Space Acquisitions: DOD Faces Substantial Challenges in Developing New Space Systems
Published: 2009-05-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Despite a growing investment in space, the majority of large-scale acquisition programs in the Department of Defense's (DOD) space portfolio have experienced problems during the past two decades that have driven up cost and schedules and increased technical risks. The cost resulting from acquisition problems along with the ambitious nature of space programs has resulted in cancellations of programs that were expected to require investments of tens of billions of dollars. Along with the cost increases, many programs are experiencing significant schedule delays--at least 7 years--resulting in potential capability gaps in areas such as positioning, navigation, and timing; missile warning; and weather monitoring. This testimony focuses on (1) the condition of space acquisitions, (2) causal factors, and (3) recommendations for better positioning programs and industry for success. In preparing this testimony, GAO relied on its body of work in space and other programs, including previously issued GAO reports on assessments of individual space programs, common problems affecting space system acquisitions, and DOD's acquisition policies.
section_title: What GAO Found
paragraphs: Estimated costs for major space acquisition programs have increased by about $10.9 billion from initial estimates for fiscal years 2008 through 2013. In several cases, DOD has had to cut back on quantity and capability in the face of escalating costs. Several causes behind the cost growth and related problems consistently stand out. First, DOD starts more weapon programs than it can afford, creating competition for funding that, in part, encourages low cost estimating and optimistic scheduling. Second, DOD has tended to start its space programs before it has the assurance that the capabilities it is pursuing can be achieved within available resources. GAO and others have identified a number of pressures associated with the contractors that develop space systems for the government that have hampered the acquisition process, including ambitious requirements and shortages of technical expertise in the workforce. Although DOD has taken a number of actions to address the problems on which GAO has reported, additional leadership and support are still needed to ensure that reforms that DOD has begun will take hold.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of Defense’s  (DOD) space acquisitions. The topic of today’s hearing is critically  important. Despite a growing investment in space, the majority of large- scale acquisition programs in DOD’s space portfolio have experienced  problems during the past two decades that have driven up cost and  schedules and increased technical risks. The cost resulting from  acquisition problems along with the ambitious nature of space programs  has resulted in cancellations of programs that were expected to require  investments of tens of billions of dollars, including the recently proposed  cancellation of the Transformational Satellite Communications System  (TSAT). Moreover, along with the cost increases, many programs are  experiencing significant schedule delays—at least 7 years—resulting in  potential capability gaps in areas such as positioning, navigation, and  timing; missile warning; and weather monitoring.
My testimony today will focus on the condition of space acquisitions,  causal factors, and recommendations for better positioning programs for  success. Many of these have been echoed by the Allard Commission,  which studied space issues in response to a requirement in the John  Warner National Defense Authorization Act for Fiscal Year 2007, and by a  study by the House Permanent Select Committee on Intelligence (HPSCI),  among other groups. The two studies highlighted concerns about diffuse  leadership for military and intelligence space efforts and declining  numbers of space engineering and technical professionals. Members of the  Allard Commission were unanimous in their conviction that without  significant improvements in the leadership and management of national  security space programs, U.S. space preeminence will erode “to the extent  that space ceases to provide a competitive national security advantage.”
subsections: section_title: Space Acquisition Problems Persist
paragraphs: Figure 1 compares original cost estimates and current cost estimates for  the broader portfolio of major space acquisitions for fiscal years 2008  through 2013. The wider the gap between original and current estimates,  the fewer dollars DOD has available to invest in new programs. As shown  in the figure, estimated costs for the major space acquisition programs  have increased by about $10.9 billion from initial estimates for fiscal years  2008 through 2013. The declining investment in the later years is the result  of the Evolved Expendable Launch Vehicle (EELV) program’s no longer  being considered a major acquisition program and the cancellation and  proposed cancellation of two development efforts that would have  significantly increased DOD’s major space acquisition investment.
