U.S. Launch Enterprise: Acquisition Best Practices Can Benefit Future Efforts
Published: 2014-07-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The EELV program is the primary provider of launch vehicles for U.S. military and intelligence satellites. The DOD expects to spend about $9.5 billion over the next five years acquiring launch hardware and services through the program, during which time it will also be working to certify new launch providers. This investment represents a significant amount of what the entire U.S. government expects to spend on launch activities—including new development, acquisition of launch hardware and services, and operations and maintenance of launch ranges—for the same period. The United Launch Alliance (ULA) is currently the sole provider of launch services through the EELV program. However, DOD, the National Aeronautics and Space Administration (NASA), and the National Reconnaissance Office (NRO) are working to certify new launch providers who can compete with ULA for launch contracts.
GAO was asked to discuss past work related to the EELV program, as well as best practices for acquiring new launch capabilities, as the Congress is currently weighing the need to reduce our reliance on rocket engines produced in Russia.
section_title: What GAO Found
paragraphs: GAO has reported extensively on the Evolved Expendable Launch Vehicle (EELV) program in the past.
In 2008, GAO reported that when the Department of Defense (DOD) moved the EELV program from the research and development phase to the sustainment phase in the previous year, DOD eliminated various reporting requirements that would have provided useful oversight to program officials and the Congress.
In 2011, GAO reported that the block buy acquisition approach may be based on incomplete information and although DOD was still gathering data as it finalized the new acquisition strategy, some critical knowledge gaps remained.
In 2012, GAO reported that DOD had numerous efforts under way to address the knowledge gaps and data deficiencies identified in the 2011 GAO report, and found that two of GAO’s seven recommendations had been completely addressed, four partially addressed, and one had no action taken.
In 2013, GAO reported on the status of DOD's efforts to certify new entrants for EELV acquisitions. While potential new entrants stated that they were generally satisfied with the Air Force’s efforts to implement the process, they identified several challenges to certification, as well as perceived advantages afforded to the incumbent launch provider.
In 2014, GAO reported and testified that DOD's new contract with ULA (sometimes referred to as the “block buy”) represented a significant effort on the part of DOD tonegotiate better launch prices through improved knowledge of contractor costs. DOD officials expect the new contract to realize significant savings, primarily through stable unit pricing for all launch vehicles.
Space launch vehicle development efforts are high risk from technical, programmatic, and oversight perspectives. It is imperative that any future development effort adopts disciplined practices and lessons learned from past programs. Practices that would especially benefit a launch vehicle development effort include the following:
Decisions on what type of new program to pursue should be made with a government-wide and long-term perspective.
Requirements and resources (for example, time, money, and people) need to be matched.
The EELV program itself should adopt knowledge-based practices.

section_title: Letter
paragraphs: Chairmen Rockefeller and Udall, Ranking Members Thune and Sessions,  and members of the Committee and Subcommittee:  Thank you for inviting me to testify on the current and future state of the  U.S. launch enterprise. As you know, the EELV program is the primary  provider of launch vehicles for U.S. military and intelligence satellites.  Today I will discuss (1) highlights of GAO’s past work on EELV, and (2)  how acquisition best practices would benefit future engine development  efforts. In general, our past work has highlighted a need for stronger  management and oversight for EELV as well as more knowledge about  pricing, costs and the industrial base for the block buy. DOD and  Congress have implemented many positive actions to address our  recommendations. For future efforts, adopting best practices early could  help stem cost and schedule growth and other problems.
My testimony is based on the body of work we have performed on the  EELV program and acquisition best practices in recent years and related  reports issued from September 2008 to March 2014. In this body of work  we interviewed DOD and industry officials, conducted contract reviews,  assessed knowledge of the industrial base, and analyzed program  acquisition strategies, among other things. Our prior reports each include  a detailed description of our scope and methodology. All work on which  this testimony is based was performed in accordance with generally  accepted government auditing standards. Those standards require that  we plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives.
The Department of Defense (DOD) expects to spend about $9.5 billion  over the next five years acquiring launch hardware and services through  the program, during which time it will also be working to certify new  launch providers. This investment represents a significant amount of what  the entire U.S. Government expects to spend on launch activities— including new development, acquisition of launch hardware and services,  and operations and maintenance of launch ranges—for the same period.  The United Launch Alliance (ULA) is currently the sole provider of launch  services through the EELV program. However, DOD, the National  Aeronautics and Space Administration (NASA), and the National  Reconnaissance Office (NRO) are working to certify new launch providers  who can compete with ULA for launch contracts.
subsections: section_title: Highlights of GAO’s Work on EELV
paragraphs: Because of the importance of the national security space launch  enterprise, we have been asked to look at many aspects of the EELV  program over the last 10 years. Our work has examined management  and oversight for EELV, as well as the “block buy” acquisition approach.  The block buy approach, finalized in December 2013, commits the  department to an acquisition that spans 5 years, in contrast with the prior  practice of acquiring launch vehicles one or two at a time, with the aim of  stabilizing the launch industrial base and enabling the government to  achieve savings. Additionally, we have assessed the status of the launch  vehicle certification process for new entrants. DOD and Congress have  taken numerous actions to address our prior recommendations which  have resulted in financial and oversight benefits. Highlights of our work  over the years follow.
