NASA: Major Management Challenges

Published by the Government Accountability Office on 1997-07-24.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on Commerce, Science, and
                          Transportation, U.S. Senate

For Release on Delivery
Expected at
9:30 a.m., EDT
July 24, 1997

                          Major Management
                          Statement of Thomas J. Schulz, Associate Director,
                          Defense Acquisitions Issues, National Security and
                          International Affairs Division

          Mr. Chairman and Members of the Committee:

          We are pleased to be here to discuss the major management challenges
          currently facing the National Aeronautics and Space Administration
          (NASA). We have previously testified before you regarding similar
          management challenges affecting other major federal agencies under this
          Committee’s jurisdiction. Our testimony today will (1) highlight the NASA
          programs and activities we see as priorities for possible congressional
          action and oversight and (2) discuss how the Government Performance
          and Results Act could help in addressing the major management
          challenges that NASA faces.

          NASA has identified the major overall challenge it faces: to manage a
Summary   world-class research and development agency for aeronautics and space
          science and technology in an environment of diminishing resources. NASA
          has reduced its program plans substantially over the past several years to
          align them better with likely budgets. However, recent plans for balancing
          the federal budget may require NASA to absorb additional reductions.

          To help adjust its programs to likely budgets, NASA began a number of
          years ago to develop and refine a strategic plan and strategic planning
          process. As you have heard from prior witnesses in this series of hearings,
          key laws, such as the Government Performance and Results Act of 1993
          and the Chief Financial Officers Act of 1990, are intended to provide a
          framework for congressional oversight of agency strategic planning and
          management to accomplish goals. NASA’s strategic planning provides an
          appropriate starting point for discussing many of the management
          challenges the agency faces.

          Overall, we see 11 challenges for NASA management. These challenges fall
          into two categories: three that require immediate attention and eight that
          warrant “watchful waiting,” or more routine, periodic oversight. A primary
          distinction between the two categories is that the management challenges
          in our first category may require congressional action to help resolve. At
          the Committee’s request, we provided information several months ago on
          all 11 challenges. We understand that this information will be made part of
          the record of these hearings. Therefore, we will briefly summarize only a
          few of the challenges today.

          Page 1                                                    GAO/T-NSIAD-97-178
                                The management challenges that may require congressional action are
Challenges That May         •   controlling space station costs,
Require Congressional       •   managing budget carryover balances, and
                            •   streamlining management of test facilities.
Controlling Space Station       We are currently conducting a follow-up review to our report and
Costs                           testimony last year on the continuing cost control difficulties in the space
                                station program.1 Last month, we testified before the Science, Technology,
                                and Space Subcommittee on the program’s worsening cost control
                                problems.2 At that time, we discussed the current and prospective adverse
                                cost impacts of the Russian Service Module delay and noted that the cost
                                and schedule performance of the station’s prime contractor continues to
                                deteriorate unabated.

                                By far, the greatest future cost growth risk NASA faces in the space station
                                program is posed by the potential continuation of the Russian
                                government’s poor performance. NASA recently began to implement the
                                first step of a three-step recovery plan for addressing this problem. Step 1
                                includes adjusting the space station program to the 8-month delay in the
                                availability of the Service Module and providing up to $300 million in
                                additional fiscal year 1997 and 1998 funding to help provide backup
                                capability if the Service Module delivery were to slip by as much as
                                another year. NASA will decide later this year on whether to initiate step 2.
                                If that step becomes necessary, the primary activity would be to
                                permanently replace the Service Module’s power, control, and habitation
                                capabilities at an estimated cost of $750 million. The need for step 3,
                                which would involve space station resupply missions using the space
                                shuttle or other launch systems, does not have to be decided until next
                                year. NASA has not estimated the cost of step 3, but the cost would be
                                considerable. Other areas of cost risk and cost growth also affect the
                                program, including the added cost of achieving the assembly complete
                                milestone due to the initial Service Module delay, continued prime
                                contractor cost control problems, and new integrated testing

                                Our current follow-up review is being done at the request of Senator Bumpers and Representative
                                Dingell. Our report and testimony last year were entitled: Space Station: Cost Control Difficulties
                                Continue (GAO/NSIAD-96-135, July 17, 1996) and (GAO/T-NSIAD-96-210, July 24, 1996).
                                 Space Station: Cost Control Problems Continue to Worsen (GAO/T-NSIAD-97-177, June 18, 1997).

