NASA: Major Management Challenges and Program Risks
Published: 2003-06-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since its inception, the National Aeronautics and Space Administration (NASA) has undertaken numerous programs that have greatly advanced scientific and technological knowledge. NASA's activities span a broad range of complex and technical endeavors. But the agency is at a critical juncture, and major management improvements are needed. In January of this year, we identified four challenges facing NASA: (1) strengthening strategic human capital management, (2) improving contract management; (3) controlling International Space Station costs, and (4) reducing space launch costs.
section_title: What GAO Found
paragraphs: In summary, these challenges affect NASA's ability to effectively run its largest programs. NASA's ultimate challenge will be in tackling the root problems impeding those programs. This will require (1) instituting a results-oriented culture that fosters knowledge sharing and empowers its workforce to accomplish programmatic goals; (2) ensuring that the agency adheres to management controls to prevent cost overruns and scheduling problems; (3) transforming the financial management organization so it better supports NASA's core mission; and (4) sustaining commitment to change.

section_title: Letter
paragraphs: Thank you for inviting me to discuss the challenges and risks facing the  National Aeronautics and Space Administration (NASA). You asked that  we provide information concerning NASA, particularly the management of  the Space Shuttle Program. We recognize the complexity and difficulty in  establishing not only the cause of the Columbia accident, but also in  understanding the agency’s environment in which management decisions  are made. We believe our body of work can help the Board in this area.
Since its inception, NASA has undertaken numerous programs that have  greatly advanced scientific and technological knowledge. As you are  aware, NASA’s activities span a broad range of complex and technical  endeavors. But the agency is at a critical juncture, and major management  improvements are needed. In January of this year, we identified four  challenges facing NASA.
Strengthening strategic human capital management.
Improving contract management.
Controlling International Space Station costs.    Reducing space launch costs.
Weak contract management and financial controls pose risks across the  agency. Therefore, we have placed this area on our high-risk list.
subsections: section_title: Strengthening Strategic Human Capital Management
paragraphs: An agency’s most important organizational asset is its people—they define  the agency’s culture, drive its performance, and embody its knowledge  base. Leading public organizations worldwide have found that strategic  human capital management must be the centerpiece of any serious change  management initiative. However, NASA, like many federal agencies, is  facing substantial challenges in attracting and retaining a highly skilled  workforce, thus putting the agency’s missions at risk. While NASA is  taking comprehensive steps to address this problem across all mission  areas, implementing a strategic approach to marshal, manage, and  maintain human capital has been a significant challenge.
In January 2001, we reported that NASA’s shuttle workforce had declined  significantly to the point of reducing NASA’s ability to safely support the  shuttle program. Many key areas were not sufficiently staffed by qualified  workers, and the remaining workforce showed signs of overwork and  fatigue. Recognizing the need to revitalize the shuttle program’s  workforce, NASA discontinued its downsizing plans in December 1999 and  initiated efforts to hire new staff. In September 2001, we testified that  NASA was hiring approximately 200 full-time equivalent staff and that it  had focused more attention on human capital in its annual performance  plan by outlining an overall strategy to attract and retain skilled workers.  However, considerable challenges remain, including the training of new  staff and addressing the potential loss of key personnel through  retirement.
As we reported in January 2003, these challenges have not been mitigated,  and work climate indicators, such as forfeited leave and absences from  training courses continue to reflect high levels of job stress. In addition,  staffing shortages in many key skill areas of the shuttle program remain a  problem, despite the recent hires. These areas include subsystems  engineering, flight software engineering, electrical engineering,  environmental control, and shuttle resources management. NASA’s hiring  posture for fiscal year 2003 has been to target areas where skill imbalances  still exist in the shuttle program.
