Space Acquisitions: Actions Needed to Expand and Sustain Use of Best Practices
Published: 2007-04-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: DOD's space system acquisitions have experienced problems over the past several decades that have driven up costs by hundreds of millions, even billions of dollars, stretched schedules by years, and increased performance risks. DOD has recognized the need to change its approach to developing space systems and is attempting to instill best practices in new efforts. GAO was asked to testify on its findings on space acquisitions problems and steps needed to sustain and expand the use of best practices. In preparing this testimony, GAO relied on its detailed reviews of space programs as well as cross-cutting work on cost estimating and best practices. GAO does not make recommendations in this testimony. However, GAO has made recommendations on steps DOD can take to ensure better outcomes for its space acquisitions programs. These include developing an overall investment strategy for acquisition programs, addressing human capital and other shortfalls in capacity, and revising policies supporting space to incorporate best practices.
section_title: What GAO Found
paragraphs: The majority of major 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. At times, cost growth has come close to or exceeded 100-percent, causing DOD to nearly double its investment in the face of technical and other problems without realizing a better return on investment. Along with the increases, many programs are experiencing significant schedule delays--as much as 6 years--postponing delivery of promised capabilities to the warfighter. Outcomes have been so disappointing in some cases that DOD has had to go back to the drawing board to consider new ways to achieve the same, or less, capability. GAO's reviews of space acquisitions this year found that some ongoing programs--for example, the Advanced Extremely High Frequency satellite program and the Wideband Global SATCOM program--have been able to work through the bulk of technical problems they were facing and are on track to meet revised targets, albeit at higher costs and with delayed capability. Others, however, including the Space-Based Infrared System High program, the Global Positioning System IIF, and the National Polar-orbiting Operational Environmental Satellite System, continue to face setbacks and further risks. In recognizing the need to reform space acquisitions, DOD has taken steps to instill best practices in two new major space efforts--the Transformational Satellite Communications System (TSAT) and the Space Radar program--which are expected to be among the most complex and costly space programs ever. For these programs, DOD has taken steps to separate technology discovery from acquisition, establish an incremental path toward meeting user needs, obtain agreements on requirements before program start, and use quantifiable data and demonstrable knowledge to make decisions to move to next phases. If these actions can be sustained, DOD will greatly reduce technical risks, although not completely. There is still significant inherent risk associated with integrating critical technologies on board the satellites and with developing the software needed to achieve the capabilities of the satellites. Moreover, sustaining these reforms on these two programs and expanding them to others will not be easy. Like all weapons programs, space programs continue to face funding pressures that have encouraged too much optimism. DOD has not prioritized its programs for funding even though its investment for all major space acquisitions is expected to increase about 46 percent in the next 3 years. It is likely to continue to face cost overruns on problematic programs, and it wants to undertake other major new efforts in addition to Space Radar and TSAT. In addition, new programs are being undertaken as DOD is addressing shortfalls in critical technical, business, and program management skills. In other words, DOD may not be able to obtain the right skills and experience to manage all of the new efforts.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of Defense’s  (DOD) space acquisitions. Each year, DOD spends billions to acquire  space-based capabilities to support current military and other government  operations as well as to enable DOD to transform the way it collects and  disseminates information, gathers data on adversaries, and attacks targets.  In fiscal year 2008 alone, DOD expects to spend over $22 billion dollars to  develop and procure satellites and other space systems, including nearly  $10 billion on selected major space systems. Despite its growing  investment in space, however, DOD’s space system acquisitions have  experienced problems over the past several decades that have driven up  costs by hundreds of millions, even billions of dollars; stretched schedules  by years; and increased performance risks. In some cases, capabilities  have not been delivered to the warfighter after decades of development.