We reported that when DOD moved the EELV program from the research  and development phase to the sustainment phase in the previous year,  DOD eliminated various reporting requirements that would have provided  useful oversight to program officials and Congress. For example, the  EELV program was no longer required to produce data that could have  shed light on the effects the joint venture between Lockheed Martin and  Boeing companies (later known as ULA) was having on the program,  programmatic cost increases and causes, and other technical  vulnerabilities that existed within the program. Furthermore, because the  program was now in the sustainment phase, a new independent life-cycle  cost estimate was not required for the program; as a result, DOD would  not be able to rely on its estimate for making long-term investment  planning decisions. According to DOD officials, the life-cycle cost  estimate for the program at the time was not realistic. Our  recommendations to strengthen oversight reporting gained attention in  2011 following concerns about rising program cost estimates and at that  time, Congress required the Secretary of Defense to redesignate the  EELV program as a major defense acquisition program, thereby removing  it from the sustainment phase and reinstating previous reporting  requirements. DOD also developed a new program cost estimate, which  allows for greater oversight of the program for both Congress and DOD.
We reported that the block buy acquisition approach may be based on  incomplete information and although DOD was still gathering data as it  finalized the new acquisition strategy, some critical knowledge gaps  remained. Specifically, DOD analysis on the health of the U.S. launch  industrial base was minimal, and officials continued to rely on contractor  data and analyses in lieu of conducting independent analyses.  Additionally, some subcontractor data needed to negotiate fair and  reasonable prices were lacking, according to Defense Contract Audit  Agency reports, and some data requirements were waived in 2007 in  exchange for lower prices. DOD also had little insight into the sufficiency  or excess of mission assurance activities, which comprise the many steps  taken by the government and contractors to ensure launch success.  Though the level and cost of mission and quality assurance employed  today is sometimes criticized as excessive, it has also resulted in more  than 80 consecutive successful launches. We also reported that the  expected block buy may commit the government to buy more booster  cores than it needs, and could result in a surplus of hardware requiring   Further,  storage and potentially rework if stored for extended periods.while DOD was gaining insight into the rise in some engine prices,  expected at that time to increase dramatically, it was unclear how the  knowledge DOD was gaining would inform the expected acquisition  approach or subsequent negotiations.
We reported that broader issues existed as well, regarding the U.S.  Government’s acquisition of, and future planning for, launch services— issues which we recommended be addressed, given that they could  reduce launch costs and assure future launch requirements are met. For  example, we recommended that federal agencies—like the Air Force,  NRO, and NASA—more closely coordinate their acquisitions of launch  services. Planning was also needed for technology development focused  on the next generation of launch technologies, particularly with respect to  engines, for which the United States remains partially reliant on foreign  suppliers. Congress responded to our work by legislating that DOD  explain how it would address the deficiencies we found.
We reported that DOD had numerous efforts underway to address the  knowledge gaps and data deficiencies identified in our 2011 report. Of  the seven recommendations we made to the Secretary of Defense, two  had been completely addressed, four were partially addressed and one  had no action taken. That recommendation was aimed at bolstering  planning for the next generation of launch technologies. Since GAO’s  2011 report, DOD had completed or obtained independent cost estimates  for two EELV engines and completed a study of the liquid rocket engine  industrial base. Officials from DOD, NASA, and the NRO initiated several  assessments to obtain needed information, and worked closely to finalize  new launch provider certification criteria for national security space  launches. Conversely, we reported that more action was needed to  ensure that launch mission assurance activities were not excessive, to  identify opportunities to leverage the government’s buying power through  increased efficiencies in launch acquisitions, and to strategically address  longer-term technology investments.
