United States General Accounting Office

GAO Report to Congressional Requesters

June 1995 SPACE SHUTTLE

NASA Must Reduce

Costs Further to

Operate Within Future

Projected Funds

GAO/NSIAD-95-118

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-260706 

June 15, 1995

The Honorable William S. Cohen

Chairman, Subcommittee on Oversight

 of Government Management and

 the District of Columbia

Committee on Governmental Affairs

United States Senate

The Honorable James A. Hayes

House of Representatives

As requested, we reviewed efforts by the National Aeronautics and Space Administration (NASA)

to reduce operating costs for the space shuttle program. This report addresses (1) the extent to

which shuttle operating costs have been reduced and what changes enabled the reductions;

(2) the potential for further cost reductions; and (3) NASA’s consideration of the impact, if any, of

cost reductions on shuttle safety.

Unless you publicly announce its contents earlier, we plan no further distribution of this report

until 30 days after its issue date. At that time, we will send copies to other interested

congressional committees, the Administrator of NASA, and the Director of the Office of

Management and Budget. We will also provide copies to others on request.

Please contact me at (202) 512-8412 if you or your staff have any questions concerning this

report. Other major contributors are listed in appendix II.

David R. Warren

Director, Defense Management

 and NASA Issues
Executive Summary

Purpose The space shuttle is the single most expensive program in the National

Aeronautics and Space Administration’s (NASA) budget. In fiscal year 1992,

NASA set a goal of substantially reducing the costs to operate the shuttle to

provide additional funding for other programs.

The current Chairman, Subcommittee on Oversight of Government

Management and the District of Columbia, Senate Committee on

Governmental Affairs; and the former Chairman, Subcommittee on

Investigations and Oversight, House Committee on Science, Space, and

Technology, asked GAO to review NASA’s efforts to reduce funding

requirements for shuttle operations. The specific objectives were to

determine (1) how successful NASA has been in reducing funding for

shuttle operations and what changes enabled the reductions; (2) if the

potential exists for further reductions; and (3) whether NASA adequately

considered the impact, if any, of the reductions on shuttle safety.

Background The space shuttle has operated for about 14 years and is likely to be used

well into the next century. Since it is the nation’s only launch system

capable of transporting people, the shuttle’s viability is critical to other

space programs such as the international space station. The shuttle has

not lived up to its expectations to make space access routine and

inexpensive. In fiscal year 1996, NASA spent about $3.2 billion of its

$14.3-billion budget for shuttle production and operations. NASA’s Office of

Space Flight established a program to reduce shuttle funding requirements

and operating costs beginning in fiscal year 1992.

Results in Brief NASA has made substantial reductions in funding for shuttle operations and

plans to make further cuts. However, these additional reductions in some

cases are not yet defined. GAO’s review showed that NASA reduced

(1) cumulative funding for fiscal years 1992 through 1995 by 22 percent

from the requirements projected at the time of the fiscal year 1992 budget

and (2) actual annual operating costs by 8.5 percent between fiscal years

1992 and 1994—the equivalent of a 12.3-percent reduction after inflation.

Significant additional funding reductions are needed to achieve NASA’s

future budget projections for shuttle operations. At the time of the fiscal

year 1996 budget request, program requirements still exceeded budget

estimates by at least 10 percent in fiscal years 1996 through 2000, not

including any of the “unresolved percentage reductions” shown in the

budget request. Shuttle managers told GAO they were concerned about

Page 2 GAO/NSIAD-95-118 Space Shuttle
Executive Summary

their ability to achieve the needed additional reductions, but in

February 1995, independent review teams recommended additional ways

to reduce costs. NASA has not yet acted on all of the recommendations and

does not have an estimate of the savings that may result from them. If NASA

cannot reduce shuttle operating costs to match available funds in fiscal

years 1996 through 2000, either NASA’s budget must be increased or funding

for other programs will have to be cut. On May 19, 1995, after completion

of GAO’s work, the Administrator announced plans for significantly

reducing NASA’s infrastructure. GAO did not evaluate the potential effect of

these changes on shuttle costs.

NASA appears to have adequately considered safety while implementing

cost reduction actions to date. However, because shuttle safety cannot be

directly measured, it is difficult for NASA to know how much further it can

reduce costs without affecting safety. In 1994, two outside review teams

expressed concern about the planned size and pace of future cost

reductions. However, two different review teams reported in

February 1995 that additional reductions were possible without adversely

affecting safety. Shuttle program managers have begun to more closely

monitor trends in certain indirect safety indicators, such as the numbers of

problems in flight and the number of mishaps during processing for flight.

Principal Findings

NASA Has Reduced

Funding Requirements for

Shuttle Operations

In its fiscal year 1992 budget, NASA estimated $13 billion in cumulative

funding would be required to operate the shuttle between fiscal years 1992

and 1995. In the fiscal year 1995 budget, NASA reduced required funding for

those years by a cumulative amount of $2.9 billion—22 percent.

Reductions have resulted primarily from a combination of decreasing

contract labor by increasing operating efficiency (about $1.6 billion),

reducing program requirements ($388 million), decreasing the level of

funding reserves ($458 million), and making other miscellaneous changes

($417 million). Between fiscal years 1992 and 1994, NASA reduced shuttle

operations contract labor by 19 percent—from 19,556 direct equivalent

persons to 15,902—by freezing designs, automating processes, eliminating

unnecessary paperwork, and implementing other efficiencies. The primary

reduction in requirements was a reduction in the planned annual flight rate

from 10 to 7 flights. Although NASA planned to fly up to 10 missions a year,

it never launched more than 8 in any given year. Other reductions included

Page 3 GAO/NSIAD-95-118 Space Shuttle
Executive Summary

decreasing the level of funding reserves available for unforeseen changes

and experiencing lower than expected inflation rates.

NASA Has Reduced Actual

Shuttle Operating Costs

To some extent, the reductions in funding requirements resulted from

eliminating projected cost increases. NASA also reduced the actual

operating costs from $2.8 billion in fiscal year 1992 to about $2.6 billion in

fiscal year 1994 for the same number of flights—an 8.5-percent decrease.

Because the costs decreased over the period, when inflation is taken into

account, the 8.5-percent decrease equated to a 12.3-percent decrease in

constant dollars.

Further Reductions Will Be

Required to Meet Future

Budget Projections

To meet its future budget targets, NASA must reduce shuttle operating costs

by at least an additional $1.3 billion in fiscal years 1996 through 2000—an

average of $250 million a year. For example, the fiscal year 1996 budget for

shuttle operations was $258.5 million lower than the estimated funding

requirements at the time the budget was submitted to the Congress. The

gap between estimated funding requirements and future budgets will be

even larger if future shuttle operations budgets must be reduced to

compensate for “unresolved percentage reductions” shown in NASA’s fiscal

year 1996 budget request. NASA has not yet identified how it will

accomplish these “unresolved target reductions,” totaling $775 million for

human space flight activities in fiscal years 1997 through 2000.

NASA’s ability to resolve even the $1.3-billion projected shuttle operations

funding deficit for fiscal years 1996 through 2000 is uncertain. Some

officials are more optimistic than others that needed reductions can be

achieved. In February 1995, two reviews reported their recommendations

for further ways of reducing costs, but NASA has not acted on all of the

recommendations and does not yet have an estimate of the savings

expected to result from the reviews. An internal NASA workforce review

recommended over 500 changes that, according to the team, will allow

NASA to significantly reduce its shuttle labor force. An independent shuttle

management review recommended that NASA restructure shuttle program

management by consolidating operational activities under a single

contractor, more clearly define operating requirements, and limit NASA’s

oversight of contractor activities.

