Status Report

Testimony of Sean O’Keefe, Deputy Director, OMB before the House Science Committee

By SpaceRef Editor
November 7, 2001
Filed under , ,

Chairman Boehlert, Rep. Hall and members of the Science Committee, it is
a pleasure to appear before the Committee this morning in response to your
invitation to discuss the International Space Station (ISS) and the report
of the ISS Management and Cost Evaluation (IMCE) task force. First, let me
begin by sharing with you how pleased I am with the technical progress of
this program. The nearly flawless integration of hardware and software in
orbit from numerous nations and cultures from around the globe is a
testament to the hard work and dedication of the thousands of people who
made it happen. We are now beginning to see the fruits of those efforts,
as research is underway on orbit, already producing important results. The
resourcefulness and dedication of the international crew members on-board
the Station have allowed them to spend more time than hoped for on
important research activities, all this during some of the busiest periods
of assembly. The Administration is very proud of the technical
accomplishments of this program, as we all should be.

However, technical excellence at any cost is not an acceptable approach.
Managing the program within cost and schedule must be elevated in
importance – particularly within the culture of NASA’s Human Space Flight
activities – to be on a par with technical excellence. This notion, I
believe, is the fundamental tenet of what the IMCE task force found, and
one with which I strongly agree. It also provides the foundation for the
necessary reforms that must be undertaken by NASA to restore credibility
and secure its future in human space flight. Let me pause at the outset to
express the gratitude of the Administration for the contribution of the
IMCE task force and their chairman, Tom Young.

A Program at a Crossroads

In January 2001, NASA informed us that the estimated cost of the Space
Station program had grown by roughly $4 billion over the next five years —
that represented a 50 percent increase over what was projected about six
months prior. This continued a history of cost growth that saw nearly $4
billion added to the cost of completing assembly of the Space Station over
the last three years. What made this latest projected overrun particularly
troubling is that it came with little warning and it was so much larger
than what was projected only a little while ago. I testified before the
House Appropriations Veterans, Housing, and Independent Agencies
Subcommittee in May on that $4 billion figure, a figure we were told was
conservative. But within days after my hearing, NASA informed OMB that the
number had grown an additional $800 million to $4.8 billion. With numbers
that large, and no certainty that even this additional $5 billion would be
sufficient, there was no doubt that this was a program facing a management
and financial crisis.

Administration Strategy

Faced with this crisis, the Administration was determined not to repeat
a history of continued cost growth and instead to learn from the past.
Therefore, we worked with NASA senior management to make the tough
decisions, and chose a solution called the "U.S. core complete."
This solution was based on the principles of establishing permanent human
presence in orbit; conducting world-class research; and accommodating the
international elements. This vision was highlighted in the President’s FY
2002 Budget Blueprint. We were and still are determined that none of this
cost growth be offset by cuts to NASA’s Space and Earth Science and
Aerospace Technology activities. Instead, we sought the offsets from
within the Human Space Flight program, especially Station itself. The core
complete Station addressed about $2 billion of the cost growth by
redirecting funding from three elements with significant high-cost and
high-risk development remaining — the habitation module, crew return
vehicle, and propulsion module. Reducing the planned budget for research
equipment and utilization offset about a billion dollars of the cost growth
in development and operations. This left about a billion dollars to go,
which would be addressed by NASA with further cost scrubs and management

After the FY 2002 Budget came out in April, we continued to work with
NASA in crafting a strategy to deal with this crisis. In June, OMB and
NASA reached an agreement on the next step towards a solution. This
included further adjustments within the Space Station program, and NASA
applied funds from other Human Space Flight activities to address the Space
Station cost growth. At that point, there was an estimated $484 million
that was yet to be resolved in the FY 2004-2006 time period. However, we
also recognized that there was no real precision to that estimate and it
would take more than money and design changes to complete the Station and
get cost growth under control. That is why the Administration charged NASA
with undertaking whatever management reforms are necessary to get the
program back on track.

To assist NASA in understanding both the cost credibility of current
estimates and the needed management reforms, the IMCE task force was formed
and announced in July. I am very pleased to report that the task force met
a very aggressive schedule. The Chairman and members did a superb job of
distilling the complex problems facing the Space Station program and the
agency. The task force made solid recommendations of steps that are
necessary and that NASA can act on. We are still in the midst of reviewing
the report and expect to develop with NASA a plan of action that can
accompany NASA’s FY 2003 Budget submission to Congress. Nonetheless, I do
have some initial reactions to the report that I would like to share with
the members of the Committee.