                                Page 2                                                                         GAO/T-NSIAD-97-178
                          All of these areas of cost growth and cost risk, if realized, could add
                          billions of dollars to the cost of the space station program. However, NASA
                          will not have cost estimates for several of these areas before the Congress
                          completes action on NASA’s funding request for fiscal year 1998. After this
                          information becomes available, the Congress may wish to consider
                          reviewing the space station program. Such a review could focus on
                          reaching agreement with the executive branch on the future scope and
                          cost level for a station program that merits continued U.S. government

Managing Budget           Last summer, we reported and testified on the wide range of budget
Carryover Balances        carryover balances among NASA’s programs and the high balances carried
                          by some of them.3 NASA said it would improve the management of
                          carryover balances and reduce their size. However, the actual carryover
                          balance at the end of fiscal year 1996 was about $4.5 billion—$1 billion
                          higher than estimated by NASA halfway through the fiscal year. This
                          balance was well above the carryover balance level suggested by a NASA
                          internal study. That study said that a carryover balance equivalent to
                          3 months of budget authority should be the threshold. NASA’s carryover
                          balance at the end of fiscal year 1996 exceeded this threshold by over
                          $1 billion.

                          NASA’s  internal study also recommended a series of actions to reduce and
                          better manage carryover balances. NASA has made progress in
                          implementing the recommendations. However, it is too early to tell what
                          impact NASA’s actions will have on its balances. NASA is currently predicting
                          that its carryover balance at the end of fiscal year 1997 will be significantly
                          lower. However, some individual programs still plan to carry over large
                          portions of their budgets. Unless NASA demonstrates that it can control its
                          carryover balances or justifies the large carryover balances seen in some
                          programs, the Congress may wish to use excess carryover balances to help
                          meet NASA’s request for new obligational authority.

Streamlining Management   NASA and the Department of Defense (DOD) separately manage a variety of
of Test Facilities        similar test facilities, such as rocket propulsion test stands and wind
                          tunnels. Last year, NASA and DOD teams were directed to find ways to
                          reduce investment and increase the effectiveness and efficiency of six

                           NASA Budget: Carryover Balances for Selected Programs (GAO/NSIAD-96-206, July 16, 1996) and
                          (GAO/T-NSIAD-96-207, July 18, 1996).

                          Page 3                                                                    GAO/T-NSIAD-97-178
                           types of aerospace facilities. The teams recommended the formation of
                           NASA and DOD alliances to continue cooperation in these areas.

                           Although NASA has suggested the national management of wind tunnels
                           and NASA and DOD recently signed an agreement in principle to move in that
                           direction, overall progress in establishing and initiating operations of the
                           alliances has been uneven. Most of the alliances did not organize or meet
                           at all during the past year, and only one has contributed to an
                           investment-related decision.

                           Despite a commitment to increased cooperation, NASA and DOD are
                           separately evaluating consolidation of selected test facilities without the
                           participation of the other agency. In some areas, the separate search for
                           external customers could result in NASA and DOD facilities competing
                           against each other. This situation is most likely in the area of rocket engine
                           test facilities, which each agency has in excess of its existing and likely
                           future requirements. In a September 1996 testimony, we said that NASA
                           might need outside help in reducing its facilities.4 We have not seen
                           anything since that time to change our basic view. As a result, we still
                           believe that the Congress may wish to consider an independent means to
                           determine an appropriate mix of aerospace test facilities governmentwide.

                           Our watchful waiting category covers the following eight management
Management                 challenges:
Challenges Requiring
Periodic Oversight     •   overseeing space shuttle operations,
                       •   reducing Earth Observing System cost,
                       •   helping develop new launch system technologies,
                       •   preserving an adequate workforce while downsizing,
                       •   developing a fully integrated financial management system,
                       •   determining environmental liability,
                       •   overseeing contract management activities, and
                       •   improving information technology management.