Page 4 GAO/NSIAD-95-118 Space Shuttle
Executive Summary

NASA Considered Safety

Implications in Shuttle

Changes

All proposed changes to hardware or procedures have been approved

through a formal review process that included reviews by independent

NASA safety and mission assurance personnel. Some proposed changes

were not implemented because the review panel concluded that safety

risks were unacceptable. So far, NASA has targeted only noncritical

hardware and processes—those which could not result in injury, damage,

or loss of mission or life—for cost reduction efforts.

Two external and two internal studies of the safety implications of the cost

reduction effort found no adverse safety impact resulting from the

reductions. For example, a July 1994 General Research Corporation study

concluded that reductions up to that point were a healthy “tightening up”

of the program while protecting content and that no instances of safety

compromise were found. An October 1994 internal NASA study of trends for

18 measures of shuttle performance that could provide indirect indications

of any possible adverse impact of cost reductions concluded that all of the

indicators had remained stable or improved.

Outside Review Groups

Assess Possible Impacts of

Further Reductions

The Aerospace Safety Advisory Panel, in its March 1994 report, and the

General Research Corporation, in its July 1994 report, both expressed

concern about the pace of future cost reductions. Both studies cited the

difficulty of measuring the impact of the reductions on shuttle safety. The

Aerospace Safety Advisory Panel stated that future reductions carry a

higher probability of affecting safety. The General Research Corporation

study concluded that the frequency and rate of budget and budget-driven

change experienced by the program decrease the ability to assess impacts

and risk. However, both the NASA workforce review and the independent

management review team that reported in February 1995 concluded that

additional reductions were possible without adversely affecting safety.

According to the management review team, because the program has

matured since the Challenger accident, shuttle processing requirements

and safety oversight can be reduced.

Page 5 GAO/NSIAD-95-118 Space Shuttle
Executive Summary

NASA Monitoring Potential

Safety Impacts at Higher

Management Level

Because of the safety concerns, NASA, in November 1993, asked the

General Research Corporation to recommend a system to help monitor the

potential impact of funding reductions on safety. NASA did not adopt all of

the recommendations, but it did develop its own system similar to the one

suggested by the corporation. Although no new measurements are to be

made, some data will be analyzed and reviewed at the highest level of

shuttle management.

Recommendations GAO recommends that the Administrator (1) identify any significant

unresolved cost reductions in future budget requests so that the Congress

can provide oversight and make informed decisions and (2) request an

independent organization, such as the National Research Council, to

review significant cost reduction actions in future years, in the context of

safety tradeoffs.

Agency Comments NASA concurred with the two recommendations and stated that it had

already begun implementing them. (See app. I for a copy of NASA’s

comments.)

Page 6 GAO/NSIAD-95-118 Space Shuttle
Page 7 GAO/NSIAD-95-118 Space Shuttle
Contents

Executive Summary 2

Chapter 1 

Introduction

10

Shuttle Cost History 10

Cost Reduction Goals 11

Changes in Shuttle Budget Structure 12

Objectives, Scope, and Methodology 12

Chapter 2 

NASA Has Reduced

Shuttle Operating

Costs, but Additional

Cuts Are Needed

14

NASA Has Reduced Projected Funding Requirements for Shuttle

Operations

14

NASA Has Reduced Actual Shuttle Operations Costs 19

Additional Cuts Will Be Needed to Achieve Future Shuttle

Budgets

20

External Reviews Chartered to Identify Additional Reductions 24

Conclusion 26

Recommendation 26

Agency Comments 27

Chapter 3 

NASA Considers

Safety Impacts of Cost

Reductions

28

NASA Considered Safety Implications in Evaluating Shuttle Cost

Reductions

28

Reviews Assess Risk of Continued Reductions 33

NASA Monitors Potential Safety Indicators at Higher Levels 35

Conclusion 36

Recommendation 36

Agency Comments 36

Appendixes Appendix I: Comments From the National Aeronautics and Space

Administration

38

Appendix II: Major Contributors to This Report 42

Figures Figure 1.1: NASA’s Fiscal Year 1996 Budget 10

Figure 2.1: Estimated Shuttle Funding Requirements 15

Figure 2.2: Reductions in Projected Shuttle Funding

Requirements

16

Figure 2.3: Labor Reductions 17

Figure 2.4: NASA Reduced Actual Shuttle Operating Costs 20

Figure 2.5: Program Requirements Versus Likely Budgets 22

Page 8 GAO/NSIAD-95-118 Space Shuttle
Contents

Abbreviations

GAO General Accounting Office

NASA National Aeronautics and Space Administration

Page 9 GAO/NSIAD-95-118 Space Shuttle
Chapter 1 

Introduction

The space shuttle has operated for about 14 years and is likely to be used

into the next century. It is the only U.S. launch system capable of carrying

people to and from space, and its viability is critical to other space

programs, especially the international space station. The shuttle—the

world’s first reusable space transportation system—consists of a reusable

orbiter with three liquid fueled main engines, two partially reusable solid

rocket boosters, and an expendable external fuel tank. The shuttle is used

primarily when human space activities are required.

Shuttle Cost History The shuttle is the single most expensive program in the National

Aeronautics and Space Administration’s (NASA) budget. It is estimated to

consume about one fourth of NASA’s $14.3 billion fiscal year 1996 budget

(see fig. 1.1).

Figure 1.1: NASA’s Fiscal Year 1996 Budget

Station

Shuttle

Science aeronautics Mission support

14%

25%

43%

18%

Originally intended to make space access routine and inexpensive, the

shuttle has not lived up to its expectations. NASA initially planned up to 

60 missions a year. Prior to the January 1986 Challenger accident, NASA

reduced the target flight rate to 24 per year and after the accident, to 

16 per year. After shuttle flights resumed, the target rate was reduced to 

10 per year.1

 The budgets for fiscal years 1994 and 1995 supported eight

1

Although NASA planned for higher flight rates, it never launched more than eight flights in a given

year.

Page 10 GAO/NSIAD-95-118 Space Shuttle
Chapter 1 

Introduction

flights per year. Reductions in flight rates were based on more realistic

estimates, national policy, and funding constraints. As the number of

flights decreased, the average cost of operating the shuttle increased

significantly. A June 1976 estimate placed the average cost of 572 flights at

about $53 million each (in 1995 dollars).2

 In its fiscal year 1995 budget to

the Congress, NASA estimated the eight flights planned for fiscal year 1995

would cost an average of $336 million each (in 1995 dollars), an increase

of about 534 percent over the 1976 estimate. According to NASA, the cost

increase was due primarily to the reduction in the number of flights.

Cost Reduction Goals In response to tight fiscal constraints, the Deputy Associate Administrator

for Space Shuttle, in January 1991, established a program to reduce shuttle

funding requirements3

 and operating costs.4 The goal was to reduce

recurring shuttle costs by 3 percent in fiscal years 1992 and 1993 without

compromising flight safety. In August 1991, the Space Shuttle Director

extended the 3-percent per year reductions through fiscal year 1996. The

cumulative reductions would total 15 percent by fiscal year 1996.