Cultural Change is Essential

The task force found that the cost estimate for the core Station
program, if it proceeds with business as usual, is not credible. Even with
the content removed for the U.S. core complete Station, it could cost as
much as a billion or two more, unless what the task force called
"radical" reforms are achieved. It would be a big mistake to
begin adding content back to the program now, when we still do not have
confidence that NASA can manage to finish the core complete Station and
operate it within the available budget
. To establish that confidence,
culture change in the way NASA conducts its Human Space Flight activities
must occur. Such change is not just desirable, it is essential.

As I said in my opening remarks, this means putting management
excellence – as measured by controlling total program cost as affected by
cost-growth and schedule slips – on a par with technical excellence driven
by true safety and science requirements. In an engineering-dominated
culture like NASA’s Human Space Flight programs, this is a daunting
challenge. While safety is a top priority, the task force believed that
the Station program did not need to mirror its operational staffing
approach to that of the Space Shuttle. I should point out, however, that
the Human Space Flight elements within NASA would be well-served to learn
from the NASA’s Space Science and Earth Science elements, which have made
major strides in addressing scientific priorities, managing to total cost,
and appropriately managing risks.

Focus on Research

The Administration believes in the research potential of the Space
Station and is committed to making the necessary reforms to realize that
potential. As Tom Young said in his remarks last week, the Space Station
is not primarily an engineering or infrastructure project, but a research
project. Research is the appropriate and necessary focus of the Space
Station program. However, there is a further need to clearly prioritize
the research objectives to be achieved by the Space Station and, as
required, shift resources within Human Space Flight and associated
Biological and Physical Research activities to realize those priorities.

Some have argued that the research to be done at U.S. core complete is
insufficient and we should commit now to providing "just" 10 to
15 percent more to the total cost to restore the original design. I would
like to counter this argument with the following points:

  • First, the $2 to 4 billion to make this happen is a lot of money; money
    that is not readily available.
  • Second, even if the funds were available, it represents a significant
    investment compared to other research opportunities. For example, as the
    adjacent chart shows, the annual Federal investment in Human Space Flight
    is considerable and is significantly more than other major Federal research
    investments. So, it is a huge amount when compared to other science and
    technology opportunities.
  • Third, in response to those who say that a three-person Station does
    not provide useful science, I would point out that conducting good science
    with a three-person Station has always been a program requirement. In
    fact, even prior to the $5 billion overrun, the plan had assumed a
    three-person crew through at least FY 2006. So what we are really
    discussing is what level of scientific productivity might we accomplish for
    later this decade. I am pleased to see the seeds of innovation begin to
    sprout as new ideas are being explored to improve scientific productivity.
    This is something that would not have happened previously, as some would
    have assumed that additional funding would always be the solution.
  • And, finally, as highlighted in the IMCE report, until we receive a
    good independent cost estimate of U.S. core complete and NASA implements
    changes to control costs, we run a major risk that spending more money
    would only go to the next budget overrun on Station. It might make some
    feel better today, but regretful tomorrow. Space Station must restore
    management and cost credibility.

NASA’s Human Space Flight Program Must Build Credibility

The concept presented by the task force of a decision gate in two years
that could lead to an end-state other than the U.S. core complete Station
is an innovative approach, and one the Administration will adopt. It calls
for NASA to make the necessary management reforms to successfully build the
core complete Station and operate it within the $8.3 billion available
through FY 2006 plus other human space flight resources. If NASA can show
it is on track to meet this performance standard after two years, against a
checklist of specific actions and conditions, then the Administration will
reassess the resource needs to achieve an expanded end-state beyond core
complete. If NASA fails to meet the standards, then an end-state beyond
core complete is not an option. The strategy places the burden of proof on
NASA performance to ensure that NASA fully implements the needed

OMB will work with NASA and the IMCE task force, building on suggestions
from the task force, to assemble a specific checklist of actions for this
two-year decision gate. We want to be very clear about these action items
and the performance necessary to meet them, so that we are not reinforcing
old expectations and status quo operations. Cultural change is required.

End-State Defined by Research Priorities

Understanding what the research priorities are for the Space Station is
critically important to making the greatest use of the core complete
Station, and to formulating those capabilities to be the focus of any
potential end-state beyond core complete. I have consulted with the
President’s Science Advisor, Jack Marburger, about this and we are in
complete agreement. Space Station must be driven by a clear set of
research priorities. OMB and the Office of Science and Technology Policy
will be working closely with NASA and the research community in firmly
setting these priorities. We welcome the suggestions of members of the
Committee. Working hard over the next several months, we will identify
science priorities and begin to lay out longer term directions. The IMCE
task force has provided us an important starting point.

