oversight

Evolved Expendable Launch Vehicle: DOD Is Addressing Knowledge Gaps in Its New Acquisition Strategy [Reissued on August 13, 2012]

Published by the Government Accountability Office on 2012-07-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Committees




July 2012
             EVOLVED
             EXPENDABLE
             LAUNCH VEHICLE

             DOD Is Addressing
             Knowledge Gaps in Its
             New Acquisition
             Strategy



              This report was revised on August 13, 2012, to correct text
              regarding the space sector survey on page 10.




GAO-12-822
                                                 July 2012

                                                 EVOLVED EXPENDABLE LAUNCH VEHICLE
                                                 DOD Is Addressing Knowledge Gaps in Its New
                                                 Acquisition Strategy
Highlights of GAO-12-822, a report to
congressional committees




Why GAO Did This Study                           What GAO Found
DOD plans to spend about $19 billion             The Department of Defense (DOD) has numerous efforts in progress to address
to acquire launch services from fiscal           the knowledge gaps and data deficiencies identified in the GAO report. Of the
year 2013 to fiscal year 2017, and total         seven recommendations GAO made to the Secretary of Defense, two have been
program costs through 2030 are                   completely addressed. While two of GAO’s recommendations have actions
expected to approach $35 billion. The            underway that are expected to be completed, two recommendations need more
Evolved Expendable Launch Vehicle                action for completion and one has had no action taken.
(EELV) program launches satellites for
military, intelligence, civil, and                Recommendation                                                                   GAO assessment
commercial customers. In 2011, the Air            Conduct an independent assessment of the health of the U.S.                      Action underway;
Force created a Program Executive                 launch industrial base, paying special attention to engine                       expected to complete
Officer for Space Launch position,                manufacturers
responsible for completing a new                  Reassess the block buy contract length given the additional                      Action underway;
EELV acquisition strategy. GAO                    knowledge DOD is gaining as it finalizes its new acquisition                     expected to complete
reported that the new strategy needed             strategy
to be based on sufficient information,            Work closely with the National Aeronautics and Space                             Complete
and made seven recommendations to                 Administration (NASA) to ensure DOD has sufficient knowledge
                                                  of NASA heavy-lift program decisions—given the potential
further this goal. DOD finalized a new            bearing those decisions could have on Evolved Expendable
EELV acquisition strategy in November             Launch Vehicle (EELV) engine prices—to facilitate DOD’s ability
2011. In the 2012 National Defense                to negotiate EELV launch contract prices that maximize the
Authorization Act, Congress required              government’s investment
DOD to describe how it had                        Refrain from waiving Federal Acquisition Regulation                              Complete
implemented each GAO                              requirements for contractor and subcontractor certified cost and
                                                  pricing data as DOD finalizes its new EELV acquisition strategy
recommendation, and GAO to assess
that information. This report provides            Ensure launch mission assurance activities are sufficient and not                Some action taken; more
                                                  excessive, and identify ways to incentivize the prime contractor                 action needed
that assessment.                                  to implement efficiencies without affecting mission success as
GAO reviewed DOD’s report and                     DOD develops a new contracting structure for the EELV
                                                  program
supporting information, program
                                                  Examine how broader launch issues, such as greater                               Some action taken; more
budgets, performance reports, and                 coordination across federal agencies, can be factored into future                action needed
contracts. GAO examined recent                    launch acquisitions to increase efficiencies and cost savings
defense industrial base studies,                  Develop a science and technology plan for improving and                          No action taken
government audits of the prime                    evolving launch technologies. This plan should link to the
contractor’s business systems,                    broader space science and technology plans mandated by the
independent engines cost                          2010 National Defense and NASA Authorization Acts
assessments, and comparisons of                  Source: GAO assessment of DOD actions to address recommendations in GAO-11-641.
historical and current launch manifests.
GAO also interviewed or obtained                 Since GAO’s 2011 report, DOD has completed or obtained independent cost
perspectives from various launch                 estimates for two Evolved Expendable Launch Vehicle engines and completed a
officials and the prime contractor.              study of the liquid rocket engine industrial base. Officials from DOD, the National
                                                 Aeronautics and Space Administration, and the National Reconnaissance Office
                                                 have initiated several assessments to obtain needed information, and have
What GAO Recommends                              worked closely to finalize new launch provider certification criteria for national
GAO is making no new                             security space launches. Conversely, more action is needed to ensure that
recommendations in this report. DOD              launch mission assurance activities are not excessive, to identify opportunities to
reviewed and concurs with this report.           leverage the government’s buying power through increased efficiencies in launch
                                                 acquisitions, and to strategically address longer-term technology investments.
                                                 Some information DOD is gathering could set the stage for longer-term strategic
View GAO-12-822. For more information,           planning for the program, especially in critical launch technology research and
contact Cristina Chaplain at (202) 512-4841 or   development decisions. Investing in a longer-term perspective for launch
chaplainc@gao.gov.                               acquisitions is important to fully leverage the government’s buying power and
                                                 maintain a healthy industrial base.
                                                                                                            United States Government Accountability Office
Contents


Letter                                                                                     1
               Background                                                                  2
               DOD Is Taking Action to Address Deficiencies Identified in Our
                 September 2011 Report                                                    7
               Conclusions                                                               20
               Agency Comments                                                           21

Appendix I     Scope and Methodology                                                     24



Appendix II    Comments from the Department of Defense                                   26



Appendix III   GAO Contact and Staff Acknowledgments                                     27



Tables
               Table 1: Status of DOD Action to Address Recommendations from
                        GAO-11-641                                                        7
               Table 2: Summary of ULA Business System Evaluations                       15




               Page i                            GAO-12-822 Evolved Expendable Launch Vehicle
Abbreviations
DACO              Divisional Administrative Contracting Officer
DCAA              Defense Contract Audit Agency
DCMA              Defense Contract Management Agency
DFARS             Defense Federal Acquisition Regulation Supplement
DOD               Department of Defense
EELV              Evolved Expendable Launch Vehicle
FAR               Federal Acquisition Regulation
FTC               Federal Trade Commission
NASA              National Aeronautics and Space Administration
NDAA              National Defense Authorization Act
NRO               National Reconnaissance Office
OSD               Office of the Secretary of Defense
PEO               Program Executive Officer
SLS               Space Launch System
ULA               United Launch Alliance
USD(AT&L)         Under Secretary of Defense for Acquisition, Technology,
                  and Logistics

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Page ii                                    GAO-12-822 Evolved Expendable Launch Vehicle
United States Government Accountability Office
Washington, DC 20548




