United States General Accounting Office

GAO Testimony

Before the Subcommittee on Space and Aeronautics,

Committee on Science, House of Representatives

For Release on Delivery

Expected at

10:00 a.m., EST

Wednesday,

October 1, 1997

SPACE SHUTTLE

Upgrade Activities and

Carryover Balances

Statement of Allen Li, Associate Director, Defense

Acquisitions Issues, National Security and International

Affairs Division

GAO/T-NSIAD-98-21

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss two aspects of the National

Aeronautics and Space Administration’s (NASA) space shuttle

program—upgrade activities and carryover balances.

In May 1997, the House Science Committee expressed concern about

NASA’s plans to take $190 million from the space shuttle program to help

offset additional costs in the International Space Station program.

According to NASA, the funds were available for transfer because of the

high carryover balances projected to be available at the end of fiscal year

1997. The funding transfer was made, with a significant portion of the

funds coming from the safety and performance upgrade portion of the

shuttle program. Pursuant to the Committee’s request, we agreed to review

(1) the effect of the funding transfer on major shuttle upgrade projects and

the status of those projects, (2) the role carryover balances had in the

transfer and in funding upgrades, and (3) funding for future upgrades.

Background The space shuttle is the United States’ only means for transporting humans

to and from space and NASA considers safe operation of the shuttle as its

top priority. The shuttle has flown 86 missions over the past 16 years. It

will be required well into the next century for space station assembly and

operations support and other human space flight missions. Upgrades will

be a necessary part of the program until the space shuttle is replaced.

NASA’s strategy is to identify and prioritize upgrades to meet the program

goals of (1) improving system safety, (2) supporting the flight manifest,

(3) improving system supportability and reliability, and (4) reducing

system operating costs.

NASA began a new supportability upgrade program in fiscal year 1997 to

combat obsolescence in, and improve the reliability of, the space shuttle.

This program involves updating and modernizing shuttle components,

such as the checkout and launch control system at Kennedy Space Center.

According to NASA, supportability upgrades are required to help ensure

continued safe shuttle flight operations.

Future plans for the shuttle that could influence upgrade decisions are

currently being formulated. At the direction of the Office of Management

and Budget (OMB), NASA is developing a space transportation strategy. In

support of that strategy, NASA is also developing a common space

transportation technology development plan. Taken together, these plans

Page 1 GAO/T-NSIAD-98-21 Space Shuttle
are intended to guide decisions related to future investments in space

transportation systems. The strategy is to be coordinated with both the

Department of Defense and the commercial sector to ensure an integrated

approach to U.S. space transportation in the 21st century. These

documents are to accompany NASA’s fiscal year 1999 budget submission to

OMB.

NASA’s budget for the space shuttle in fiscal year 1997 was $3.15 billion,

including $636 million in the safety and performance upgrades line item.

Space shuttle funding is available for obligation over a 2-year period.

Funding that cannot be used in the year it is appropriated can be carried

over to help cover program costs in the next fiscal year. Carryover

includes unobligated funds as well as funds that have been obligated for

goods and services but for which costs have not been incurred. The

amount of carryover at the end of a fiscal year is determined by the total

budgetary resources available less the costs incurred that year. Total

budgetary resources consist of carryover from the prior year plus new

budget authority.1

Summary The $190 million funding transfer to the space station program did not

adversely impact current or near-term upgrade projects. Four current

projects, which account for about 91 percent of the total funding provided

for upgrade activities in fiscal year 1997, could not have used the

transferred funds. Even though they experienced technical problems and

associated schedule slips, the projects’ financial reserves were sufficient

to fund the problems experienced. The transferred funds were also not

needed for supportability upgrades because they began more slowly than

planned due to a longer-than-anticipated approval process. As a result,

only about $40 million of the $70 million in funds allocated in fiscal year

1997 to the new supportability upgrade effort will be used; the remainder

will carry over to support fiscal year 1998 activities.

The $190 million transferred to the space station program was available

because of the large amount of carryover within the shuttle program.

Without the transfer, the shuttle program would have had about a

$600 million budget carryover at the end of fiscal year 1997. However,

shuttle program managers estimated that they would need only

$395 million in carryover at that time.

