Statement of Robert J. Polutchko Member, Cost Assessment And Validation Task Force Advisory Committee on the International Space Station, before the

Mr. Chairman and Members of the Committee: I am pleased to appear before the Committee to answer your questions regarding the International Space Station.
Thank you for the invitation. I I believe that all members of the CAV Task Force had hoped that our three year old projections would have been long overtaken by
positive recovery actions and programmatic successes.

The CAV Task Force recognized, as I’m sure anyone else who has had any involvement with the ISS Program recognizes, that the technical and management complexity
of the program is, and has been, extremely challenging and the systems integration requirements are unprecedented. NASA, the Congress, the contractors, the
international partners and the American people should take great pride in the recent ISS accomplishments which successfully and safely conducted thirteen flights and
established the beginnings of a functional system on orbit. Much remains to be accomplished and sustained support to NASA’s hardworking and dedicated ISS team is
more important than ever before.

The Committee asked that I address several questions from a reference point of our CAV Task Force Report which was released to NASA on April 15, 1998 and
briefed to this Committee during your May 6, 1998 Hearings. Since I have not been involved with ISS since the May 6, 1998 Hearing, you have requested a “look back”
perspective relative to the current status of the ISS Program. The overall current program status as presented by the NASA briefing to the Congressional Staff on
March 5, 2001 and the brief summary of the Administration’s FY 2002 Budget Blueprint Summary for NASA dated February 28, 2001, is the information benchmark
for my comments. The transcripts of the later Committee Hearings of June, August and October 1998 were also reviewed. Obviously much has happened over the last
three years that has shaped the current situation and, perhaps, the unencumbered, retrospective view you have requested may be of some help as the program develops,
re- assesses and re-baselines the details of the “to go” plan.

The Committee provided the following questions:

1) What issues raised by the Cost Assessment and Validation Task Force have not been adequately addressed?

2) What is your assessment of the current Space Station cost overrun in light of the recommendations of the CAV Task Force?

3) What recommendations do you have to minimize or prevent further unforeseen cost growth on the Space Station program and reduce program risk?

What issues raised by the Cost Assessment and Validation Task Force have not been adequately addressed?

The CAV Task Force Report outlined a number of issues, developed a series of findings, identified major risk areas and provided nine recommendations. Over the
several months following the release of the report, it became apparent from the subsequent Committee Hearings that the ISS Program did not have serious disagreement
to the vast majority of the CAV issues, findings or recommendations. Quite to the contrary, NASA found that the CAV report was constructive and helpful. I do not
possess insight of the specific details of the corrective actions that were implemented by the program nor a working knowledge of the subsequent three years of program
activities. However, the summary of the current cost and schedule status of the program causes concern that, perhaps, additional focus and attention should have been
given to several of these CAV items. As only one example, the CAV recommended that “the present (Rev C) program plan should be revised so that it
is achievable (emphasis added) with the financial resources available. Realistic milestone dates should be established as the basis for
development of the program plan and internally defined target dates should be used for execution. If necessary, program content should be
eliminated or deferred to fit within funding constraints.” Conversely stated, if the program could not develop an achievable plan with acceptable program
content within the resources available, additional resources should have been brought to bear at that time in order to mitigate the inefficient and disruptive snowplowing
of deferred work and the postponement of critical issues which, in turn, invariably exert additional pressure on future schedule milestones and cost to complete
expectations.

A retrospective look indicates that the four major on- orbit modules were successfully accomplished on the following schedule relative to the Rev C baseline:

Additionally, the current program milestone plan (Rev F) shows:

The underlying issue here seems to be a continuation of a “success oriented” planning, budgeting and management approach that necessitates a large amount of parallel,
workaround and re-work activities which results in additional cost and schedule risks to the overall program. For even a modestly complex development program, when
highly integrated schedules, budgets and task plans are baselined without adequate margins, reserves and risk mitigation expenditures, inefficient and costly program
turmoil and disruption become the everyday way of life. The current status of the ISS Program seems to strongly suggest that this management approach remains as
pervasive on the program today as it was three years ago. Program management had continually predicted that the hardware and software developments will meet
planned performance goals of schedule and cost, despite the fact that similar predictions in the past had not been realized. One unfortunate characteristic of this
misguided management approach is that frequent, major re-planning and re-baselining exercises then require very high and untimely traffic in administrative and
contractual change management. This process in and of itself causes costly inefficiencies for nearly every segment of the program.

The CAV determined that cost and schedule variances as a percentage of work performed were growing. This increase in overrun growth rate suggested a very serious
omen for management. Also for FY 1998, NASA and other non-Prime contractors accounted for approximately 47 % of the ISS budget and it was projected that within
two years this group will be consuming the majority of the ISS budget. We noted that NASA did not have an earned value Performance Measuring System (PMS) in
place for much of the NASA and other non-Prime efforts. Given the scope and content of the NASA effort, measuring and forecasting schedule and cost performance is
severely hampered.

