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MEMORANDUM FOR THE RECORD
SUBJECT:
Science, Technology and Space Subcommittee of the Senate Commerce, Science and Transportation Committee Hearing on the International Space Station: September 18, 1997
TESTIFYING:
Administrator Daniel Goldin
Allen Li, Associate Director, Defense Acquisitions Issues, National
Security and International Affairs, General Accounting Office
Douglas Stone, Vice President and Program Manager, International
Space Station, Boeing Defense and Space Group
Chairman Frist (R-TN) held a two hour hearing of the Science, Technology and Space Subcommittee of the Senate Commerce, Science and Transportation Committee on the International Space Station (ISS), particularly on schedule and cost overruns, and the reasons for continuing to support the development of this premiere orbiting microgravity laboratory. The witnesses testified and responded to questions from the Subcommittee separately.
Mr. Goldin focused on the status of U.S. developmental activities and the impact of the partnership with Russia on those activities. He indicated that NASA has identified an additional funding requirement totaling $430M for the ISS program and related requirements beyond amounts included in the President’s FY98 budget submission. This is composed of approximately $330M for the baseline Station Program and $100M for continuation of Step One of the Russian Program Assurance activity with a minimum level of reserves. Without these additional funds in FY98, he said, "the Program will have to slip work to the out years which will, in turn, result in contractor work force levels remaining high, in schedule delays, and in substantially higher run-out costs. The prime contractor, Boeing, recently issued a revised cost Estimate at Completion (EAC) reflecting a $600M variance from that previously planned, he testified. Boeing and NASA continue to work together to identify and implement improved processes and activities that will result in improved Prime and subcontractor performance levels.
Questions from Chairman Frist, Senator Rockefeller (D-WV), and Senator Burns (R-MT) focused on the fiscal needs of the ISS, particularly reserves and threats to unencumbered funds, and the cause of the cost and schedule overruns by the Prime contractor. Mr. Goldin explained that NASA believed the cost overrun would be slightly higher than the $600M estimated by Boeing, but that Boeing claims it will not come in above the $600M. The overruns are due, he believes, to the high cost of software development and de-staffing of ISS workers at Boeing, which is not happening as rapidly as it should. He has had open discussions with Boeing’s senior management and they have sharpened up scheduling. When asked how he would ensure that fundamental science would not be affected by the budget shortfall, Mr. Goldin answered that it would come from uncosted carryover, particularly in the mission support area. Senator Rockefeller asked him how a Senator should respond to the annual Bumpers amendment to kill Space Station, to which Mr. Goldin described the essential leg of long term research in the scientific disciplines of biomedicine, technology, combustion, advanced communication, engineering, and material science. Senator Burns asked about Mir and Mr. Goldin explained that there is a process in place to ensure the safety of our astronauts onboard and that the planned research program would proceed. He introduced Captain Frank Culbertson, Director of the Phase One Program, and indicated that he has full responsibility for the lives of the astronauts onboard, who are his friends, but that he also feels personally responsible for the lives of these astronauts. The Inspector General’s report included some concerns that Captain Culbertson has reviewed, and found Mir to be safe. Independent review of both the Inspector General’s report and Frank Culbertson’s report will be conducted by Tom Young. Senator Burns requested that Mr. Goldin review the report and communicate to the subcommittee his findings. Mr. Goldin promised that the subcommittee would have a thorough understanding of NASA’s corporate position and independent review before committing to the launch of STS-86 on September 25.
Allen Li testified that the ISS cost and schedule problems have worsened, but that the Prime contractor is implementing a corrective plan that it believes will improve the performance of the entire contractor team, including changes in personnel, hiring additional software engineers and managers, and committing $30M for a software integration facility. He indicated that NASA’s concern about the prime contractor’s performance is evident in its decision not to award the bonus for the 6-month period that ended March 1997. He cited the cost overruns as ranging from $514M to $610M. He was asked if he agreed with the current assessment of a $430M shortfall for FY98, but he stated that his review did not cover that since the information had not been available at the time, although there was strong indication that it would be needed. He stated that the software development problem will continue to be the most difficult facet of the program because of the retention of skilled people as well as the complexity involved in integration software programs, requiring a great deal of testing.
