Hearing of the Subcommittee on Space and Aeronautics - Cost Management Issues in NASA's Acquisitions and Programs

HEARING OF THE SUBCOMMITTEE ON SPACE AND AERONAUTICS OF THE HOUSE SCIENCE AND TECHNOLOGY COMMITTEE

SUBJECT: COST MANAGEMENT ISSUES IN NASA'S (NASA) ACQUISITIONS AND PROGRAMS
CHAIRED BY: REP. GABRIELLE GIFFORDS (D-AZ)

WITNESSES: CHRISTOPHER SCOLESE, ACTING ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; CRISTINA T. CHAPLAIN, DIRECTOR OF ACQUISITION AND SOURCING MANAGEMENT AT THE U.S. GOVERNMENT ACCOUNTABILITY OFFICE; GARY P. PULLIAM, VICE PRESIDENT OF CIVIL AND COMMERCIAL OPERATIONS AT THE AEROSPACE CORPORATION

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REP. GIFFORDS: This hearing will come to order.

(Sounds gavel)

Good morning everyone. I'm very pleased to welcome all of you to the first hearing on the Subcommittee for Space and Aeronautics of the 111th Congress.

I'm very much looking forward to working with the Ranking Member Pete Olson, who represents a district that has JSC in it, and my colleagues on both sides of the aisle. I am very pleased that we have members that make up many of the NASA facilities, and a real passion on this committee or the Subcommittee for Space and Aeronautics.

We have a lot to do this year, but I am confident that we will have a productive and a cordial year ahead of us. I think that all members of the subcommittee would agree that NASA is one of America's greatest achievements. And as we look forward to the next two years on this subcommittee, Congress and the American people will be looking to NASA to help solve some of our greatest challenges.

The development of Orion, the next exploration vehicle, as the shuttle is scheduled to retire in 2010; the ability to forecast and understand changes in climate as our planet continues to warm; other countries competing in space exploration for both military, also technological and scientific purposes; and the continuing decline that we have in numbers of STEM field graduates. United States is not graduating enough students inspired to pursue career areas in these important areas of science, technology, engineering, and mathematics.

What I like about this committee -- well, I would say, there is a lot I like about this committee, but one is this quote that stands above us. "Where there is no vision, the people will perish." So I think about NASA and I want the American people to know as we continue to look for all of you of that vision, that you have inspired us that you have captured our imaginations and you have transformed our nation.

Our jobs as member of Congress is to give you the tools and the resources you need to do your jobs. But we also have to be responsible as good stewards of the American taxpayers for the dollars that are allocated to your Agency. And this is a responsibility that the Subcommittee members take very seriously. With that, the legislative session of the hearing today, is going to be on cost management issues in NASA's acquisition and programs.

I want everyone to know that this subcommittee hearing just like all the committee hearings will be cast on the web, but I believe this is a good start for us because it is appropriate for us to take some time to look at our oversight activities. It is clear that good cost and schedule management will be critical to the success of NASA's planned robotic and human space flight activities. It's good common sense, given that NASA will always be working with a constrained budget and competing priorities.

As has been summarized in numerous reports and studies, NASA has suffered cost growth and schedule delays in a number of projects and programs in recent years. The stated causes of the cost growth and delays have varied, and the prescriptions to fix the problems offered by individuals inside and outside the agency are also varied, and indeed sometimes have been in conflict.

I want to use this hearing to start to sort out the facts and to explore what can and should be done to reduce the instances of cost and schedule growth that we see at NASA. As was noted in the charter for today's hearing, cost and schedule growth has been a concern at NASA since the early 1980s, if not earlier.

Moreover, from my vantage point on the House Armed Services Committee, it is clear that our military space programs suffer from similar problems. However, it is also clear that NASA, DOD, and the other agencies of the Federal Government involved in space activities have many dedicated and competent scientists and engineers working long hours to try to deliver complex and successful projects.

That tells me that dealing with these cost and schedule issues is hard, and that there's no simple fix or situation. If that was the case, certainly we would have resolved this a long time ago. So we need to figure out why preventing cost and schedule growth in our space projects is so hard. But more importantly, what we can do to about it to be on a better path for the future.

I suspect that getting on that better path will involve the need for improved practices within NASA, in the agency's oversight of its contractors, and in its collaborations with our international partners, as well as better efforts by us, those of us in Congress and the White House to reduce the vagaries of the budgeting process that introduce additional instability in NASA programming planning.

It may not be possible to achieve perfection, but we certainly need to do our best to ensure that NASA is making the best use of its funds that it's been given. We owe that to the American taxpayers, as well as to those who are working so hard to advance this nation's agenda in space and aeronautics research.

Today's hearing should be viewed as simply a first step in this subcommittee's oversight of NASA's acquisition and program management. I am very pleased that we have a incredibly knowledgeable panel of witnesses here before us today. I want to welcome each of you, and I look forward to hearing your testimony.

With that, I now yield to Mr. Olson for any opening statement that he would care to make.

REP. PETE OLSON (R-TX): Madame Chairwoman, thank you for convening this hearing today. The subject matter we are going to discuss is always a great concern, but particularly now, in the current budget environment.

I too want to welcome and thank our witnesses for taking their time to brief us on the GAO report, selected -- assesses selected large scale projects at NASA.

Since this is our first subcommittee hearing of the 111th Congress, I would like to offer my gratitude to Chairman Gordon and Ranking Member Hall for this opportunity to serve. I would especially like to say that I'm extremely pleased to be working with our Chairwoman Gabrielle Giffords.

In every conversation we've had, she has been more than gracious and welcoming of my thoughts and perspectives. I want to thank you for that. And as further encouragement, it turns out that our thoughts and our perspectives are often the same. Our goals are similar, and our respect for the men and women of our nation's space and aeronautics agency industries are beyond measure.

Our nation faces enormous challenges. In their own way, the sectors we will be dealing with can help by offering ways to meet those challenges, whether by creating jobs, performing cutting-edge scientific research, or serving as the inspiration to a new generation of explorers. We must work to service -- our work must serve as a means to help those who are doing the work to fulfill their missions in the most effective way possible.

And along those lines, today's hearing on cost effectiveness in particular is a very critical one. Right now, NASA has as much room for air in their budgeting as they do for one of their manned space missions. That much.

The Agency needs to have a well-balanced, well-managed and cost efficient system of budgeting and scheduling for their future missions. I'm glad to read that NASA, according to the GAO has, quote, "Developed a comprehensive plan to address systematic acquisition management weaknesses."

And I look forward to learning how this was done, what challenges remain, and how this will apply to future missions. But the GAO also writes that NASA, quote, "Would benefit from a more disciplined approach to its acquisitions," unquote.

There are many members of this -- in this Congress, myself and the chairwoman, chief among them, who stand ready and willing to stand up for increased NASA funding. To be effective in doing so, we need to be able to show our colleagues, and most importantly the American people that their tax dollars are being invested wisely.

Thank you again for being here. And I look forward to hearing your statements, and to our discussion.

REP. GIFFORDS: Thank you Mr. Olson. If there are members who wish to submit additional opening statements, your statements will be added to the record at this point.

At this time, I would like to introduce our witnesses. First step we have Christopher Scolese, who is currently the acting administrator at NASA. I would note that we will be here -- we are having hearings on NASA's fiscal year 2010 budget request in the near future. And members will have plenty of opportunities to ask questions of the Agency on the budget request at those hearings.

So I would like to ask members to confine their questions to Acting Administrator Scolese today to the topic of this hearing.

We also have with us Ms. Cristina Chaplain, who is the director of Acquisition and Sourcing Management at the Government Accountability Office. And we have Mr. Gary Pulliam, who is vice president for civil and commercial operations at the Aerospace Corporation. Welcome.

As our witnesses should know, you will each have five minutes for your spoken testimony. Your written testimony will be included in the record for the hearing. When you've all completed your spoken testimony, we will begin with questions. Each member, myself included, will have five questions for the panelists.

I would like to start with Mr. Scolese.

MR. SCOLESE: Thank you. Ms. Chairwoman and members of the subcommittee, thank you for the opportunity to appear today to discuss NASA's efforts to improve the cost and schedule of the Agency's projects. NASA missions have allowed us to rove the surface of Mars, other planets, to send people to live and work in space, to improve our understanding of the universe, and to better understand our earth.

So we recognize the importance of delivering missions on cost and on schedule, and developing clear and stable baselines for planning. We continually strive to improve our tools, so that we can develop better estimates and implement corrective actions. And we are pleased that the Government Accountability Office recognizes these efforts. Today I'll outline the progress NASA has made to date.