                                   July 26, 2012

                                   Congressional Committees

                                   The Department of Defense’s (DOD) Evolved Expendable Launch
                                   Vehicle (EELV) program is the primary provider of launch vehicles for
                                   U.S. military and intelligence satellites, as well as some civil and
                                   commercial satellites. DOD plans to spend about $19 billion to acquire
                                   launch services from fiscal year 2013 to fiscal year 2017, and total
                                   program costs through 2030 are expected to approach $35 billion.1
                                   Following significant increases in estimates for launch prices, in 2009 the
                                   Commander of Air Force Space Command and the Director of the
                                   National Reconnaissance Office (NRO) determined that a new EELV
                                   acquisition strategy needed to be developed. Several efforts began to
                                   study the best way forward, and in March 2011, the Secretary of the Air
                                   Force created a new executive position, the Program Executive Officer
                                   (PEO) for Space Launch, who is responsible for, among other things,
                                   spearheading the effort to finalize the new EELV acquisition strategy. We
                                   reported in September 2011 that DOD needed to ensure the new
                                   acquisition strategy was based on sufficient information, and we made
                                   seven recommendations to the Secretary of Defense to assist in
                                   furthering this goal.2 DOD generally concurred with our recommendations
                                   and its new EELV acquisition strategy was finalized in November 2011.
                                   Following our review, the Congress included a requirement in the
                                   National Defense Authorization Act (NDAA) for Fiscal Year 2012 that
                                   DOD report to congressional committees a description of how it
                                   implemented each recommendation contained in our report, or how it
                                   otherwise addressed the deficiencies we cited.3 The fiscal year 2012
                                   NDAA also mandated that GAO provide an assessment to congressional
                                   committees of the information contained in DOD’s response.




                                   1
                                    This amount includes spending for launch services the DOD will acquire for the National
                                   Reconnaissance Office.
                                   2
                                    GAO, Evolved Expendable Launch Vehicle: DOD Needs to Ensure New Acquisition
                                   Strategy Is Based on Sufficient Information, GAO-11-641 (Washington, D.C.: Sept. 15,
                                   2011).
                                   3
                                    National Defense Authorization Act for Fiscal Year 2012, Pub. L No 112-81, §839 (2011).




                                   Page 1                                    GAO-12-822 Evolved Expendable Launch Vehicle
             To fulfill this mandate, we reviewed DOD’s report to the Congress and
             supporting information, including documentation of efforts underway to
             obtain sufficient information to negotiate EELV contracts, recent defense
             industrial base studies, government evaluations of contractor business
             systems, program budget and performance documents, independent cost
             assessments for two EELV engines, and compared historical and current
             launch manifests. We interviewed or obtained perspectives from launch
             officials in various military and civilian government agencies, and the
             prime contractor.

             To assess the information contained in the DOD report and determine if
             the recommended action is complete or underway, we assigned one of
             the following four status assessments to each of the recommendations.

             1. Complete. The recommended action item has been accomplished.

             2. Action underway; expected to complete. Steps have been taken to
                complete the recommended action item, and the item is expected to
                be completed in the near term.

             3. Some action taken; more action needed. Steps have been taken to
                complete the recommended action item, but more action is needed.

             4. No action taken. No action has been taken to address the
                recommended action item, and the item is not expected to be
                completed.

             We conducted this performance audit from May 2012 to July 2012 in
             accordance with generally accepted government auditing standards.
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives. For more information on our
             scope and methods, see appendix I.


             DOD began the EELV program in 1995 to provide a new generation of
Background   launch vehicles to ensure affordable access to space for government
             satellites. It resulted in two families of commercially owned and operated
             launch vehicles—Boeing’s Delta IV and Lockheed Martin’s Atlas V. It also
             includes manufacturing and launch site facilities and ground support



             Page 2                             GAO-12-822 Evolved Expendable Launch Vehicle
                       systems. Each family of launch vehicles consists of medium-,
                       intermediate-, and heavy-lift vehicles.4

                       In 1995, DOD awarded contracts to four companies to define EELV
                       system concepts and complete preliminary system designs. At the end of
                       their contracts, DOD planned to choose one contractor with the most
                       reliable and cost-effective design. However, in November 1997, the Office
                       of the Secretary of Defense (OSD) approved maintaining two contractors,
                       based on forecasts that growth in the commercial space launch market
                       would support more than one launch provider and the resulting
                       competition would translate into lower costs for the government. In 1998,
                       DOD competitively awarded Boeing and Lockheed Martin two firm-fixed
                       price contracts for Delta IV and Atlas V launch services, respectively,
                       under the Federal Acquisition Regulation (FAR) provisions governing
                       commercial items. Under these contracts, DOD had limited insight into
                       contractor costs because certified cost or pricing data is not required in
                       the acquisition of commercial items.5 In 2000, new market forecasts
                       showed a dramatic reduction in the expected demand for commercial
                       launch services and the robust launch market upon which the DOD based
                       the EELV acquisition strategy did not materialize. As a consequence,
                       estimated prices for future contracts for launch services increased, along
                       with the total cost of the program.


Previous Acquisition   In March 2005, DOD revised the EELV acquisition strategy to reflect the
Approach               changes in the commercial market and the new role of the government as
                       the primary EELV customer. This revised strategy provided two contracts
                       each—Launch Capability and Launch Services—to Boeing and Lockheed
                       Martin, the two launch service providers. The EELV Launch Capability
                       cost-plus award fee contract was primarily for launch infrastructure (such
                       as launch pads and ranges) and labor, while the EELV Launch Services
                       firm-fixed price contract with a mission success incentive provision, was
                       for launch services, including vehicle production.




                       4
                        The Atlas V heavy lift vehicle is neither fully designed nor built.
                       5
                        Under the FAR, the government typically has little insight into a contractor’s costs since
                       contracting officers cannot require cost or pricing data when the contracting officer
                       determines, among other things, that prices agreed upon are based upon adequate price
                       competition or when a commercial item is being acquired. FAR § 15.403-1(b).




                       Page 3                                        GAO-12-822 Evolved Expendable Launch Vehicle
The contracts were negotiated under FAR Part 15, which governs
negotiated acquisitions. In addition, FAR Part 15 allows the contracting
officer to obtain certified cost or pricing data from the contractor. Certified
cost or pricing data is meant to ensure that the government has the data it
needs to effectively negotiate a fair and reasonable price with the
contractor. The government can waive the requirement for certified data
in exceptional cases. As part of the negotiations process for the 2005
EELV contracts, the government waived its requirement for certified cost
or pricing data, and the contracts were awarded using “other than full and
open competition procedures” under Part 6 of the FAR.