Doug Stone testified that over 220,000 pounds of flight hardware have been produced to date, including the first element of the Space Station, the Russian FGB, which is being built under a subcontract to Boeing. He stated that technical issues encountered during the ongoing development phase of the program have created management challenges in both schedule and cost performance. The program is currently approximately 5 weeks behind schedule to delivery dates, but in-place work around plans continue to support all launch dates. They have committed to improve performance in six specific areas: reinforced Space Station management team and structure; improved subcontractor performance; meeting critical schedule milestones; creating special incentives to acquire and retain key software engineers and managers; committing $30M to build a Software Integration Facility; and finally, added even more senior management involvement and visibility on the program.
Questions from the Subcommittee focused on the causes of the overruns, which Mr. Stone explained were Boeing’s "success attitude" which may have caused them to be too optimistic at the beginning of the program, and technical issues which they hadn’t been aware of when they entered the contract. He said that ISS is not Boeing’s biggest project, but it is very important. In response to budget questions, he indicated that in FY98 much of the development risk would behind us, and that by the end of FY97 $400M of the $600M overrun would have already been paid to Boeing by NASA. Of the remaining $200M, half would be consumed in FY98 and the rest in the following years. Mr. Frist closed with a question concerning Mr. Stone’s impressions of Russia, having just returned from the General Designer’s Review held in Moscow. Mr. Stone responded that he was very impressed. The FGB is on schedule, ready to proceed to the launch site. At the General Designer’s Review for the Service Module, he was surprised that he didn’t have to ask any questions, because they asked each other. He was "quite impressed at the meeting with the lack of people saying, ‘I don’t have enough money.’"
Mr. Chairman and Members of the Subcommittee: I am glad to be here today to discuss the current status of the International Space Station (ISS) Program. When I last appeared before the Committee concerning the International Space Station in June, I provided a status overview of the entire Program, including Phase 1 activities and the progress of our International Partners. Today, I will focus my testimony on the status of U.S. developmental activities and the impact our partnership with Russia is having, or may have, on those activities.
In June, I indicated there was much uncertainty as to whether the ISS Program would be able to meet all of the cost, schedule and technical goals for FY 1998. In fact, for some time NASA has expressed concern regarding the ability of the ISS Program to live within the constrained, flat funding profile during the peak development period, currently underway. As I previously informed the Subcommittee, prime contractor increases and necessary technical Program changes have strained near-term Program reserves. Beyond that, there are continuing requirements stemming from contingency activities to reduce the risk of assembly delays should Russia incur future Service Module delivery problems. Over the last few months, ISS Program managers have scrutinized FY 1998 resource requirements and now have a detailed, current understanding of the FY 1998 funding situation. NASA has identified an additional funding requirement totaling $430 million for the ISS Program and related requirements beyond amounts included in the President’s FY 1998 budget submission. This is composed of approximately $330 million for the baseline Station Program and $100 million for continuation of Step One of the Russian Program Assurance activity with a minimum level of reserves. I am working closely with the White House to address this issue and estimated outyear shortfalls as part of the FY 1999 budget process. NASA is prepared to accommodate the majority of the necessary adjustments within our pending FY 1998 budget request. Without these additional funds in FY 1998, the Program will have to slip work to the out years which will, in turn, result in contractor work force levels remaining high, in schedule delays, and in substantially higher run-out costs.
The flat funding profile for Space Station has resulted in the deferral of substantial reserves into the later years. The Space Station Program is a typical large research and development project with all of the unknowns and challenges characteristic of such projects. There are not many instances of mass production runs and most elements are one-of-a-kind builds. The Space Station team has encountered and solved many developmental problems and has made outstanding progress, but we still have challenges ahead.
As we are currently experiencing our peak period of activity, we now find ourselves with basically no reserves available in FY 1998 to address maturing Program content, developmental challenges, or additional contractor performance problems. Unfortunately, this problem has been exacerbated by the Russian-driven delay to the assembly sequence because of the Service Module slip. As a result, the start of the assembly has been pushed into 1998, coinciding with NASA’s peak period of manufacturing, testing and integration. Needless to say, the misalignment of reserves resulting from a flat budget profile will result in increased costs to the Program, as work will need to be deferred in order to make sufficient reserves available for ongoing tasks. A reasonable adjustment to the Program’s funding profile over the next two years would save tax-payer dollars in the long run by avoiding this deferral of work.