In May 1992, the Acting Deputy Administrator implemented a coordinated

review of all NASA programs. The objective was to identify additional areas

where program costs could be reduced by increasing efficiency,

eliminating work no longer required, and prioritizing work that was not

mandatory to safely accomplish the flight manifest. The review resulted in

an initial target for these additional reductions in shuttle costs of about

8 percent per year between fiscal years 1994 and 1998.

Even further reductions to shuttle funding requirements were directed in

fiscal years 1994 and 1995. The Space Shuttle Operations Office first asked

shuttle element project managers to identify possible reductions. NASA

reduced funding estimates based on these recommendations; however,

further reductions would be required based on the funding that would be

available. The shuttle program office allocated the remainder of the

reductions to each project based on its share of the budget. Project

managers were challenged to find further ways to reduce funding

requirements.

2

The June 1976 estimate was $16.07 million in 1975 dollars. To make it comparable with current

estimates, we added an allowance for the inflation that occurred between 1975 and 1995 using a factor

supplied by NASA.

3

Funding requirements are estimates of the funding needed to accomplish the planned program in any

given time period.

4

Operating costs are the actual costs to accomplish the program in any given year.

Page 11 GAO/NSIAD-95-118 Space Shuttle
Chapter 1 

Introduction

Initially, NASA measured its shuttle funding reductions by comparing the

projected funding requirements in the fiscal year 1992 budget request to

the projected funding requirements in the budget requests for subsequent

years. When NASA submitted its fiscal year 1995 budget to the Congress,

NASA began tracking reductions in shuttle operating costs from one year to

the next.

Changes in Shuttle

Budget Structure

Prior to fiscal year 1995, NASA included space shuttle funding requirements

in the Space Flight, Control, and Data Communications category of its

budget. Shuttle costs were divided between two lines: shuttle production

and operational capability and shuttle operations. Shuttle production and

operational capability included nonrecurring or investment costs such as

those to modify and improve flight hardware and ground facilities and

produce reusable hardware such as liquid fueled main engines. Shuttle

operations included recurring costs such as those for production of

expendable flight hardware, mission training and support at Johnson

Space Center, and shuttle processing and support at Kennedy Space

Center.

Beginning in fiscal year 1995, NASA moved shuttle funding to a new

appropriations category entitled “Human Space Flight.” Again, shuttle

funds were included in two lines that closely parallelled the previous

budget lines. Nonrecurring costs were included in a line entitled “Safety

and Performance Upgrades” and recurring costs were included in a line

entitled “Shuttle Operations.” Other costs totaling about $243 million in

fiscal year 1995 that were formerly included in the shuttle operations line

were moved to other budget lines. Payload operation costs were included

in a separate line within the Human Space Flight category. Research

operation support—support to civil service staff and physical plants at

field centers where shuttle operations activities are performed and at NASA

headquarters—was moved to a new category entitled “Mission Support.”

Objectives, Scope,

and Methodology

The Chairman, Subcommittee on Oversight of Government Management

and the District of Columbia, Senate Committee on Governmental Affairs,

and the former Chairman, Subcommittee on Investigations and Oversight,

House Committee on Science, Space, and Technology, asked us to review

NASA’s efforts to reduce shuttle funding requirements. Our specific

objectives were to determine (1) how successful NASA has been in reducing

shuttle operating costs and what changes enabled the reductions; (2) if the

potential exists for further funding or operational cost reductions; and

Page 12 GAO/NSIAD-95-118 Space Shuttle
Chapter 1 

Introduction

(3) whether NASA adequately considered the impact, if any, of cost

reductions on shuttle safety.

To evaluate how successful NASA has been in reducing shuttle operating

costs, we compared budgets for fiscal years 1992 through 1995 and visited

NASA Headquarters and three NASA field centers. In addition, we

judgmentally selected cost estimates for five shuttle projects, one

directorate, and two operations for detailed review to determine how NASA

had achieved the reductions. The budgets of these eight elements

constituted an average of 85 percent of NASA’s total operating budget for

the shuttle. Our analyses were all based on recurring operations costs and,

for consistency, we adjusted all of the estimates to reflect the new budget

structure. We also discussed efforts to reduce costs with NASA and

contractor project managers, business managers, and cost and budget

analysts to determine how costs had been reduced for the eight elements.

To determine the potential for further reductions, we reviewed NASA’s

plans for achieving further reductions and discussed items the agency may

have considered but rejected. We also reviewed reports of outside groups

and independent assessments of potential reductions and discussed the

findings with the outside organizations and with NASA officials.

To evaluate whether NASA adequately considered safety in reducing shuttle

operating costs, we reviewed NASA’s procedures for evaluating the safety

implications of the cost reductions. We discussed specific reductions with

safety, reliability, and quality assurance personnel at the project, program,

and headquarters levels. We also reviewed independent safety

assessments and discussed the findings with NASA officials.

We conducted our audit work at

• Marshall Space Flight Center, Alabama;

• Johnson Space Center, Texas;

• Kennedy Space Center, Florida; and

• NASA Headquarters, Washington, D.C.

We conducted our work between October 1993 and March 1995 in

accordance with generally accepted government auditing standards.

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Chapter 2 

NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

Over the past 3 years, NASA has substantially reduced shuttle funding

requirements and operating costs. To achieve future budgets, NASA will

have to reduce projected shuttle funding requirements by at least another

10 percent between fiscal years 1996 and 2000. Reductions may be even

larger, depending on how NASA allocates “unresolved percentage

reductions” for fiscal years 1997 through 2000. Agreement about the

likelihood of achieving the projected shuttle operating cost reductions was

not universal. Consequently, in 1994, NASA initiated two independent

reviews aimed at identifying additional ways of reducing shuttle operating

costs. Both groups reported their change recommendations in

February 1995, but as of the end of March 1995, NASA had not acted on all

of the recommendations and did not have an estimate of the savings

expected to result from the changes.

NASA Has Reduced

Projected Funding

Requirements for

Shuttle Operations

Between fiscal years 1992 and 1995, NASA reduced projected shuttle

operations funding requirements by 22 percent.1

 In its fiscal year 1992

budget request, NASA projected that annual appropriations required to fund

shuttle operations would increase from about $3 billion in fiscal year 1992

to about $3.6 billion in fiscal year 1995. By the time the President

submitted his fiscal year 1995 budget request, shuttle operations funding

requirements for those years had been reduced by a total of about

$2.9 billion from the levels estimated in the fiscal year 1992 budget (see 

fig. 2.1).

1

We adjusted all estimates to conform to the structure of the fiscal year 1995 budget.

Page 14 GAO/NSIAD-95-118 Space Shuttle
Chapter 2 

NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

Figure 2.1: Estimated Shuttle Funding

Requirements

1992 1993 1994 1995

0

1,000

2,000

3,000

4,000

Fiscal Year

Dollars in millions

 1992 Budget 1995 Budget

NASA achieved the reductions primarily by making operations more

efficient and reducing the planned number of shuttle flights and funding

reserves. Using a reasonable methodology, NASA allocated the cost

reduction amounts to four categories, which have some interrelationship.

Increased efficiency, which translated primarily into reductions in the

contractor labor force, accounted for over half of the total reductions.

Reduced program content—primarily eliminating some flights between

fiscal years 1992 and 1995—accounted for another 13 percent of the

reductions. Reduced management reserve funding accounted for another

16 percent, and other miscellaneous changes accounted for the remaining

15 percent.