NASA is fortunate to be entrusted with conducting revolutionary missions in earth and space science, aeronautics, and human space flight. These missions are often one of a kind, and require new capabilities and new technologies to meet mission goals.

These new developments, while exciting and offering benefits to society, seldom had clear analogs to past missions, thus presenting challenges for the development of cost and schedule estimates. As a result, there is no perfect formula for estimating cost. So we must rely on a combination of experience, cost models based on past missions, and actual costs when available.

We recognize two types of growth to understand our projects. First is internal growth, resulting from actions by the project. Examples are optimism in estimates of cost, optimisms in estimates of schedule or technology readiness, underestimation of mission complexity, or the overestimation of the utility of heritage components, components that have flown before.

Growth may also be caused by poor management. We don't see this very often, but we do see it. The other type of growth results from external factors that are beyond the control of the project, and I mean the project. Sometimes they are beyond the control of NASA, sometimes they are beyond the control of the government, but strictly speaking, we are talking about the project.

These include partner performance, industrial base issues, launch manifest issues, or changes in plan, budget, or budget profile. However, not all external factors affecting a project are due to poor performance. A project can be impacted by the success of other missions, missions that last well beyond expectation in terms of discovery and lifetime.

We are planning to conduct further study to improve our understanding of these factors to allow us to better estimate project life cycle costs. Existing analysis indicates that early in the project development, estimates can be driven by the optimism I mentioned earlier. Typically, NASA uses these early estimates for planning purposes to identify the rough costs and schedule range for the proposed mission. It is important to note that we do not consider these early estimates as cost commitments.

As the project advances, we develop a better understanding of the challenges, risks, technologies, and therefore, costs and schedule. We believe that we have the best estimate at a time when the size of the action can be still be taken at the completion of a properly funded preliminary design.

Thus, it is at this point that NASA makes our cost and schedule commitment for the project to the Congress. I'm pleased to say that we have put improvements in place in our processes and tools to improve our cost and schedule performance. This was recognized by the GAO in the high risk series.

Improvements include, standardization of project life cycle, milestones and reports to ensure that all projects are measured consistently and are reporting to our stakeholders is, likewise, more consistent. Use of historical cost analyses were possible to identify areas that need to be addressed with corrective actions.

Implementation of joint cost and schedule probabilistic estimation, tools to better provide estimates for both early phase planning, and later to support our commitment when we make it, implementation of a rigorous monthly review process to provide ongoing senior management review of program project and institutional performance, so we can correct problems before they become serious.

Use of independent review boards to evaluate project performance at key decision points, formal commitment of cost and schedule following the preliminary design review, and better use of tools such as Earned Value Management, also annual assessments of proposed new missions versus the proved activities that are already in place to determine industrial base, partner, and NASA ability to accomplish those objectives.

We recognize the cost and schedule estimation of a one-of-a-kind mission is difficult. Therefore multiple techniques are required to improve estimates and performance. Let me assure you and the American public that we are committed to this improvement and to working with the GAO and Congress to provide consistent metrics on our performance. There are many improvements already in place, others are underway. From these, we have developed and will continue to develop, improve NASA processes yielding results now and in the years to come.

Thank you for the time to speak today and I'm ready for questions.

REP. GIFFORDS: Thank you, Mr. Scolese. Ms. Chaplain, please.

MS. CHAPLAIN: Madame Chairwoman and members of the subcommittee, thank you for inviting me to discuss our work on NASA's major acquisitions. In addition to my formal written statement, I'd like to point out that GAO has just issued its first annul comprehensive assessment of major NASA programs, which is available on the gao.gov website.

To put this work in the context, I'd like to start with our designation of NASA's contract management as a high-risk area in 1990. We put NASA on GAO's high-risk list because our work was continually finding there was little emphasis on end results, performance, and cost control.

At the time, NASA found itself procuring expensive hardware that did not always work properly. Numerous reviews following that report identified some more issues. Fourteen years later, in a review of NASA's cost-estimating practices, we concluded that acquisition problems still existed and found significant cost growth across the portfolio of 27 programs.

In that review, we found NASA lacked basic cost estimating processes needed to establish priorities, quantify risks, and make informed investment decisions. We also found that programs were being moved forward into the development phases without a clear understanding of whether their requirements could be achieved within available funding, technologies, expertise, and other resources.

Five years later, in this most recent review, we are finding that improvements have been made, but problems still exist. To NASA's credit, much has been done to address the causal factors identified in our previous work, particularly in the areas of cost estimating, cost reporting, program management, and oversight.

In addition, Congress has also done its part by instilling requirements that make cost growth more transparent and limit the circumstances in which programs can be re-baselined, and by asking GAO to conduct an independent annual assessment of major projects, many of which do not receive much external oversight. Because baselines were set just two or three years ago, the true magnitude of cost growth in the programs, in our assessment is understated.

Nevertheless, it's clear their programs still anticipate growth in cost and schedule. And in just two or three years, 10 of 13 projects reassessed in implementation, experienced an average of 13 percent cost growth and they have an average launch delay of 11 months.

Many of the projects we reviewed indicated that they had experienced challenges in developing new technologies or retro fitting older technologies, as well as in managing their contractors. And more generally understanding the risk and challenges they were up against when they set their baselines.

In conducting this work, we assessed the level of knowledge programs have about technologies, design, and their contractors at certain points in the development process, while at the same time tracking other causal factors that we have identified in previous reviews, such as funding instability requirements, growth, program and contract management weaknesses.

This methodology is designed to provide more insight in to why programs encounter problems, as well as what actions are needed to address problems. While it is beneficial to have a wealth of policies and procedures aimed at ensuring successful execution, it is still necessary for us and the Congress to see what's happening on the ground and what types of unknowns exist in programs despite what policy is encouraged.

This assessment is not meant to create a debate over the uniqueness of NASA's projects or what specific criteria should be applied to assess what types of unknowns and problems exist in programs and implementation, but rather to serve as a useful oversight and management tool.

We remain open to working with NASA to determine the best way forward for measurement. Though the criteria we have used has been time tested, it is based on sound program management practices and it has been well received in communities involving all types of complex and technical development efforts, including the defense-based community.

In conclusion, what's fundamentally important today is that NASA is being asked to undertake new missions in space, science, and aeronautics. As such, it is vital that NASA and Congress clearly understand the costs and uncertainties of programs proposed for authorization and during their execution.

It is equally important that problems be transparent, well understood, and tracked. We believe our report sets the course for doing so. Thank you, and I'm happy to answer any questions.

REP. GIFFORDS: Thank you, Ms. Chaplain. Mr. Pulliam.

MR. PULLIAM: Good morning. Madame Chairwoman and members of the subcommittee, I am pleased to represent the Aerospace Corporation and to appear before you today as you deliberate cost management issues in NASA's acquisitions and programs.

As a private nonprofit corporation, the Aerospace Corporation has provided engineering and scientific services to government space organizations for almost 50 years. As its primary activity, Aerospace operates a federally funded research and development center. But we also undertake projects for NASA and other civil agencies.

The subcommittee asked us to focus on the main causes of cost and schedule delays at NASA, how effective NASA has been at mitigating these problems, and similarities we see in other agencies. While there are many factors affecting cost and schedule growth, I'll briefly discuss four main causes as we see them.

First, sometimes, NASA is too optimistic in its initial designs. This is understandable because NASA's job is to push science to new frontiers. Yet, there is palpable pressure for mission execution at the lowest possible cost. The net result can be a less-than-complete appreciation for the complexity of the technical baseline. This can lead to artificially low initial cost estimates and optimistic schedules.

The cost estimating process itself can introduce optimism depending on what data and what missions are included. These factors taken together can increase the likelihood that the initial cost estimate would not be an accurate indicator of the final program cost.

Second, there can be scope changes as the design evolves. Designs and technologies mature as projects proceed through development. This too is understandable and perhaps even desirable from a science perspective.

The project manager wants to deliver maximum value to his customer. However, the effects are clear. An instrument that is more complex than originally thought will likely require more mass or more power. We should not be surprised that these changes from the original design produce changes in cost and schedules as well.

Third, the inherent difficulty of developing world class technologies, contributes to cost and schedule growth. The technology immaturity is most often apparent in the advancement of science through new instrument development.

Delays in instrument development can lead to schedule delays for the entire project.

NASA is working toward reducing risk associated with immature technologies, but has reduced technology development in some other areas.

Fourth, we must acknowledge that external influences can have a major effect on cost and schedule performance. From the program or project manager's perspective, whether that change comes from the Congress, or from inside NASA, the effects are the same.