In May 2005, Boeing and Lockheed Martin announced plans to form a
joint venture that would combine the production, engineering, test, and
launch operations associated with U.S. government launches of Boeing’s
Delta and Lockheed Martin’s Atlas launch vehicles. According to both
contractors, the joint venture, named the United Launch Alliance (ULA),
would gain efficiencies and provide the government with assured access
to space at the lowest possible cost by operating independently as a
single company and providing launches on both Atlas V and Delta IV
vehicles. Though the Federal Trade Commission (FTC) initially opposed
the ULA joint venture because of its potential to limit competition in the
launch industry, DOD stated the benefits of the joint venture to national
security outweighed the loss of competition, and FTC allowed the joint
venture to proceed. ULA officially began operations in December 2006 as
the sole source contractor for EELV. The government, Boeing, Lockheed
Martin, and ULA entered into novation agreements which transferred the
obligations and liabilities of the earlier Boeing and Lockheed Martin
contracts to ULA.6

Following ULA formation, the Air Force approved a waiver to obtain
certified cost or pricing data from the top 104 Boeing subcontractors
whose purchase orders valued at $650,000 or more, representing over
$1.4 billion total. The waiver states that Boeing purchased the materials
via commercial item contracts and thus did not require the data of its




6
 With respect to government contracts, a novation agreement is a legal instrument
executed by the contractor (transferor), successor in interest (transferee), and
government, and by which, among other things, the transferor guarantees performance of
the contract, the transferee assumes all obligations under the contract, and the
government recognizes the transfer of the contract and related assets. FAR § 2.101.




Page 4                                   GAO-12-822 Evolved Expendable Launch Vehicle
subcontractors, and that further, the prices Boeing obtained in its large-
quantity purchase of subcontractor hardware warranted waiving the data.

In 2007, DOD decided to advance the EELV program from the production
phase to the sustainment phase.7 We reported in 2008 that this action
significantly reduced the program’s reporting requirements to the DOD
and the Congress, such as program cost and status information, limiting
its own ability to oversee the program.8 Today, ULA’s customers are
mostly DOD, NRO, and the National Aeronautics and Space
Administration (NASA). NASA negotiates its own contracts with ULA.
Commercial customers have comprised less than 20 percent of ULA
business since operations began in 2006.

According to DOD officials, in late 2009, projected increases in EELV
program prices prompted the Commander of Air Force Space Command
and the Director of the NRO to reconsider the current EELV business
model. They commissioned a team of Air Force and other DOD
acquisition officials, NRO, and NASA officials, and contractor personnel—
known as the Tiger Team—to study the current approach to buying
government launches, and develop a new acquisition strategy. Although
development of the acquisition strategy shifted from the Tiger Team to the
new PEO for Space Launch in late March 2011, the Tiger Team study
findings and recommendations remain a cornerstone of the new
acquisition strategy.

Under this arrangement, DOD awarded a contract for each launch vehicle
as needed, with a separate contract to cover the ULA’s overhead and
facilities cost. DOD did not guarantee a specific number of launch vehicle
orders per year to the contractor, and the quantity of launch vehicles
needed fluctuated. The Tiger Team and other DOD launch studies have
raised concerns regarding the unpredictable orders and low demand for
launch vehicle components. Both DOD and ULA officials say this



7
 Typically, major defense acquisition programs in the production phase achieve an
operational capability that meets mission needs; the sustainment phase begins when the
acquired weapons or automated information systems have been fielded or deployed. In
this phase, DOD oversight is normally reduced and program emphasis is on activities
such as supply, maintenance, and transportation.
8
 GAO, Space Acquisitions: Uncertainties in the Evolved Expendable Launch Vehicle
Program Pose Management and Oversight Challenges, GAO-08-1039 (Washington, D.C.:
Sept. 26, 2008).




Page 5                                   GAO-12-822 Evolved Expendable Launch Vehicle
condition is contributing to rising launch costs, particularly in the area of
engines, a primary launch cost driver. According to DOD officials, the new
EELV acquisition strategy was developed in part to address these
concerns, and specifically to stabilize the industrial base and to keep
costs from escalating more. The new EELV acquisition strategy outlines
an approach to obtain prices from ULA for launch vehicles—or more
specifically prices for common booster cores—in a range of quantities
over varying contract periods.9 The pricing proposal from ULA will inform
DOD’s EELV quantity commitment and block buy contract period. The
block buy is expected to commit the Air Force and NRO to buy a block of
launch vehicles each year, and commit to doing so for a specific number
of years, instead of buying one launch vehicle at a time as was done
under the previous acquisition approach. The block buy is subject to
Congress funding the procurement each year. DOD officials told us that
the department is still obtaining a significant amount of data and
information to analyze before locking into a specific booster core quantity
or contract length through upcoming EELV block buy contract
negotiations.

Finally, although no certified U.S. commercial launch capability for EELV-
class payloads other than Atlas V and Delta IV exists at this time,
domestic commercial launch providers are emerging that may satisfy
some of DOD’s EELV-class launch vehicle needs. According to DOD
officials, these newer providers have not yet demonstrated adequate
reliability to provide launches for critical satellites, but may be poised in
the future to compete with the current sole-source EELV provider, ULA.
We reported in September that such competition could incentivize ULA
pricing and efficiencies, potentially yielding cost savings to the
government.




9
 The booster core is the main body of a launch vehicle. In the EELV program, common
booster cores are used to build all of the Atlas V and Delta IV launch vehicles. Medium
and intermediate launch vehicles use one core each, while the Delta IV Heavy launch
vehicle requires three.




Page 6                                     GAO-12-822 Evolved Expendable Launch Vehicle
                       In general, DOD has been responsive to our recommendations, and
DOD Is Taking Action   efforts to address knowledge gaps and data deficiencies identified in our
to Address             report should position DOD to make informed decisions on how to
                       proceed with the EELV program. Of the seven recommendations made,
Deficiencies           six are completed or actions are underway for completion (see table 1 for
Identified in Our      summary of recommendations and status). DOD officials indicate that
September 2011         efforts currently planned or underway will yield sufficient information for
                       Air Force contracting officials to negotiate and award EELV contracts
Report                 supporting the new acquisition strategy. Officials say they intend to award
                       a single-year “bridge” contract for launch capabilities to ensure no
                       disruption to missions in the launch manifest occurs while they evaluate
                       the information prior to a block buy contract award.

                       Table 1: Status of DOD Action to Address Recommendations from GAO-11-641

                              Recommendation                                                             GAO assessment
                        1     Conduct an independent assessment of the health of the U.S.                Action underway;
                              launch industrial base, paying special attention to engine                 expected to
                              manufacturers                                                              complete
                        2     Reassess the block buy contract length given the additional                Action underway;
                              knowledge DOD is gaining as it finalizes its new acquisition               expected to
                              strategy                                                                   complete
                        3     Work closely with NASA to ensure DOD has sufficient                        Complete
                              knowledge of NASA heavy-lift program decisions—given the
                              potential bearing those decisions could have on EELV engine
                              prices—to facilitate DOD’s ability to negotiate EELV launch
                              contract prices that maximize the government’s investment
                        4     Refrain from waiving FAR requirements for contractor and                   Complete
                              subcontractor certified cost and pricing data as DOD finalizes
                              its new EELV acquisition strategy
                        5     Ensure launch mission assurance activities are sufficient and              Some action taken;
                              not excessive, and identify ways to incentivize the prime                  more action needed
                              contractor to implement efficiencies without affecting mission
                              success as DOD develops a new contracting structure for the
                              EELV program
                        6     Examine how broader launch issues, such as greater                         Some action taken;
                              coordination across federal agencies, can be factored into                 more action needed
                              future launch acquisitions to increase efficiencies and cost
                              savings
                        7     Develop a science and technology plan for improving and    No action taken
                              evolving launch technologies. This plan should link to the
                              broader space science and technology plans mandated by the
                              2010 National Defense and NASA Authorization Acts
                       Source: GAO assessment of DOD actions to address recommendations in GAO-11-641.