Increased Efficiency NASA reduced shuttle operations funding requirements by $1.6 billion

through increasing efficiency. The most significant reductions occurred in

the production of flight hardware such as the external tank, space shuttle

main engines, redesigned solid rocket motor, solid rocket booster, orbiter,

Page 15 GAO/NSIAD-95-118 Space Shuttle
Chapter 2 

NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

and orbiter spare parts and ground support equipment. Other reductions

were about equally spread between launch and landing, which is primarily

the processing activities at Kennedy Space Center that ready the shuttle

for its next flight, and flight operations at Johnson Space Center, which

include mission control, crew training, systems engineering, and other

similar activities (see fig. 2.2).

Figure 2.2: Reductions in Projected

Shuttle Funding Requirements Flight hardware

Launch and landing

Flight operations

58%

21%

21%

Efficiency reductions included a large number of individual changes to

each of the shuttle projects and activities. Examples included decreases in

some contract fees, reduced material prices, and decreased stockage

levels for some spare parts. Decreases in shuttle contractor labor

constituted the single largest reduction. The labor reductions were made

possible by such actions as freezing the design of major hardware

components, reorganizing and combining work tasks, automating some

tasks, eliminating unnecessary administrative work, and closing some

facilities.

From fiscal years 1992 to 1995, NASA reduced shuttle contractor labor by

3,654 people,2

 a reduction of about 19 percent (see fig. 2.3).3 The largest

2

Labor is measured in “equivalent persons.” One equivalent person is equal to the number of hours one

person could be expected to work in a year less adjustments such as for federal holidays.

3

The analysis assumes that the contractor will make the reductions currently estimated for fiscal year

1995.

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Chapter 2 

NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

single reduction was in the shuttle processing contract at Kennedy Space

Center.

Figure 2.3: Labor Reductions

1992 1993 1994 1995

0

5,000

10,000

15,000

20,000

Fiscal Year

Equivalent persons

Flight hardware Shuttle processing Flight operations Other

The contractor that produces the shuttle’s external fuel tank reduced its

labor force by 300 people from a baseline of 2,328 people in 1992. The

reductions were made possible by reducing the flight rate from 12 to 8 per

year and freezing the tank’s design, except for safety and efficiency

changes. As a result, engineering and administrative personnel who were

no longer required to process numerous design changes were released.

The redesigned solid rocket motor contractor reduced its labor force by

almost 480 people between fiscal years 1992 and 1995 through more

efficient operations. The reductions were achieved primarily by

automating part of the process for mixing and casting the solid

propellants, by constructing a new, more efficient facility for final

assembly of motor segments, and by freezing the motor design, except for

safety and efficiency changes.

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NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

Contractors responsible for launch and landing activities at Kennedy

Space Center also found more efficient ways to operate. As a result, the

largest of these contractors, the shuttle processing contractor, reduced its

workforce by 1,421 people between fiscal years 1992 and 1995. The

contractor reduced clerical and administrative personnel, programmers,

planners, schedulers, and crafts labor by the highest proportion, and only

about 19 percent of the reductions were of “hands-on,” or touch labor. For

example, the prime contractor analyzed work authorization documents to

determine the value of multiple levels of review. If the reviews did not

result in added value—such as increased safety or reliability—then one or

more of the reviews were eliminated. Technical procedures were not

changed and the areas affected were primarily support areas such as

logistics, communications, and ground systems engineering.

Contractors performing mission operations and crew training activities

also reduced their combined labor forces by almost 590 people between

fiscal years 1992 and 1995 through increased efficiency. For example, the

Mission Operations Directorate maintains a library of computer tapes

containing flight software. Previously, storage and retrieval of the tapes

were performed manually. The Mission Operations Directorate now uses

an automated system to store and retrieve computer tapes instead of

storing and retrieving the tapes manually. The Directorate also merged its

software production facility with the Engineering Directorate’s software

development facility. The merger consolidated facility operations and

sustaining engineering under a single contractor and permitted labor

reductions.

Reductions in Flight Rates Lowering the planned number of shuttle flights resulted in a cumulative

reduction of $388 million4

 in operations funding between fiscal years 1992

and 1995. At the time of its fiscal year 1992 budget request, NASA planned

for 38 flights between fiscal years 1992 and 1995 at a rate of up to 10 flights

per year. Funding restraints imposed by several consecutive budgets,

however, forced NASA to reduce its planned maximum flight rate to eight a

year, which eliminated one flight each planned for fiscal years 1992 and

1993 and two flights each planned for fiscal years 1994 and 1995.

Additional funding reductions in fiscal year 1995 caused NASA to reduce the

planned number of flights for that year to seven.

4

The reduction was offset somewhat by an increased cost for the super lightweight external tank, but

the net effect was a reduction of $388 million.

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NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

Reduced Management

Reserve

NASA also reduced the amount of funds it set aside as management

reserves by $458 million, or 93 percent, between fiscal years 1992 and

1995. The shuttle program uses these funding reserves to cover

unanticipated increases in program requirements not funded in the budget.

For example, the external tank must be emptied and then refilled when a

launch is rescheduled, which increases the cost for propellants because

some of the liquid hydrogen and oxygen is lost during the process.

Management reserves may be needed to cover the added costs.

In its fiscal year 1992 budget, NASA projected it would need $474 million in

management reserves between fiscal years 1992 and 1995, or about 

3.5 percent of the projected funding requirement for those years. Budgets

for subsequent years include progressively less funding for reserves. For

example, the management reserves budgeted for fiscal year

1995—$17 million—was less than 1 percent of estimated funding for that

year.

According to NASA’s Shuttle Resources Management Chief, reductions in

the level of reserves were possible because the shuttle program’s actual

costs have been less than available funding in each of the past 5 years.

Excess funds have been used to replenish reserves or carried over for use

in succeeding fiscal years. The official acknowledged, however, that

reduced reserves increase the level of schedule risk in the program. If

funds are not available to quickly resolve problems, flights may have to be

delayed.

Other Reductions The remaining $417-million cost reduction resulted from a variety of other

changes such as unrealized inflation. For example, in preparing its fiscal

year 1992 budget request, NASA anticipated 5 percent inflation each year for

the following 3 years. Actual price level increases were less than 5 percent;

therefore, NASA did not need as much funding as previously estimated for

shuttle operations.

NASA Has Reduced

Actual Shuttle

Operations Costs

Another measure of NASA’s shuttle operations cost reduction effort is

changes in the actual costs to operate the shuttle from one year to the

next. In that regard, NASA also reduced the actual cost to operate the

shuttle between fiscal years 1992 and 19945

 by 8.5 percent. Considering the

general price level increases that occurred in the economy over this

period, this reduction equated to a real decrease of 12.3 percent.

5

Fiscal year 1994 is the latest year for which actual operating costs are known.

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NASA Has Reduced Shuttle Operating Costs,

but Additional Cuts Are Needed

NASA processed the shuttle for flight eight times in each of these years.6 As

shown in figure 2.4, operating costs in fiscal year 1992 totaled

$2,832.6 million, and in fiscal year 1994, these costs totaled

$2,591.8 million, a reduction of $241 million, or 8.5 percent. After adjusting

the fiscal year 1992 costs to reflect price level increases that occurred

between fiscal years 1992 and 1994,7

 the reduction would be about

$363.3 million, or about 12.3 percent, in constant fiscal year 1994 dollars.