                           Many of these challenges represent long and difficult undertakings, and
                           some of them are in the early stages of development or implementation.
                           Some of the challenges make total or substantive changes in the way NASA
                           has traditionally done business. Examples include having a contractor
                           operate the space shuttle under greatly reduced NASA supervision,

                            NASA Infrastructure: Challenges to Achieving Reductions and Efficiencies (GAO/T-NSIAD-96-238,
                           Sept. 11, 1996.)

                           Page 4                                                                     GAO/T-NSIAD-97-178
                        researching and developing launch system technology under a cooperative
                        agreement with the private sector, focusing contracts more on
                        performance and outcomes rather than process, and implementing
                        information technology management improvements.

                        This group of challenges also involves providing new, needed capabilities
                        for managing data. Examples include organizing NASA’s business and
                        management practices to help implement a fully integrated financial
                        management system and organizing and disseminating Earth Observing
                        System data.

                        Finally, the impacts of two of the challenges on NASA’s future human and
                        financial resources are not currently well understood. These challenges
                        involve determining future workforce downsizing impacts on research or
                        safety and establishing the level of financial liability for environmental

                        By suggesting that watchful waiting is an appropriate oversight strategy at
                        this time for this group of management issues, we are not implying that
                        these issues are trouble free. In fact, some of them are currently
                        encountering developmental difficulties. For example, the development of
                        the information systems portion of the Earth Observing System is
                        currently behind schedule. The failure to adequately manage these
                        challenges could adversely affect NASA’s ability to achieve its goals. To
                        illustrate, risks could increase if NASA loses too many highly skilled
                        employees too soon or if NASA’s contractors are unable to successfully
                        adapt to, and adequately perform in, their new roles in developing and
                        operating space transportation systems. Any such threat would warrant
                        immediate congressional attention and potential congressional action.

                        To this point, we have specifically suggested that increased congressional
Further Observations    oversight is necessary to help NASA deal with its current management
on Possible Solutions   challenges and that adequately addressing several challenges may require
                        congressional action. In a more general context, the consultative
                        framework of the Government Performance and Results Act, other recent
                        laws intended to improve federal government management, and NASA’s
                        strategic planning process provide an opportunity to obtain a better
                        understanding of what goals NASA programs are supposed to achieve and
                        how they are progressing toward those goals.

                        Page 5                                                    GAO/T-NSIAD-97-178
           Now may be an appropriate time to start focusing on a crucial element
           required by the Results Act—the development and application of
           performance measures that are linked to clear, focused, and measurable
           goals—especially as they relate to those NASA programs that currently or
           prospectively face challenging problems. For example, the essential
           questions to be answered about the space station program could be
           (1) whether it has priorities and clearly understood measures for goals,
           such as advancing human exploration of space, advancing science and
           technology, establishing U.S. leadership in international cooperation in
           space, and managing a complex program in a timely and cost-effective
           manner and (2) whether these goals are the appropriate ones. Similar
           questions need to be asked about every other NASA program.

           Neither the Congress nor NASA should expect effective management
           performance or clear program outcomes without well understood and
           agreed-upon goals. Unless goals are well defined, it is more difficult to
           assess the impact of, and develop a consensus on dealing with, significant
           events, such as Russia’s performance problems associated with the space
           station. The Results Act provides an opportunity to discuss and agree on
           goals, their relative priorities, and measurements of progress toward them.

           We have previously reported that establishing goals and measuring
           performance in a research and development environment, such as NASA’s,
           are very difficult.5 NASA’s goals must necessarily be ambitious to keep the
           agency on the cutting edge of science and technology. However, setting
           high goals carries an increased risk of failure. For the Results Act to
           function fully and effectively for NASA, it is vital that there be a common
           understanding of the agency’s specific goals among the key parties—NASA,
           the administration, and the Congress. Ultimately, improved management
           can be both a cause and a product of working toward mutually agreed,
           focused goals that are supported by an adequate commitment of

           This concludes my prepared statement, Mr. Chairman. We will be happy to
           respond at this time to any questions you or members of the Committee
           may have.

            Measuring Performance: Strengths and Limitations of Research Indicators (GAO/RCED-97-91, Mar. 21,

(707263)   Page 6                                                                     GAO/T-NSIAD-97-178
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