A Confident NASA: Back in the Saddle Again?

NASA is poised to make major announcements in the coming weeks with regard to completing the International Space Station program, restructuring of the Space Launch Initiative and NASA's Integrated Space Transportation Plan, and extending the life of the Space Shuttle Program. All of these changes will be predicated upon implementation of cost and management reforms that many would argue are long overdue at the agency.

At the core of these reforms is restoring confidence within Congress and the Administration that NASA can manage programs within cost and on schedule. The most vexing project on NASA's plate has been the International Space Station (ISS). NASA hopes that getting its flagship program back on track will allow it to not only complete its assigned tasks, but also to openly discuss developing a credible replacement for the Space Shuttle - and even the prospect of discussing the sending of humans beyond Low Earth Orbit once again.

But there is a long road between fixing ISS costs and sending humans to a L1 space station.

Getting From There to Here

Slightly less than two years ago, just after the 2000 presidential election, NASA suddenly announced that its projected cost for the ISS was off by $4 billion - perhaps more. Despite detailed excuses as to why this happened, NASA would eventually say (in retrospect) that it did not see these problems coming until it was too late. This did not sit too well with those who had supported the agency through thick and thin. After years of being told that things were on track and under control - only to find out that they were not - Congress wanted answers.

In July 2001, after several months of internal studies which attempted to clarify the magnitude of the ISS cost overrun - and its causes - NASA announced a Task Force to address ISS cost and management issues head on. In making the announcement, NASA Public Affairs said "the ISS Management and Cost Evaluation Task Force (IMCE) will help NASA address the recent cost growth on the program by assessing the quality of the ISS cost estimates as well as program assumptions and requirements, and identifying high- risk budget areas and potential risk mitigation strategies."

Four months later, in November 2001, the IMCE reported its findings to the NASA Advisory Council (NAC). A month later, when it came to describing the IMCE report - and NASA's cost credibility on the International Space Station program - the NAC said: "... the viability of the entire international human space flight enterprise is being undermined by a loss of confidence in NASA's ability to exercise adequate management and cost discipline in the ISS program. The deficiencies in NASA's management and financial control of the ISS program identified in the IMCE report cannot be excused and must not be ignored. Resolving these deficiencies will require major restructuring of the management, budget, infrastructure, and staffing of NASA's human space flight enterprise."

Specifically, the NAC recommended that NASA "focus on executing the U.S. Core Complete configuration defined in the President's FY 2002 Budget Blueprint." In working to rectify financial and managerial deficiencies, the NAC recommended that NASA "demonstrate to an independent panel its progress in resolving the identified deficiencies in management and financial control. If NASA agrees, the NAC could establish an ad-hoc subcommittee to fulfill this independent review function. Progress should be reported against a specific set of goals, metrics, and milestones."

Flash forward a year. A new NASA Administrator (a self-avowed 'bean counter' from OMB), a new Comptroller (also from OMB) are now on the job and a wholesale reorganization of the agency's senior management has taken place. Moreover, the agency has stated that it will implement full cost accounting in the FY 2004 budget and will do so by fixing NASA's IFMP (Integrated Financial Management Plan). Instead of learning about budget problems months after they first arise, NASA now claims that it will be able to monitor problems - in near real time - as they develop.

Things as They Stand

According to NASA Comptroller Steve Isakowitz, in an interview with NASA Watch on Monday, the biggest concern at OMB "was that the sense that the program might be hemorraging in terms of its cost and its growth on the program. Although it was providing numbers at the time to say how they were going to try to address the overrun, there was not a strong basis by which to really understand its foundation i.e. the dollars that underpin the entire program. If you don't understand that, talking about 'four billion' or 'five billion' doesn't make a whole lot of sense if you don't know what is going on in the base activity." According to Isakowitz, NASA brought together two independent teams "to understand how well the foundation was understood and what the estimate was for the program to go forward."

In implementing the IMCE's recommendations, NASA chartered two external cost reviews - one outside the ISS program - but within the agency - and a second outside the agency within the Department of Defense. According to Isakowitz these were "two totally independent teams that had next to no interaction with each other except at certain junctures where we wanted to make sure that they were evaluating the same thing.

One of the teams was assembled through the Defense Department through their CAIG - Cost Analysis Improvement Group. "We brought in Steve Miller" Isakowitz said "the best analyst they have there - who has done some work before for us." The other team was located at NASA Johnson Space Center (JSC) and was organized through the recently created SMO (Systems Management Office). SMOs are an office recently established at NASA field centers which allow centers to undertake independent program reviews. The JSC team was lead by Lee Graham with help from NASA Langley Research Center. According to Isakowitz this team had "NASA's best experts in cost analysis."