Figure 2.4: NASA Reduced Actual

Shuttle Operating Costs

1992 1993 1994

0

500

1,000

1,500

2,000

2,500

3,000

Fiscal Year

Dollars in millions

Additional Cuts Will

Be Needed to Achieve

Future Shuttle

Budgets

To achieve future shuttle budgets, NASA must continue reducing shuttle

funding requirements because the purchasing power of funds available for

shuttle operations is expected to decline through the end of the century.

Shuttle officials estimate that current funding requirements exceed

projected budgets by about $1.3 billion in fiscal years 1996 through 2000,

6

NASA processed eight flights in fiscal year 1992, but launch of one of the flights was delayed by about

3 weeks into the next fiscal year.

7

We used the gross domestic product deflator for fiscal years 1992 through 1994 to calculate price level

changes.

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but Additional Cuts Are Needed

even after the impact of cost reduction measures to date has been

considered.

In addition, NASA’s fiscal year 1996 budget documents show that NASA

expects to reduce human spaceflight costs by another $775 million in

fiscal years 1997 through 2000. This reduction is a portion of a $4-billion

general reduction to NASA’s projected budgets for those years. The

reduction was identified in February 1995 when NASA submitted its fiscal

year 1996 budget to the Congress. NASA has not yet determined how the

reduction will be allocated. If the shuttle program absorbs a portion of the

reduction, the shuttle operations funding deficit will increase even further

in those years.

NASA estimates that in fiscal year 1995, it will have to reduce shuttle

operating costs by $75.3 million below the fiscal year 1994 level. NASA

officials told us that they will make the reductions by decreasing the

planned number of flights from eight to seven, reducing contractor labor

forces even further, consolidating some small contracts, and using funds

carried over from prior years. As of February 1995, officials were still

projecting a $54.1-million funding deficit for shuttle operations in fiscal

year 1995. Officials told us that they were confident they could resolve the

deficit by finding additional efficiencies in shuttle operations.

Achieving the reductions that are needed in fiscal years 1996 through 2000

is less certain, however. For example, at the time NASA submitted its fiscal

year 1996 budget, it estimated that shuttle operations would cost

$258.5 million more than the amount budgeted for that year. NASA

estimates that funds available for shuttle operations will rise slightly in

fiscal years 1997 through 2000. The increases, however, will not be

sufficient to cover forecasted price level increases.

The estimated shuttle operations funding requirements, the funding levels

projected to be available in fiscal years 1996 through 2000, and the

projected funding deficits for those fiscal years are shown in figure 2.5.

The amounts are based on fiscal year 1996 budget documents and do not

reflect any impact in available funding that may result from the

$775-million general reduction to the human spaceflight budget.

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Figure 2.5: Program Requirements

Versus Likely Budgets

1995 1996 1997 1998 1999 2000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Fiscal Year

Dollars in millions

Projected Budget Unresolved

To achieve the projected budgets, NASA must reduce funding requirements

for shuttle operations by an additional 10 percent between fiscal years

1996 and 2000. NASA currently estimates the shuttle program will require a

cumulative amount of about $14.3 billion to operate during this time

period, but it projects that only about $13.1 billion will be available in its

budgets, leaving a funding deficit of about $1.3 billion. The deficit averages

about $250 million a year, or about 10 percent of the shuttle operations

budget.

NASA officials and outside reviewers agreed that the shuttle program is

more efficient than it has ever been, but future efficiencies will be more

difficult to achieve. NASA’s Administrator has stated that NASA can reduce

shuttle funding requirements below current levels. The Administrator and

other agency officials point out that NASA had achieved all of the necessary

reductions through fiscal year 1994. In addition to achieving the necessary

reductions each year since fiscal year 1992, NASA estimated that the shuttle

program spent $83 million less than the amount shown in the cost plan in

fiscal year 1994. The $83-million underrun will help achieve reductions

necessary in fiscal year 1995. The Chief of Shuttle Resources Management

told us shuttle managers also hope to underrun the cost plan for fiscal year

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but Additional Cuts Are Needed

1995, thereby generating savings to be applied to the unresolved shuttle

funding gap in fiscal year 1996.

Some of the shuttle managers we interviewed told us that, in their view,

the only way to achieve significant further reductions was to reduce

program requirements, primarily the numbers of flights. According to the

Administrator, NASA cannot safely operate the shuttle at fewer than six

flights a year. NASA has already reduced the shuttle program to seven

flights a year, and eliminating another flight will not be enough to resolve

all of the projected $1.3-billion deficit. According to NASA, although it can

safely reduce the flight rate from the current seven flights a year to six,

there would be a reduction in efficiency, a loss of schedule and surge

flexibility, and a serious problem meeting space station assembly and

operation requirements.

According to a December 1994 report by the National Academy of Public

Administration,8

 the amount that can be saved from reducing the number

of shuttle flights depends upon whether the reduction is for a single year

or for several consecutive years. Reducing the number of flights in a single

year would reduce costs by about $50 million. If, however, the reduction

were for several consecutive years—essentially a reduction in the

maximum flight rate—annual costs could be reduced between $90 million

and $100 million because labor can be reduced to match the reduced flight

rate.

Reducing the number of shuttle flights would increase the schedule risk

associated with the assembly of International Space Station Alpha, which

is projected to begin in fiscal year 1998. The current schedule requires

three space station assembly flights in fiscal year 1998 and seven assembly

flights in fiscal year 1999. Thus, as assembly of the station progresses,

fewer flights can be eliminated without endangering the station assembly

schedule.

Many of the shuttle managers we interviewed expressed uncertainty about

achieving the cost reductions necessary to match available shuttle

operating funds in fiscal years 1996 through 2000. Some of the managers

stated they did not know how they would achieve the necessary

reductions and still support the flight schedule. For example, the Kennedy

Space Center Director wrote in June 1994 that significant funding gaps

existed in shuttle operations and that the center could not achieve the

8

National Academy of Public Administration, A Review of the Space Shuttle Cost, Reduction Goals and

Procedures (Dec. 1994).

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needed cost reductions and still support the projected flight rate.

Similarly, the orbiter project manager told us that the project’s ability to

achieve the needed cost reductions in fiscal year 1996 and beyond was

doubtful. If forced to absorb the reductions, the project manager said that

timeliness of decisions and implementation of corrective actions would be

adversely affected. He stated that key technical skills were already at the

minimum levels required to sustain operations and that reducing the skills

base further could affect the planned flight schedules.

In July 1994, the General Research Corporation, under contract to NASA,

reported on its review of shuttle cost reductions.9

 The review team

concluded that although reductions taken through the end of fiscal year

1993 represented a healthy tightening up of the program, there were no

obvious, significant additional reductions that would be easy to achieve.

The review did recommend that NASA consider several additional ways of

reducing costs, such as combining the external tank, solid rocket booster,

and redesigned solid rocket motor projects into a single propulsion

project. However, the review team acknowledged that none of the

recommended actions would individually resolve the difference between

shuttle funding requirements and likely budgets. Also, the National

Academy of Public Administration reported in December 199410 that most

shuttle project managers believe that nearly all of the readily identifiable

reduction opportunities have been accomplished and that further

reductions will be much more difficult to achieve.