Program performance problems have indeed contributed to the funding situation we are currently experiencing. However, before discussing the performance issues in greater detail, I would like to first review the progress made on near-term Station flights.
The design and development of ISS elements for the first six flights is largely completed and we are well into qualification testing and integration. By this time next year, all the flight elements for these flights are to be delivered to their respective launch integration sites for checkout and integration prior to flight, and the next series of flight elements will be completing manufacture and outfitting and be beginning qualification testing. These are clear indicators that staffing levels will be coming down and that annual development costs will be subsiding. Maintaining current ISS Program plans will more than double the 220,000 pounds of flight hardware already completed and result in the completion of over 80 percent of the total development activity by close of FY 1998.
The first flight to be launched--the U.S. funded, Russian-built Functional Cargo Block (FGB)--is proceeding on schedule for a June 1998 launch from the Baikonur Cosmodrome. A full system integrated test has been completed. New propulsion system modifications to provide a more robust capability and support Step One of Russian Program Assurance contingency plan has been completed. The modified FGB is now in the process of going back through integration testing. Shipment to the Baikonur launch facility is scheduled for next January.
For assembly Flight 2A, Node 1 and Pressurized Mating Adapter 1 (PMA-1) proof pressure test are complete and the hardware has been delivered to the Kennedy Space Center (KSC) where acceptance testing is in process. PMA-2 will be shipped to KSC in the next few weeks. Hatch and qualification testing has also been successfully completed. While we are making good progress in preparation for this flight, the effort is not entirely without challenges. We are working to recover from late deliveries of Common Berthing Mechanism components and Node control software development is slightly behind schedule.
The major flight element for Flight 3A is the Z1 Truss, on which control moment gyros and the S-Band and Ku-Band Communication and Telemetry equipment will be attached. The control moment gyros have completed qualification testing. The Z1 flight unit is in assembly at Tulsa and is progressing toward completion later this year. The Spacelab Pallet Manual Berthing Mechanisms are also in final assembly. Qualification testing, which was begun last month, was delayed by over a month. However this testing is slated to run through next March and workarounds have been identified to maintain the completion of these tests on schedule.
Flight 4A is the first flight where a photovoltaic array will be placed on orbit. It is also the flight which will launch of the Integrated Electronics Assembly (IEA), which will contain many Orbital Replacement Units (ORU’s). An integrated qualification unit containing the IEA, solar arrays, photovoltaic radiators and ORU’s is fully assembled and undergoing electromagnetic interference testing. While there are several ORU’s that have had manufacturing problems that the Prime contractor is addressing, all other elements are on plan or very close to plan.
Flight 5A, the U.S. Lab, is our most significant challenge. The Lab structure is currently being outfitted with electrical cables and fluid lines. This work has been delayed by late delivery of cables and parts deliveries. The Common Module, which is the structural test article for the Lab, has completed modal survey and vibroacoustic tests ahead of plan. The first avionics rack is in standalone testing and other internal Lab racks which will contain systems equipment and experiments are proceeding, but are having to work around some late suffering from late parts deliveries. There are also risks identified in the area of flight software. The main schedule concern that we are addressing is the ability of the Lab to support element-to-element integrated testing at KSC prior to launch. While schedules remain tight, we believe that recovery plans will support the integrated test.
Relative to progress on Russian development, NASA technical officials in Russia continue to monitor the progress of the Service Module (SM) by tracking and validating the schedules at the working level. Significant work is occurring, funding is flowing, and deliveries are being made by the Russian contractors. The majority of internal secondary structures have been installed. However, the flight article shipment to RSC-Energia for testing in the integrated test stand is behind schedule due, in part, to the transfer of work that was originally planned to be performed by RSC-E to Krunichev (KhSC), late delivery of some equipment for installation, and Thermal Control System (TCS) modifications resulting from Mir lessons learned. Relative to other SM subsystems, the Electrical Analog assembly has been completed and was delivered to Energia on September 1, 1997.
