 

reflect the potential net effect—that the amount of stable time available for 

conducting scientific operations may be reduced.

7. We revised the text to incorporate these comments as appropriate.

(707362) Lert
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