In view of these problems, the Air Force, DOD’s primary space system  acquirer, has been attempting to instill best practices in two newer space  programs—Space Radar and the Transformational Satellite  Communications System (TSAT). These steps can help better position the  two programs for success, but they will not work without adhering to  commitments to delay milestone decisions if there are still gaps between  requirements and resources, and to use more robust tools to analyze risks,  costs, and schedule. Moreover, other space programs—new and old—are  still facing setbacks, reflecting problems in technology development or  design, problems in managing contractors, and more broadly, funding  shifts needed to sustain the larger space portfolio. Such setbacks— common among all weapons acquisitions—continue to hamper the Air  Force’s ability to provide resources and support needed to deliver  capabilities within cost, schedule, and performance targets. My testimony  today will highlight our findings on space acquisitions as well as actions  needed to address persistent acquisition problems and to build on best  practice approaches being adopted in Space Radar and TSAT.
subsections: section_title: Space Acquisitions Continue to Face Cost and Schedule Increases
paragraphs: The majority of major 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. Several programs have  been restructured by DOD in the face of delays and cost growth. At times,  cost growth has come close to or exceeded 100 percent, causing DOD to  nearly double its investment in the face of technical and other problems  without realizing a better return on investment. Along with the increases,  many programs are experiencing significant schedule delays—as much as  6 years—postponing delivery of promised capabilities to the warfighter.  Outcomes have been so disappointing in some cases that DOD has had to  go back to the drawing board to consider new ways to achieve the same,  or less, capability. Some programs have been able to work through the  bulk of technical problems they were facing and are on track to meet  revised targets, albeit at higher costs and with delayed deliveries. Others,  however, continue to face setbacks.
The following chart compares original cost estimates and current cost  estimates for the broader portfolio of major space acquisitions for fiscal  years 2007 through 2012. The wider the gap between original and current  estimates, the fewer dollars DOD has available to invest in new programs.
The next two figures reflect differences in unit costs and total costs for  satellites from the time the programs officially began to their most recent  cost estimate. As the second figure 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.  Likewise, the Space Based Infrared System (SBIRS) High missile detection  program deferred capabilities, such as mobile data processors for the Air  Force and the Army and a fully compliant backup mission control facility,  and it pushed off a decision to procure the third and fourth satellites,  which will not meet SBIRS High requirements for coverage. Despite such  measures, unit costs for both programs are still considerably higher than  originally promised. In addition to SBIRS High and NPOESS, the programs  featured in the figures include the Advanced Extremely High Frequency  (AEHF) satellites, the Wideband Global SATCOM (WGS) and the Mobile  User Objective System (MUOS), which are all communications satellites,  and the Global Positioning System (GPS) II.
The next chart 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 an alternative infrared system effort, known as the  Alternative Infrared Satellite System (AIRSS), to run in parallel with the  SBIRS High program.
Some programs, such as AEHF and WGS, have worked through the bulk of  technical and other problems that were causing large schedule increases  and cost delays. For example, the AEHF program, which has been in the  final stages of development for almost 3 years, resolved issues related to  its cryptographic equipment and is on track to meet a revised date for first  launch. The WGS program completed rework on improperly installed  fasteners, and contractors have redesigned computers to rectify data  transmission errors. The program expects a first launch in June 2007. As  noted in our figures, the MUOS program, which began more recently than  AEHF and WGS, is generally meeting its targets, though it has yet to enter  into the more difficult stages of satellite production, integration and test.
By contrast, the SBIRS High program still faces considerable risks. Recent  GAO work for this subcommittee, for example, shows that the program is  diverging from cost and schedule targets just months after rebaselining  due to problems related to assembly, integration, and testing and that the  contractor’s estimates for addressing these issues are overly optimistic.  Defense Contract Management Agency reports also show that software  development efforts are behind schedule—by as much as 32 percent. In  addition, the contractor has already spent about 28 percent, or $66 million,  of its management reserve from April 2006 to November 2006. This reserve  is designed to last until 2012, but at the current rate, is likely to be  depleted by May 2008. If this trend continues, $500 million in additional  reserve will be needed. As noted earlier, DOD initiated an alternative  effort—AIRSS—to ensure it would have continued capabilities. However,  we have questions as to whether AIRSS is being pursued as a “plan B”  program, as originally envisioned. Rather than seek to maintain continuity  of operations, the program is focused on advancing capabilities because  program managers believe there are no viable alternatives. We also found  that there was disagreement among DOD stakeholders as to whether there  were alternatives or not, and there was concern that the AIRSS schedule  may be too compressed. Our analysis also found that there was a high  degree of concurrency in the program’s schedule, which may be limiting  DOD’s ability to gain knowledge from planned demonstrations and  increased the potential for costly rework further in the program.