External Reviews

Chartered to Identify

Additional Reductions

In August 1994, the Administrator directed senior management to

comprehensively review contractor and civil service workforces across

the agency. NASA’s primary objective for the review, known as the “Shuttle

Workforce Review,” was to develop a understanding of reductions that can

be achieved while maintaining safety. In implementing the review, the

Associate Administrator for Space Flight instructed the center directors to

• identify every function and person required to safely support the schedule,

• specify areas where changes to shuttle program requirements or plans can

lead to savings without jeopardizing safety, and

• forecast the expected savings or cost avoidances to be achieved as a result

of ongoing continuous improvement programs.

9

General Research Corporation, Space Shuttle Budget Allocation Review (July 1994).

10National Academy of Public Administration, A Review of the Space Shuttle Costs, Reduction Goals

and Procedures (Dec. 1994).

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Twelve teams comprised of four to five members, most of whom were

independent of the organization and associated management under

review, were formed. Each team had representatives for major

areas—such as engineering, management, and business—with significant

experience related to functions of the organization being reviewed.

In February 1995, the teams reported that they had identified over 500

recommendations for further cost reductions. The recommendations were

grouped into six categories:

• eliminating tasks such as all nonessential panels, work groups, and teams

that are not value added;11

• reducing workforces such as engineering support contractor labor at

Kennedy Space Center;

• improving processes such as adopting more efficient flight software

development and verification processes;

• eliminating potential overlaps by actions such as consolidating

responsibility for institutional activities at Kennedy Space Center;

• shifting some work such as contract administration support from

contractors to civil service personnel; and

• making other changes such as closing redundant facilities.

Some of the recommendations require further coordination, but according

to the teams, most recommendations can be accomplished during fiscal

years 1996 and 1997. NASA does not yet have a firm estimate of the savings

that may result from the recommendations, but according to the Office of

Space Flight, implementing the recommendations will help reduce the

funding gap in future shuttle budgets.

In December 1994, the Administrator established another independent

team to review management of the shuttle program. The team, which

consisted of aerospace executives, business leaders, and former NASA

officials, was charged with evaluating the current processes and

procedures for conducting shuttle operations at NASA’s various field

centers and recommending a new and more efficient operating structure.

In February 1995, the management review team reported its conclusion

that significant additional reductions in cost will be difficult without a new

and innovative approach.12 This new approach must transition the current

11Not value added means the review did not increase the safety or reliability of the process.

12NASA, Report of the Space Shuttle Management Independent Review Team (Feb. 1995).

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program to a more operational program and introduce cost-effective

operations as a primary goal. To achieve this goal, the review team

recommended that NASA (1) establish a clear set of program goals, placing

a greater emphasis on efficient operations and payload integration;

(2) redefine the management structure, separating development and

operations and disengaging NASA from routine shuttle operations; and

(3) provide the necessary environment and conditions within the program

to pursue these goals. The review team also recommended that NASA

consolidate all shuttle operations under a single prime contractor and

provide incentives for the contractor to reduce operations cost while

maintaining safety of flight and mission success. The team’s report did not

include any estimate of the savings that might result from its

recommendations. NASA has not yet acted on the recommendations.

On May 19, 1995, the Administrator announced plans for significantly

downsizing NASA’s infrastructure to reduce the cost of agency operations.

We did not assess the potential affect of these changes on the shuttle

program. One potential action still being studied was to restructure the

shuttle program and prepare it for contractor consolidation and

privatization.

Conclusion NASA has substantially reduced shuttle operating costs since it first began

cost reduction efforts in fiscal year 1992. However, substantial additional

reductions are needed to eliminate gaps between estimated funding

requirements and projected budgets for fiscal years 1996 through 2000.

While review groups have recommended additional changes to reduce

costs, NASA has not acted on all of the recommendations and has no

estimate of the savings that will result from the changes. The current

funding gaps are not specifically identified in NASA’s budget documents,

but if they cannot be eliminated, NASA’s future budgets will have to

increase or funding for other programs will have to decline. Decreasing

funds for other programs to eliminate the gaps could disrupt the balance

between human spaceflight activities and science, aeronautics, and

technology that NASA has sought to achieve.

Recommendation We recommend that in future budget submissions, the Administrator

specifically identify any significant unresolved reductions that remain so

that the Congress can provide oversight and make informed budget

decisions.

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Agency Comments In commenting on a draft of this report, NASA agreed with our

recommendation. NASA indicated that the January 12, 1996, budget cuts

were not specifically accounted for by program in the NASA budget

submission, due to the late timing of the reductions. However, NASA

intends to delineate the various programs’ and institutions’ share of these

reductions in future budget inputs.

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Although there are no direct measures of shuttle safety except for

accidents such as the Challenger, there are some indirect indicators. To

date, NASA appears to have given adequate consideration to safety in

evaluating potential cost reductions. Therefore, only noncritical hardware

and processes1

 have been changed, and all potential changes to hardware

and processes were formally reviewed by appropriate groups, including

NASA’s safety and mission assurance organizations, before being

implemented. Both internal and external reviews have concluded that the

changes have not affected safety. Two groups have cautioned that further

reductions on the scale planned by NASA could increase safety risks

especially since the impact of changes is difficult to determine. However,

both the NASA workforce review and the independent management review

team reported in February 1995 that additional reductions were possible

without adversely affecting safety. Because of its concern about the

possibility that cost reductions could affect safety, higher level NASA

managers recently began monitoring some potential, indirect safety

indicators.

NASA Considered

Safety Implications in

Evaluating Shuttle

Cost Reductions

NASA’s commitment to safety is reflected in the processes it has to ensure

that safety is adequately considered. Changes to hardware and processes

are reviewed by multiple levels before being implemented. Neither highly

critical components nor the processes that support them have been

changed to achieve cost reductions. Several groups outside NASA have

echoed the agency’s commitment to a safe shuttle program. Trends in a

number of indirect safety indicators remain stable or improve while

operating costs are being reduced.

Potential Changes

Reviewed by Appropriate

Groups

NASA has an approved and defined shuttle program configuration that is

used for a reference point for program planning and as a point of

departure for controlling changes. Changes to it must be approved either

by NASA or by the contractor, depending on the classification of the

change. All configuration changes to flight hardware or software must be

authorized by the space shuttle program or one of its projects. Changes

that affect safety must be forwarded to the Space Shuttle Program for

disposition.

The space shuttle configuration control structure consists of three levels.

The Associate Administrator for Space Flight and the Deputy Associate

1

Noncritical hardware and processes are those for which no injury, damage, or loss of mission or life

would result from a failure.

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Administrator for Space Shuttle provide strategic guidance, programmatic

oversight, budget and procurement direction, and external advocacy for

the program. The Director of Space Shuttle Operations manages the

day-to-day operations of the program, including the integration of the

various shuttle program elements. Project managers at Johnson and

Kennedy Space Centers and at Marshall Space Flight Center manage the

design, qualification, and manufacturing associated with their projects and

control specifications and changes to them. At the contractor level, those

charged with project implementation are responsible for design,

development, manufacture, test, qualification, and certification of certain

contract end items.

The ultimate controlling authority for all changes to the space shuttle

program baseline is the Space Shuttle Program Requirements Control

Board. The board has delegated authority to make decisions about certain

changes to the baseline to other boards. The Mission Integration Control

Board decides about changes to mission integration requirements such as

those with impacts to standard launch or landing processes and flows. At

the project level, a number of configuration control boards represent the

controlling authority for changing baselines for the hardware elements,

flight support equipment, payload ground support equipment, and launch

and landing. Several other boards control changes in areas such as crew

procedures.