Project changes can set off chain reactions all across an agency. Cost growth in one program may result in reducing funding from other programs that were performing well, making them less executable. Missions can be delayed or cancelled because existing programs are consuming available budget. Each of these actions has a negative impact on established cost and schedule.

And looking at the effectiveness NASA has in mitigating cost and schedule growth, we believe NASA deserves some credit for their efforts. In the past few years, NASA has initiated several measures specifically designed to solve this problem. Some are strategic, such as budgeting at a higher confidence level and some are tactical, such as collecting the necessary data for sound cost estimating.

NASA should be commended for investing in new and innovative technologies and techniques. One example is schedule estimating, which is a relatively new capability in our industry. Another is affordability analysis, which allows examination of the portfolio interactions, long-range planning, and evaluation of cost, risk, and program reserves. These are ground-breaking efforts and they will produce positive results.

Even with these management actions, however, there is still uncertainty in the cost management process. NASA is attempting to manage these uncertainties through establishing cost estimates at a higher level of confidence than the previous years. While commendable; this higher level of confidence is valid only if the baseline remains stable, if technology maturation is controlled, and if external influences are understood and managed.

Effective cost and schedule management requires a project manager to accept, be accountable for, and execute to a valid baseline. NASA is studying how to reconcile project estimates with independent estimates. Greater transparency into both processes and reconciliation of these bases of estimates will yield positive results.

Our overall assessment of NASA's mitigation efforts is that the agency is implementing many measures which should provide increased capability for cost and schedule management and as a result better cost and schedule performance.

And finally, the committee asked us to look at similarities between NASA and other Federal agencies. We found far more similarities than differences. As outlined above, optimism, baseline growth, technology changes, and external influences are not unique to NASA.

Dozens of commissions and panels have studied cost and schedule for decades and the themes are generally consistent. While each federal agency can point to their unique problems and circumstances, the fundamental challenges of good cost and schedule estimating and performance are remarkably similar across federal agencies.

Madame Chairwoman, I'm pleased to present our findings and assessments to this subcommittee and I look forward to your questions.

REP. GIFFORDS: Thank you, Mr. Pulliam. At this point we are going to begin our first round of questions. The chair recognizes herself for five minutes.

Beginning with Mr. Scolese, we've heard testimony from Ms. Chaplain and Mr. Pulliam about the factors that have historically led to cost, schedule growth. They've also been able to identify some of the standard approaches that should be considered in attempting to mitigate such growth.

But none of these approaches or none of these factors are certainly new. Dating back to 1981 to the Hearth Report, certainly earlier than that, there have been similar causes in mitigation strategies for cost and schedule growth in NASA and certainly to referred projects. Yet, we are sitting here today because these projects continue to persist.

I see from your biography that you have been on the frontlines in the battle to control costs, as a NASA project and program manager and a variety of important positions. So in addition to knowing theoretically what should be done, you've actually experienced first hand the real life challenges of attempting to manage cost and schedule.

What from your perspectives, specifically, are the most important real-world impediments to consistently achieving on-budget, on- schedule performance in NASA's projects and programs? And following that, are we just going to have to accept some level of cost growth if you want to conduct space research and exploration?

I realize that this is very challenging what we are asking you to do. But -- or is it possible that measures that you and the other witnesses have outlined, can make a significant difference?

MR. SCOLESE: Well, to answer the question -- first, you're correct. Many of these techniques have been talked about in the past, and Gary and Cristina discussed techniques that we are using. One of the things that we are doing different today is we are using all of them in a consistent framework.

So that we are not just doing cost estimation, we are not just improving our models, we are not just using EVM, we are taking all of those tools and we are using all of them. In addition, we are having other people look at it, people that are independent of the performing organization, whether it's a project or a program or a center, to go off and look at it. Because when you are sitting there and you're looking at it, and you're doing it day-to-day, you think you can solve the problem. Otherwise you probably wouldn't be in the job.

But somebody else looking at it, is going to be a little bit more skeptical, look at what you're doing a little bit more clearly, and bring that back for others to go off and evaluate and see if we can make adjustments to help do it, to help correct problems, whether they are due to the project or they are outside of the project's control. That can be done if we know what they are early enough.

You also asked having lived in the trenches, what are the things that are most important to a project in order to be successful. Probably, the most important thing is stability. One of the things that is extremely difficult in the project environment is uncertainty in your budget or uncertainty in requirements that you don't control.

Once they are stable, and they usually become stable later in the program development, things go fairly well. I mean, there can be surprises. There is no doubt about it. We are doing things that oftentimes haven't been done before, so we do get surprised. But stability was one of the things that we really looked for and we really felt that we needed in order to be successful.

And last, you asked, do we have to live with consistent cost overruns. I think the answer is no. And I think you've heard from the three of us that we can do better if we implement these tools, we can better predict what our costs will be. Will they be totally gone? No, I don't think so. Because what we do is very different.

We have high risks and therefore there is probability of failure and there is probability of cost growth. But overall, we can do better and I think when we put all these tools together, you'll see our performance improve.

REP. GIFFORDS: Mr. Scolese, when instances of cost growth arise, many in the public want to know who exactly is accountable. It seems that assigning accountability can be difficult when there are a number of contributing factors that have led to that cost growth. But the desire for accountability at heart is based on the belief that it can contribute to preventing future cost and schedule growth at the agency.

As you know, in trying to deal with such growth, and if some have called for punitive measures and some have called for providing incentives for good performance, what mechanism does NASA currently have for penalizing poor cost and schedule performance, and conversely, what kinds of incentives does NASA provide for good performance?

MR. SCOLESE: Well, first and most important is, as you've said, we need to understand what caused the growth.

If it was something that was clearly caused by the project -- the performance of the project, then indeed we do take actions. And over the last several years, over the lifecycle of projects coming to completion now, we've replaced probably about 10 percent of our project managers.

So there is strong accountability there for performance, if it is due to the project. Oftentimes, it is not due to the project. It is due to that lack of stability, it is due to unforeseen technical problems. It is due to taking over a project that was originally in trouble.

So first we look at what the causes are, and then we take the appropriate actions as needed. In addition, we clearly hold accountable all of the people that are in the project. If a contractor is not performing, we have -- award fee scores, how much additional fee or how much fee we provide to them for their performance.

Theoretically, if they were perfect, they will get a 100 percent, and if they were terrible, they will get zero percent. So we evaluate based on that. I do want to say though, that when we do that, we recognize that many of the people, most of the people that are performing on these projects are very good people. They have distinguished themselves in other fields and other areas within NASA.

So while they may not be successful here, we rely on our people to do our missions. Without them, we can't do them. We rely on our contractor personnel and our partner personnel to do our missions. So when we do have to take action, we recognize these people have been -- distinguish themselves somewhere else and we move them on to other activities.

So there is no public, you know, discussion of this. They move on to other things where they were at one time very good. But overall, I think we have the tools to reward people for doing good performance. We have the tools to penalize people and organizations for doing bad performance.

REP. GIFFORDS: Thank you, Mr. Scolese. The chair will now recognize Mr. Olson for five minutes.

REP. OLSON: And thank you, Madame Chairwoman. With your permission, I would like to extend my time to the ranking member of the full committee and fellow Texan, Mr. Hall.

REP. RALPH M. HALL (R-TX): Thank you. I'm not sure I thank you. I didn't get to hear all of that. But you know, we have a problem, we have a new administrator coming aboard. And I don't think it's any secret that Chairman Barton and I joined as a ranking member, requested the president to maintain Mike Griffin. And I know everything he did was not perfect, but he was always upright with this, and made projections that we doubted, but understood.

And we're here with a four-year gap in there that concerns everybody. And we don't want to depend on nations that we don't really trust, but we are under some type of contract with them. Now, I understand the acting administrator can tell us about that.

But I guess, what I'm trying to say is, being not the first by whom a new is tried nor yet the last to lay the old aside, I don't know about the long experience of schedule, and cost growth, and very complex robotic machines. And I think maybe we ought to just impose higher cost and schedule reserves in the project's outset, at the very beginning, rather than trying to squeeze in too small reserve when the project encounters difficulties.

But what -- no matter what -- where we are now, and we need to somehow squeeze together those four years between the time that we can quit using Discovery and Endeavour and Atlantis, and get the project constellation underway. Somehow -- and with the minute budget compared to the overall budget that we extract for this project, it seems to make sense to me.