It seems fairly clear that realistic task planning, scheduling and budgeting remains a critical program deficiency and, actions to reform the management approach to this
process is desperately needed. The current cost and schedule summary data presented by NASA confirms this conclusion. For example, and I quote from the NASA
status report and the FY ‘02 Administration Budget Blueprint:

“Staffing levels and downstaffing plans underestimated assembly and ops realities”

– “.. Service Module(SM) delay, resolving test anomalies, & significant more effort than estimated to close out paper.”

-“Ops have identified need for additional staffing for procedures, development, training, software updates, and operations.”

-“SM and U.S. schedule delays undermined ability to estimate or advocate the overall budget runout required to address threats and liens against reserves.”

Why did this happen? The FY 2000 budget performance assessment by NASA shows that the FY 2002 budget estimate was based on optimistic performance
projections. Again I quote,

“Costs for FY 2000 planned $2278 -versus $2364 actual”

“Uncosted carryover into FY 2001 planned $500M -versus $412 M actual”

” DDT&E destaffing was planned -versus actual increased staffing for integ and ops”

“Flight H/W and S/W deliveries expected on schedule -versus many delays”

“Program liens were discounted by plan -versus actual liens exceeded by both Prime and non-Prime performance.”

Planning, managing and executing a development program such as ISS on a essentially flat annual funding level (or cap) is intrinsically out of phase with the development
life cycle and budgetary needs of the program. The development phase of a program contains very little level of effort activity. Budgeting and funding ISS essentially at
a fixed annual level introduces a continuing program dilemma and tends to exacerbate an already very difficult and challenging management job. ISS requires a highly
integrated program plan of a multitude of elements which coordinates the efforts of literally thousands of contractors in many countries as well as the extensive
non-Prime efforts at numerous government facilities. When problems arise that require additional resources, there is an initial, natural desire (or bias) to believe that the
schedule and cost impacts can be absorbed into the work in process since it is known that additional, unencumbered fiscal funds are not readily available to operational
managers. The only management alternative in this situation is to defer other scheduled work downstream with the hope and belief that the deferred work can be
accomplished later at the same cost that has to be diverted and allocated to fix the problem which caused the deferral. Unfortunately, the reality is that this work (before
deferral) was planned and scheduled at that point in time because then is when the program needed it to be accomplished. Work deferrals have collateral cost and
schedule impacts which are seldom considered on a task by task basis. When many problems are simultaneously being funded and fixed on a program the size of ISS
with essentially a fixed annual budget, the work deferrals integrated over the program can become such a massive perturbation that the integrity of the highly integrated
program plans is jeopardized.

I believe I understand some of the historical reasons, commitments and legislation that are in place and why we continue to utilize this budgeting and funding approach
for ISS. It needs to be emphasized that those considerations, albeit important, have tended to complicate and adversely impact the management process, the ultimate
costs and schedule – and even more critical – the final configuration products of the ISS DDT&E phase when compared to other more traditional management methods
for a complex development program.

What is your assessment of the current Space Station cost overrun in light of the recommendations of the CAV Task Force?

The CAV Task Force conclusions in April of 1998 were based upon a statistical combination of the effects of the issues, findings and risk assessments of the Rev C
plan rather than a summed or even statistical worst case. In addition, the CAV provided a sanity check on our statistical judgments by extrapolating prior available
program schedule and cost performance into the future. Based on our state of knowledge at that time, we projected a 50/50 estimate of $24.7 B for ISS Assembly
Complete with a corresponding schedule delay of two years beyond December 2003 (12/05). The corresponding 70/30 projection was $26.3 B and three years beyond
December 2003 (12/06) for Assembly Complete. The Task Force also concluded that additional funding requirements of between $130 M and $150 M annually would
be required beyond Assembly Complete. Therefore, for the planned ten year operations phase, an additional $1.3 -1.5 B will be required. These estimates did not
include funding for possible extreme contingencies such as: major element or launch failures; withdrawal of an International Partner; or, the development of a U.S.
propulsion capability which the Task Force believed should be factored into an overall Russian contingency strategy.

With all due respect to the Committee, it would be presumptuous to make a top of the head

assessment of the current Space Station cost overrun without the detailed knowledge that is required to responsibly analyze the current situation. Many important
changes have transpired over the last three years including a number of remarkable successes. However in the retrospective way that you asked the question, I would be
willing to make the following judgments in light of the CAV Task Force results. The current schedule and cost overrun for the Rev F program plan should not have been
unexpected or, for that matter, are not terribly surprising. What is troubling, however, is: (1) the degree to which we are now contemplating increasing, rather than
decreasing, our dependence on the Russians – particularly regarding propulsion, logistics and crew return; (2) reducing costs by proposing to terminate ISS construction
after the “U.S. Core” is complete and European and Japanese lab modules are launched; (3) indefinitely deferring the Habitation Module, Crew Return Vehicle, and the
Propulsion Module; (4) and, as mentioned earlier in response to Question 1, the perpetuation over the last three years of optimistic program implementation plans given
the restricted resources that were being made available to the program.