                       Page 7                                                   GAO-12-822 Evolved Expendable Launch Vehicle
                           Some of the activities DOD is undertaking to inform contract negotiations
                           and award were underway at the time of our last report, and some have
                           commenced since. We assessed the actions DOD describes in its report
                           to the Congress, and in some cases identified other activities DOD is
                           undertaking to obtain and incorporate needed information into upcoming
                           contract negotiations and award.


Recommendation 1:          We made this recommendation because the development of the new
Conduct an Independent     EELV acquisition strategy was predicated in part on the need to stabilize
Assessment of the Health   a vulnerable launch industrial base, yet at the time of our review, we
                           found that DOD lacked reliable information on the health of the industrial
of the U.S. Launch         base, including the need for stabilization. DOD also lacked independent
Industrial Base, Paying    analysis demonstrating the effect an EELV block buy would have in
Special Attention to       stabilizing the industrial base. Additionally, the predicted rise in engine
Engine Manufacturers       prices was a primary driver of expected increases in launch vehicle costs,
                           and DOD efforts to gain insight into the price increases were still in the
                           early stages.

                           Action underway; expected to complete. Since our report, DOD has
                           completed or obtained independent cost estimates for two EELV engines,
                           completed a study of the liquid rocket engine industrial base, and begun
                           efforts to develop a national rocket propulsion strategy with NASA as
                           mandated by the Congress in the fiscal year 2012 NDAA. DOD is also
                           participating in an in-depth assessment of the space sector industrial
                           base, but the results from this effort are not expected to inform upcoming
                           EELV contract negotiations and award.

                           The NRO Cost Analysis Improvement Group conducted an independent
                           cost assessment of the RL-10 upper stage engine, a version of which is
                           used on both the Atlas V and Delta IV launch vehicles. The assessment
                           examined production costs of each engine variant, existing inventory, and
                           engine price estimates for the anticipated block buy of EELVs, among
                           other things. Additionally, the Air Force Cost Analysis Agency conducted
                           a cost assessment of the main engine used on Delta IV launch vehicles,
                           known as the RS-68, that analyzed estimated and actual labor hours,
                           subcontractor materials, and overhead rates. Both assessments provide
                           some explanation for the increased engine price estimates in recent
                           years, and contain detailed information on pricing that EELV contracting
                           officials told us they can use to assure reasonable prices in upcoming
                           EELV contract negotiations.




                           Page 8                             GAO-12-822 Evolved Expendable Launch Vehicle
A December 2011 DOD report on the liquid rocket engine industrial base
highlights recent NASA program changes that have contributed to an
unstable supplier base. The report, issued by the Office of the Under
Secretary of Defense for Acquisition, Technology, and Logistics
USD(AT&L), Manufacturing and Industrial Base Policy office, indicates
that DOD must sustain this base to meet national security space launch
requirements, and that all of the liquid rocket engines currently supporting
these requirements are associated with the EELV program. The report
provides evidence of instability in the supplier base and highlights the
need for one of the expected benefits of an EELV block buy—a
predictable and steady rate of production. But it also concludes that
production activities alone will not be sufficient to protect critical skills, and
that research and development programs are required to sustain the
industry.10

A March 2011 DOD report of the solid rocket motor industrial base
reached similar conclusions, and supporting documentation indicates that
DOD investment in research and development is inadequate. Both
reports also hold industry accountable for aligning their production
capacity with current and future market demand. We spoke with officials
involved in these and other defense industrial base studies, who asserted
that an EELV block buy could ameliorate some of the negative impact
that the Space Shuttle program retirement had on the propulsion
industrial base by “leveling out” government quantity orders, and
providing suppliers with a predictable rate of production for the duration of
an EELV block buy contract.

In its fiscal year 2012 NDAA, the Congress indicated its belief that the
sustainment of the liquid rocket engine and solid rocket motor industrial
bases is a national challenge spanning multiple departments, and
established a requirement for a national rocket propulsion strategy.11 The
strategy, to be transmitted by the President, is to include details on the
effects of NASA program cancellations on the liquid rocket engine and
solid rocket motor industrial bases, potential mitigation plans, current and



10
  According to the report, NASA’s Space Shuttle program has been the primary stabilizing
factor for liquid rocket engine industrial capabilities for decades, and its recent retirement
has put the industry in jeopardy.
11
  National Defense Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, § 1095
(2011).




Page 9                                      GAO-12-822 Evolved Expendable Launch Vehicle
future missile requirements and options and recommendations for
interagency coordination to strengthen both supplier bases. According to
DOD and NASA officials, this effort is early in development.

In commenting on our September 2011 report, DOD indicated that
USD(AT&L) had begun a tier-by-tier evaluation of the space sector and
other industrial sectors, that would provide a "comprehensive
understanding of not only the prime contractors but the subcontractors
and suppliers" of vital components, subsystems, and services. Since that
time, the space sector effort has evolved into a separate, parallel, and
significantly larger effort, and its end-date is currently to be determined.
According to Air Force officials, the partnership with Department of
Commerce on this effort arose in part because the Department of
Commerce has authority to compel participation and disclosure of data
that the DOD does not have. The larger space sector evaluation is being
conducted by the Department of Commerce, Bureau of Industry and
Security, in cooperation with the Air Force, NRO, and NASA through a
comprehensive survey intended to provide a greater understanding of the
industrial supply chain that supports the development, production, and
sustainment of products and services across the defense, intelligence
community, civil and commercial space sectors.12 More than nine
thousand surveys are expected to be sent to space sector companies in
an effort to provide the U.S. Government with a baseline of the health and
status of the space sector industrial base. Because the effort is still in the
early stages of development and implementation, results from this survey
are not expected to inform upcoming EELV contract negotiations or
award.




12
  The Department of Commerce, Bureau of Industry and Security, informed all Government
space-related offices of the survey in Memorandum for All Government Space-Related
Offices, Subject: Survey of the U.S. Space Industrial Base, dated September 13, 2011.