1

For a discussion of carryover balances, see NASA Budget: Carryover Balances in Selected Programs

(GAO/NSIAD-96-206, July 16, 1996) and (GAO/T-NSIAD-96-207, July 18, 1996).

Page 2 GAO/T-NSIAD-98-21 Space Shuttle
NASA has used carryover to fund upgrades in the past and plans to continue

doing so in the future. For example, NASA designated $70 million in fiscal

year 1996 carryover funds to initiate the new supportability upgrade effort,

and it plans to use another $95 million for this purpose in fiscal year 1998.2

Depending on the future upgrades selected, costs could range from

hundreds of millions to several billions of dollars. NASA is presently

defining an upgrade program to keep the shuttle a viable space

transportation system at least through the planned mission life of the

space station—about 2013. Other planning assumptions include increasing

the shuttle’s flight rate from about 8 to 15 times a year, obtaining other

customers, and operating the shuttle to 2030. In addition to annual funding

requests for safety and performance upgrades and the continued use of

excess carryover, NASA plans to use any savings that are generated within

the shuttle program to fund its upgrade activities. However, the extent to

which these sources will be available in the future is uncertain.

Funding needs for future upgrades will be driven by a number of questions

for which answers are not yet apparent. These questions are related to

such issues as how long the shuttle will be required and whether viable

alternatives can be developed to support space station operations and

other human space flight requirements.

Funding Transfer Did

Not Adversely Impact

Current and

Near-Term Upgrade

Projects

Transferring funds from the shuttle program had no impact on ongoing

upgrades because reserves available in those projects were sufficient to

fund the technical problems experienced. Likewise, the funds would not

have benefited the supportability upgrade effort because it took longer

than planned to initiate those projects.

The four largest ongoing shuttle upgrades represent about 91 percent of

the $636 million funding for upgrades in fiscal year 1997. These projects

involve the design and development of the (1) alternate high pressure

turbopump (AHPTP), (2) super lightweight tank (SLWT), (3) large throat main

combustion chamber (LTMCC), and (4) multifunction electronic display

system (MEDS). Each of these projects has remained within its initial

funding profile because each project has sufficient financial reserves to

cover the costs of development problems and schedule delays they have

experienced so far. Two of the projects, SLWT and LTMCC, are essentially

2

The $70 million for upgrade activities in fiscal year 1997 included $50 million for supportability

upgrades and $20 million for studies of long-term upgrades. For fiscal year 1998, NASA plans to use

$75 million for supportability upgrades and another $20 million for continued study of long-term

upgrades.

Page 3 GAO/T-NSIAD-98-21 Space Shuttle
complete and NASA officials do not anticipate any more development

problems. It is still possible that the other two projects could experience

further development problems, exhaust their remaining financial reserves,

and require additional funding. However, NASA officials believe that

reserves would be available elsewhere within the shuttle program if the

projects’ remaining reserves are insufficient. Table 1 summarizes the cost

and schedule status of the four largest upgrades currently underway.

Additional information on the status of the four upgrades is in appendix I.

Table 1: Cost and Schedule Changes for Four Largest Shuttle Upgrades

Upgrade projects

Initial

funding

estimatea

Current

funding

estimatea

Funding

estimate

Changea

Initial schedule

(month/year)

Current schedule

(month/year)

Schedule

changes

(months)

AHPTP $1,056 $971 $-85 10/97 7/98 +9

SLWT 173 156 –17 12/97 5/98 +5

LTMCC 118 77 –41 10/97 1/98 +3

MEDS 230 206 –24 2/98 1/99 +11

aDollars in millions.

Activities under the new supportability upgrade program have begun more

slowly than planned because projects took longer than anticipated for

approval. Before work begins, upgrades must be approved through the

shuttle Program Requirements Control Board. Proposals to modify the

shuttle are thoroughly reviewed through a very formal process before they

are approved by the Board. As a result, only about $40 million of the

$70 million allocated to the new supportability upgrade effort will be used

in fiscal year 1997; the remainder will carry over to support fiscal

year 1998 activities.

High Carryover

Balances Enable

Transferring Funds

and Funding

Upgrades

The $190 million transferred to the space station program was available

because of the large amount of carryover within the shuttle program.