NASA believes that similar workforce problems affect the entire agency  and that, as a result, its ability to perform future missions and manage its  programs may be at risk. Currently, the average age of NASA’s workforce  is over 45, and 15 percent of NASA’s science and engineering employees  are eligible to retire; within 5 years, about 25 percent will be retirement  eligible. At the same time, the agency is finding it difficult to hire people  with science, engineering, and information technology skills—fields  critical to NASA’s missions. Within the science and engineering workforce,  the over-60 population currently outnumbers the under-30 population  nearly 3 to 1. As the pool of scientists and engineers shrinks, competition  for these workers intensifies. The agency also faces the loss of significant  procurement expertise through 2007, according to NASA’s Inspector  General. Coupled with these concerns, NASA has limited capability for  personnel tracking and planning, particularly on an agencywide or  programwide basis. Furthermore, NASA acknowledges that it needs to  complete and submit to the Office of Management and Budget (OMB) a  transformation workforce restructuring plan, which it notes that, in  conjunction with its strategic human capital plan, will be critical to  ensuring that skill gaps or deficiencies do not exist in mission- critical  occupations.
NASA is taking steps to address its workforce challenges. For example:    NASA is developing an agencywide integrated workforce planning and  analysis system that aims to track the distribution of NASA’s workforce  across programs, capture critical competencies and skills, determine  management and leadership depth, and facilitate gap analyses. NASA has  completed a pilot of an interim competency management system to  facilitate analyses of gaps in skills and competencies. NASA plans to  implement the interim system agencywide in 2003 and integrate it with the  new comprehensive workforce planning and analysis system in 2005. The  new system should foster better management of the existing workforce  and enable better strategic decisions about future workforce needs.
NASA has developed a strategic human capital plan, which identifies  human capital goals, problems, improvement initiatives, and intended  outcomes and incorporates strategies and metrics to support the goals.  The plan has been approved by OMB and the Office of Personnel  Management (OPM). According to NASA, the plan is based on OMB’s  scorecard of human capital standards and OPM’s scorecard of supporting  human capital dimensions, as well as our own model, which we published  in March 2002.
NASA has renewed its attention to hiring applicants just out of college and  intends to pursue this even more aggressively in coming years. The agency  is undertaking a number of initiatives and activities aimed at acquiring and  retaining critically needed skills, such as using the new Federal Career  Intern Program to hire recent science and engineering graduates,  supplementing the workforce with nonpermanent civil servants where it  makes sense, and implementing a program to repay student loans to  attract and retain employees in critical positions.
Finally, NASA has included an objective in its most recently updated  strategic plan and fiscal year 2004 performance plan to implement an  integrated agencywide approach to human capital management. The plans  state that this approach will attract and maintain a workforce that  represents America’s diversity and will include the competencies that  NASA needs to deliver the sustained levels of high performance that the  agency’s challenging mission requires.
The 108th Congress is currently considering a series of legislative  proposals developed by NASA to provide it with further flexibilities and  authorities for attracting, retaining, developing, and reshaping a skilled  workforce. These include a scholarship-for-service program; a streamlined  hiring authority for certain scientific positions; larger and more flexible  recruitment, relocation, and retention bonuses; noncompetitive  conversions of term employees to permanent status; a more flexible  critical pay authority; a more flexible limited-term appointment authority  for the senior executive service; and greater flexibility in determining  annual leave accrual rate for new hires.
We continue to monitor NASA’s progress in resolving its human capital  problems, including how well its human capital initiatives and reforms and  any new and existing flexibilities and authorities are helping to  strategically manage and reshape its workforce.
section_title: Correcting Weaknesses in Contract Management
paragraphs: Much of NASA’s success depends on the success of its contractors—who  received more than 85 percent, or $13.3 billion, of NASA’s funds in fiscal  year 2002. However, since 1990, we have identified NASA’s contract  management function as an area at high risk because of its ineffective  systems and processes for overseeing contractor activities. Specifically,  NASA has lacked accurate and reliable information on contract spending  and has placed little emphasis on end results, product performance, and  cost control. NASA has addressed many of these acquisition-related  weaknesses, but key tasks remain, including completing the design and  implementation of a new integrated financial management system.