Figures 2 and 3 reflect differences in total life-cycle and unit costs for  satellites from the time the programs officially began to their most recent  cost estimate. As figure 2 notes, in several cases, DOD has had to cut back  on quantity and capability in the face of escalating costs. For example, two  satellites and four instruments were deleted from National Polar-orbiting  Operational Environmental Satellite System (NPOESS) and four sensors  are expected to have fewer capabilities. This will reduce some planned  capabilities for NPOESS as well as planned coverage.
Figure 4 highlights the additional estimated months needed to complete  programs. These additional months represent time not anticipated at the  programs’ start dates. Generally, the further schedules slip, the more DOD  is at risk of not sustaining current capabilities. For this reason, DOD began  a follow-on system effort, now known as Third Generation Infrared  Surveillance, to run in parallel with the Space Based Infrared System  (SBIRS) program.
This fiscal year, DOD launched the second Wideband Global SATCOM  (WGS) satellite. WGS had previously been experiencing technical and  other problems, including improperly installed fasteners and data  transmission errors. When DOD finally resolved these issues, it  significantly advanced capability available to warfighters. Additionally, the  EELV program had its 23rd consecutive successful operational launch in  April. However, other major space programs have had setbacks. For  example:  In September 2008, the Air Force reported a Nunn-McCurdy unit cost  breach of the critical cost growth threshold for the Advanced Extremely  High Frequency (AEHF) communications satellite because of cost growth  brought on by technical issues, schedule delays, and increased costs for  the procurement of a fourth AEHF satellite. The launch of the first satellite  has slipped further by almost 2 years from November 2008 to as late as  September 2010. Further, the program office estimates that the fourth  AEHF satellite could cost more than twice the third satellite because some  components that are no longer manufactured will have to be replaced and  production will have to be restarted after a 4-year gap. Because of these  delays, initial operational capability has slipped 3 years—from 2010 to  2013.
The Mobile User Objective System (MUOS) communications satellite  estimates an 11-month delay—from March 2010 to February 2011—in the  delivery of on-orbit capability from the first satellite. Further, contractor  costs for the space segment have increased about 48 percent because of  the additional labor required to address issues related to satellite design  complexity, satellite weight, and satellite component test anomalies and  associated rework. Despite the contractor’s cost increases, the program  has been able to remain within its baseline program cost estimate.
The first Global Positioning System (GPS) IIF satellite is now expected to  be delayed almost 3 years from its original launch date to November 2009.  Also, the cost of GPS IIF is now expected to be about $1.6 billion—about  $870 million over the original cost estimate of $729 million. (This  approximately 119 percent cost increase is not that noticeable in figures 2  and 3 because the GPS II modernization program includes the  development and procurement of 33 satellites, only 12 of which are IIF  satellites.) The Air Force has had difficulty in the past building GPS  satellites within cost and schedule goals because of significant technical  problems—which still threaten its delivery schedule—and challenges it  faced with a different contractor for the IIF program, which did not  possess the same expertise as the previous GPS contractor. Further, while  the Air Force is structuring the new GPS IIIA program to prevent mistakes  made on the IIF program, the Air Force is aiming to deploy the GPS IIIA  satellites 3 years faster than the IIF satellites. We believe the IIIA schedule  is optimistic given the program’s late start, past trends in space  acquisitions, and challenges facing the new contractor.
Total program cost for the SBIRS program is estimated around $12.2  billion, an increase of $7.5 billion over the original program’s cost, which  included 5 geosynchronous earth orbit (GEO) satellites. The first GEO  satellite has been delayed at least 7 years in part because of poor  oversight, technical complexities, and rework. Although the program  office set December 2009 as the new launch goal for the satellite, it is  currently assessing the satellite launch schedule and expects to have a  new plan in place by June 2009. Subsequent GEO satellites have also  slipped as a result of flight software design issues.