A complete integrated review of the development schedules and revisions to these schedules was recently accomplished at the SM General Designer’s Review (GDR), held on September 12 in Russia and attended by senior NASA managers and technical staff. As with our own schedules, there are areas where work-arounds will need to be made to recover schedule slippage. Although the schedule is risky, NASA believes, at this time, that the planned launch date of December 1998 can be met. It is also worth noting that Russia has made significant progress on other elements supporting the ISS such as the Progress M1, docking modules, the Soyuz and its modifications. NASA intends to hold a meeting of the Space Station Control Board (SSCB) in late September 1997, at which time it is expected that the decision to retain the planned launch of the Service Module in the December 1998 time-frame will be revalidated by all the International Partners.
Last year, and into the spring of this year, the Russian Space Agency experienced difficulties in meeting their ISS objectives due to a lack of funding from the Russian government. Since April 1997, adequate funding has been supplied. Most recently, in August, President Yeltsin signed a decree providing an additional 580 billion rubles (~ $99.5 million). Russian contractors have not raised any recent concerns about adequacy of funding, and it is expected that remaining funding will be available when required.
Having addressed the notable development progress being made, I would now like to return to the discussion of two items which are driving the need for additional resources in FY 1998 beyond those reflected in NASA’s budget submission: the level of performance by our Prime Contractor, Boeing, and Russian Program Assurance.
When all things are considered, Boeing’s rate of performance is not the only driver in reserve usage. However, given the flat funding profile and the significant resources the Program has applied to address Russian-induced assembly delays and uncertainties, the variances contribute greatly to the difficult financial challenges of FY 1998 and FY 1999. This has impacted our ability to address real engineering challenges and to implement other Program changes. Authorized Program changes alone account for application of over $1 billion of reserves. Our current budget plan accommodates the cost of all these authorized changes. The changes are initiated by the individual integrated product teams (IPTs) and are reviewed and approved by change boards which consists of both NASA and Boeing management. With few exceptions, these changes are intended to "make operable" various systems or components to meet requirements and specifications on the ISS vehicle and crew. When such changes cannot be made because of financial constraints, schedules are perturbed, resulting in cost growth which could otherwise be avoided.
I would like to remind the Subcommittee that the International Space Station is a development program, the complexity of which rivals any NASA or the Federal Government has ever undertaken. NASA certainly expected to see some variances from our baseline plans, to see technical threats surface, and to observe some fluidity in requirements, within defined limits in the details of total Program budget, content and schedule. Boeing recently issued a revised cost Estimate at Completion (EAC) reflecting a $600 million variance from that previously planned. While any cost growth is undesirable, this current estimate is not unreasonable considering the size and complexity of the contract and the fact that $356 million of that amount has already been incurred through FY 1997, with the remainder of the estimate reflecting future risks. In the context of the total cost for work performed, the Prime variance is approximately 8.5 percent on a total cost of $4.2 billion for work performed to date. This is not to downplay the fact that there are certainly causes for concern which NASA is addressing with Boeing. For the last six months, Boeing and its subcontractors have spent about twenty percent more than planned to perform the contracted scope of work. There has been little schedule deterioration over this period, and we are actually beginning to see some schedule recovery. However, it is coming at the expense of increased cost. As I mentioned in June, NASA’s displeasure with this level of performance was reflected in the reduced incentive and award fees provided to Boeing in the appraisal period ending last spring.
Boeing is addressing the technical problems identified to date and continues to work to solve the myriad of challenges encountered as the Program moves through the production and qualification testing phases of the development cycle. They are continuing to make progress in the process. However, individual Boeing site locations and subcontractors have had higher than anticipated technical and schedule performance problems associated with the delivery of both hardware and software products.
To combat these performance problems, the Prime has already made personnel changes to strengthen its management team, put in place an incentive package to acquire and retain people with necessary software expertise, and committed over $30M of Boeing capital investment to build a new systems/software integration facility. Boeing has also developed a monthly de-staffing plan which calls for a systematic reduction in staffing at the Prime locations and major subcontractors.
Boeing and NASA continue to work to identify and implement improved processes and activities that will result in improved Prime and subcontractor performance levels. NASA is also looking at areas of Program content currently under the Prime scope of work which could be pulled out and performed less expensively. Recovery plans will mitigate cost and schedule variances, but the continued cost growth and performance problems have strained near-term reserves and will continue to require the use of reserves in the future. NASA will continue to work closely with the Prime’s corporate management to ensure that required corporate assets are available to this critical Program and that the necessary levels of management experience and tools are applied. This is a complex and difficult undertaking, but NASA believes they can, and will, improve their planning, scheduling, and control processes. We have the right program, the right facilities and the right people to do the job. We will complete the job we set out to do.