Page 10                                 GAO-12-822 Evolved Expendable Launch Vehicle
Recommendation 2:           We reported in September 2011 that DOD was gathering data to finalize
Reassess the Block Buy      its EELV acquisition strategy, but that it may not allow sufficient time to
Contract Length Given the   leverage the knowledge gained before finalizing the new strategy. The
                            strategy was finalized in November 2011 and states that the program
Additional Knowledge        leadership “believes it is essential to have more fidelity in the EELV
DOD Is Gaining as It        pricing strategy before making a long term contractual commitment.”
Finalizes Its New           Despite indications in DOD’s report to the Congress that the EELV block
Acquisition Strategy        buy contract will cover fiscal years 2013-2017, DOD officials emphasized
                            to us that no decision on the duration and quantity of the government
                            block buy commitment had been made, or would be until DOD fully
                            analyzes the information it plans to obtain. DOD officials indicate that
                            DOD intends to award a single-year bridge contract in fiscal year 2013 for
                            EELV launch capabilities to ensure DOD has sufficient time prior to EELV
                            block buy contract negotiations and award to incorporate the information
                            generated by this approach.

                            Action underway; expected to complete. DOD has initiated an
                            approach to obtain critical information prior to negotiating and awarding a
                            new EELV block buy contract. The approach addresses deficiencies
                            indentified in our report, including both the lack of a detailed risk analysis
                            of planned launches using DOD satellite program knowledge, and data
                            supporting contractor and subcontractor prices. Additionally, DOD has
                            assembled an independent team of retired military personnel with
                            experience in space launch, to assess the predicted production,
                            processing and launch capacity of potential new launch providers who
                            may ultimately compete with ULA for EELV-class launches. Preliminary
                            results of all three assessments are expected later this summer.

                            When we reported last, DOD had not assessed whether the satellites
                            planned for launch during fiscal years 2013-2017 would proceed as
                            scheduled. Without a confidence assessment of the planned launches,
                            we pointed out that DOD did not have a clear picture of the likely number
                            of launch vehicles it would need for that time period. We also noted that if
                            actual DOD launch rates followed historical ones, DOD could find itself
                            with a significant oversupply of launch vehicles, potentially requiring
                            storage, retest, and retooling. According to DOD officials, the Air Force’s
                            Space and Missile Systems Center is assessing the confidence
                            associated with each of the satellites planned for launch during the fiscal
                            year 2013-2017 time frame that will inform the likely number of launch




                            Page 11                              GAO-12-822 Evolved Expendable Launch Vehicle
vehicles needed for that period of time.13 DOD launch officials indicate
that the results of the confidence assessment will be weighed in
determining the terms of the EELV block buy contracts.

Another deficiency we identified in our last report was the lack of cost or
pricing data to support EELV prime contractor and subcontractor
proposals. For over a decade, EELV contracting officials have been
unable to access subcontractor cost or pricing data for hardware used on
Delta IV booster cores, and DOD contract auditors have consistently
found ULA proposals inadequate as a basis to negotiate contracts. To
address the lack of cost or pricing data, DOD is planning to conduct an in-
depth cost analysis of proposals from ULA and its subcontractors prior to
EELV contract negotiations and award. In cases where no data exists,
DOD officials indicate they intend to develop government estimates
based on commercial products and historical pricing trends. Most
significant to EELV contract negotiations may be an in-depth government
analysis of ULA and subcontractor pricing data, some analysis of which is
currently underway in advance of ULA’s certified pricing proposal
submission.

In its certified pricing proposal expected later this summer, ULA will
present price proposals for its Atlas V and Delta IV booster cores to cover
different launch quantities across several contract lengths. DOD officials
indicate they will attempt to obtain subcontractor materials and labor pool
costs to support an in-depth, full evaluation of the pricing proposal
submitted by ULA prior to contract negotiations and award. According to
DOD and ULA officials, some of the data requests are already underway.
The PEO for Space Launch indicates that these evaluations will undergo
peer review by senior pricing officials in the Office of the Secretary of
Defense prior to contract award.

Another assessment that will take place prior to EELV contract award is
an evaluation of the potential production capability and technology
development status of a new launch provider, and potential competitor of
ULA. DOD has authorized an assessment of a launch vehicle provider



13
  According to Air Force officials, the satellite confidence assessment will be based on
information from individual satellite program offices and contractors relating to the
development status, cost increases, schedule delays, and overall readiness to meet
planned launch dates, for each satellite currently planned for launch between fiscal years
2013 and 2017.




Page 12                                    GAO-12-822 Evolved Expendable Launch Vehicle
                            who may in the future be certified by the Air Force to compete with ULA
                            for EELV-class missions. The assessment is being conducted by retired
                            Air Force personnel with launch expertise. The results of this assessment
                            are expected to be finalized by the end of the fiscal year. DOD officials
                            stress that competition for national security space launches is a priority,
                            and recognize that the results of this assessment could inform strategic
                            planning for the EELV program. Gaining an understanding of the potential
                            production capacity and development timeframes of emerging
                            competitors to ULA can contribute to informed decisions as DOD
                            evaluates and negotiate sole-source proposals for the upcoming EELV
                            block buy.


Recommendation 3: Work      At the time of our report, NASA had not finalized the design of its heavy-
Closely with NASA to        lift Space Launch System (SLS), which could have potentially included
Ensure DOD Has Sufficient   one of the same engines currently used on EELVs. DOD cost evaluators
                            noted that the decision to use the same engine could significantly lower
Knowledge of NASA           the price of that engine to DOD, as infrastructure and labor costs would
Heavy-Lift Program          likely have been shared across both agencies. Accordingly, knowledge of
Decisions                   NASA’s design plans could have better positioned DOD to negotiate
                            EELV contracts.

                            Complete. Since our report last September, DOD has worked with NASA
                            to keep apprised of SLS heavy-lift decisions that could have bearing on
                            EELV contract negotiations, leverage knowledge across agencies, and
                            coordinate some limited technology development, according to officials at
                            both agencies. According to NASA officials, NASA finalized design plans
                            for its SLS heavy-lift launch vehicle late last year and provided a briefing
                            to DOD summarizing its decisions. The NASA SLS vehicle will not use
                            the RS-68 engine that is currently used on EELVs, and will instead use an
                            RS-25D as its main engine—this was also the Space Shuttle main
                            engine—and a newer J-2X engine for the upper stage engine. NASA will
                            use the RS-25Ds already in NASA’s inventory from the Space Shuttle
                            program, which officials say provided the earliest path at the lowest cost
                            for developing a heavy lift capability, as using the RS-68 engine would
                            have required design modification and added development cost. DOD
                            reported to the Congress that the use of the RS-25 and J-2X engines in
                            the SLS program will likely have a positive impact on the EELV supplier
                            business base, possibly resulting in lower overhead rates to DOD, the
                            NRO, and NASA for EELVs. NASA officials added that while the supplier
                            base for the RS-68 and RS-25 production lines are not identical, the
                            manufacturer of both engines is the same, and plans to bolster its
                            supplier base by maximizing commonality in the supply chain for both


                            Page 13                             GAO-12-822 Evolved Expendable Launch Vehicle
                            engines. In addition to discussing SLS design and development progress,
                            launch officials at both agencies told us they meet quarterly to share
                            knowledge resulting from launch acquisitions and operations, new entrant
                            certification, and space industrial base studies.