The NPOESS program has experienced problems with replenishing the  current constellation of aging weather satellites and was restructured in  July 2007 in response to a Nunn-McCurdy unit cost breach of the critical  cost-growth threshold. The program was originally estimated to cost about  $6.5 billion for six satellites from 1995 through 2018. The restructured  program called for reducing the number of satellites from six to four and  included an overall increase in program costs, delays in satellite launches,  and deletions or replacements of satellite sensors. Although the number of  satellites has been reduced, total costs have increased by almost 108  percent since program start. Specifically, the current estimated life-cycle  cost of the restructured program is now about $13.5 billion for four  satellites through 2026. This amount is higher than what is reflected in  figure 2 as it represents the most recent GAO estimate as opposed to the  DOD estimates used in the figure. We reported last year that poor  workmanship and testing delays caused an 8-month slip in the delivery of  a complex imaging sensor. This late delivery caused a delay in the  expected launch date of a demonstration satellite, moving it from late  September 2009 to early January 2011.
This year it is also becoming more apparent that space acquisition  problems are leading to potential gaps in the delivery of critical  capabilities. For example, DOD faces a potential gap in protected military  communications caused by delays in the AEHF program and the proposed  cancellation of the TSAT program, which itself posed risks in schedule  delays because of TSAT’s complexity and funding cuts designed to ensure  technology objectives were achievable. DOD faces a potential gap in ultra  high frequency (UHF) communications capability caused by the  unexpected failures of two satellites already in orbit and the delays  resulting from the MUOS program. DOD also faces potential gaps or  decreases in positioning, navigation and timing capabilities because of late  delivery of the GPS IIF satellites and the late start of the GPS IIIA  program. There are also concerns about potential gaps in missile warning  and weather monitoring capabilities because of delays in SBIRS and  NPOESS.
Addressing gaps in any one of these areas is not a simple matter. While  there may be opportunities to build less complex “gap filler” satellites, for  example, these still require time and money that may not be readily  available because of commitments to the longer-term programs. There  may also be opportunities to continue production of “older” generation  satellites, but such efforts also require time and money that may not be  readily available and may face other challenges such as restarting  production lines and addressing issues related to obsolete parts and  materials. Further, satellites on orbit can be made to last longer by turning  power off at certain points in time, but this may also present unacceptable  trade-offs in capability.
section_title: Underlying Reasons for Cost and Schedule Growth
paragraphs: Our past work has identified a number of causes behind the cost growth  and related problems, but several consistently stand out. First, on a broad  scale, DOD starts more weapon programs than it can afford, creating a  competition for funding that encourages low cost estimating, optimistic  scheduling, overpromising, suppressing bad news, and, for space  programs, forsaking the opportunity to identify and assess potentially  more executable alternatives. Programs focus on advocacy at the expense  of realism and sound management. Invariably, with too many programs in  its portfolio, DOD is forced to continually shift funds to and from  programs—particularly as programs experience problems that require  additional time and money to address. Such shifts, in turn, have had costly,  reverberating effects.
Second, DOD has tended to start its space programs too early, that is,  before it has the assurance that the capabilities it is pursuing can be  achieved within available resources and time constraints. This tendency is  caused largely by the funding process, since acquisition programs attract  more dollars than efforts concentrating solely on proving technologies.  Nevertheless, when DOD chooses to extend technology invention into  acquisition, programs experience technical problems that require large  amounts of time and money to fix. Moreover, when this approach is  followed, cost estimators are not well positioned to develop accurate cost  estimates because there are too many unknowns. Put more simply, there is  no way to accurately estimate how long it would take to design, develop,  and build a satellite system when critical technologies planned for that  system are still in relatively early stages of discovery and invention.
While our work has consistently found that maturing technologies before a  program’s start is a critical enabler of success, it is important to keep in  mind that this is not the only solution. Both the TSAT and the Space Radar  development efforts, for example, were seeking to mature critical  technologies before program start, but they faced other risks related to the  systems’ complexity, affordability, and other development challenges.  Ultimately, Space Radar was cancelled, and DOD has proposed the  cancellation of TSAT. Last year, we cited the MUOS program’s attempts to  mature critical technologies before the program’s start as a best practice,  but the program has since encountered technical problems related to  design issues and test anomalies.