And with the offset of -- and the $850 billion expenditure and throwaway that the former president launched in the stimulus program of ($)700 (billion) to $800 billion, it makes that project look like a very small cost and easy to add to. So I hope that we can all get together, and push, and carry out the program that had been set for the -- and hopes are -- and it makes our expenditures looks minute compared to the giveaways, and the waste-aways, and the throwaways that they are.

Because I believe Jay Leno was right when he said that he thought automobile makers ought to keep on making automobiles, and those guys on Wall Street ought to start making license tags.

(Laughter)

But we have such a small comparative budget and request for such an important program project. I just hope we'll be more realistic in our approaches, not -- I didn't get to hear all the testimony, but that's the one thing I can offer. I yield back. Thank you, Madame Chairwoman.

REP. GIFFORDS: Yes, thank you, Mr. Hall. I think everyone in this committee agrees that we always look forward to your comments and you're an incredible asset to the subcommittee.

The chair will now recognize Ms. Fudge who has Glenn in her district. Ms. Fudge, please?

REP. MARCIA L. FUDGE (D-OH): Thank you, Madame Chair.

My first question is for Mr. Scolese. Do you believe that human spaceflight projects are likely to encounter cost and schedule growth? Are they more likely than if you use robotic science projects?

MR. SCOLESE: I don't think they're inherently different in terms of their purpose. But the differences with human spaceflight programs, we tend to do developments on such long time scales that they are separated by such a large amount of time.

We started designing the shuttle in the 1970s and began flying it in the 1980s. We did the station in the 1990s, and we're doing constellation now in the 2000s. And that presents some challenges, because with robotics missions we tend to do several per year. With our aeronautics activities we tend to do several per year.

So we don't have a strong and historical database to allow us to make the predictions that we can do with the robotic missions. So from that standpoint, I think we have greater uncertainties in our initial estimates for the human mission, than we do for the robotic missions, but that's because we haven't done so many of them.

You can basically count on one hand, all the human missions or the human spaceflight activities that we have done in the four decades, five decades that this space program has been around. So that presents a challenge for us. But to say that they're inherently different or that one can do different things than the other, that's certainly true, but that doesn't add to it. It's the fact that we don't do as many human missions as we do robotic missions.

REP. FUDGE: Thank you.

Mr. Pulliam.

MR. PULLIAM: Yes, madame.

REP. FUDGE: You stated in your testimony that the initial cost estimate is not representative of the final as-built configuration due to required changes. Should NASA either freeze requirements early on, or not proceed to implementation until it establishes greater knowledge of requirements and the resources needed?

MR. PULLIAM: Thank you. It is among the most difficult problems to try to solve at NASA or other agencies spending taxpayer dollars. As we've noted, when you start a program you don't know everything that you need to know to execute that program.

Sometimes the technologies just are in development and that goes the way it goes. There is this optimism at the beginning that is in part fostered by an increasingly competitive environment for a NASA program. So contractors and bidders are likely to bid more and more against the mission that is available that contributes to optimism.

So while one could just freeze design and say we're not going to allow any of this, our view is you would wind up not being able to accomplish the mission, and that is so important to NASA. And that is to put the world's best technology up for the benefit of mankind.

So it is a difficult dilemma. The answer, in our view, is somewhere along the way. You have to manage this technology maturity in a planned organizational way, understand the path that technology maturity is on, and to understand the changes that accompany that, to both your cost and your schedule, and then as NASA has stated, confirm that baseline at some point at which time you have an executable program.

So we wouldn't suggest that technology just continues to roam indefinitely nor would we just suggest locking it down so early solely for the benefit of cost and schedule, because you would lose out on what you're trying to accomplish to some extent.

REP. FUDGE: Thank you. And this is for any member of the panel. Certainly assuring the health and safety of our crews is critical to the success of NASA's exploration mission. And I guess because of NASA Glenn, we have had some discussions about the lack of timely demonstrations of hardware and techniques to mitigate the adverse effects of long duration spaceflights. Does that cost become one of the costs that you can't contain, or is that one of the issues that arises -- that creates some growth in the cost?

MR. SCOLESE: It certainly could. And that is one of the things that, of course, we have to address if we are going to do long duration spaceflight. The space station is the tool to help us do that, and the better we can utilize it, the better we can retire those risks and develop better cost estimations, schedule estimates, and better estimates overall about when we can start sending people on those long-duration missions beyond low-earth orbit.

So yes, it does add an uncertainty to what we're doing. We're looking at that for the utilization, you know, utilization of the space station. I'm certain some of the efforts that Glenn is pursuing in those areas would be included in that.

REP. FUDGE: Thank you, Madame Chair, I yield back.

REP. GIFFORDS: Great, thank you, Ms. Fudge. Mr. Olson, please.

REP. OLSON: Thank you Madame Chairwoman.

And Mr. Scolese, I have a question for you. In your opening statement, you mentioned the issues with the American industrial base. I was just wondering if you could elaborate on the impact that a dwindling industrial base has on NASA, and it's maintaining a cost- effective schedule.

MR. SCOLESE: Yes, sir. As the industrial bases collapsed, of course one of the initial -- or I shouldn't say collapsed, that's too strong of a word. As the industrial bases shrunk and consolidated, that provides us less opportunity for competition.

So oftentimes we have to go with the supplier that exists. And we don't have a choice. The bigger problem, probably, is the loss of expertise that was mentioned earlier in the opening statements. We don't have as many scientists, and engineers, and technicians to go off and build our instruments, build our spacecraft, build the components that go into those instruments or spacecraft.

And that's created some degree of a problem for us. In addition, it has some unintended consequences, because we have to go overseas for many of our components. And that, of course, hurts American industry. A third factor that plays into this is with lack of some parts, we've had an -- a rise in the number of counterfeit parts, the things that we can't deal with.

This is a worldwide problem. It's not a U.S. problem. This is a worldwide problem. And in dealing with that, you find out late, typically, when you get counterfeit parts. We do inspections. We do all of the things that you are supposed to do. That adds cost clearly.

But when you find out about them, if you don't find out about them at receipt, you find out about it when you are in test, or you find out about it when you're sitting on top of the rocket, or worse you find out about it when you are in space. And all of those have cost implications.

One of the things that could help that, of course, is having, you know, more missions that are available along the lines that we were talking about here. If we can reduce our costs and improve our cost estimations, we can provide, you know, opportunities to do that. But I think what I said pretty much summarizes the concerns that we see with the consolidation of the industrial base.

REP. OLSON: Thank you very much. In addition to having more missions, any suggestions what we can do as a nation to help grow the American industrial base, to ensure we're competitive, and we have the capacity here in America to perform the missions that NASA performs?

MR. SCOLESE: Yes, sir. One area clearly is, I believe there was a hearing last week about the ITAR activities, and we're all very concerned about our national defense and recognize what ITAR's purpose is. But its implementation has been -- has had an effect, a negative effect in our ability of our industry to compete overseas.

It's also made it very difficult for us, as the nation's space program, to also work with our partners overseas, because we can't necessarily share information with them in ways that are as effective as they could be. It's also delayed our ability to make agreements, which has caused cost growth that we've talked about.

When it takes a year or two to come to an agreement about a mission that you've agreed to do, you've clearly built risk into it as you can't talk to the international organizations that are providing resources. But for our industry, they lack the ability to go off and compete because a contract on a communication satellite, you really have about what 30 days or 60 days to put in a bid, and it takes that long to get through the process.

So reducing some of those requirements or streamlining the process, and there's other people that know more about it than I do, could certainly help our industrial base be able to compete on the open market.

REP. OLSON: Well thank you for that question. That's a nice segue to my final question here, but in your testimony you indicated that 10 of the projects that exceeds -- of the 10 projects that exceeded the cost, 5 of those were due to external factors out of NASA's control. I mean, ITAR, I think is probably a great example. What are these external factors, could you elaborate and what can we do to help mitigate?

MR. SCOLESE: Well, not all can be mitigated easily. Three of them, or I think four of them, in fact, were due to issues with either the launch manifest or with partner performance. And we have a very -- we have a backed-up launch manifest right now.

Two of the missions were delivered on time, and unfortunately the launch manifest has backed up to the point where one, the Solar Dynamics Observatory will be delayed almost a year. That's something that we couldn't foresee. We are, of course, working with our colleagues in the Defense Department and the commercial industry to try and improve the launch manifest, improve our launch posture, but that's one area where we could, you know, clearly see some help.

The other missions were affected by partner performance -- international or U.S. partner performance, where they ran into difficulties that were unforeseen to us. And I'm not sure there's much more that could be done that we haven't talked about.