Recommendation 4:           On May 2, 2007, the Air Force waived the requirement for Boeing to
Refrain from Waiving FAR    provide certified cost or pricing data for a significant amount of hardware
Requirements for            associated with the production contract. The hardware is still being used,
                            and the waiver, while officials believe it afforded DOD a reduced price,
Contractor and              has limited government insight into cost or pricing data on a large lot of
Subcontractor Certified     launch vehicle hardware, including engines, purchased at that time. The
Cost and Pricing Data as    lack of certified cost or pricing data for this hardware has contributed to
DOD Finalizes Its New       years of Defense Contract Audit Agency (DCAA) reports that consistently
EELV Acquisition Strategy   find ULA proposals inadequate for government evaluation and contract
                            negotiation. Given that the waiver limited government insight into the
                            reasonableness of launch vehicle prices, we recommended that DOD
                            refrain from waiving such requirements under its new acquisition strategy
                            and subsequent EELV block buy.

                            Complete. DOD indicates it has no intention of waiving FAR
                            requirements for certified cost or pricing data in implementing the EELV
                            acquisition strategy. According to DOD officials, a government cost
                            assessment team plans to obtain and analyze a sample of the missing
                            subcontractor cost or pricing data. The team will also assess prices for
                            ULA’s existing launch vehicle inventory intended for use under the
                            upcoming block buy—DOD estimates the excess inventory values
                            between $260-300 million. DCAA will be involved in reviewing contractor
                            and subcontractor proposals and cost or pricing data, and though DCAA
                            officials expressed concern that they may not have time to do so prior to
                            contract award, DOD officials indicate DOD will not award new EELV
                            contracts prior to DCAA evaluation of these proposals. ULA business
                            systems determine the output or cost data which goes into proposed
                            contracts and provides a reasonable basis for the government to
                            negotiate a contract deal. DCAA audits of these systems may still find
                            deficiencies.

                            In addition to insufficient cost or pricing data, our previous report
                            highlighted DCAA findings that some ULA business systems were
                            inadequate or immature. We made no recommendations related to the
                            business systems, as audits were planned or underway at the time of our
                            last report. Both DCAA and the Defense Contract Management Agency
                            (DCMA) have continued to evaluate ULA’s six business systems and


                            Page 14                             GAO-12-822 Evolved Expendable Launch Vehicle
                                      subsystems to determine their compliance with the Defense Federal
                                      Acquisition Regulation Supplement (DFARS). If the audits result in
                                      findings of significant deficiencies that rise to the level of a material
                                      weakness in the system, DCAA would report those deficiencies as
                                      potentially noncompliant with the business system criteria. See table 2 for
                                      the status of ULA business systems evaluations as of July 2012.
                                      Following each evaluation, and in some cases, corrective actions by ULA,
                                      the DCMA Divisional Administrative Contract Officer (DACO) will make a
                                      final determination of the adequacy or compliance of the system.

Table 2: Summary of ULA Business System Evaluations

Business system       Lead agency   DACO determination                              Status of evaluation
Accounting            DCAA          Not evaluated, final determination              Final DCAA audit report February 2012 identified
                                    expected September 2012                         10 DFARS noncompliances out of 18
Estimating            DCAA          Not evaluated, final determination date Final DCAA audit report expected August 2012
                                    unknown
Earned Value          DCMA          Approved (initial), final determination         DCMA validation review April 2012 identified 8
Management                          date unknown                                    high-risk deficiencies; ULA provided its response
                                                                                    on June 4, 2012
Material Management   DCAA          Not evaluated, final determination date Expected start date November 2012
& Accounting                        unknown
Property Control      DCMA          Approved                                        February 2012
Purchasing            DCMA          Approved                                        September 2011
                                      Source: GAO analysis of DCAA and DCMA data.




Recommendation 5:                     We reported in September 2011 that DOD has little insight into the costs,
Ensure Launch Mission                 adequacy or excess of its mission assurance activities. Industry and DOD
Assurance Activities Are              studies describe launch mission assurance as activities undertaken
                                      throughout the lifecycle of a launch vehicle development program and
Sufficient and Not                    through launch to assure success and safety. DOD officials maintained at
Excessive, and Identify               the time of our last report that mission assurance costs may not be
Ways to Incentivize the               severable from the many launch activities in which they are integrated,
Prime Contractor                      and that the level of effort required to quantify them would likely be
                                      outweighed by any cost savings identified in the process.

                                      Some action taken; more action needed. DOD restructured the EELV
                                      Launch Capability contract from a cost-plus award fee-, to a cost-plus
                                      incentive fee contract, to incentivize ULA to find efficiencies and reduce




                                      Page 15                                           GAO-12-822 Evolved Expendable Launch Vehicle
costs while maintaining mission assurance.14 This change affords ULA
flexibility in determining the areas in which efficiencies can be gained
without being overly prescriptive. Additionally, Air Force officials recently
conducted a comprehensive evaluation of missions in the launch manifest
with an eye toward reducing redundant steps in the independent launch
verification matrix.15 Air Force officials said that while the verification
activities for each mission have always been tailored on a case-by-case
basis at the start of a launch vehicle acquisition, the current missions in
the launch manifest represent a unique opportunity to revisit the matrix
and identify potential efficiencies because the current launch manifest
contains more second-, and third-flight missions, or re-flights, than it has
in decades. The “re-flight era,” as some officials called it, presented Air
Force officials with an opportunity to revisit the activities typically
undertaken prior to a first-flight launch, and effect the suspension of
redundancies.

Independent launch verification is only a small percentage of overall
launch vehicle mission assurance activities, however, and most mission
assurance activities remain undefined and unquantified. DOD officials are
working to develop standards for potential new launch providers, but
actions are still needed to address defining mission assurance
requirements. As we previously reported, defining mission assurance
requirements for national security space launches is important as new
entrants emerge who will have to meet and account for defined mission
assurance requirements to compete with ULA for EELV-class launches.




14
  In July 2011, the EELV program awarded a Launch Capability contract as a cost-plus
incentive fee contract. Air Force officials stated the contract includes a mission
performance incentive plan and that the change in contract type is intended to incentivize
ULA to deliver mission success at a lower cost.
15
  The Launch Verification Matrix is a tool used for tracking closure of mission assurance
activities, reviews and analyses related to mission assurance.