Third, programs have historically attempted to satisfy all requirements in a  single step, regardless of the design challenge or the maturity of the  technologies necessary to achieve the full capability. DOD has preferred to  make fewer but heavier, larger, and more complex satellites that perform a  multitude of missions rather than larger constellations of smaller, less  complex satellites that gradually increase in sophistication. This has  stretched technology challenges beyond current capabilities in some cases  and vastly increased the complexities related to software. Programs also  seek to maximize capability because it is expensive to launch satellites. A  launch using a medium- or intermediate-lift EELV, for example, would cost  roughly $65 million.
Fourth, several of today’s high-risk space programs began in the late  1990s, when DOD structured contracts in a way that reduced government  oversight and shifted key decision-making responsibility onto contractors.  This approach—known as Total System Performance Responsibility, or  TSPR—was intended to facilitate acquisition reform and enable DOD to  streamline its acquisition process and leverage innovation and  management expertise from the private sector. Specifically, TSPR gave a  contractor total responsibility for the integration of an entire weapon  system and for meeting DOD’s requirements. However, because this  reform made the contractor responsible for day-to-day program  management, DOD did not require formal deliverable documents—such as  earned value management reports—to assess the status and performance  of the contractor. The resulting erosion of DOD’s capability to lead and  manage the space acquisition process magnified problems related to  requirements creep and poor contractor performance. Further, the  reduction in government oversight and involvement led to major  reductions in various government capabilities, including cost-estimating  and systems-engineering staff. The loss of cost-estimating and systems- engineering staff in turn led to a lack of technical data needed to develop  sound cost estimates.
section_title: Actions Needed to Address Space and Weapon Acquisition Problems
paragraphs: Over the past decade, we have identified best practices that DOD space  programs can benefit from. DOD has taken a number of actions to address  the problems on which we have reported. These include initiatives at the  department level that will affect its major weapons programs, as well as  changes in course within specific Air Force programs. Although these  actions are a step in the right direction, additional leadership and support  are still needed to ensure that reforms that DOD has begun will take hold.
Our work—which is largely based on best practices in the commercial  sector—has recommended numerous actions that can be taken to address  the problems we identified. Generally, we have recommended that DOD  separate technology discovery from acquisition, follow an incremental  path toward meeting user needs, match resources and requirements at  program’s start, and use quantifiable data and demonstrable knowledge to  make decisions to move to next phases. We have also identified practices  related to cost estimating, program manager tenure, quality assurance,  technology transition, and an array of other aspects of acquisition-program  management that could benefit space programs. Table 1 highlights these  practices.
DOD is attempting to implement some of these practices for its major  weapon programs. For example, as part of its strategy for enhancing the  roles of program managers in major weapon system acquisitions, the  department has established a policy that requires formal agreements  among program managers, their acquisition executives, and the user  community that set forth common program goals. These agreements are  intended to be binding and to detail the progress a program is expected to  make during the year and the resources the program will be provided to  reach these goals. DOD is also requiring program managers to sign tenure  agreements so that their tenure will correspond to the next major  milestone review closest to 4 years. Over the past few years, DOD has also  been testing portfolio management approaches in selected capability  areas—command and control, net-centric operations, battlespace  awareness, and logistics—to facilitate more strategic choices for resource  allocation across programs.