The GPS Block IIF program is also at a high risk of cost increases and  schedule delays. Since our last annual assessment of the GPS Block IIF  program, the program has revised its acquisition program baseline to  account for cost increases and schedule delays, and requested an  additional $151 million to cover these costs. The number of IIF satellites to  be procured was reduced from 19 to 12. Further, the launch date of the  first IIF satellite continues to slip. The original baseline showed an initial  launch availability date of December 2006, but DOD’s current baseline  shows July 2009—a slip of about 2.5 years. The program also learned that  the contractor’s earned value management reporting system was not  accurately reporting cost and schedule performance data. A DOD report  also recently found that development of user equipment has not been  synchronized with the development of satellites and control system,  increasing the risk of substantial delays in realistic operational testing and  fielding of capabilities. GPS is taking measures to address these problems.  For example, this year, it did not award its contractor $21.4 million in  award fees. In December 2005, GAO recommended that DOD improve its  use of award fees for all weapon system contracts by specifically tying  them to acquisition outcomes. A review of a sample of programs, including  SBIRS High, found that this was generally not done.
The NPOESS program is also still at risk of more cost increases and  schedule delays. In June 2006, DOD certified the NPOESS program to  Congress, and with agreement from its program partners, DOD  restructured the program. Now the NPOESS program acquisition costs are  estimated to be about $11.5 billion—an increase of about $3 billion over  the prior cost estimate. Before the contract was awarded, in 2002, the life  cycle cost for the program was estimated to be $6.5 billion over the 24-year  period from the inception of the program in 1995 through 2018. The  delivery of the first two NPOESS satellites has been delayed by roughly   4 and 5 years, and as noted earlier, the number of satellites to be produced  has been reduced from six to four. In addition, the number of instruments  was reduced from 13 (10 sensors and 3 subsystems) to 9 instruments   (7 sensors and 2 subsystems), and 4 of the remaining sensors will have  fewer capabilities. The NPOESS program will incorporate any number of  the deleted instruments if additional funding is provided from outside the  NPOESS program. The program restructure will result in reduced satellite  data collection coverage, requiring dependence on a European weather  satellite for coverage during midmorning hours. Although the program has  reduced the number of satellites it will produce, the cost per satellite is  more than 150 percent above the original approved program baseline. The  NPOESS program is now updating the cost, schedule, performance  baselines and acquisition strategy, and coordinating the changes with the  three agencies. The program expects these documents to be approved  later this year. While work is continuing on key sensors, the program still  faces potential problems in their development.
The Space Based Space Surveillance System (SBSS) system—not featured  on the charts above because it is not yet a formal acquisition program—  is also encountering problems. The SBSS system is to replace an aging  sensor on an orbiting research and development satellite and improve the  timeliness of data on objects in geosynchronous orbit. As currently  planned, the initial block will consist of a single satellite and associated  command, control, communications, and computer equipment.  Subsequent SBSS efforts will focus on building a larger constellation of  satellites to provide worldwide space surveillance of smaller objects in  shorter timelines. In late 2005, an independent review team found that the  program’s baseline was not executable; that the assembly, integration, and  test plan was risky; and that the requirements were overstated. The SBSS  program was restructured in early 2006 due to cost growth and schedule  delays. The restructuring increased funding and schedule margin;  streamlined the assembly, integration, and test plan; and relaxed  requirements. The launch of the initial satellite was delayed to April  2009—a delay of about 18 months. Cost growth due to the restructure is  about $130 million over initial estimates.