Without the transfer, the carryover in the shuttle program would have

been about $600 million at the end of fiscal year 1997. In contrast, between

fiscal year 1993 and 1996, carryover in the shuttle program averaged about

$400 million annually. Two factors contributed to much higher than

average estimated carryover at the end of fiscal year 1997. First, the

$467 million carryover from fiscal year 1996 into 1997 was higher than

normal. Second, shuttle program costs in fiscal year 1997 were less than

originally estimated. NASA initially estimated program costs for fiscal

Page 4 GAO/T-NSIAD-98-21 Space Shuttle
year 1997 at about $3.1 billion, but its most recent estimate is now almost

$100 million less.

In May 1997, shuttle program officials indicated that they would like to

have a carryover balance of $395 million at the end of fiscal year 1997—for

forward funding on contracts ($200 million), reserves for estimating

uncertainties ($100 million), and supportability upgrades ($95 million).

NASA’s estimated fiscal year 1997 carryover of about $400 million is

consistent with the program’s average annual $400 million carryover for

the four preceding fiscal years. However, it is substantially higher than the

$138 million that NASA officials had projected last summer would be

carried over from fiscal year 1997 to fiscal year 1998. The $138 million

estimate did not include carryover for reserves or supportability upgrades

and assumed a much lower carryover from fiscal year 1996.

In July 1996, NASA estimated that its carryover balance in the shuttle

program would be about $152 million on September 30, 1996. However,

the actual carryover balance on September 30, 1996, was over

$467 million. The large increase was due to NASA not using all of its

program reserves ($122 million), underspending or underrunning costs in

some program elements ($185 million), and reserving funds to cover costs

associated with the transition to a single space flight operations contract

for the shuttle ($19 million).

NASA has used carryover to fund shuttle upgrades in the past and plans to

continue doing so in the future. NASA designated $70 million in fiscal

year 1996 carryover funds to initiate a new effort involving supportability

upgrades in fiscal year 1997, and it plans to use another $95 million for this

purpose in fiscal year 1998. Beginning in fiscal year 1999, supportability

upgrades will be funded as a part of the safety and performance upgrade

portion of the shuttle program’s budget. Some of the supportability

upgrades approved so far include upgrading the checkout and launch

control system. Funds are also being used to study potential long-term

upgrades such as liquid flyback boosters.

Issues Warrant

Consideration Before

Funding Future

Upgrade

Requirements

NASA is presently defining an upgrade program to keep the shuttle a viable

space transportation system at least through the planned mission life of

the space station, about 2013. Additional planning assumptions include

operations until 2030, a flight rate of 15 per year, and use of the shuttle by

both the Department of Defense and commercial customers.

Page 5 GAO/T-NSIAD-98-21 Space Shuttle
The potential funding requirements for future shuttle upgrade activities

could be substantial. NASA has identified about 70 potential modifications

to the shuttle with an estimated total cost of $5 billion to $7 billion. Most

of this estimated cost relates to development of the liquid flyback booster.

Over 30 upgrades with an estimated total cost of about $322 million have

already been approved for implementation or study.

NASA plans to use a variety of sources to fund these activities, including the

safety and performance upgrade budget line, the continued use of excess

carryover balances, and savings from the new space flight operations

contract. Shuttle program officials are depending on the last two sources

to build an account to help fund future upgrades. However, the extent to

which all of these sources together will provide sufficient funding for

upgrades is uncertain. For example, NASA’s overall future budgets are

currently planned at slightly reduced levels, but larger reductions may

occur. Also, the continuing availability of sufficient excess carryover

balances is questionable, and the level of any future savings under the

space flight operations contract is unknown. Ongoing NASA studies,

including the one directed by OMB, are expected to provide additional

information about the shuttle’s role in the Nation’s space transportation

strategy. The results of these studies will help initiate the necessary debate

for shaping the U.S. government’s future space transportation policy.

Funding needs for future upgrades will be driven by a number of questions

for which answers are not yet apparent. These questions are related to

such issues as (1) how long the shuttle will be required, (2) what upgrades

will be needed to maintain the shuttle’s safe operation, (3) whether there

will be any savings from the space flight operations contract and excess

carryover, (4) who should pay for required upgrades if the shuttle is

privatized, and (5) whether there are viable alternatives to the shuttle to

support space station operations and other human space flight

requirements.

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

answer any questions that you or members of the Subcommittee may have.