Page 16                                    GAO-12-822 Evolved Expendable Launch Vehicle
Recommendation 6:           When we last reported on EELV, the Secretary of the Air Force, Director
Examine How Broader         of the NRO, and the Administrator of NASA had signed an agreement
Launch Issues, Such as      formalizing their commitment to more closely coordinate launch vehicle
                            acquisitions, but implementation details were largely undecided and the
Greater Coordination        certification guide had yet to be finalized. Additionally, fragmented launch
across Federal Agencies,    acquisitions contributed to pass-through fees levied on government
Can Increase Efficiencies   launch agencies. For example, according to a 2010 Air Force study, ULA
and Cost Savings.           charges up to an 18 percent profit on top of engine prices and to act as a
                            broker for the program office on commodities like propellants bought from
                            other government agencies, like NASA and the Defense Logistics
                            Agency. These are the costs the program could avoid if it were to
                            coordinate purchases directly from other agencies.

                            Some action taken; more action needed. Since our report, significant
                            formal and ad hoc coordination has taken place across the DOD, NASA,
                            and NRO, in areas such as new entrant certification and launch
                            technology development, but officials at DOD and NASA indicate actions
                            to implement broader efficiencies in launch acquisitions are not yet
                            planned.

                            DOD finalized its certification guide for new launch providers in October
                            2011 following much collaboration with NASA and NRO. In addition to
                            coordinating the final certification guide, officials at DOD, NASA and NRO
                            meet regularly to discuss launch issues, such as vehicle design,
                            technology development and the space industrial base. The Commander,
                            Air Force Space Command, and the NASA Administrator also hold
                            quarterly summit meetings, and DOD and NASA program-level launch
                            officials at each agency hold monthly and ad hoc meetings to discuss
                            upcoming launches and to share lessons learned.

                            In December 2011, NASA, announced establishment of four expert teams
                            as part of the National Institute for Rocket Propulsion Systems. These
                            teams are comprised of specialists whose purpose is to tackle a series of
                            challenges facing the rocket propulsion industrial base, which is at risk to
                            industry downsizing and a shortage of new propulsion programs. The
                            teams, consisting of propulsion experts representing government,
                            industry, and academia lead by NASA’s Marshall Space Flight Center,
                            have been created to develop action plans addressing challenges
                            identified including fostering access to facilities and expertise and
                            developing and implementing an integrated science and technology plan
                            for propulsions systems, among others.




                            Page 17                             GAO-12-822 Evolved Expendable Launch Vehicle
                         DOD and NASA also continue to work together on launch technology
                         development efforts, including several new and ongoing efforts to
                         upgrade existing engines and develop alternate engines. DOD and NASA
                         are collaborating for example, on upperstage engine technology research
                         and hydrocarbon booster engine projects jointly managed and executed
                         by the Air Force Research Laboratory and NASA as part of the Integrated
                         High-Payoff Rocket Propulsion Technology program.16 Additionally, both
                         agencies contribute to NASA’s Ground Systems Development and
                         Operations program, a modernization effort to develop NASA ground
                         systems and refurbish infrastructure for the next generation of rockets.

                         The collaboration among the three agencies on the new entrant
                         certification guide represents a step toward establishing greater
                         coordination in governmentwide launch acquisitions, but, according to
                         officials, DOD and NASA plan to continue to acquire launch vehicles on
                         separate contracts. We have previously reported that space launch
                         acquisition processes for NASA and DOD are not formally coordinated,
                         duplicate one another, and may not fully leverage the government’s
                         investment because the government is not acting as a single buyer.17 And
                         though communication takes place among the agencies, officials at DOD
                         and NASA indicate little action has been taken to address broader launch
                         issues governmentwide to leverage government buying power or
                         coordinate launch and range acquisitions.


Recommendation 7:        We previously reported that national space policy and varied launch
Develop a Science and    studies point to a lack of investment in the future of the U.S. launch
Technology Plan for      industry, and we noted that the future of U.S. launch depends in part on
                         next-generation technology, and decision makers could benefit from early
Improving and Evolving   insight into the path forward for launch.
Launch Technologies
                         No action taken. Since our report, no launch technology plan has been
                         developed. DOD investment in future launch technologies remains
                         minimal, and DOD officials indicate developing a science and technology



                         16
                           The Integrated High Payoff Rocket Propulsion Technology Program is a structured
                         government and industry program to improve U.S. rocket propulsion systems.
                         17
                           GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and
                         Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington,
                         D.C.: Feb. 28, 2012).




                         Page 18                                  GAO-12-822 Evolved Expendable Launch Vehicle
plan is not a high priority. DOD officials noted that in the current budget
climate, increased investment in launch technology research and
development is unlikely. In some cases, technology efforts have been
underway for 5 years or more, but receive minimal funding. Less than $8
million of the roughly $1.7 billion in the EELV budget for fiscal year 2013
is dedicated to launch technology research and development, with no
funding budgeted after 2014. However, national policy and EELV and
industrial base sustainment plans highlight the need for significant
technology development and predict dire consequences if the current lack
of development is sustained.

In June 2011, the EELV program provided a sustainment plan to the
Congress which identified required technology and investments to
maintain the program’s current capability.18 The investments identified in
the plan include $80 million for the RL10C engine conversion activities,
$500 million in non-recurring costs over 5 years to develop a new or
evolved upper stage engine, and $100 million each year to sustain and
replace avionics, ordnance, ground command, control, and
communications, and launch infrastructure. The plan states that due to
the limited demand for some types of materials and components for
propulsion, avionics, and ordnance systems, which can include complex
materials, electronics, and computers, special emphasis must be placed
on designing and qualifying new designs to mitigate obsolescence issues.
Many of the parts across the systems either have designs that have
become obsolete or are no longer produced. For example, to sustain
some EELV mission-critical components, the Air Force is drafting a time
phased plan to (1) identify obsolescence issues, (2) consolidate suppliers
and components to improve the health of the supplier base by ordering
larger quantities of one version versus smaller quantities of multiple
versions, and (3) identify opportunities to insert new technology and
design common systems, thereby increasing system reliability and
interoperability.

National policies, such as the National Security Presidential Directive-40,
place a requirement on the government to sustain the EELV program and
preserve its systems that provide access to space for the foreseeable


18
  The House of Representatives Committee on Appropriations directed the Secretary of
the Air Force, in consultation with the Director of the National Reconnaissance Office, to
submit an EELV sustainment plan to the congressional defense committees by January 4,
2010. H. R. Rep. No. 111-230, at 277 (2009).




Page 19                                    GAO-12-822 Evolved Expendable Launch Vehicle
              future, and the 2010 National Space Policy recognizes a need to continue
              technology development directing the Secretary of Defense, with NASA,
              to sustain technology development for the next generation of launch.19
              The December 2011 liquid rocket engine report indicates the current lack
              of design opportunities creates a challenge for industry to sustain a skilled
              workforce for future liquid rocket engine development programs, adding
              that a loss of critical skills and resources to continue development would
              be detrimental to mission success.