Since 1990, our reports and testimonies have repeatedly demonstrated just  how debilitating these weaknesses in contract management and oversight  have been. For example, our July 2002 report on the International Space  Station found that NASA did not effectively control costs or technical and  scheduling risks, provide adequate oversight review, or effectively  coordinate efforts with its partners. In other examples, we found that  NASA lacked effective systems and processes for overseeing contractor  activities and did not emphasize controlling costs.
Center-level accounting systems and nonstandard cost-reporting  capabilities have weakened NASA’s ability to ensure that contracts are  being efficiently and effectively implemented and that budgets are  executed as planned. The agency’s financial management environment  is comprised of decentralized, nonintegrated systems with policies,  procedures, and practices unique to each of its field centers. For the  most part, data formats are not standardized, automated systems are not  interfaced, and on-line financial information is not readily available to  program managers. NASA’s lack of a fully integrated financial management  system also hurts its ability to collect, maintain, and report the full cost of  its projects and programs. For example, in March 2002, we testified that  NASA was unable to provide us with detailed support for amounts that it  reported to the Congress as obligated against space station and related  shuttle program cost limits, as required by the National Aeronautics and  Space Administration Authorization Act of 2000.
In recent years, NASA made progress in addressing its contract  management challenges. For example:  In July 1998, we reported that NASA was developing systems to provide  oversight and information needed to improve contract management and  that it had made progress in evaluating its field centers’ procurement  activities on the basis of international quality standards and its own  procurement surveys. In January 1999, we reported that NASA was  implementing its new system for measuring procurement-related activities  and had made progress in evaluating procurement functions in its  field centers.
NASA has also made progress reducing its use of undefinitized contract  actions (UCA)—that is, unnegotiated, or uncosted, contract changes. In  2000, we reported that NASA’s frequent use of undefinitized contract  changes could result in contract cost overruns and cost growth in the  International Space Station program. In March 2003, NASA’s Office of  Inspector General reported that NASA had significantly reduced both the  number and dollar amount of undefinitized contract actions since we  highlighted UCAs as one reason for designating NASA’s contract  management as a major management challenge.
NASA has also recognized the urgency of implementing a fully integrated  financial management system. We recently reported that NASA has  estimated the life-cycle cost of this effort through 2008 to be $861  million.,  While this is NASA’s third attempt at implementing a new  financial management system (NASA’s first two efforts covered 12 years  and cost $180 million), this effort is expected to produce an integrated,  NASA-wide financial management system through the acquisition and  incremental implementation of commercial software packages and related  hardware and software components. The core financial management  module, which NASA considers to be the backbone of the Integrated  Financial Management Program, is currently operating at 6 of NASA’s 10  centers and is expected to be fully operational in June 2003. According to  NASA’s business case analysis for the system, the core financial module  will provide NASA’s financial and program managers with timely,  consistent, and reliable cost and performance information for  management decisions.
While NASA has made noteworthy progress in strengthening its contract  oversight, much work remains. As NASA moves ahead in acquiring and  implementing its new financial management system, NASA needs to  ensure that its systems and processes provide the right data to oversee  its programs and contractors—specifically, data to allow comparisons of  actual costs to estimates, provide an early warning of cost overruns or  other related difficulties, and monitor contract performance and make  program requirement trade-off decisions. In addition, NASA must employ  proven best practices, including (1) aligning its selection of commercial  components of the system with a NASA-wide blueprint, or “enterprise  architecture;” (2) analyzing and understanding the dependencies among  the commercial components before acquiring and implementing them;  (3) following an event-driven system acquisition strategy; (4) employing  effective acquisition management processes, such as those governing  requirements management, risk management, and test management;  (5) ensuring that legacy system data are accurate to avoid loading and  perpetuating data errors in the new system; and (6) proactively positioning  NASA for the business process changes embedded in the new system, for  example, by providing adequate formal and on-the-job training.