Last, additional cost increases are expected for the Evolved Expendable  Launch Vehicle (EELV) program, but for reasons that are different than  the ones being experienced on the satellite programs. In recent years,  program cost has risen 79 percent, with a cost per unit increase of   135 percent. A chief reason for cost increases is a decline in the  commercial launch market upon which the program’s business case was  based. Cost increases are also a result of additional program scope,  including mission assurance, assured access to space, and earned value  management systems reporting.  In addition, satellite vehicle weight  growth and satellite launch delays have contributed to cost increases. In  December 2006, Boeing and Lockheed Martin initiated a joint venture  (United Launch Alliance, or ULA) that will combine the production,  engineering, test, and launch operations associated with U.S. government  launches of Boeing Delta and Lockheed Martin Atlas rockets. Though the  EELV program office expects long-term savings to be achieved through  this arrangement, the cost per launch under a recently negotiated Buy III  acquisition strategy will be higher than under Buy I. According to the Air  Force, this is because the contractors will incur additional costs to allow  the government to perform the necessary oversight not required under  Buy I. (Exact estimates of the new cost per launch have not been finalized  by the program office yet.) Under the new strategy, EELV will be  transitioning from a fixed-price arrangement, where launches were  essentially procured as a service, to a combination of a cost-plus and  fixed-price contracts. The arrangement will allow the government to  exercise more oversight and to incentivize contractors through the use of  award fees. But to realize these benefits, the Air Force will need to ensure  it has resources (skills, expertise, and tools) to begin accumulating and  analyzing detailed cost, schedule, performance, design, and technical data.  In addition, it will be important to assess progress in achieving longer-term  savings envisioned under ULA as well as to ensure that the combined  assets of the contractors are adequately protected.
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 of bad news, and, for space  programs, forsaking the opportunity to identify and assess potentially  better 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.
Figure 5 illustrates the negative cycle of incentives that come when  programs compete for funding. Table 1 highlights specific areas where we  found the original cost estimates of programs to be optimistic in their  assumptions.
Second, as we have previously testified and reported, DOD has tended to  start its 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 the 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 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.
GAO, Space Acquisitions: DOD Needs to Take More Action to Address Unrealistic Initial  Cost Estimates of Space Systems, GAO-07-96, (Washington, D.C.: Nov. 17, 2006). the full capability. Increasingly, 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—a problem that  affected SBIRS High and AEHF, for example.
In addition, several of the space programs discussed above 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 a cumbersome acquisition process and leverage  innovation and management expertise from the private sector. However,  DOD later found that this approach magnified problems related to  requirements creep and poor contractor performance. In addition, under  TSPR, the government decided not to obtain certain cost data, a decision  that resulted in the government having even less oversight of the programs  and limited information from which to manage the programs. 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: DOD Is Implementing Best Practices on Two New Efforts
paragraphs: Over the past decade, GAO has examined successful organizations in the  commercial sector to identify best practices that can be applied to space  and weapon system acquisitions. This work has identified a number of  practices, which we have recommended that DOD adopt. 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 start, and use quantifiable data  and demonstrable knowledge to make decisions to move to next phases.  DOD is making efforts to instill these practices on two programs reviewed  this year: the Transformational Satellite Communications System and the  Space Radar program. Specifically:    Successful organizations we have studied ensure that technologies  are mature, that is, proven to work as intended before program start.  Both TSAT and Space Radar are attempting to do this. According to  their plans, critical technologies should reach at least a Technology  Readiness Level (TRL) 6 by program start, meaning the technologies  have been tested in a relevant environment. This stands in sharp  contrast to previous programs, which have started with immature  technologies, such as SBIRS and NPOESS, and it reflects the  implementation of a “back to basics” policy advocated this past year by  the Under Secretary of the Air Force. If these programs adhere to the  TRL 6 criteria, they will greatly reduce the risk of encountering costly  technical delays, though not completely. There are still significant  inherent risks associated with integrating critical technologies and with  developing the software needed to realize the benefits of the  technologies. Moreover, the best practice programs we have studied  strive for a TRL 7, where the technology has been tested in an  operational environment, that is, space.