Within the space community, cost estimators from industry and agencies  involved in space have been working together to improve the accuracy and  quality of their estimates. In addition, on specific programs, actions have  been taken to prevent mistakes made in the past. For example, on the GPS  IIIA program, the Air Force is using an incremental development  approach, where it will gradually meet the needs of its users, use military  standards for satellite quality, conduct multiple design reviews, exercise  more government oversight and interaction with the contractor and spend  more time at the contractor’s site, and use an improved risk management  process. On the SBIRS program, the Air Force acted to strengthen  relationships between the government and the SBIRS contractor team, and  to implement more effective software development practices as it sought  to address problems related to its flight software system. Correspondingly,  DOD’s Office of the Under Secretary of Defense for Acquisition,  Technology, and Logistics is asking space programs to take specific  measures to better hold contractors accountable through linking award  and incentive fees to program milestones. DOD interim space guidance  also asks space programs to make independent technology readiness  assessments at particular points in the acquisition process and to hold  requirements stable.
Furthermore, the Air Force, U.S. Strategic Command, and other key  organizations have made progress in implementing the Operationally  Responsive Space (ORS) initiative. This initiative encompasses several  separate endeavors with a goal to provide short-term tactical capabilities  as well as identifying and implementing long-term technology and design  solutions to reduce the cost and time of developing and delivering simpler  satellites in greater numbers. ORS provides DOD with an opportunity to  work outside the typical acquisition channels to more quickly and less  expensively deliver these capabilities. In 2008, we found that DOD has  made progress in putting a program management structure in place for  ORS as well as executing ORS-related research and development efforts,  which include development of low cost small satellites, common design  techniques, and common interfaces.
Legislation introduced in recent years has also focused on improving  space and weapon acquisitions. In March, the Senate Committee on Armed  Services introduced an acquisition reform bill which contains provisions  that could significantly improve DOD’s management of space programs.  For instance, the bill focuses on various measures, including increasing  emphasis on systems engineering and developmental testing, instituting  earlier preliminary design reviews and strengthening independent cost  estimates and technology readiness assessments. Taken together, these  measures could instill more discipline in the front end of the acquisition  process when it is critical for programs to gain knowledge. The bill also  requires greater involvement by the combatant commands in determining  requirements and requiring greater consultation among the requirements,  budget, and acquisition processes. In addition, several of the bill’s  sections, as currently drafted, would require in law what DOD policy  already encourages, but it is not being implemented consistently in  weapon programs. In April, the House Committee on Armed Services  introduced a bill to similarly reform DOD’s system for acquiring weapons  by providing for, among other things, oversight early in product  development and for appointment of independent officials to review  acquisition programs. Both bills are moving forward in the Senate and  House.
The actions that the Air Force and Office of the Secretary of Defense have  been taking to address acquisition problems are good steps. However,  there are still more significant changes to processes, policies, and support  needed to ensure reforms can take hold. With requirements, resource  allocation, and acquisition processes led by different organizations, it is  difficult to hold any one person or organization accountable for saying no  to a proposed program or for ensuring that the department’s portfolio of  programs is balanced. This makes it difficult for DOD to achieve a  balanced mix of weapon systems that are affordable and feasible. For  example, diffused leadership has been problematic with the GPS program  in terms of DOD’s ability to synchronize delivery of space, ground, and  user assets. GPS has a separate budget, management, oversight, and  leadership structures for the space, ground, and user equipment segments.   Several recent studies have also concluded that there is a need to  strengthen leadership for military and intelligence space efforts. The  Allard Commission reported that responsibilities for military space and  intelligence programs are scattered across the staffs of the DOD and the  Intelligence Community and that it appears that “no one is in charge” of  national-security space. The HPSCI expressed similar concerns in its  report, focusing specifically on difficulties in bringing together decisions  that would involve both the Director of National Intelligence and the  Secretary of Defense. Prior studies, including those conducted by the  Defense Science Board and the Commission to Assess United States  National Security Space Management and Organization (Space  Commission) have identified similar problems, both for space as a whole  and for specific programs. While these studies have made  recommendations for strengthening leadership for space acquisitions, no  major changes to the leadership structure have been made in recent years.  In fact, an “executive agent” position within the Air Force that was  designated in 2001 in response to a Space Commission recommendation to  provide leadership has not been filled since the last executive resigned in  2007.