              DOD is taking steps to address deficiencies we identified in our
Conclusions   September 2011 report and obtain the knowledge it needs to negotiate
              and award contracts supporting its new EELV acquisition strategy. We
              are encouraged by the wide range of actions taken and underway,
              although the quality of data to be yielded through these various activities
              is to be determined. Much of the value of the information obtained will
              depend on its quality and the extent to which DOD makes use of the
              information it obtains. That being said, the information likely to be
              available, coupled with actions such as not waiving access to cost or
              pricing data and providing more deliberative time via a bridge contract,
              should put DOD in a much better position to decide how to proceed with
              EELV than when we last reported. Near-term, it is imperative that DOD
              follow through with its plan to award a bridge contract for fiscal year 2013
              and allow its contracting officials enough time to incorporate the
              information it is gaining prior to awarding EELV block buy contracts, and
              that DOD remain flexible in awarding the block buy contract until it has all
              the knowledge it needs. Additionally, some information DOD is gaining
              could set the stage for longer-term strategic planning for the program,
              especially in critical launch technology research and development
              decisions. Investing in a longer-term perspective for launch acquisitions is
              important to fully leverage the government’s buying power and maintain a
              healthy industrial base.




              19
               National Space Policy of the United States of America, Intersector Guidelines Section,
              Pages. 5. 7, & 11 (June 28, 2010).




              Page 20                                   GAO-12-822 Evolved Expendable Launch Vehicle
                  DOD reviewed a draft of this report and concurred, with technical
Agency Comments   comments, which we incorporated in the final report as appropriate. See
                  appendix II for DOD’s comments.


                  We are sending copies of this report to appropriate congressional
                  committees, the Secretary of Defense, and other interested parties. In
                  addition, the report will be available at no charge on our website at
                  http://www.gao.gov.

                  If you have any questions about this report, please contact me at
                  (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of
                  Congressional Relations and Public Affairs may be found on the last page
                  of this letter. Key contributors to this report are found in appendix III.




                  Cristina T. Chaplain
                  Director
                  Acquisition and Sourcing Management




                  Page 21                            GAO-12-822 Evolved Expendable Launch Vehicle
List of Committees

The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate

The Honorable Dianne Feinstein
Chairman
The Honorable Saxby Chambliss
Ranking Member
Select Committee on Intelligence
United States Senate

The Honorable Daniel Inouye
Chairman
The Honorable Thad Cochran
Ranking Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Howard P. “Buck” McKeon
Chairman
The Honorable Adam Smith
Ranking Member
Committee on Armed Services
House of Representatives

The Honorable Mike Rogers
Chairman
The Honorable C.A. “Dutch” Ruppersberger, III
Ranking Member
Permanent Select Committee on Intelligence
House of Representatives




Page 22                            GAO-12-822 Evolved Expendable Launch Vehicle
The Honorable C.W. Bill Young
Chairman
The Honorable Norman Dicks
Ranking Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives




Page 23                         GAO-12-822 Evolved Expendable Launch Vehicle
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




             To assess the information contained in the Department of Defense (DOD)
             report to the Congress mandated by the fiscal year 2012 National
             Defense Authorization Act (NDAA), we reviewed DOD’s report and the
             supporting information contained therein, the Evolved Expendable
             Launch Vehicle (EELV) Acquisition Strategy, National Aeronautics and
             Space Administration (NASA) reports on its Space Launch System
             heavy-lift launch vehicle program, and DOD documentation of efforts
             underway to obtain sufficient information to negotiate EELV contracts; we
             assessed recent defense industrial base studies, DOD reports on United
             Launch Alliance (ULA) business systems from the Defense Contract Audit
             Agency (DCAA) and Defense Contract Management Agency (DCMA),
             and the EELV Sustainment Plan. We also examined EELV program
             budget and performance documents, independent cost assessments for
             two EELV engines, and compared historical and current launch
             manifests. We interviewed DOD officials responsible for auditing ULA’s
             business systems, and summarized the results or status of six subsystem
             audits. We interviewed or obtained perspectives from launch officials in
             various military and civilian government agencies and ULA. Through our
             review of DOD efforts, industrial base studies, and other relevant
             government and industry reports, our interviews with DOD, NASA, and
             contractor officials, and our review of an NRO report, we assessed the
             extent to which DOD has taken action to implement each of our seven
             recommendations made in GAO-11-641. Officials from DOD reviewed a
             draft of this report and provided technical comments, which we
             incorporated in the final report as appropriate. We did not evaluate
             progress made toward implementing prior GAO recommendations, for
             example from our 2008 report, as this was not part of the fiscal year 2012
             National Defense Authorization Act mandate.

             In summarizing the status of each recommendation, we assigned one of
             the following four status assessments to each of the recommendations.

             1. Complete. The recommended action item has been accomplished.

             2. Action underway; expected to complete. Steps have been taken to
                complete the recommended action item, and the item is expected to
                be completed in the near term.

             3. Some action taken; more action needed. Steps have been taken to
                complete the recommended action item, but more action is needed.




             Page 24                             GAO-12-822 Evolved Expendable Launch Vehicle
Appendix I: Scope and Methodology




4. No action taken. No action has been taken to address the
   recommended action item, and the item is not expected to be
   completed.

We interviewed officials in Washington, D.C. at the Office of the Secretary
of Defense, Cost Assessment and Program Evaluation; and the Offices of
the Under Secretary of Defense for Acquisition, Technology and
Logistics, Defense Procurement and Acquisition Policy Directorate; Office
of the Under Secretary of Defense for Acquisition for Manufacturing and
Industrial Base Policy; and the National Aeronautics and Space
Administration; in addition, we interviewed the Program Executive Officer
(PEO) for Space Launch, Launch and Range Systems Directorate
Commander; various EELV contracting officials; as well as officials at the
Office of the Assistant Secretary of the Air Force for Acquisitions to
discuss ongoing initiatives with respect to the space industrial base. We
talked to the United Launch Alliance regarding its business systems, the
EELV acquisition strategy, and mission assurance. We reviewed relevant
reports from and interviewed officials directly involved in overseeing the
program in DCAA, Littleton, Colorado, and in DCMA, Englewood,
Colorado.




Page 25                             GAO-12-822 Evolved Expendable Launch Vehicle
Appendix II: Comments from the Department
             Appendix II: Comments from the Department
             of Defense



of Defense




             Page 26                                     GAO-12-822 Evolved Expendable Launch Vehicle
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Cristina T. Chaplain, (202) 512-4841 or chaplainc@gao.gov
Contact
                  Key contributors to this report were Art Gallegos, Assistant Director;
Acknowledgments   Claire Buck; Desirée Cunningham; John Krump, and Bob Swierczek.




(121051)
                  Page 27                               GAO-12-822 Evolved Expendable Launch Vehicle
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