"The thing that kept them bounded together is called the CARD (Cost Analysis Requirements Document)" said Isakowitz. Use of a CARD at NASA has not been a standard in the past. This document provides a standard against which a program manager can assess their programs and develop cost estimates i.e. it allows for an 'apples to apples' comparison and gives very specific definitions to what a program is going to do and how it is going to do it. "This allows these independent teams to assess the same thing" Isakowitz said.

According to Isakowitz such a cost review process normally takes 9 to 12 months to complete. This process was compressed down to 6 months for the ISS cost analyses. Both teams worked independently, drawing upon NASA expertise when required. Occassionaly they would get together with the ISS program. Their work was brought together at the end of August "when they all got together and compared notes as to what sort of estimates they were coming up with. Not so much to refute whether one was right or one was wrong. [Rather] it was just to technically understand what the differences were so that if there was something that was just a misunderstanding [that it could be resolved]" said Isakowitz. In September 2002, "we had a chance for the first time to see all three teams." he said.

"The ISS program also tried to undertake their own independent cost analysis and try to bring in new tools to try and do their own assessment using these new tools" said Isakowitz. "This was important because, according to one of the major issues raised by the IMCE, NASA had tended to run the ISS program based on budget - not on cost. [That is], NASA ran things according to what budget they were going to get from OMB and the Congress and managed to that instead of trying to figure out 'what is this really going to cost us to pull off this program?' said Isakowitz.

"One of the major transformations over the past year was having the program office do their own assessment and to work hard in terms of thinking through cost and thinking in 'life cycle' costs." said Isakowitz. "Use of this term ['life cycle'] in connection with this program is probably something you haven't heard in a decade. They decided to pick a date of 2016 - not that there was anything magic to that date. It was generally selected because the ISS as nominally something talked about which needs to operate for at least 10 years after the end of assembly activity in 2006. 2016 was the nominal date. As such, everyone, as part of the CARD, looked at the life cycle cost for the ISS between now and 2016."

[click to enlarge] A chart provided by Isakowitz was used to illustrate a key point. As of today the bulk of ISS development is complete - or near completion. Items not yet launched are being prepared for launch. [Editor's note: this refers, of course, to the U.S. Core complete milestone (3 person crew and International Partner elements), not the original ISS plan wherein the ISS would support a 7 person crew - including the habitation module, life support, centrifuge accommodation module and additional crew return vehicle capability (CRV) hardware].

That distinction not withstanding, from the U.S. perspective, hardware development is definitely on the wane. The large challenge ahead is transition to a program where operations and sustaining engineering are the prime foci. Isakowitz noted that you normally do independent assessments much earlier in a program's life - during the development process - not when the transition from development to operations is well underway. Isakowitz cited this as a bit of challenge to be certain that the teams knew just what they were evaluating.

In doing such an evaluation, modeling is required - modeling based on experience. "We haven't really had a lot of experience on the operations of the space station. None the less, these teams used the best models they had with the notion that if they could get within 10% of our numbers that this would be a pretty good result."

[click to enlarge] To compare these two cost estimates against NASA's Isakowitz referred to a chart showing all three estimates. The green line represents the program office assessment. The Independent NASA team (blue) came in with an estimate that was a bit higher ($1.19 billion between FY 2003 and FY 2016) than the program office whereas the DoD team (red) came in with an estimate that was $1.86 billion lower than the program office.

This budget again assumes development, deployment of a ISS that stops at the U.S. Core Complete configuration and is operated as such thereafter out to 2016. "This assumes a crew of 3 and that all of the International Partners meet their obligations" said Isakowitz. "They broke this out into two pieces - what it takes to get you to core complete and then, what it takes for you to operate it."

According to Isakowitz, "NASA's estimates were within 10% of what both teams estimated and they both used the word 'credible' to describe NASA's ability to make its own assessment. But what they both did point out is that they tended to think that, in the near term, we were being (perhaps) optimistic in terms of what we could achieve. There is perhaps more risk on the program than we have provided budget [so as] to support that kind of cost." In the near term both the NASA team the DoD team expressed a concern that more reserves were needed in the FY 2004 and FY 2005 budgets.

At this point I asked Isakowitz to comment on the reserves that NASA had decided to put into the program to allay these concerns. Isakowitz declined to discuss this (since such numbers will be found in the still-embargoed FY 2004 budget). According to information obtained independently by NASA Watch, it is NASA's intent to add a total of $660 million between FY 2004 and FY 2007 to its programmatic reserves. None will be added in the FY 2003 amendment. Moreover, these reserves will be held at NASA HQ - not at the field centers. Unspent reserves will be set aside and spent on augmenting ISS science and, in some instances, perhaps on the human exploration of space beyond ISS.