Membership varies somewhat among the boards. Generally, members

represent areas such as engineering, integration, NASA and contractor

management and safety, reliability, and quality assurance. We reviewed the

paperwork associated with several proposed changes and found that in all

cases, the boards included a member of the safety, reliability, and quality

assurance community.

All proposed changes to the baseline must be documented, evaluated,

coordinated, and either implemented or disapproved. Changes proposed

by the contractor must be documented and must provide, among other

information, the impact of the proposed changes on safety, reliability,

quality assurance, test, operations, and logistics. Baseline changes

proposed by a NASA organization must include the same minimum data as

changes proposed by the contractor. Engineering change proposals are

submitted to the project office, which in turn submits the proposals to the

appropriate configuration control board. Any changes affecting space

shuttle program baselines or another project must be decided upon by the

board.

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In addition to the various control boards, there is a System Safety Review

Panel that provides an independent review of proposed changes presented

to the Program Requirements Change Board. The panel was established as

a result of the presidential commission that investigated the Challenger

accident and has been functioning since the shuttle program resumed

flights. Its membership includes a number of mandatory members of the

safety community from the centers, some projects, and the Department of

Defense. In addition, prime contractors serve as advisory members, and

safety representatives from NASA headquarters observe the panel’s

proceedings.

We reviewed several proposed cost reductions to determine if they were

handled in accordance with applicable procedures. All of the changes we

reviewed were processed in accordance with procedures. Some of these

changes were approved while others were not approved because of safety

concerns.

In some cases, proposed cost reductions were not approved because of

their potential adverse impact on safety. For example, the external tank

project office directed the prime contractor to propose an engineering

change that would eliminate nearly all of the x-ray inspections of tank

welds done before tank proof testing. The change, if approved, would have

reduced tank costs by about $3 million. The contractor’s initial analysis

concluded that 92 percent of the x-ray inspections of the welds done

before proof testing could be eliminated because the weld process had

never produced defects that were not otherwise identified. An analysis by

NASA engineers, however, raised concerns that critical flaws could escape

detection by other means and could cause a leak or burst either in proof

testing or in flight. A leak or burst occurring during testing could lead to

the loss of a facility and in-flight would likely be catastrophic.

Consequently, the project configuration control board disapproved the

change.

Only Noncritical Changes

Considered

Through March 1995, NASA had targeted only noncritical hardware and

processes for cost reduction changes. All of the project managers stated

that neither highly critical hardware items nor processes would be

considered in the future to accommodate reductions.

Shuttle hardware is categorized according to its criticality, or the potential

effect of its loss. Hardware items are categorized according to the worst

possible result of their failure to perform a required function within limits,

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under conditions, and for the duration specified. Level 1 criticality could

lead to the loss of life or vehicle, criticality 2 to the loss of a mission or the

failure of a redundant item that could cause the loss of life or a vehicle,

and all others are criticality 3.

Hardware functions are categorized according to the effect of loss of all

redundancy for that particular function. Functional criticality includes the

above definitions for levels 1, 2, and 3, plus an intermediate level between

levels 1 and 2 and between levels 2 and 3. Criticality 1R relates to

redundant hardware items that, if all failed, could cause the loss of life or

vehicle. Criticality 2R failures are redundant hardware items that, if all

failed, could cause the loss of mission.

None of the most critical hardware on the external tanks, main engines,

redesigned solid rocket motors, solid rocket boosters, or orbiters has been

changed to reduce cost. In some cases, redesign of hardware resulted in a

coincidental cost reduction. For example, on the solid rocket booster, a

single length of tubing replaced two pieces, which increased the safety and

reliability of the part and decreased cost.

The Orbiter Logistics Office has not changed any program requirement to

achieve cost reductions. The only changes implemented to date have

involved delivery schedules and the length of time to effect repairs.

Support levels for some highly critical items have been lowered. The

logistics office considers the criticality of the hardware when buying spare

parts or prioritizing repairs. However, such considerations do not impact

safety. Neither has the Mission Operations Directorate considered

changing any highly critical items or processes.

Key Shuttle Indicators

Remain Stable or Improve

In October 1994, the Director for Safety and Risk Management of NASA’s

Office of Safety and Mission Assurance reviewed and reported on trends in

18 measures of performance in the space shuttle program since shuttle

flights resumed. The analysis was in response to questions raised by the

Congress and the Administrator concerning the existence and monitoring

of indicators to gauge the safety and mission assurance of the shuttle

program because of recent budget and personnel reductions. While these

trends do not directly measure shuttle safety, they can provide indications

of problems, according to a NASA safety official. A preliminary assessment

of the indicators did not identify any adverse trends.

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All elements of the space shuttle program track certain key performance

indicators continuously. These indicators show trends that may be

indicative of incipient problems when interpreted in the context of

engineering and management judgment. Such trends are not, in isolation,

used to judge shuttle safety, but according to the Safety and Mission

Assurance officials, the trends can identify areas where further study may

be warranted. Other processes, such as pre-launch assessment reviews,

flight readiness reviews, mission safety evaluations, and management

involvement provide for the assessment of overall shuttle safety.

The review analyzed trends in 18 different measures in 12 areas of shuttle

operations, including launch attempts, processing, logistics, and problems

reported prior to or during flight. Each trend was summarized graphically

and the data interpreted. NASA’s Safety and Risk Management Division

selected the 18 indicators charted in this review. Some of the indicators

selected were those highlighted by the report of the presidential

commission on the Challenger accident.

One indicator reviewed was the number of launches attempted or

scrubbed2

 over a period of time. This trend could provide an indication of

shuttle processing quality and the effectiveness of pre-launch and flight

readiness reviews in detecting potential problems. Between the

resumption of shuttle flights and the end of 1991—just before the first

round of reductions—the trend showed an average of 1.7 attempts per

launch, excluding weather scrubs. Between 1992 and October 1994, the

trend declined slightly, to an average of 1.6 attempts per launch. An

increase in the number of scrubs over a period of time might have

indicated that processing quality had declined, but a more thorough review

would have been required to determine the reasons.

Another potential indicator of declining quality is the number of problems

reported with the flight hardware elements during processing for any

given flight. This trend could indicate system quality and reliability

problems. Since 1991, the total number of problems for a given flight has

remained well within established upper and lower control limits, with the

exception of the first flight of a new orbiter and the first flight after the

maintenance down period for other orbiters. Exceeding either limit would

probably have warranted a more thorough review to determine the cause.

Upper and lower control limits are periodically reviewed and adjusted to

reflect improved performance.

2

A scrub is a delay of 24 hours or more after the start of countdown for launch.

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One indicator that concerned the presidential commission investigating

the Challenger accident was overtime on the shuttle processing contract.

Tracking the percentage of overtime provides insight into workloads that

may have an effect on performance and schedule. Prior to the Challenger

accident, overtime on this contract was between 20 percent and

26 percent. After the accident, additional labor was hired, and overtime

rates dropped significantly, to about 13 percent. Despite a decrease in the

number of labor hours expended to process each mission, overtime has

not increased. Between September 1992 and January 1995, overtime

decreased from 9 percent to 3 percent.

Outside Groups Have

Concluded That Safety Has

Not Been Adversely

Affected

The Aerospace Safety Advisory Panel conducted an annual review of NASA

between February 1993 and January 1994.3 The panel recognized NASA’s

continued strong commitment to safety but stated that the impact on

safety of organizational and budget changes will be significantly more

difficult to assess. The panel noted that although the shuttle processing

contractor had eliminated more that 1,200 positions since September 1991,

reductions had been made without any apparent adverse impact on safety.