They have the same issues as was mentioned earlier that we do in terms of optimism and over-estimation as well as stability of their funding requirements. And at least in one case, it was due to, you know, industrial concerns where, you know, if you went to a government lab, or you went to a university, or you went to industry, you might have had the same problems because of the lack of expertise.

But that was an issue that we experienced. So with those three things, the launch manifest, which is something we can do by, you know, encouraging a robust launch capability in this country, by partner issues, which were up for a variety of different reasons that could have been unforeseen.

REP. OLSON: Thank you very much. And I yield my time.

REP. GIFFORDS: Thank you, Mr. Olson. And just for the record I think it's important to note that Mr. Olson and all of these members down on this side, either represent a NASA center or are adjacent to a NASA center, and have NASA employees in it.

And with that Mr. Griffith, who represents Marshall.

REP. PARKER GRIFFITH (D-AL): Thank you, Madame Chair, and thank you panel for being here, and I'd like to make a comment. Many of the questions that I had have been asked.

One of the frustrations that I think that we're hearing is that cost overruns are inherent in any scientific endeavor. They are not budgeted, cannot be budgeted. Burn rates for discovering the unknown are going to be there. We understand that.

I think it's unfortunate in a way that NASA has been so successful, has held themselves to such a standard of excellence that the general public expects that NASA is like starting their car in the morning, and that it is really not that much science to it anymore, and there is not that much danger anymore, and there is not that much that really goes into it.

We're just building rockets and exploding them into space. Nothing could be further from the truth. We're still on the frontier. China walked in space two months ago, Japan is on the way up, India is on the way up, Russia, of course, has been up.

For the last 50 years, NASA has established excellence in the pursuit of science, and now, you're going to become part of the high ground in the national defense. I expect there to be cost overruns, not only for safety issues, but because we're going to be pushing the envelope, because we will remain number one in space.

So I think my question to you would be, can we do a better job letting the public know what a huge scientific endeavor this is, and how much we really don't know when we send a -- send humans into space? And can we, maybe reeducate the public that we are on the great frontier again, trying to achieve the high ground, competing not only with Russia now, but China, India, Japan, and certainly others?

So I appreciate our attention to the detail of costs, but when we were discovering the vaccine for polio, we did not ask that question. We needed Dr. Salk and Dr. Sabin to get that polio vaccine. I think we're going to have the same attitude toward NASA.

We want you to do what you need to do, and we want to help you do that. So my question is can we educate the public so they are not frustrated by the scientific method, and the other thing, what can we do to help you?

And thank you very much, and I'll yield my time.

MR. SCOLESE: Well, thank you for that. I think if we could copy that speech, we would go a long way towards addressing that question. And you bring up a, you know, and -- actually I want to correct one thing that you said. We don't like to explode our things into --

(Laughter)

But you bring up, you know, a very important point. We can't lose sight of the need for mission success or safety. We have to balance the success of the mission, the risk of the mission, with the cost and the schedule. We can't focus on any one of those three or four items in order to be successful. And yes, sir, we can do a better job of explaining that and we will.

REP. GIFFORDS: Thank you, Mr. Griffith.

Mr. McCaul, please.

REP. MICHAEL T. MCCAUL (R-TX): Thank you, Madame Chair. Let me congratulate you and the ranking member in your new positions, and certainly we are very excited to have you, and you, Mr. Scolese, in your new position.

I have two areas of questioning. The first, I think one of the greatest -- and NASA has many missions. But I think one of the -- the one with the greatest vision is the one of going to the moon, Mars, and beyond.

There is a proverb's quote up here, "Where there is no vision, the people perish," that this is the greatest vision for mankind. It was Kennedy's vision. This has been estimated to cost about a $100 billion over the next 13 years.

And the chairman of this committee, Bart Gordon, took a look at GAO's recommendations and said that they were commonsense and hopes that you -- that NASA will take a look at these recommendations and implement them, and hopes that you will take these seriously.

I wanted to just get your initial, Ms. Chaplain, if you could just briefly summarize the recommendations as they pertain to that specific mission. And Mr. Scolese, how you intend to work with GAO on that?

MS. CHAPLAIN: Our recommendations have been pretty consistent across a lot of projects. Basically, we would like to see NASA pushing technology is one thing, and they have -- each project has two to five years, to do that and to learn about what they're doing and to set requirements.

Well, when they get to the point where they are ready to commit to Congress and get authorized to move ahead, as a formal program, that's where we'd like to see requirements get settled, and technology to be understood. If that happens, you have a very solid foundation for moving forward.

So I don't want there to be a misunderstanding that GAO is saying there's bad thing to have a cost growth and lots of things going on when you're trying to learn to do something that hadn't been done before. We really encourage that to happen.

But there is a time and place for that to happen. Once a program is ready to move forward, you do need stability to make it executable. And I think, you know, across the board, NASA has consistently agreed with these recommendations. It's built it into its policy; it's reflected in lot of the actions its undertaking right now.

So the thing to do is just to sustain the attention to these improvement efforts and to adhere to these good practices that are reflected in their policies going forward, especially with these big- ticket programs that are ready to --into these implementation phases including Aries, Ariane, James Webb Telescope.

REP. MCCAUL: Okay, Mr. Scolese.

MR. SCOLESE: I think Cristina said it right. We are -- we have taken those seriously. We are working in all those. I'd like to add one of the things that we're doing to make sure that we are, in fact, implementing that guidance or something that resembles that guidance is we do conduct our independent reviews at each milestone to make sure that, in fact, we're doing what we said we were going to do.

And we have independent people looking at it. And then we monitor that monthly to go off and make sure that all the pieces are still coming together. One of the challenges that we have is the stability, and it's getting to the point where we can make that commitment.

As you can imagine, as you're maturing your requirements and maturing your technologies, there is a lot of people that want you to go faster and commit sooner. We can't take forever, we recognize that. But we need to be able to take the time to get that done. And the support that we can get to allow us to do that would be greatly appreciated.

And it typically takes, you know, sometimes two, three, and in some cases as in JWS -- James Webb Space Telescope, it took us almost a decade to get to a point where we felt we had technologies mature enough to proceed and which we've really just decided on this year.

REP. MCCAUL: You know, I just wanted to let you know that we in the Congress support you in that effort and stay in close communication with this. Lastly, on -- in the stimulus bill there was money appropriate for the purpose of the climate change. Can you, Ms. Chaplain, speak to prior programs related to this -- that particular mission, and some of the cost overruns; specifically I know the Glory program had some cost overruns?

MS. CHAPLAIN: Yes, several of the climate and environmental programs have had cost overruns. A lot of them have been attributable to contractor performance, and not really recognizing that the contractor may not have had the expertise to develop some of the key sensors for satellites.

What we would like to see is more attention paid upfront into what contractors can do and cannot do, and to make sure you have a plan for dealing with any risk that you see in the contractor. We also like to see if these programs, more stability with requirements once they start and we also would like to see not too many expectations placed on any one program.

The NPOESS program, for example, has more than 10 sensors on it, makes it very difficult to design and execute that program with so many sensors and so many problems associated with each one of them in the integration process, and so forth. So there's a lot of risks associated with these kinds of satellites, but a lot of that can be done to mitigate those risks.

REP. MCCAUL: Okay, thank you, Madame Chair.

REP. GIFFORDS: Thank you, Mr. McCaul. Another terrific asset we have on the subcommittee is Ms. Edwards, who used to work at Goddard, and now represents the interests of Goddard. So please, five minutes.

REP. DONNA EDWARDS (D-MD): Thank you, Madame Chairwoman, and thank you to the panel. I just want to focus this morning on contractor performance and the ways in which contractor performance contributes to overrunning cost estimates.

And so, Mr. Scolese, and I think you came to Goddard just as I was departing Goddard. And Ms. Chaplain, both of you in your testimony talked about that. And so, I'm wondering what there is about contractor performance, and whether there are positive incentives and not as negative incentives to increase performance to contract and to avoid overruns?

And then, secondly, I wonder if you could speak to the internal capacity at NASA that actually might help us better oversee some of the highly technical and scientific projects in which NASA is engaged?

MR. SCOLESE: Yes, the -- with regard to the contracts and what our mechanisms are, we do have positive feedback mechanisms. I mentioned earlier that many of our contracts have award fee provisions, and that allows us to reward performance periodically all the way up until, in many cases, the end of the planned mission life.

So even if after it's launched, we can still go off and say, if you performed well, you can get, you know, fee on that performance. So we have the positive incentives to go off and do that. And also it can serve as a negative incentive by getting lower scores.

So we do try and find ways to motivate and reward, you know, performance. We do the same with our civil servants, as you know, although it's not quite the same as that with awards, and medals, and monetary award when that's appropriate.