Page 6 GAO/T-NSIAD-98-21 Space Shuttle
Page 7 GAO/T-NSIAD-98-21 Space Shuttle
Appendix I 

Status of the Four Largest Ongoing Shuttle

Upgrades

The National Aeronautics and Space Administration’s (NASA) four largest

ongoing upgrade projects involve the design and development of the

(1) alternate high pressure turbopump (AHPTP), (2) super lightweight tank

(SLWT), (3) large throat main combustion chamber (LTMCC), and

(4) multifunction electronic display system (MEDS).

Alternate High Pressure

Turbopump

The AHPTP project is designed to upgrade the shuttle main engine’s high

pressure oxygen and hydrogen turbopumps. The turbopumps inject liquid

oxygen and hydrogen fuel into the engine’s combustion chamber where

they mix and burn to generate power for shuttle launch. The oxygen

turbopump has completed development and is operational on the shuttle.

The hydrogen pump development was suspended in fiscal year 1992 and

restarted in fiscal year 1994. The hydrogen pump is currently scheduled

for its first flight in July 1998.

NASA officials told us that the technical difficulties associated with the

hydrogen pump are due to design problems related to cracks in the

housing and turbine blades. At this point, the solution is to redesign and

retest to verify that the problems are resolved. According to NASA officials,

currently available or planned funding reserves are adequate to cover any

additional costs. As a result, NASA officials said that additional funding

would not benefit the project.

Super Lightweight Tank SLWT will provide the shuttle with additional lift capability to support space

station assembly and operation. The tank is built from a new aluminum

alloy that reduces the tank’s weight and provides the shuttle with an

additional 7,500 pounds of lift capability. SLWT is currently scheduled for its

first flight in May 1998.

SLWT technical problems have been primarily associated with welding the

new aluminum alloy. When welds intersect, cracks can occur which cause

time consuming repairs. According to NASA officials, the problems are

related to the manufacturing process, and solutions have been identified

and implemented. SLWT has completed development and has been certified

for flight. The first flight tank is currently being manufactured.

Project officials believe there are sufficient reserves to fund any

unforeseen problems. The SLWT project completed development with about

$20 million in reserves with another $12 million in reserves at

headquarters.

Page 8 GAO/T-NSIAD-98-21 Space Shuttle
Appendix I 

Status of the Four Largest Ongoing Shuttle

Upgrades

Large Throat Main

Combustion Chamber

Liquid oxygen and hydrogen fuel mix in the space shuttle main engine

combustion chamber to generate the engine’s power. LTMCC, which is an

advanced design of the current combustion chamber, will reduce the

operating temperature and pressure within the engine and thereby

increase the engine’s safety margins. LTMCC is on schedule and within

estimated cost and is currently scheduled for its first flight in

January 1998.

Multifunction Electronic

Display System

The space shuttle orbiter currently provides flight control information to

crew members through cathode ray tube displays, instruments, and

meters. The current system consists of hardware based on 1970s

technology, which creates ongoing logistics support problems because of

wear, aging, and component obsolescence. MEDS is being designed to

simplify orbiter operations, increase the life of the orbiter’s displays, and

increase the reliability of the system. MEDS is currently scheduled to

become operational in January 1999.

MEDS has a development problem with the glass required for the displays.

NASA attempted to develop a U.S. supplier for the glass. However, the

supplier chosen was subsequently unable to meet program production

requirements and could not meet the stringent quality standards for the

severe operational environment of the orbiter. As a result, the U.S.

supplier’s contract has been terminated, and the glass is being purchased

from a foreign source.

NASA estimates that obtaining a new glass supplier will add about

$20 million to the cost of the project, but reserves have thus far been

adequate. However, contract negotiations for the new glass supplier are

not complete, and the contractor’s proposal is $6.8 million more than

available in program reserves. NASA officials told us that they hope to

resolve this issue through contract negotiations. The officials said that, if

negotiations are not successful and the increased cost materializes, they

will use funds within the shuttle program to meet the additional funding

requirement.

(707289) Page 9 GAO/T-NSIAD-98-21 Space Shuttle
Ordering Information

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

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

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

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

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

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

U.S. General Accounting Office

Washington, DC

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

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

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

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

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

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

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

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

info@www.gao.gov

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

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100