Successful organizations defer more ambitious technology efforts to  corporate research departments (equivalent to science and technology  (S&T) organizations in DOD) until they are ready to be added to  future increments. Both programs have deferred more ambitious  technology development efforts to the science and technology  environment. TSAT, for example, deferred the wide-field of view   multi-access laser communication technology, and is contributing  about $16.7 million for “off-line” maturation of this technology that  could be inserted into future increments. It has laid out incremental  advances in other capabilities over two increments. Space Radar has  deferred lithium-ion batteries, more efficient solar cells, and onboard  processing for its first increment, and like TSAT, is contributing toward  their development by S&T organizations. At this time, Space Radar has  not defined details of an increment beyond the first one.
Successful organizations extensively research and define  requirements before program start to ensure that they are achievable,  given available resources, and that they do not define requirements  after starting programs. Both programs have also employed systems  engineers to help determine achievability of requirements. The TSAT  program has reached agreement on requirements with its users— primarily in terms of what will be included in the first several blocks of  the program and what will not be included. The Space Radar program  has instituted several processes designed to achieve consensus on  requirements across a range of diverse users. It still needs to formalize  agreements related to these processes and also identify key  performance parameters. This is important because Space Radar is to  be shared by the military and intelligence communities—each with  different specific needs for the system and very specific roles and  responsibilities with regard to the data being produced by Space Radar  and its users. It has been reported recently that conflicts in roles and  responsibilities have arisen on dissemination of data being produced by  a small tactical satellite (TacSat 2) recently launched by DOD for use  by military commanders.
It remains to be seen whether TSAT and Space Radar will take additional  steps that successful organizations take to position programs for success.  For example:    The organizations we have studied do not go ahead with program  start milestone decisions if there are still gaps between requirements  and resources. TSAT and Space Radar have indicated that they intend  to do the same, but there are external pressures on both programs to  provide needed capabilities.
The organizations we have studied hold program managers  accountable for their estimates and require program managers to  stay with a project to its end. We have made recommendations to  DOD to instill similar practices departmentwide, but these have yet to  be implemented. Further, there are still incentives in place to keep  program managers’ tenures relatively short. Promotions, for example,  often depend on having varied management experience rather than  sustained responsibility for one program.
The organizations we studied have developed common templates and  tools to support data gathering and analysis and maintain databases  of historical costs, schedule, quality, test, and performance data. Cost  estimates themselves are continually monitored and regularly  updated through a series of gates or milestone decisions that demand  programs assess readiness and remaining risk within key sectors of  the program as well as overall cost and schedules. We saw indications  that TSAT and Space Radar were using more robust tools to analyze  risks, costs, and schedule than programs have done in the past.  However, it remains to be seen how these practices will be reflected in  official cost estimates. In the past, we have found space program  estimates were simply too optimistic and that independent estimates  produced by DOD’s Cost Analysis Improvement Group were not being  used. DOD agreed with our findings and asserted it was taking actions  to address them.
section_title: Actions Needed to Sustain Commitment to Improvements
paragraphs: The Air Force’s continued efforts to instill best practices on Space Radar  and TSAT are good first steps toward addressing acquisition problems in  the space portfolio. They represent significant shifts in thinking about how  space systems should be developed as well as commitment from senior  leadership. But sustaining these reforms will not be easy. The programs  are not immune to funding pressures that have encouraged too much  optimism. They are also being undertaken as DOD is addressing shortfalls  in critical technical, business, and program management skills. Further,  processes and policies key to sustainment and broader use of best  practices have not been changed to further reflect the kinds of changes  taking place on Space Radar and TSAT.