In essence, the issue facing NASA is not building ISS, but running it - and doing so in a predictable fashion out to 2016. Isakowitz also expressed some relief that the monetary uncertainties were now reduced in scale to issues of several hundred million dollars (one way or the other) as opposed to issues measured in billions that had beset NASA at the very beginning of this process.

[click to enlarge] Isakowitz then pulled out a chart which he said had not even been requested by NASA but was produced by both teams. "This was sort of their 'report card' said Isakowitz. "A lot of members of both teams were members of the Young panel (IMCE). And a lot of them took their perspective of where they thought the agency was just a year ago when they were part of that panel in terms of our ability to come up with a credible cost estimate and where they felt we are right now based upon this snapshot. To me this is a huge improvement from where we were just a year ago. The bottom line of what this points out is that its great that we have this - but as we go forward in this program we're going to continue to want to do things. It will be incumbent upon us to come up with cost estimates."

"If we want to do things in the future or do things differently with the core station, the ability for us to come up with good cost estimates has significantly improved. To me, that's a really big deal. I think that this is going to be critical because in the future we don't want to be in a situation where every time we want to do something we have to bring another independent team in to say 'OK your numbers are really good'. So we have to have the confidence in our own numbers to say that we feel great about these numbers and that an independent team, is not necessary."

I asked if this activity had helped rehabilitate NASA's image on Capitol Hill and elsewhere (White House). Isakowitz responded "I think they have - and it is not only the things that we've done here, in terms of our ability to come up with estimates - but some things we've done on the program itself. We've put a significant number of new folks [into the ISS program] that are now focused specifically on that. We've put in place new processes to improve the ability to report information - to me, most importantly, so that the people down at [the centers] truly understand their costs." He noted that Bill Gerstenmeier has new tools in place that allow him to know his costs with great accuracy "they have come along way" Isakowitz said.

"Up here at Headquarters we've reorganized, we now have a division Deputy Associate Administrator in General Kostelnick, who now has oversight responsibility and direct management line of accountability down to the program office. He gets significantly improved information - the kind of information that we can share with OMB to instill in them that we've made some dramatic improvement. We're also bringing online our new financial management system."

I then asked if the ISS was going to be a 'poster child' for some of the new accounting systems being brought on board. Isakowitz said "were trying to create an executive management information system that allows people up here [HQ] - the Administrator, the AAs, to go online and quickly see exactly where their programs are." I noted that there was an urban legend of sorts that Sean O'Keefe showed up at NASA HQ soon after his nomination was announced and asked to sit down and see such a system. According to the story, he was flabbergasted when he found that no such thing existed - perhaps this was the genesis for the new financial tracking system Isakowitz had been describing.

Isakowitz did not try to dispel that story but went on to say that this was part of NASA's attempt to implement the President's Management Agenda - and "the Administrator has made it clear that it is his highest priority to do what has to be done and he has lit a fire under a lot of people. The good news is that we've turned it [Core Financial Module] on for a couple of centers as of last week at MSFC and GRC and we've gotten some good lessons learned from that. We have phased this so that by next summer we'll have the whole agency online. And the power of what we are doing is that for the first time in this agency's history everybody will be looking at the same data in all programs - and it will be timely information. Now, when I ask for information, [my staff] will produce information that is 3 months or so old. [This new information] will be within a day or two - a week at the most. As these new systems are being brought online we're tying it into this MIS (management information system) and the Space Station is the first actually to be brought online."

Isakowitz continued "the other significant thing is going to full cost. One of the things that Tom Young felt very strongly about was something he called 'projectization'. This was the notion that project managers needed to have full control over all of the resources that they are responsible for - so it is not a situation where you show a budget against a program but the program manager only controls a fraction of it with the rest of it controlled by other individuals. As we are going to full cost, things were treated in the past as being 'free' - i.e. institutional activities, civil service costs. [These] will now actually show up against programs. In the 2004 budget that is coming out in February we're going to have a 'full cost' across the agency - obviously including space station - and we plan to be more than just full cost accounting but [also] full cost management where managers will really start to make decisions on all these things including civil service, facilities, etc."

One of the ways that the IMCE suggested that cost savings could be achieved was to cut the Space Shuttle flight rate. I asked Isakowitz how this applied to the cost of Space Shuttle flights and whether NASA was going to come up with a standard cost for a Shuttle flight - such that if the ISS program wants to add a Shuttle flight that there would be a set cost to factor in. Isakowitz said "yes - as a matter of fact that is one of the things we're working on now. [We want] to make it such that in the future as anyone wants to use the Shuttle that there is a standard catalog of prices that they have to assume in their budget if they want to fly on the Shuttle. [This will be done] so that the Shuttle is not a free commodity."