So I think we have, you know, many of the incentives in place. And of course, one of the biggest incentives for both the contractor and the team that's doing it is to see the successful performance of the mission. You know, oftentimes, you know, it's answering a scientific question that hasn't been asked before, and the results can yield, as they did with Cobey, with a Nobel price.

So there are some great rewards that come from the scientific discoveries that can be made.

REP. EDWARDS: But does -- what I wonder though is that the -- internally within the civil servant component of NASA, the agency, do you have the capacity to provide the kind of technological expertise that's needed over these projects to ask the right questions of the contractors over the lifespan of a project to ensure that we're, you know, tamping down on cost where necessary, and estimating what the overall cost of the project would be?

MR. SCOLESE: Yes, I do believe that we have that. We have, you know, a very good workforce. What we haven't always given them is the tools and the support that they needed. We have, as you well know, some of the brightest people around that are working these activities.

What we haven't always done, is the things that I tried to outline here, is give them a forum to speak up when they have issues, to give them the opportunities to speak with senior management who could do things, whether it's adding additional resources, additional people, if the project needs additional people, additional technical expertise if we need additional technical expertise.

We can reach into the agency at other centers. That's often been a problem where centers don't know what each others capabilities are. We've broken down those barriers with organizations like the NASA Engineering and Safety Center so that we can go off and share resources amongst the centers.

We've also had the ability to go outside of the agency to organizations like Aerospace Corporation and others. So we made that more available to people, in addition by having, as I mentioned, and all the centers now do this, having monthly reviews or periodic reviews, where you can bring up issues to senior management. We can take actions. They can be as simple as picking up the phone and calling a contractor and saying you're not doing what we think you should be doing, and here is why and having the details, or it could be, you know, more invasive than that.

REP. EDWARDS: Let me just interrupt you, because I've probably just enough time for this last thing, and that is, whether you're able to -- are there interim assessments and can you look at international agencies in addition to the Department of Defense to learn about where you can better assess over the life of the project, whether you're meeting cost estimates.

And so looking at like agencies, or over the lifetime of a project and you can think about this later. I'm looking, for example, at Landsat. And Landsat, over a period of time, are there things that we've learned about those assessments that actually might help us for other projects.

MR. SCOLESE: Yes, in fact we're doing that. We're -- we have been doing that and we're going to embark on a broader study to go off and look at the performance of other agencies and other activities. I'm not sure that we could get the information on the international ones, but we'll certainly go off and look and see if that's doable.

REP. GIFFORDS: Thank you, Ms. Edwards.

Mr. Grayson.

REP. ALAN GRAYSON (D-FL): Thank you, Madame Chair. Mr. Scolese, what percentage of NASA's contract dollars are spent on firm-fixed- price contracts?

MR. SCOLESE: I'll have to get you the exact details on that. I don't have that off the top of my head. But I can tell you that where we can do firm-fixed price we do, and I can give you a couple of examples here, and then for the record I'll provide you with more details.

On the tracking and data relay satellite system, communication satellites, those were fixed-price contracts. For portions of the GOES satellite that we do for NOAA, those were fixed price.

For many of our small explorer missions, the spacecraft bus is often a fixed-price bus. What percentage of our contracts beyond -- in precise terms, I can't give you off the top of my head and we'll get that to you.

REP. GRAYSON: Well, for firm-fixed-price contracts, the contractor pays a 100 percent of the cost overruns, correct?

MR. SCOLESE: If it's caused by them, that's correct, yes.

REP. GRAYSON: And for cost-reimbursement contracts, the contractor is not legally obliged to any part of the cost overrun, is that correct?

MR. SCOLESE: That's correct.

REP. GRAYSON: So is it fair to say that if NASA did more firm- fixed-price contracts we would be giving the contractor incentive -- a real incentive to avoid cost overruns?

MR. SCOLESE: We look very carefully at what type of a contract we use to try and balance the risk that's going to be in there. Typically, we do firm-fixed-price contracts when we understand the requirements, so that a contractor will in fact bid on it, and know that they have a chance of being successful.

We use cost-reimbursement type contracts when there is some uncertainty in the -- in either the requirements that we have, or in the ability to perform the -- so we do a very careful risk-benefit relationship where possible and as often as possible we try and use firm-fixed-price contracts. But that isn't the only remedy that we can use.

REP. GRAYSON: Mr. Scolese, it seems that we have here two extremes. We have one condition where the contractor pays all the cost overruns, the other condition where the contractor is legally obliged to pay none of the cost overruns. Wouldn't it be useful to have something in between?

MR. SCOLESE: Well, in fact we actually do try and work that way, and I just want to, you know, on the firm-fixed price, if we change something, we pay. If they can't meet the original specification, they pay. And yes, I mean, we actually try and work those cost- reimbursable contracts where we have negotiations.

They will not be reimbursed for all the costs if we feel it was their fault that caused it. We can't guarantee that at the beginning of the contract, or we can't guarantee that at the beginning of the negotiations, but we do work hard to try and make that stick into a -- and to assign responsibility where the responsibility lies.

REP. GRAYSON: What percentage of NASA's contracts, if any, are awarded under invitations for bids, sealed bids rather than through competitive proposals?

MR. SCOLESE: I don't have the answer to that. Most of our stuff is done competitively, but there may be some institutional activities that are done by sealed bids. I can't answer that off the top of my head.

REP. GRAYSON: Now, when there are competitive proposals, which, I'm sure you'll agree is the predominant form of NASA's contracting -- when there are competitive proposals, there is a cost technical tradeoff in those proposals, correct?

MR. SCOLESE: Yes.

REP. GRAYSON: All right, now, you can correct me if I'm wrong, but I believe that there is nothing in the statutes that indicates to NASA what that tradeoff should be, is that correct?

MR. SCOLESE: What the tradeoff between the cost and the technical should be?

REP. GRAYSON: Right. How much of an emphasis should be put on cost versus technical?

MR. SCOLESE: No. We did -- there isn't a statute for that. We determine that before the contract is released for bid.

REP. GRAYSON: Right. But the agency determines that at its sole discretion without any guidance from us, correct?

MR. SCOLESE: Yes, that's correct.

REP. GRAYSON: Now, if we were trying to save money, it seems that one way we could try to do that would be to emphasize cost more in this cost-technical tradeoff. Is that a fair statement?

MR. SCOLESE: Well, we do emphasize cost. It's a fair statement, but we have to manage the cost and the schedule and the risk and the technical performance. All those factors have to be considered. Yes.

REP. GRAYSON: Yeah, well, turning again to the tradeoff between having a firm-fixed-price contract, where the contractor bears the risk and the cost reimbursement contract where the contractor legally bears none of the risk, apart from the question of whether we should have something between those two, would you agree with me that now, it's the agency that makes that decision and not Congress?

MR. SCOLESE: Yes, I would agree with that.

REP. GRAYSON: All right. Now, again if we were trying to avoid cost overruns, do you think it might be a good idea for us to give you some direction about when to use a cost-reimbursement contract and when to have the contractor bear the risk of the cost overrun?

MR. SCOLESE: No, sir. I think, you know, those are very difficult decisions that have to be made as we're developing our requirements, and you know, when we have very stable requirements, firm-fixed-price contracts are absolutely the right thing to do, and that determination, as was mentioned earlier, comes after we've done some definition of what it is that we want to achieve.

And as I tried to mention earlier, we do in fact do that. Many of our spacecraft for the small explorers, as an example, are in fact firm-fixed price, because we understand our requirements very well. And we have good performance there.

So I think it's going to be -- it will be very difficult to look at each and every one of our missions to try and determine which should be firm-fixed price, which should be cost plus, and which portion of the mission should be firm-fixed price, and which portion should be cost plus, because in any given mission you will have different types of contracts for different components that are being delivered.

REP. GRAYSON: Thank you. I look forward to receiving the information that you promised.

Thank you, Madame Chairwoman.

REP. GIFFORDS: Thank you, Mr. Grayson.

Now, we have Ms. Kosmas with us, also a Central Floridian representing the Kennedy Space Center.

REP. SUZANNE KOSMAS (D-FL): Thank you. I'm honored to be here. Thank you, Madame Chairwoman, and thank you to the panel for being here.

I want to start by saying I'm very excited to be representing the Kennedy Space Center and throughout you have been a neighbor and watched the launches for 35 years of my time in Central Florida. I want also to echo the comments made by Parker Griffith, my colleague here, about how it's very important to me that we maintain the U.S. supremacy and man space exploration, specifically, and also the other areas in which we used -- use space exploration, whether it's for national defense, whether it's for environment, whether it's for weather prediction, or whatever the use might be. But man spaceflight, of course, is of a high interest to me.