In addition, more actions may be needed to address shortages of  personnel in program offices for major space programs. We recently  reported that personnel shortages at the EELV program office have  occurred, particularly in highly specialized areas, such as avionics and  launch vehicle groups. Program officials stated that 7 of 12 positions in the  engineering branch for the Atlas group were vacant. These engineers work  on issues such as reviewing components responsible for navigation and  control of the rocket. Moreover, only half of the government jobs in some  key areas were projected to be filled. These and other shortages in the  EELV program office heightened concerns about DOD’s ability to use a  cost-reimbursement contract acquisition strategy for EELV since that  strategy requires greater government attention to the contractor’s  technical, cost, and schedule performance information. In previous  reviews, we cited personnel shortages at program offices for TSAT as well  as for cost estimators across space. While increased reliance on contractor  employees has helped to address workforce shortages, it could ultimately  create gaps in areas of expertise that could limit the government’s ability  to conduct oversight.
Further, while actions are being undertaken to make more realistic cost  estimates, programs are still producing schedule estimates that are  optimistic while promising that they will not miss their schedule goals. The  GPS IIIA program, for example, is asking the contractor to develop a larger  satellite bus to accommodate the future GPS increments and to increase  the power of a new military signal by a factor of ten, but the schedule is 3  years shorter than the one achieved so far on GPS IIF. We recognize that  the GPS IIIA program has built a more solid foundation for success than  the IIF program.  This foundation offers the best course to deliver on time,  but meeting an ambitious schedule goal should not be the Air Force’s only  measure for mitigating potential capability gaps. Last year, we also  reported that the SBIRS program’s revised schedule estimates for  addressing software problems appeared too optimistic. For example,  software experts, independent reviewers, as well as the government  officials we interviewed agreed that the schedule was aggressive, and the  Defense Contract Management Agency has repeatedly highlighted the  schedule as high risk.
section_title: Concluding Remarks
paragraphs: In conclusion, senior leaders managing DOD’s space portfolio are working  in a challenging environment. There are pressures to deliver new,  transformational capabilities, but problematic older satellite programs  continue to cost more than expected, constrain investment dollars, pose  risks of capability caps, and thus require more time and attention from  senior leaders than well-performing efforts. Moreover, military space is at  a critical juncture. There are critical capabilities that are at risk of falling  behind their current level of service. To best mitigate these circumstances  and put future programs on a better path, DOD needs to focus foremost on  sustaining current capabilities and preparing for potential gaps. In  addition, there is still a looming question of how military and intelligence  space activities should be organized and led. From an acquisition  perspective, what is important is that the right decisions are made on  individual programs, the right capability is in place to manage them, and  there is someone to hold accountable when programs go off track.
Mr. Chairman, this concludes my prepared statement. I would be happy to  answer any questions you or members of the subcommittee may have at  this time.
section_title: Contacts and Acknowledgements
paragraphs: For further information about this statement, please contact Cristina  Chaplain at (202) 512-4841 or chaplainc@gao.gov. Contact points for our  Offices of Congressional Relations and Pubic Affairs may be found on the  last page of this statement. Individuals who made key contributions to this  statement include Art Gallegos, Assistant Director; Maria Durant; Arturo  Holguin; Laura Holliday; Rich Horiuchi; Karen Sloan; Alyssa Weir; and  Peter Zwanzig.
section_title: Appendix I: Scope and Methodology
paragraphs: In preparing this testimony, we relied on our body of work in space  programs, including previously issued GAO reports on assessments of  individual space programs, common problems affecting space system  acquisitions, and the Department of Defense’s (DOD) acquisition policies.  We relied on our best practices studies, which comment on the persistent  problems affecting space acquisitions, the actions DOD has been taking to  address these problems, and what remains to be done. We also relied on  work performed in support of our 2009 annual weapons system  assessment. The individual reviews were conducted 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.
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