The CAV Task Force believed and reported that “the major threat to the long term viability of the ISS is the uncertainty associated with the
Russian funding commitment and the potential impact on the basic station infrastructure and utilization capability. A diminished level of Russian
participation could significantly alter the current ISS assembly sequence and final design. Proceeding forward with full knowledge of the past,
present and to some extent, the future economic environment in Russia without implementing adequate contingency capabilities to address likely
shortfalls is tantamount to accepting a level of risk that could drive U. S. costs significantly higher.”  

The reality of the current status and NASA’s work in process to re-assess the entire program seems to indicate that we are close to deciding to accept an almost
unbounded risk for the indeterminate future with regard to the viability of timely logistics, propulsion and crew return support from our Russian partners. This
approach as well as indefinitely deferring the U.S. Habitation Module limits the ISS to three (vice six) crew members until sufficient Soyuz capsules can (or will) be
made available which, in all likelihood in the interim, will adversely impact the amount of science return. In addition, it is very likely that additional, expensive Shuttle
flights may be required to provide the back-up to, and a gap filler for, the Progress vehicles.

All of the above sounds like false economy and seems to be driven primarily by self-imposed, annual funding caps or congressional mandated program development
caps. To the interested and dedicated outside observer (and taxpayer), we should be able to face up to the realities of the current status and develop the right remedies,
rather than expeditious ones, for the program and the nation. NASA desperately needs to develop a conservative re-plan for the ISS Program and make the case to the
Administration and the Congress of the absolute necessity to get the program on a sustainable track to mission success. Again a quote from the 1998 CAV Report,
“Program cost and schedule increases will occur; however, the negative impacts can be reduced if the Program has the reserves to develop
necessary cost and schedule risk mitigation plans and then commits itself to implement these plans. This is an area in which NASA, the
Administration, and Congress must have a clear understanding and an agreed-to course of action.”

What recommendations do you have to minimize or prevent further unforeseen cost growth on the ISS program and reduce program risk?

With all due respect, I am humbled by a portion of the question. “Preventing unforeseen cost growth” is almost an oxymoron in a major development program like ISS.
“Minimizing”, on the other hand, the impacts of unforeseen problems when they occur can be accomplished by insuring that the program is planned with adequate
unencumbered schedule and budget reserves. The Master Schedule and sub-tier schedules must have enough flexibility to fix unforeseen problems in their respective
areas and minimize any collateral cost and schedule impact to other areas. I fully realize the statement sounds obvious and somewhat trite – and it is meant to be.
Developing an achievable and sustainable plan for a highly integrated program such as ISS, however, is a very difficult and laborious job requiring top-to-bottom
management commitment in order to sustain program viability and minimize disruptions caused by unanticipated problems or failures over the life cycle. The process
involves a great deal more than tacking on schedule and budget reserves at the Master Schedule level.

The more likely situations occur, however, with known system or subsystem threats that have not yet evolved from the risk stage to problems that cause (or could
cause) real, substantive impact. Prudently conservative program plans at all levels can be managed to incorporate targeted risk mitigation activities. Threat identification
and awareness are necessary risk management activities but are not sufficient. Many times an ounce of risk mitigation yields a pound of cure if the threat materializes.
In this area the 1998 CAV Task Force found that budget and schedule constraints had precluded ISS program managers from adequately planning for contingencies.
Budget availability rather than technical requirements had, in certain circumstances, a large influence on program planning. As a result, contingency planning, cost and
schedule risk management, and risk mitigation had tended to be less proactive than they could or should have been. I suspect that this situation is probably more true
today than in 1998 when instances of this problem extended across the program: the procurement of spares, the resolution of continuing parts shortages,
implementation of Multi-Element Integrated Test (MEIT) throughout the program, the lack of adequate contingency alternatives relative to Russian shortfalls, hardware
obsolescence projections, and inadequate schedule and cost margins.

Summary

Mr. Chairman, in attempting to answer each of your three questions, my retrospective look at today’s ISS program from the 1998 CAV Task Force perspective leads
me to a single, overriding judgment and recommendation; namely, that we need to maintain the Committee’s steadfast support of the program and encourage NASA to
take a fresh look at conservative planning and rebaselining of the ISS program, including reconsideration of the major deletions that NASA believes must be made in
order to comply with existing fiscal funding and cap requirements. Yes, the rebaselined ISS program will require substantial additional funding but, on the other hand,
providing a Space Station that has severe operational constraints and much reduced science return may not be in the best interests of our nation and our partners.

Thank you very much and I have provided a more complete written statement for the record.