So with reference to the comments made by Congressman Grayson and the cost analysis, would you say that you put a greater emphasis, or that you allow a greater latitude, or flexibility in terms of cost overruns when there is a significant safety factor involved particularly with regard to human spaceflight?

MR. SCOLESE: Well, certainly that goes exactly to the risk discussion that we were just talking about.

Clearly, if we have a mission, we err on the side of safety. There is no question about that. Clearly, we can't allow it to go so far beyond what our ability to pay is and we would have to take a step back and see if we're doing it the right way and ask that question. But clearly, we're not going to scrimp when it comes to safety.

REP. KOSMAS: Well, good. I mean, I assumed that to be the case, but I thought it needed to be pointed out perhaps --

MR. SCOLESE: Thank you.

REP. KOSMAS: -- that that is an area in which cost overruns maybe are, we've learned from experience that certain things require greater care in terms of the safety risk factor, which brings me to the second part of my question which has to do with -- in my district, of course, we're concerned about the end of the shuttle launch and the beginning of the constellation program, and the difficulties that that poses for us in maintaining a professional workforce in the area, and wanted to ask you with regard to the safety aspect of putting a hard and fast date on the end of the shuttle program, do you think that that's a wise thing to do?

MR. SCOLESE: I won't comment on the wise part, but I will say that clearly that having a fixed date adds to the -- one of the things that we mentioned earlier, which is stability. We need that same workforce -- portions of that same workforce to go off and build the next system, design the next system, test the next system. So we need to move some of those talented people over to that activity.

They're doing a wonderful job in flying the shuttle, but we also need them in other areas as well. So we need to start transitioning some of those people over. We also need some of those facilities. As you know, you were down there just recently and you saw the three lightning towers going up on 39B. We need to have the -- those facilities available to begin launching the new systems.

So from a stability standpoint, from a risk standpoint, having a fixed date to allow us to start transitioning those people and those resources is important to us, and I think 2010 is a reasonable date for us to go off and do that by.

We have, as you know, we have the hardware to get us there. We would have to build additional external tanks to go beyond that. But -- so I think 2010 is a reasonable date and it provides us a reasonable risk posture to proceed.

REP. KOSMAS: You think it does provide a reasonable risk posture for you to proceed?

MR. SCOLESE: Yes. Yes.

REP. KOSMAS: Okay. Given the flexibility, shall we say, in time for rocket launches -- the launchers to take off and that provides a flexibility in time. How much flexibility do you think would be reasonable past 2010?

MR. SCOLESE: You mean to fly the shuttle or --

REP. KOSMAS: Yes, to fly the shuttle.

MR. SCOLESE: We'll have to get back to you on that. We have a report actually that's coming in on --

REP. KOSMAS: Okay.

MR. SCOLESE: -- to answer specifically that question.

REP. KOSMAS: Okay. Thanks very much.

REP. GIFFORDS: Thank you, Ms. Kosmas.

That completes our first round of the questions. We know that votes would be called very shortly, but we're going to attempt to do a second round. So with that Mr. Scolese, President Obama yesterday signed a presidential memorandum to overhaul the way that government does its contracting.

He indicated that your agency would be working with other agencies as well as OMB to come up with new procedures and practices. Can you tell us today anything about the impact this overhaul will have on NASA contracting?

MR. SCOLESE: Actually, we took a quick look at it and we think that we're largely in line with the provisions in there, the utilization of fixed-price contracts as we discussed earlier. We do, do that where that's appropriate on space hardware as well as, you know, institutional items.

So we're certainly going to look at it and see where we can improve. The other provision, to use competition, we regularly use competition and require competitive activities, we require a justification, when we do not use competitive bids. So we do that, where there is one supplier, for instance, as is the case for large solids, you know, the first stage of the Aries vehicle.

There is only one supplier of large solids, so we had to do fixed price there -- or I mean, sole source there. But predominantly, we use competition and then, as far as the A176, we've had some experience with that, but not as much and that requires a little bit more of our looking at it, but it's along the lines of the way we have proceeded to maintain inherently governmental responsibilities within the government.

REP. GIFFORDS: Thank you. And our subcommittee will likely have you come back and report on how things are going. I also understand that NASA is very concerned as it was indicated by your testimony earlier about the crowded manifest for launch vehicles in 2011, and the fact that the Mars Science Lab's launch window that year will be very tight.

Evidently, NASA needs to contend not only with the Juno mission to Jupiter, but also with DOD launches as well. However, this is not the first time that this has happened. As you know launch delays increase project costs. We've heard a bit about that, but what is NASA doing to mitigate launch conflicts, and also, Mr. Pulliam, based on the Aerospace Corporation's work at DOD, what can NASA do better to mitigate launch conflicts, and is this problem going to get better or is it going to get worse?

MR. SCOLESE: Well, what we're doing to resolve the problem is, of course, we're working with United Launch Alliance, we're working with our colleagues in the Department of Defense, and Department of Commerce to try and make sure that we have a manifest that is doable and we -- and that that we can have confidence in.

We're behind right now. There is no question about it. The launch manifest is, as you mentioned is backed up, and causing some missions to slip. What the exact way to fix that problem is going to take some time. We're also looking within NASA -- certainly, you've heard about the COTS activities and about our launch vehicle on ramps for the NASA launch services. We're also looking at other suppliers as they come online to fly our vehicles.

And where partnerships make sense, we use international launches on a not fee -- not-for-fee basis. That's their contribution to us. So we're looking at all three of those things, working with our colleagues in Defense Department, in ULA to improve the manifest, improve the capability to launch more frequently.

We're encouraging the development of other launch vehicles, particularly the medium class launch vehicle that will end when the Delta 2 stops producing, which carries most of our science payloads. And we also, where it makes sense, and where it's beneficial to the United States are looking at international launches as well.

MR. PULLIAM: I would agree with the statements Chris has made. I -- you know, we see the clogging of the manifest just from inside the DOD perspective even before you integrate the NASA launches into that, so it is clear and that clogging of the manifest comes and goes as missions encounter these difficulties, we've talked about and perhaps move into a new area of the launch manifest where maybe it wasn't so bad before, and now it's worse than you thought.

So it's an ever changing game, so even though we see a clogged manifest in the future, that will change some as we approach it as well. I think the answers to it are as they are with most of these other problems.

It requires a very close interaction between NASA and the DOD on which instruments need to go when.

If it's a planetary mission, then surely we need to hold on to those windows, unless we lose two years. If the DOD has a mission that's more important to national security, then perhaps that takes the precedence, and I think we do that now.

So that coordination and cooperation needs to continue, and then finally, I would say we need to look at what the -- what is on the critical path as we try to use our facilities in the most efficient way. Is it the -- just the physical turn of the path, does it have something to do with range capabilities.

You know, what is it that could be viewed from a multi-user perspective to see if the -- if we want to operate at the maximum efficiency. Are we doing that now? Are there upgrades that are required? Is there infrastructure that we don't now have, and to look far enough in advance, to know what that is, so that we don't wind up just accepting whatever capacity that there happens to be, perhaps based on a time when the demand wasn't quite so high.

REP. GIFFORDS: Thank you.

Mr. Olson.

REP. OLSON: Thank you, Madame Chairwoman.

And Mr. Scolese, give you a little break.

Mr. Pulliam, back to you.

MR. PULLIAM: My turn.

(Laughter)

REP. OLSON: Yeah, to spread the love a little bit, so to speak.

MR. PULLIAM: Okay.

REP. OLSON: Just wanted to talk about NASA and in comparison to the Department of Defense. And in your testimony, you compared NASA with the national security space community. You said NASA was far less -- received requests, far less overall support from the Aerospace Corporation, but proportionately more programmatic and budgeting support.

And so between NASA and the national security space community, who in your view does a better job with cost estimating, budgeting, maintaining programmatic control over their programs, what are the differences and why do you think those differences exist?

MR. PULLIAM: Thank you. It is true that the predominant customer for the Aerospace Corporation is the Department of Defense based program that that's why we were created back in 1960. NASA is the company's third largest customer right behind the DOD and NRO.

So we're privileged to work with them, and we did want to make the point that and we think it accrues to NASA's credit, while the Air Force typically uses Aerospace more for the inline hardcore technical and scientific kinds of things that we're expected to do, NASA has that capability, more capably in its organic workforce, so they turn to Aerospace as we would expect federal agencies to do to see what we have that serves them in the accomplishment of their national mission.