We reported on the status of DOD’s efforts to certify new entrants for  EELV acquisitions.generally satisfied with the Air Force’s efforts to implement the process,  they identified several challenges to certification, as well as perceived  advantages afforded to the incumbent launch provider, ULA. For  example, new entrants stated that they faced difficulty in securing enough  launch opportunities to become certified. During our review, the Under  Secretary of Defense for Acquisition, Technology, and Logistics directed  the Air Force to make available up to 14 launches for competition to new  entrants, provided they demonstrate the required number of successful  launches and provide the associated data in time to compete.  Additionally, new entrants considered some Air Force requirements to be  overly restrictive; for example, new entrants must be able to launch a  minimum of 20,000 pounds to low earth orbit from specific Air Force  launch sites (versus facilities the new entrants currently use.) The Air  Force stated that 20,000 pounds represents the low end of current EELV  lift requirements, and that alternate launch sites are not equipped to   While potential new entrants stated that they were  support DOD’s national security space launches. Further, new entrants  noted that the incumbent provider receives ongoing infrastructure and  development funding from the government, an advantage not afforded to  the new entrants, and that historical criteria for competition in the EELV  program were more lenient. The Air Force acknowledged that criteria for  competition are different, and reflective of the differences in the current  acquisition environment.
We reported and testified that DOD’s new contract with ULA (sometimes  referred to as the “block buy”) represented a significant effort on the part  of DOD to negotiate better launch prices through its improved knowledge  of contractor costs, and that DOD officials expected the new contract to  realize significant savings, primarily through stable unit pricing for all  launch vehicles. At the time of our review, DOD was leading the broader  competition for up to 14 launches, expected to begin in fiscal year 2015.  In advance of the upcoming competition, DOD was considering several  approaches to how it would require competitive proposals to be  structured. Our report did not recommend an approach. However, we  identified the pros and cons of two different ends of the spectrum of  choices, one being a commercial-like approach and the other being  similar to the current approach (a combination of cost-plus and fixed price  contracts). If DOD required offers be structured similar to the way DOD  currently contracts with ULA, there could be benefits to DOD and ULA as  both are familiar with this approach, but potential burdens to new  entrants, which would have to change current business practices.  Alternatively, if DOD implemented a commercial approach to the  proposals, new entrants would potentially benefit from being able to  maintain their current efficient business practices, but DOD could lose  insight into contractor cost or pricing, as this type of data is not typically  required by the Federal Acquisition Regulation under a commercial item  acquisition. DOD could also require a combination of elements from each  of these approaches, or develop new contract requirements for this  competition.
section_title: Best Practices Would Benefit Future Engine Development Efforts
paragraphs: ULA’s Atlas 5 launch vehicle uses the RD-180 engine produced by the  Russian company NPO Energomash. DOD and Congress are currently  weighing the need to reduce U.S. reliance on rocket engines produced in  Russia and the costs and benefits to produce a similar engine  domestically. The RD-180 engine has performed extremely well for some  of the nation’s most sensitive national security satellites, such as those  used for missile warning and protected communications. Moreover, the  manufacture process of the RD-180 is one that cannot be easily  replicated. In addition, the most effective way to design a launch  capability is to design all components in coordination to optimize  capabilities needed to meet mission requirements. In other words,  replacing the RD-180 could require the development of a new launch  vehicle and potentially new launch infrastructure.
Space launch vehicle development efforts are high risk from technical,  programmatic, and oversight perspectives. The technical risk is inherent.  For a variety of reasons, including the environment in which they must  operate, a vehicle’s technologies and design are complex and there is  little to no room for error in the fabrication and integration process.  Managing the development process is complex for reasons that go well  beyond technology and design. For instance, at the strategic level,  because launch vehicle programs can span many years and be very  costly, programs often face difficulties securing and sustaining funding  commitments and support. At the program level, if the lines of  communication between engineers, managers, and senior leaders are not  clear, risks that pose significant threats could go unrecognized and  unmitigated. If there are pressures to deliver a capability within a short  period of time, programs may be incentivized to overlap development and  production activities or delete tests, which could result in late discovery of  significant technical problems that require more money and ultimately  much more time to address. For these reasons, it is imperative that any  future development effort adopt disciplined practices and lessons learned  from past programs. I would like to highlight a few practices that would  especially benefit a launch vehicle development effort.
First, decisions on what type of new program to pursue should be made  with a government-wide and long-term perspective. Our prior work has  shown that defense and civilian government agencies together expect to  require significant funding, nearly $44 billion in then-year dollars (that  factor in anticipated future inflation), for launch-related activities from  fiscal years 2014 through 2018. At the same time, our past work has  found that launch acquisitions and activities have not been well  coordinated, though DOD and NASA have since made improvements.  Concerns have also been raised in various studies about the lack of  strategic planning and investment for future launch technologies. Further,  the industry is at a crossroads. For example, the government has a  decreased requirement for solid rocket motors, yet for strategic reasons  some amount of capability needs to be sustained and exercised. The  emergence of Space Exploration Technologies, Corp. (SpaceX) and other  vendors that can potentially compete for launch acquisitions is another  trend that benefits from coordination and planning that takes a  government-wide perspective. The bottom line is that any new launch  vehicle effort is likely to have effects that reach beyond DOD and the  EELV program and should be carefully considered in a long-term,  government-wide context.