However, as we reported in April 2003, the core financial module is not  being designed to accommodate much of the information needed by  program managers and cost estimators. For example, to adequately  oversee NASA’s largest contracts, program managers need reliable  contract cost data—both budgeted and actual—and the ability to integrate  these data with contract schedule information to monitor progress on the  contract. However, because program managers were not involved in  defining system requirements or reengineering business processes, the  core financial module is not being designed to integrate cost and schedule  data needed by program managers. In addition, because NASA has  embedded in the core financial module the same accounting code  structure that it uses in its legacy reporting system, the core financial  module is not being implemented to capture cost information at the same  level of detail that it has received from NASA’s contractors. Finally,  because NASA has done little to reengineer its acquisition management  processes to ensure that its contractors consistently provide the cost and  performance information needed, the core financial module does not  provide cost estimators with the detailed cost data needed to prepare  credible cost estimates.
Because more work is needed to demonstrate substantial progress in  resolving the root causes of NASA’s contract management weaknesses,  our 2003 Performance and Accountability Series continued to report  contract management as a major management challenge for NASA and a  high-risk area. We are continuing to monitor NASA’s progress in  addressing contract management weaknesses. In response to a request  from the Senate Commerce, Science, and Transportation Committee and  the House Science Committee, we continue to assess the extent to which  NASA’s financial management system acquisition is in accordance with  effective system acquisition practices and is designed to support NASA’s  decision-making needs and external reporting requirements.
section_title: Controlling International Space Station Costs
paragraphs: The International Space Station represents an important effort to foster  international cooperation in scientific research and space exploration. It is  also considered one of the most challenging engineering feats ever  attempted. The estimated cost of the space station has mushroomed, and  expected completion has been pushed out several years. NASA is taking  action to keep costs in check, but its success in this area still faces  considerable challenges. In the meantime, NASA has had to make  substantial cuts in the program, negatively impacting its credibility with  the Congress, international partners, and the scientific community.
The grounding of the shuttle fleet following the Columbia accident has had  a significant impact on the continued assembly and operation of the  International Space Station. The shuttle is the primary vehicle for  transferring crew and equipment to and from the station and is used to  periodically reboost the station into a higher orbit. Although on-orbit  assembly of the station has stopped, NASA must continue to address the  challenges of developing and sustaining the station and conducting  scientific experiments until shuttle flights resume. While controlling cost  and schedule and retaining proper workforce levels have been difficult in  the past, the shuttle grounding will likely exacerbate these challenges.  Because the return-to-flight date for the shuttle fleet is unknown at this  time and manifest changes are likely, the final cost and schedule impact on  the station is undefined at this time.
NASA has had difficulty predicting and controlling costs and scheduling  for the space station since the program’s inception in 1984. In  September 1997, we reported that the cost and schedule performance of  its prime development contractor, which showed signs of deterioration in  1996, had continued to worsen and that the program’s financial reserves  for contingencies had all but evaporated. In our January 2001 Performance  and Accountability Series, we reported that the prime contract was  initially expected to cost over $5.2 billion and that the assembly of the  station was expected to be completed in June 2002. But by October 2000,  the prime contractor’s cost had grown to about $9 billion—$986 million of  which was for cost overruns—and the current estimate is about $11  billion. Because of on-going negotiations with the international partners  and uncertainty associated with the shuttle’s return to flight, the station’s  final configuration and assembly date cannot be determined at this time.  NASA’s Office of Inspector General also reported cost overruns in a  February 2000 audit report, and based on recommendations in that report,  NASA agreed to take several actions, including discussing the prime  contractor’s cost performance at regularly scheduled meetings and  preparing monthly reports to senior management on the overrun status.  However, in July 2002, we reported continued cost growth due to an  inadequate definition of requirements, changes in program content,  schedule delays, and inadequate program oversight. While NASA’s  controls should have alerted management to the growing cost problem  and the need for action, they were largely ignored because NASA focused  on fiscal year budget management rather than on total program  cost management.
NASA is instituting a number of management and cost-estimating reforms,  but significant challenges threaten their successful implementation. First,  NASA’s new life-cycle cost estimate for the program—which is based on a  three-person crew instead of a seven-person crew, as originally planned— will now have to be revised because of changes to the program’s baseline.  The lack of an adequate financial management system for collecting space  station cost data only exacerbates this challenge. Second, NASA must still  determine how research can be maximized with only a limited crew. Last,  NASA has yet to reach agreement with its international partners on an  acceptable on-orbit configuration and sharing of research facilities and  costs. As a result, the capacity and capabilities of the space station, the  scope of research that can be accomplished, and the partners’ share of  operating costs are unknown at this time.