In 1994, the General Research Corporation reviewed shuttle cost reduction

efforts to assess whether actual or planned cost reductions or functional

changes across the program could have a significant impact on risk. The

review team reported in July 1994 that the cost reductions through fiscal

year 1993 were a healthy “tightening up” while protecting content and no

instances of compromise were found.

Preliminary results from an internal study are also consistent with the

outside reviews. The internal study, known as the Shuttle Workforce

Review, was chartered in September 1994 to, among other objectives,

identify any adverse consequences of cost reductions to date. In

February 1995, the workforce review teams reported that the last 3 years

of program reductions have not created any unacceptable safety holes.

Reviews Assess Risk

of Continued

Reductions

Both the Aerospace Safety Advisory Panel and the General Research

Corporation expressed concern about the safety implications of future

projected cost reductions. However, the shuttle workforce review and the

independent management review team have concluded that further cuts

are possible without jeopardizing safety.

3

The Aerospace Safety Advisory Panel, Annual Report (Mar. 1994).

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The Aerospace Safety Advisory Panel expressed concern that even though

reductions already made to the shuttle processing contract had not

adversely affected safety, comparable further reductions called for by the

end of fiscal year 1995 could not be made without a higher probability of

affecting safety. The panel recommended that NASA and contractor

management remain vigilant and vocal in avoiding unacceptable impacts

on safety as a result of cost reductions planned for fiscal year 1995 and

beyond. The panel also indicated in a letter to the Associate Administrator

for Space Flight that the key to monitoring the safety of the program is not

just in reviewing metrics but fostering good communication with the

managers throughout the system.

The General Research Corporation also found that safety had not been

compromised by reductions made to date. The corporation, however,

stated that the frequency and rate of budget and budget-driven change

experienced by the program decreases the ability to assess impacts and

risks. According to the review team, the program needs time to plan and

implement changes prior to taking on additional reductions.

In February 1995, both the internal shuttle workforce review and the

independent management review team recommended additional program

changes to reduce costs. The workforce review made over 

500 recommendations that, according to the teams, contained no

significant safety impacts when taken individually. The management

review team recommended a new program management structure.

According to this team, as a result of the Challenger accident, NASA created

a safety environment that is duplicative and expensive. Managers,

engineers, and business people are reluctant to make decisions that

involve risk because of the “fear of persecution,” according to the

management review team. As a result, a parallel and independent safety,

reliability, and quality assurance element has grown to large proportions.

According to the review team, to achieve significant cost reduction, NASA

must restructure and streamline safety, reliability, and quality assurance

throughout the shuttle program, maintaining only the necessary checks

and balances. The management review also recommended that NASA

review shuttle requirements with the goal of significantly reducing

checkout and other requirements based upon operations experience.

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NASA Monitors

Potential Safety

Indicators at Higher

Levels

In 1994, NASA contracted with the General Research Corporation to

develop and demonstrate a system of metrics to monitor the impact of

changes on shuttle schedule, performance, and safety and recommend a

system to improve the measurement of space shuttle program

performance and risk. The task included identifying any key indicators

that would provide broad performance metrics, standards for risk

assessment, and a management analysis process. The corporation

identified five areas that were key to assessing shuttle program

performance—program management, logistics, engineering, flight crew

preparation, and operations. The operations area was further broken down

into personnel, hardware, and schedule.

Within each area, the corporation identified metrics that would indicate

the overall status for each area. The corporation identified a total of 

32 metrics distributed across the five areas. It also recommended potential

sources for the data to be analyzed and provided a means for scoring each

metric as being satisfactory, having minor weaknesses, having major

weaknesses, or having major problems. In addition, arrows indicated

whether the trend was improving, worsening, or remaining stable.

NASA did not adopt all of the recommended metrics. Instead, the then

Associate Administrator for Space Flight tasked the Deputy Associate

Administrator to establish a team to review the recommendations. The

team presented its recommendations to the Deputy Associate

Administrator who then decided which metrics were key and should be

tracked. From the original 32 metrics, the team recommended tracking

in-flight anomaly history, space shuttle monthly cost rate, maintenance

trend analysis report, total mishaps at Kennedy Space Center, orbiter

system and line replaceable unit problem reports, waivers of the

processing criteria, overtime for the shuttle processing contract, and

errors in the Kennedy Space Center and shuttle processing contractor’s

structured surveillance system.

NASA currently tracks all of these trends as well as others. The difference is

that the identified trends are singled out as key and are subject to a

scoring system similar to the one the corporation suggested. The team also

recommended parameters outside of which the metric would be coded as

other than satisfactory.

One key difference between the system recommended by the contractor

and the one NASA is considering is the level at which the trend data is

reviewed and scored. The corporation recommended the analysis and

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coding at the project level, and NASA believes that the project managers

already track these metrics and many more. The Deputy Associate

Administrator (Space Shuttle) believes that the purpose of the

headquarters metrics is to supplement existing programmatic

communications systems with a few key indicators of program health.

Conclusion Except for accidents like Challenger, NASA has no direct measure of shuttle

safety, but it has placed substantial emphasis and effort into considering

the safety implications of cost reduction actions to date. However, the

absence of any direct safety measure makes continued reductions

progressively riskier. Nonetheless, because of NASA’s declining budgets,

pressure to cut costs will no doubt remain high. Some external reviewers

have advised more caution in the cost reduction effort while others have

recommended additional reductions, including eliminating what they view

as duplicative and unnecessary safety, reliability, and quality assurance

activities. Because of concern about the possible impact of the reductions

on safety, NASA managers are more closely monitoring possible indirect

indicators of safety problems. An independent assessment of proposed

cost reduction approaches may prove helpful in the critical and complex

task of balancing the need to reduce costs and the need to maintain safe

shuttle operations.

Recommendation Because the potential safety impact of cost reduction changes cannot be

measured directly, we recommend that the Administrator request an

independent organization, such as the National Research Council, to

review significant cost reduction actions to be taken in the future. This

organization could bring added objectivity because it would not be subject

to the same cost reduction measures that all NASA employees are

experiencing.

Agency Comments In commenting on a draft of this report, NASA agreed that an independent

entity should review the possible safety implications of the cost

reductions. According to NASA, it has asked the Aerospace Safety Advisory

Panel to undertake this effort.

Page 36 GAO/NSIAD-95-118 Space Shuttle
Page 37 GAO/NSIAD-95-118 Space Shuttle
Appendix I 

Comments From the National Aeronautics

and Space Administration

Page 38 GAO/NSIAD-95-118 Space Shuttle
Appendix I 

Comments From the National Aeronautics

and Space Administration

Page 39 GAO/NSIAD-95-118 Space Shuttle
Appendix I 

Comments From the National Aeronautics

and Space Administration

Now on p. 3.

Now on p. 5.

Now on p. 31.

Page 40 GAO/NSIAD-95-118 Space Shuttle
Appendix I 

Comments From the National Aeronautics

and Space Administration

Now on p. 10.

Now on p. 23.

Now on p. 28.

Now on p. 34.

Now on p. 35.

Page 41 GAO/NSIAD-95-118 Space Shuttle
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division

Lee Edwards

Fred Felder

Dayna Foster

Mark Lambert

Charles W. Perdue

(709032) Page 42 GAO/NSIAD-95-118 Space Shuttle
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