First, new programs still must compete for limited funding. As DOD seeks  to fund Space Radar and TSAT, it will be (1) undertaking other new, costly  efforts, including GPS III, SBSS, and AIRSS; (2) addressing cost overruns  associated with programs like SBIRS High and GPS; and (3) facing  increased pressures to increase investments in assets designed to protect  space systems. In total, these efforts will increase DOD’s investment for all  major space acquisitions from $6.31 billion to $9.22 billion, or about   46 percent over the next 3 years. More may be needed if technical,  software, and other problems on current programs worsen. At the same  time, investment needs for other weapon systems are also on the rise,  while long-term budget forecasts indicate that considerably fewer   dollars will be available for discretionary spending in coming years   rather than more.
In prior reports, we have stated that as long as too many programs  compete for too few dollars in DOD, programs will be incentivized to  produce optimistic estimates and suppress bad news. They will view  success as securing the next installment of funds versus delivering  capability within cost and schedule goals. We have recommended that  DOD guide its decisions to start space and other weapons acquisition  programs with an overall investment strategy that would identify priorities  for funding so that space systems that are expected to play a critical role  in transformation, such as Space Radar and TSAT, could be prioritized  along with other legacy and transformational systems.
Let me take a moment to illustrate why an investment strategy is critical.  We have reported in the past that DOD and the Air Force have waited too  long to establish priorities or make trade-off decisions. We have also  reported that frequent funding shifts have hurt programs that were  performing well or further damaged troubled programs. We have also  reported cases where DOD and the Air Force have walked away from  opportunities to save costs in lot buys or leverage knowledge already  gained in legacy programs in favor of starting new programs that promise  much more advanced capability but have little knowledge to back up that  promise. Today, DOD is on track to cut short the AEHF program in order  to pursue TSAT. It has stated it may also do the same for SBIRS to pursue  AIRSS. In both cases, DOD would be forgoing savings that it had already  negotiated for lot buys and in effect, paying significantly more for  nonrecurring engineering. While these decisions have the potential to  enable DOD to obtain advanced capability sooner (provided best practices  are followed on the new programs), they should have been made much  earlier and more strategically in order to stem investment losses.
DOD’s own reports recognize that investment planning needs to be  instilled in weapon acquisitions. A February 2007 report, in response to a  requirement in the John Warner National Defense Authorization Act for  Fiscal Year 2007, outlines steps that DOD is taking to better prioritize and  fund programs. The initiatives include (1) establishing a new concept  decision review to provide decision makers with an early opportunity to  evaluate trade-offs among alternative approaches to meeting a capability  need, (2) testing portfolio management approaches in selected capability  areas to facilitate more strategic choices about how to allocate resources  across programs, and (3) capital budgeting as a potential means to  stabilize program funding. While these developments are promising, we  recently reported that such initiatives do not fundamentally change DOD’s  existing service-centric framework for making weapon system investment  decisions. Moreover, it will take some time to determine their success in  enabling more effective funding prioritization.
Second, space programs are facing capacity shortfalls. These include  shortages of staff with science and engineering backgrounds as well as  staff with program management and cost estimating experience. During  our review this year, the TSAT program cited shortages of space  acquisition personnel as a key challenge that increases risk for the  program. Due to broader Air Force cuts in workforce, the program did not  expect to be able to fill technical positions needed to accompany plans to  ramp up spending. During our review of DOD’s space cost estimating  function, Air Force space cost estimating organizations and program  offices said that they believed their cost-estimating resources were  inadequate to do a good job of accurately predicting costs. Because of the  decline in in-house cost-estimating resources, space program offices and  Air Force cost-estimating organizations are now more dependent on  support contractors. At 11 of 13 program offices we informally surveyed,  contractors accounted for 64 percent of cost-estimating personnel. This  reliance raised questions from the cost-estimating community about  whether numbers and qualifications of government personnel were  sufficient to provide oversight of and insight into contractor cost  estimates. In addition to technical and cost estimating skills, DOD and  GAO studies have also pointed to capacity shortfalls in program  management. According to DOD’s Young Panel report, government  capabilities to lead and manage the space acquisition process have  seriously eroded, in part because of actions taken in the acquisition reform  environment of the 1990s. During our 2005 review of program  management, we surveyed DOD’s major weapon system program  managers and interviewed program executive officers, who similarly  pointed to critical skill shortages in program management, systems  engineering, and software development. The Air Force and DOD recognize  these shortfalls and are taking actions to address them, but these will take  time to implement. It is important that in the interim, the Air Force identify  and take steps to grow or retain skill sets that should be organic, such as  highly specialized knowledge of certain military space technologies.  During both our cost estimating and space system reviews, program  officials noted that it can take several years for new technical staff to build  knowledge and skills unique to military space.