Ongoing cost and schedule weaknesses have profoundly affected the  utility of the space station—with substantial cutbacks in construction, the  number of crew members, and scientific research. As a part of the space  station’s restructuring, further work and funding for the habitation module  and crew return vehicle have been deferred, which led to the on-orbit crew  being reduced from seven to three members, limiting the crewmember  hours that can be devoted to research. Additionally, the number of  facilities available for research has been cut from 27 to 20. NASA’s  international partners and the scientific community are not satisfied with  these and other reductions in capabilities and have raised concerns about  the viability of the space station science program.
section_title: Reducing Space Launch Costs
paragraphs: In our earlier identification of costs to build the International Space  Station, we identified space shuttle launch costs as being a substantial cost  component—almost $50 billion. NASA recognized the need to reduce  such costs as it considered alternatives to the space shuttle. Indeed, a key  goal of the agency’s earlier effort to develop a reusable launch vehicle was  to reduce launch costs from $10,000 per pound on the Space Shuttle to  $1,000 through the use of such a vehicle. As we testified in June 2001,  NASA’s X-33 program—an attempt to develop and demonstrate advanced  technologies needed for future reusable launch vehicles—ended when the  agency chose not to fund continued development of the demonstrator  vehicle in February 2001.
Subsequently, until November 2002, NASA was pursuing its Space Launch  Initiative (SLI)—a 5-year, $4.8 billion program to build a new generation of  space vehicles to replace its aging space shuttle fleet. SLI was part of  NASA’s broader Integrated Space Transportation Plan, which involves  operating the space shuttle program through 2020 as successive  generations of space transportation vehicles are developed and deployed,  beginning around 2011. The primary goals for SLI were to reduce the risk  of crew loss as well as substantially lower the cost of space transportation  so that more funds could be made available for scientific research,  technology development, and exploration activities. Currently, NASA  spends nearly one-third of its budget on space transportation.
In September 2002, we reported that SLI was a considerably complex and  challenging endeavor for NASA—from both a technical and business  standpoint. For example, SLI would require NASA to develop and  advance new technologies for the new vehicle, including (1) new airframe  technologies that will include robust, low-cost, low-maintenance structure,  tanks, and thermal protection systems, using advanced ceramic and  metallic composite materials, and (2) new propulsion technologies,  including main propulsion systems, orbital maneuvering systems, main  engines, and propellant management. The program would also require  NASA to carefully coordinate and communicate with industry and  government partners in order to reach agreements on the basic  capabilities of the new vehicle, the designs or architectures that should be  pursued, the sharing of development costs, and individual partner  responsibilities. Last, the SLI project would require careful oversight,  especially in view of past difficulties NASA has had in developing the  technologies for reusable launch vehicles to replace the space shuttle.  These efforts did not achieve their goals primarily because NASA did not  develop realistic requirements and, thus, cost estimates, timely acquisition  and risk management plans, or adequate and realistic performance goals.
Most importantly, however, we reported that NASA was incurring a high  level of risk in pursuing its plans to select potential designs for the new  vehicle without first making other critical decisions, including defining the  Department of Defense’s (DOD) role in the program; determining the final  configuration of the International Space Station; and identifying the  overall direction of NASA’s Integrated Space Transportation Plan. At the  time, indications were that NASA and DOD differed on program priorities  and requirements; NASA had yet to reach agreement with its international  partners on issues that could dramatically impact SLI requirements, such  as how many crew members would operate the station.