When asked if the cost would be a mathematical fraction of the entire Shuttle budget divided by the number of flights, Isakowitz said that they were moving more to the 'marginal cost ' - "assuming that money has already been spent on infrastructure, such that if we want to add a Shuttle cost for our own internal customers. So you would expect that to be marginal. Where you have a different methodology is when you have outside users - how do you want to charge them."

Isakowitz noted that this was an important issue in that it is hard with 4 Space Shuttle flights a year to supply the ISS to meet other demands. I also asked if these Shuttle costs would be used in making trade analyses - i.e., using Extended Duration Orbiter flights over a period of time to do surge science or surge maintenance so as to perhaps delay or obviate some hardware or operations expenses on the ISS side. Isakowitz said that this was something that people were doing "in their trade space" and that having this standard internal cost would facilitate such trades.

Hitting the Ground Running

I asked Isakowitz if such a cost estimating project could serve as a springboard or 'foundation' for any possible future enhancements to the U.S. Core Complete configuration. Without getting into any specific changes or "excursions" as Sean O'Keefe likes to call them, Isakowitz replied "Yes that is the value of going through this exercise - it gives us that foundation."

Indeed, this foundation will be used by NASA to both set the stage for major changes in the agency as well as justify the White House's confidence in NASA's ability to accomplish these changes. A multi-page letter has been prepared for forwarding to the White House which outlines NASA's plans and the rationale for these plans. These plans call for an amendment to NASA's previously submitted FY 2003 budget - which as already been modified by both the House and Senate. More detail will be seen in the FY 2004 budget to be released in February 2003. Having a reliable ISS cost estimate is needed - not only to describe these plans - but to convince Congress that NASA (and, by virtue of the unprecedented request of the White House, the President) feels that it has made strides in reforming its ability manage programs and control costs. Indeed, the logic used to substantiate these proposed changes relies heavily on an assumption that costs supplied by NASA are indeed credible.

If implemented, changes to the FY 2003 (and future years) NASA budgets would result in a dramatic decrease in funding for SLI. A substantial portion (more than $2.3 billion between FY 2003 and 2007) of SLI's $4.6 billion be spent on other programs such as the Orbital Space Plane Space Shuttle successor) , ISS, Life and Microgravity sciences, and Space Shuttle "enhancements". SLI would be reduced to a program of longer term advanced technology demonstration - not one of nearer term launch system development - was previously (and murkily) envisioned.

This letter to the White House will lead shortly to a request by the Bush Administration to Congress to begin the amending process. Given that this letter will allow even the most casual observer an insight into what is probable in future budgets (something unprecedented) NASA has been careful to craft this request with substantial supportive detail.

What's the rush? Instead of waiting until the FY 2004 budget to implement these changes, NASA is looking to modify its previously submitted FY 2003 budget so as to get a head start. Since both the House and Senate Appropriations committees have reported out their respective versions of the FY 2003 VA HUD Appropriations Bills (see below), simultaneous amendments to those bills will offered on the House and Senate floor along lines requested by the White House. It is not certain at this time whether the post-election 'lame duck' Congress will be able to take these matters up or whether they will need to be reintroduced in the next Congress. Regardless of whether they are acted upon this year or, in redrafted form in the next Congress, it is almost a certainty that these augmentations will make it to through to the President's desk - with his requested amendment.

The advantage should be obvious: NASA gets to implement changes as soon as the FY 2003 Appropriations bill becomes law. Otherwise, if NASA had waited until the FY 2004 budget submission, these changes would likely not occur until a year from now. Given that SLI has started down a course, time was running out wherein it could be put on pause as changes were considered. As such, leaving proposed changes out to air for long periods of time would make them susceptible to considerable political modification, possibly (probably) undercutting their original intent.

Summary

A plan will soon emerge wherein it becomes clear that NASA believes that it has a fixed and credible path toward U.S. Core Complete while preserving options for both the expansion of the ISS beyond U.S. Core complete, the augmentation of ISS science, and perhaps, after a long dry spell, some serious attention to the human exploration of space beyond low Earth orbit.

The question is, will Congress go along? Stay tuned.

Related Links

  • 27 October 2002: NASA Looks to Replace Space Shuttle With Orbital Space Plane, SpaceRef
  • 16 June 2002: NASA Advisory Council Briefed on ISS and Overall NASA Financial Status, Spaceref
  • 20 December 2001: NASA Advisory Council Findings from the International Space Station Management and Cost Evaluation (IMCE) Task Force
  • 20 December 2001: NASA Advisory Council Releases Space Station Recommendations
  • 31 July 2001: NASA Administrator announces distinguished team to review International Space Station
  • House and Senate Appropriations Marks for 2003

    10 October 2002: House Rpt.107-740 VA-HUD Appropriations Bill 2003

    25 July 2002: Senate Rpt.107-222 VA-HUD Appropriations Bill 2003

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