Our past work has also pointed to capacity shortfalls that go beyond  workforce. For example, in 2006, we reported that cost estimation data  and databases are incomplete, insufficient, and outdated. And in our  testimony last year, we pointed to limited opportunities and funding for  space technologies, and the lack of low-cost launch vehicles. It is our  understanding that the Air Force and DOD are working to address all of  these shortfalls. Budget plans show, for example, an increase of nearly   $11 million in funding for the space test program beginning in 2009—  about 23 percent.
Last, policies that surround space acquisition need to be further revised to  ensure best practices are instilled and sustained. For example, DOD’s  space acquisition policy does not require that programs such as TSAT and  Space Radar achieve a TRL 6 or higher for key technologies before being  formally started (KDP B). Instead, it is suggested that TRL 6 be achieved at  preliminary decision review (KDP C) or soon after. Given that there are  many pressures and incentives that are driving space and other weapon  programs to begin too early and to drive for dramatic rather than  incremental leaps in capability, DOD needs acquisition policies that ensure  programs have the knowledge they need to make investment decisions  and that DOD and Congress have a more accurate picture of how long and  how much it will take to get the capability that is being promised. In  addition, although the policy requires that independent cost estimates be  prepared by bodies outside the acquisition chain of command, it does not  require that they be relied upon to develop program budgets. Officials  within the space cost estimating community also believed that the policy  was unclear in defining roles and responsibilities for cost estimators. We  continue to recommend changes be made to the policy—not only to  further ingrain the shift in thinking about how space systems should be  developed, but to ensure that the changes current leaders are trying to  make can be sustained beyond their tenure.
In closing, we support efforts to instill best practices on programs like  Space Radar and TSAT. They are critical to enabling DOD to break the  cycle of space acquisition problems by matching resources to  requirements before program start. We encourage DOD to build on this  momentum by extending a best practice approach to its entire space  portfolio. For newer efforts, such as AIRSS, this means reexamining  requirements and alternative means of satisfying those requirements and  clarifying the true purpose of the program. For current programs, such as  SBIRS, this means continuing to track risks and dedicating resources  necessary to mitigate those risks, leveraging management tools such as  earned value management analyses, and finding ways to incentivize  contractors to perform well. For the broader portfolio, this means  ensuring programs have all the right resources to enable success. These  include adequate levels of funding accompanied by short- and long-term  investment plans, adequate skills and capabilities, as well as data, policy,  and processes, accountability and leadership support.
section_title: Appendix I: Scope and Methodology
paragraphs: In preparing for this testimony, we relied on previously issued GAO  reports on assessments of individual space programs, common problems  affecting space system acquisitions, and DOD’s space acquisition policy.  We also relied on our best practices studies, which have examined  pressures and incentives affecting space system acquisition programs, the  optimal levels of knowledge needed to successfully execute programs, and  complementary management practices and processes that have helped  commercial and DOD programs to reduce costs and cycle time. In  addition, we analyzed DOD’s Selected Acquisition Reports to assess cost  increases and investment trends. We conducted our review between  March 19 and April 13, 2007 in accordance with generally accepted  government auditing standards.
section_title: Appendix II: Contacts and Acknowledgments
paragraphs: For in information, please contact Cristina Chaplain at 202-512-4841 or  chaplainc@gao.gov. Individuals making contributions to this testimony  include, Art Gallegos, Jeff Barron, Tony Beckham, Noah Bleicher,   Greg Campbell, Maricela Cherveny, Claire Cyrnak, Jean Harker, and   Rich Horiuchi.