NASA agreed with our findings and, in October 2002, postponed its  systems requirements review for SLI so that it could focus on defining  DOD’s role, determine the future requirements of the International Space  Station, and firm up the agency’s future space transportation needs. In  November 2002, the administration submitted to the Congress an  amendment to NASA’s fiscal year 2003 budget request to implement a  new Integrated Space Transportation Plan. The new plan makes  investments to extend the space shuttle’s operational life for continued  safe operations and refocuses the SLI program on developing an  orbital space plane—which provides a crew transfer capability to and  from the space station—and next-generation launch technology. The  Integrated Space Transportation Plan is an integral part of our ongoing  work assessing NASA’s plans to assure flight safety through space shuttle  modernization through 2020.
As NASA proceeds with its revised plans, it will still be important for  NASA to implement management controls that can effectively predict  what the total costs of the program will be and minimize risks. These  include cost estimates, controls designed to provide early warnings of cost  and schedule overruns, and risk mitigation plans. With such controls in  place, NASA would be better positioned to provide its managers and the  Congress with the information needed to ensure that the program is on  track and able to meet expectations.
section_title: Better Mechanisms Needed for Sharing Lessons Learned
paragraphs: In addition to taking actions to address its management challenges, NASA  uses various mechanisms to communicate lessons garnered from past  programs and projects. In 1995, NASA established the Lessons Learned  Information System (LLIS), a Web-based lessons database that managers  are required to review on an ongoing basis. NASA uses several  mechanisms to capture and communicate lessons learned—including  training, program reviews, and periodic revisions to agency policies and  guidelines—but LLIS is the principal source for sharing lessons  agencywide. In January 2002, we reported that NASA had recognized the  importance of learning from the past to ensure future mission success and  had implemented mechanisms to capture and share lessons learned.  However, spacecraft failures persist, and there is no assurance that  lessons are being applied toward future mission success. We reported that  insufficient risk assessment and planning, poor team communications,  inadequate review process, and inadequate system engineering were often  cited as major contributors to mishaps. (See table 1.)
At that time, we also reported on a survey we conducted of NASA’s  program and project managers. The survey revealed that lessons are not  routinely identified, collected, or shared by programs and project  managers. The survey found that less than one-quarter of the respondents  reported that they had submitted lessons to LLIS; almost one-third did not  even know whether they had submitted lessons. In addition, most  respondents could not identify helpful lessons for their program or  project.
Furthermore, many respondents indicated that they were dissatisfied with  NASA’s lessons learned processes and systems. Managers also identified  challenges or cultural barriers to the sharing of lessons learned, such as  the lack of time to capture or submit lessons and a perception of  intolerance for mistakes. They further offered suggestions for areas of  improvement, including enhancements to LLIS and implementing  mentoring and “storytelling,” or after-action reviews, as additional  mechanisms for lessons learning.
While NASA’ s current knowledge management efforts should lead to  some improvement in the sharing of agency lessons and knowledge, they  lack ingredients that have been shown to be critical to the success of  knowledge management at leading organizations. Cultural resistance to  sharing knowledge and the lack of strong support from agency leaders  often make it difficult to implement an effective lessons-learning and  knowledge-sharing environment. We found that successful industry and  government organizations had overcome barriers by making a strong  management commitment to knowledge sharing, developing a well- defined business plan for implementing knowledge management,  providing incentives to encourage knowledge sharing, and building  technology systems to facilitate easier access to information. The  application of these principles could increase opportunities for NASA to  perform its basic mission of exploring space more effectively.
To fulfill its vision, NASA is taking on a major transformation aimed at  becoming more integrated and results-oriented, and at reducing risks  while working more economically and efficiently. However, to  successfully implement its human capital, financial management, and  other reforms, NASA will need sustained commitment from senior leaders.  Given the high stakes involved, it is critical that NASA’s leadership provide  direction, oversight, and sustained attention to ensure that reforms stay on  track. NASA’s Administrator, who comes to the position with a strong  management background and expertise in financial management, has  made a personal commitment to change the way NASA does business and  has appointed a chief operating officer to provide sustained management  attention to strategic planning, organizational alignment, human capital  strategy, performance management, and other elements necessary for  transformation success. The challenge ahead for NASA will be to achieve  the same level of commitment from managers at NASA centers so that  NASA can effectively use existing and new authorities to manage its  people strategically and quickly implement the tools needed to strengthen  management and oversight.