Second, requirements and resources (for example, time, money, and  people) need to be matched at program start. This is the first of three key  knowledge points we have identified as best practices. In the past, we  have found that recent launch programs, such as NASA’s Constellation  program and Commercial Crew Program, have not had sufficient funding  to match demanding requirements. Funding gaps can cause programs to delay or delete important activities and thereby increase risks and can  limit the extent to which competition can be sustained. Realistic cost  estimates and assessments of technical risk are particularly important at  program start. Space programs have historically been optimistic in  estimating costs (although recently DOD and NASA have been making  strides to produce more realistic estimates). The commitment to more  realistic, higher confidence cost estimates would be a great benefit to any  new launch vehicle development program and enable Congress to ensure  its commitment is based on sound knowledge. We have also found that  imposing overly ambitious deadlines can cause an array of problems. For  instance, they may force programs to overlap design activities with testing  and production. The many setbacks experienced by the Missile Defense  Agency’s ground-based midcourse defense system, for example, are  rooted in schedule pressures that drove concurrent development. Even  if the need for a new engine is determined to be compelling, the  government is better off allowing adequate time for disciplined  engineering processes to be followed.
Third, the program itself should adopt knowledge-based practices during  execution. The program should also use quantifiable data and  demonstrable knowledge to make go/no-go decisions, covering critical  facets of the program such as cost, schedule, technology readiness,  design readiness, production readiness, and relationships with suppliers.  Our work on the second and third knowledge points during execution  (design stability and production process maturity) has tied the use of such  metrics to improved outcomes. In addition, the program should place a  high priority on quality, for example, holding suppliers accountable to  deliver high-quality parts for their products through such activities as  regular supplier audits and performance evaluations of quality and  delivery, among other things. Prior to EELV, DOD experienced a string of  launch failures in the 1990s due in large part to quality problems.
This concludes my statement. I am happy to answer questions related to  our work on EELV and acquisition best practices.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For questions about this statement, please contact Cristina Chaplain at  (202) 512-4841, or at chaplainc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this statement. Individuals making key contributions to this  testimony were Art Gallegos, Assistant Director; Pete Anderson, Claire  Buck, Erin Cohen, Laura Hook, and John Krump.
section_title: Related GAO Products
paragraphs: NASA: Actions Needed to Improve Transparency and Assess Long-Term  Affordability of Human Exploration Programs. GAO-14-385. Washington,  D.C.: May 8, 2014.
Missile Defense: Mixed Progress in Achieving Acquisition Goals and  Improving Accountability. GAO-14-351. Washington, D.C.: April 1, 2014.
Evolved Expendable Launch Vehicle: Introducing Competition into  National Security Space Launch Acquisitions. GAO-14-259T.  Washington, D.C.: March 5, 2014.
The Air Force’s Evolved Expendable Launch Vehicle Competitive  Procurement. GAO-14-377R. Washington, D.C.: March 4, 2014.
Defense and Civilian Agencies Request Significant Funding for Launch- Related Activities. GAO-13-802R. Washington, D.C.: September 9, 2013.
Space: Launch Services New Entrant Certification Guide. GAO-13-317R.  Washington, D.C.: February 7, 2013.  2012 Annual Report: Opportunities to Reduce Duplication, Overlap and  Fragmentation, Achieve Savings, and Enhance Revenue.  GAO-12-342SP. Washington, D.C.: February 28, 2012.
National Aeronautics and Space Administration: Acquisition Approach for  Commercial Crew Transportation Includes Good Practices, but Faces  Significant Challenges. GAO-12-282. Washington, D.C.: December 15,  2011.
Evolved Expendable Launch Vehicle: DOD Needs to Ensure New  Acquisition Strategy Is Based on Sufficient Information. GAO-11-641.  Washington, D.C.: September 15, 2011.
NASA: Constellation Program Cost and Schedule Will Remain Uncertain  Until a Sound Business Case Is Established. GAO-09-844. Washington,  D.C.: August 26, 2009.
Space Acquisitions: Uncertainties in the Evolved Expendable Launch  Vehicle Program Pose Management and Oversight Challenges.   GAO-08-1039. Washington, D.C.: September 26, 2008.
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