And that's turned out to be this body of work and cost estimating, looking at the parameters that go into that. And we think NASA in partnership with Aerospace is doing some things that other agencies frankly aren't doing, and it's going to pay off and we're going to see the dividends of that.

Which organization is doing best, we can cite examples across both agencies where there have been spectacular failures of managing cost and schedule. We did find that the causes and fundamental elements seem to be about the same.

The Department of Defense uses other very capable contractors to help them with their cost estimating. So we're not as deeply involved with them as we are with NASA, in trying to figure out the doctrine and the managerial techniques. But I think it sounds a bit like a cop-out, but I think the agencies have essentially the same problems and they are running at similar kind of overhead rates.

So NASA can say, yeah, but we have this mission that really pushes the science in a way that that no other mission has, DOD can respond by saying yeah, but we have this multi-military user community that requires things to change, and technology and scheduling growth. So it just needs to be managed uniquely from each agency's perspective, but in full appreciation of best practices that might be out there.

And if I could just take one more moment, there is a lot of really fine work being done that was begun at the GAO and has migrated into NASA and to the Aerospace Corporation and looking at major acquisition milestones called key decision points. And looking in advance of those, that the kind of knowledge one needs to have in order to be ready for those milestones, and those milestones play directly into cost and schedule.

And NASA and the Aerospace Corporation and GAO are all very interested in continuing to define what it takes to be successful at every part of the program, and that's going to pay off as well.

REP. OLSON: Thank you very much for that answer.

Mr. Scolese, I could not let you get away clean free, I just want to talk very briefly about the Mars Science Lab, and it's my understanding that the original cost estimate for the Mars Science Lab was in the $600 million range.

And that NASA's initial confirmation estimate was closer to ($)1.6 billion. That first estimate did not come from NASA, as I understand it. And you've -- NASA's recently announced the two-year delay in the MSL, the cost increase of $400 million. I just want you to elaborate on how those numbers were obtained and what is being done to eliminate unrealistic estimates.

MR. SCOLESE: Yes. The -- that first number that you mentioned, the roughly ($)600 million came out of what's called a decadal survey that we do with the national academies where they look at our objectives in the future, and they try and prioritize them and say these are the science goals that you really should think about doing. And we work with them to try to accomplish those goals.

The Mars Science Lab was one of those and at that time it was estimated at $600 million. When we went off and did our studies, as was mentioned here, we did the work to mature the technologies to get a better understanding of it. We estimated the cost to be ($)1.6 billion. Clearly, we still underestimated the complexity of it and we should, and could, and can, and will do better in the future.

We're also working with the national academy to help them improve their earlier cost estimates that you see there, because it often gets out, you know, one way or the other, that you know somebody thought this was going to cost whatever was set at the earliest phase.

So we are working with them to help them obtain the tools and to get resources and the academy is doing it as well. So we're doing it together and doing it willingly so that we can go off and have a better understanding of what those missions would cost so they can better establish priorities.

REP. OLSON: Thanks for that answer.

And Madame Chairwoman, I yield back my time.

REP. GIFFORDS: Thank you.

We have with us Mr. Rohrabacher, and of course votes have been called, but we're going to have some minutes to hear.

REP. DANA ROHRABACHER (R-CA): Thank you very much. I apologize for being late to the hearing.

As usual, we had -- (laughs) -- two important hearings at exactly the same time. I would like to ask a general question to just -- when we take a look at the -- this Mars Science Lab and we take a look at, I guess, it's INPOESS -- I guess, NPOESS. I've never been able to pronounce that right. I've been looking at this for years.

But with that said, you know, which project I'm talking about. When we look at that and we look at this whole Mars issue today, are we talking about basically, and these other problems -- are we basically talking about intentional wrongdoing in terms of lying about a bid. You know when you underbid -- when you are offering -- intentionally offering a bid that you cannot handle, that's a lie and that's intentional wrongdoing.

Then you have another option, bad judgment, you know, unintentionally doing something that will -- ends up causing harm, like miscalculating what you really can accomplish for a certain degree, or are we talking about systematic flaws. Because we have had consistently over the years, examples, after -- example after, example after, example, of overruns and of people not really being able to fulfill the obligation they've taken on when a contract has been issued.

So what are you talking about? Are we talking about a systematic flaw, should be doing something else, or are we talking about just bad judgments that were made, but with no ill -- nothing, you know, wrong, because people do make bad judgments at times. Or are we talking about intentional wrongdoing?

MR. SCOLESE: Well, let me start off by saying NPOESS is a NASA project, so I can't comment, you know, in any degree of detail on that, but your question is broader than that, and I don't believe that intentional wrongdoing is there ever, I mean, I suspect it probably happens occasionally, but that's not what we see. It's more in your second one, which is you know, a bad judgment although I'd like to call it optimism.

REP. ROHRABACHER: All right.

MR. SCOLESE: The people that are proposing these missions that want to do them are extremely enthusiastic about it and they are optimistic about the technologies that are out there. They are optimistic about their ability to do the job.

REP. ROHRABACHER: Irrational optimism can be very costly.

MR. SCOLESE: Yes, it can. Yes, sir. And that's why we get to this to this third part which is really the answer to your question which is, is it systemic? And that's what we were trying to talk about here on what we're going and that's what the GAO has pointed out that we need to do.

It's not one thing that's going to improve our performance. It's many things that are going to improve our performance. We have to train our people, and we do, and we're improving our training process, so that they will be able to recognize their optimism as well as others' optimism.

We have to monitor the performance of what is going on, so that we can see if optimism is driving the estimate, or if in fact poor performance is causing us to have some overruns. We have to put those tools in place so that we can catch them early enough, so that they don't become you know surprises for sure, but they don't become large cost impacts, because we can then apply additional resources without maybe having to increase the budget or change the schedule.

REP. ROHRABACHER: So training, monitoring, oversight, but let me add one other word here that I -- over the years that I just never hear, and that is accountability. And if someone has a bad judgment, or if someone is -- especially if someone is intentionally doing something wrong, I have not found the ability of people to be fired or to be charges being brought against people.

And I just -- especially if they are within the system and making a bad judgment as compared to a contractor from the outside, shouldn't -- isn't there a problem with accountability here. How many people do you know have been fired from their job at NASA?

MR. SCOLESE: If you mean by fired, sent away from NASA --

REP. ROHRABACHER: Yeah, or --

MR. SCOLESE: I mean, for wrong doing, you know, violated the law, I wouldn't have the names, but I know --

REP. ROHRABACHER: I wouldn't say violated the law. If someone just has very bad judgment. I remember with the Hubble Telescope there was a bad decision made somewhere there where they sent it up and the mirrors weren't exactly right, and it was -- it cost the taxpayers a lot of money.

We should -- I know my time is up, so I'll just say that we need to be holding people more accountable for bad judgments, irrational optimism. I know you're going to work on the systematic problems as well.

MR. SCOLESE: And we do the other -- we do take into account those types of things. We do hold people accountable and we have in fact replaced project managers, project personnel, other personnel, if they're not performing. But we also have to recognize what caused them not to perform, and if it was certainly their fault we do remove them. To say that we fire them, I can't necessarily say that, because oftentimes these people have performed spectacularly in other areas, so we'll remove them from their current job and move them to another.

REP. ROHRABACHER: Okay. Thank you very much.

REP. GIFFORDS: Thank you, Mr. Rohrabacher.

Thank you, Mr. Scolese.

Just in closing, I know that a lot of the work that NASA has done in the budgetary areas were not reflected in this GAO report. So when do you expect the Congress to be able to see the result of the work that you've done?

MR. SCOLESE: Well, as the GAO report said, and you know these tools have been put in place in the last couple of years. Our missions typically last -- our mission cycle is typically three to five years. So you should be seeing some of the results soon.

I think you'll see our estimates, you know, better, but probably you'll see the real benefit of what we're doing in the next couple of years, in the next one to two years as we start delivering on those missions that we started this process on, about two years ago.

REP. GIFFORDS: Thank you. Before we bring the hearing to a close, I want to thank the witnesses for testifying before the subcommittee today. I want to thank my ranking member as well for our first successful hearing, and also as you saw that there is a real passion for space in this subcommittee, and a lot of members -- new members to the Congress, represent NASA's interest, the American people's interest. So I will look forward to a fruitful, productive, next couple of years.

The record will remain open for two weeks for additional statements from members and for answers to any of the follow-up questions the subcommittee may ask of our witnesses. The witnesses are excused and the hearing is now adjourned. Thank you.

END.

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