Make no mistake, there are still developmental issues remaining: particularly, in the areas of command and data handling software, qualification and testing activities for thermal control and outboard truss segments, photovoltaic electronics system and other electrical orbital replaceable units, and in the area of Lab software and Lab hardware assembly and test. We know there will be cost growth. Boeing has challenged its management to keep future growth to less than the $244 M reflected in their $600M variance at completion. However, even at current trends, future cost growth will be substantially less than it would be if work must be deferred to maintain the current annual funding limitation.
As NASA’s reserves are limited, and largely intended to cover unanticipated U.S. development costs, NASA’s objective is to maintain separate funding for contingency activities and other resulting impacts of Russian delays, including the downstream impact to the assembly sequence from the eight month Service Module delay. This is fully consistent with the approach to the 1993 redesign which defined reserves as applicable to preserving the baseline U.S. portion of the ISS. As with our current projections, NASA assumed and expected full participation by all its partners.
Before closing, I would like to address an important matter for which NASA is seeking the support of this Committee as part of NASA’s proposed FY 1998 authorization bill: authority for NASA to reciprocally waive claims in its aerospace activities. As I am sure you are aware, cross waivers of liability have become an increasingly important tool in our expanded space cooperation activities. With reciprocal cross-waivers, each party absorbs the risk of damage to their employees and their property involved in aerospace activities. This in turn allows aerospace partners to concentrate on taking whatever steps are necessary to accomplish the joint mission safely, instead of basing their decisions on avoidance of future lawsuits. The Space Station Intergovernmental Agreement contains the broadest cross-waiver of liability ever used in an aerospace activity and inclusion of the language will assure that the United States can effectively implement this agreement. This same language is also important in our on-going negotiations with commercial users of the Station and for future commercial operations of Station.
In conclusion, I seek the support of the Committee for the necessary level of funding in FY 1998 to maintain the International Space Station baseline plan and for continuation of Step One of our Russian Program Assurance contingency effort. As stated earlier, these requirements can largely be accommodated within NASA’s total FY 1998 request. I am convinced these adjustments represent a prudent path to bring this Program to its operational phase at minimum cost to the U.S. taxpayer.
At a hearing before this Subcommittee earlier this year, the Chairman of the Commerce committee, Senator John McCain, raised the issue of a program cap on space station. I told the Chairman at that time that NASA would work with the GAO on an estimate of the total program costs and we are working with them now.. Furthermore, I told the Chairman that I would empanel a group of experts independent from NASA to look at the issue of total program cost. I have requested that Mr. Jay Chabrow, an expert from the private sector with over 30 years experience in contracts, pricing, cost estimating, analysis and procurement for aerospace projects, assist in the development of such a external review team. Mr. Chabrow currently serves as a member on the Advisory committee on the International Space Station. This team will consist of experts from outside of NASA, capable of performing a detailed cost analysis. It is my expectation that this team will first conduct its assessment independent of the GAO, but remain in existence for a period thereafter to work collectively with the GAO to address its analyses and any additional concerns the GAO would desire to address.
We are less than a year from launch, with no known major impediments in our path. The road has not been as smooth as we would have liked. However, it has taken us far. Even with the additional funds we are requesting, our estimated development costs are less than those incurred last year. As flight elements continue to be delivered to the Kennedy Space Center, the level of development staffing will continue to drop. The mountain it no longer before us, but neither are we on the homeward slide. There will be many challenges yet to overcome. But, we will forge ahead as surely as we have come this far.
I feel very privileged to be the NASA Administrator in this time of unprecedented achievements in human and robotic space exploration. NASA, the U.S. aerospace industry, and our foreign partners have talented and outstanding people who are working closely together to build a space station which will have a profound impact on the whole world. To be sure, we have had problems and we will have more, but I am confident that with this dedicated International State Station team and the support of the Administration and the Congress we will deliver as promised.
Page last updated 9/30/97 by Julie Meredith