Any end-state must be driven by research priorities, and it must be
fueled by innovation. As the Station begins to demonstrate the value of its
research agenda and Station costs are brought under control, we anticipate
the potential for enhancing Station research. I have seen, and I know the
task force has as well, the seeds of creativity that are out there in NASA,
the academic community and industry, and with our international partners.
This will help achieve much more cost-effective solutions and to make sure
that the best ideas are being pursued to get the most research out of the
Station. The program has already moved past the point at which the
previously envisioned habitation module and crew return vehicle is the
presumptive solution to an expanded end-state. When and if the time comes
to reassess resource needs for the program, any increases to fund an
expanded end-state for the Space Station must be prioritized against other
research activities of the agency and the nation. It is doubly important,
therefore, that NASA nurture those seeds of creativity that will reduce
costs and increase the likelihood that an end-state for Space Station will
yield the research potential we had all hoped the Station would attain.

Strengthening Management

NASA is on the path to full-cost management, which is a principle the
Administration is aggressively pursuing on a government-wide basis. I
chair the President’s Management Council, which coordinates management
reforms and issues across the government. We are beginning to do things
that move the full cost of doing business to the agencies, such as shifting
retirement funding to all agencies so it is part of their integrated human
capital strategy. I believe strongly that this approach will greatly
strengthen the hand of managers to pursue the most efficient and effective

Many of the reforms proposed by the IMCE task force are, in effect,
promoting full-cost management for the Space Station. I wholeheartedly
agree to restructuring the Johnson Space Center and other NASA reporting
arrangements so that the Space Station is a project-based organization with
full authority and accountability over planned U.S. use of its resources.
This is the right thing to do. This is an important step towards full-cost

Once the credibility of the program management is established and the
program is in a more routine operational phase, we should consider taking
full-cost management a step further. The user of the Space Station is
primarily the research community – the Space Station is but a means toward
the end of scientific discovery. For instance, the Space Science and Earth
Science enterprises manage not only their research activities, but also the
means to achieve them (i.e., spacecraft). Similarly, at some point in the
future, the science enterprise that primarily uses the Space Station should
be given the full-cost management authority over this orbiting laboratory.
This way, the Station and other research platforms can be most effectively
used for successfully addressing the high priority research objectives.

Next Steps

The IMCE task force report provides an excellent foundation that sets
the direction for necessary reforms, but much more work is required to
bring the reforms to fruition. NASA must move swiftly to assess and then
implement the recommendations of the task force. We stand ready to help
NASA meet the challenges that will come with implementation, and I ask that
the Congress also commit to providing necessary flexibilities and
authorities to enable the success of needed reforms. I know that at times,
this may cause discomfort for members who are concerned that their
districts may be impacted. At those times, I ask that each of you take a
few steps back and think about the bigger future that these needed changes
will enable. Realize that while unpleasant in the near-term, these reforms
are the medicine that will restore NASA’s health and produce great benefits
to the nation in the long run.

The Administration will work with NASA to achieve success in this
endeavor – no one wants this to fail. We already have government-wide
legislative proposals before Congress that will provide NASA some important
tools. For example, the proposed Freedom to Manage Act and the Management
Flexibility Act would, among other things, give NASA and other federal
agencies increased discretion and flexibility in attracting, managing, and
retaining a high quality workforce. These proposals would give NASA more
flexibility needed to compete with the private sector, fill skill gaps, and
hire the needed financial, engineering and management experts needed to
pursue state-of-the-art management and financial information systems as
recommended by the IMCE.

We also plan to work closely with our international partners in Japan,
Europe, Canada and Russia. We are committed to accommodating the Station
partner elements and working with the partners so we can all realize the
research potential of the Station. This will be an important aspect of the
work as we go forward with necessary management reforms and new ways of
doing business.

Beyond the specific recommendations of the task force, which were
appropriately constrained by their terms of reference, there are other
reforms that NASA is pursuing. Initiation of a non-government organization
(NGO) to manage Space Station research is critical during these next two
years. By all accounts, such an organization would improve the quality and
productivity of the research results we can expect from the Space Station.
Another priority reform is continued privatization of the Space Shuttle.
This is an important step to free NASA from the burden of operating
infrastructure that, in the long run, is the purview of the private sector
from which NASA will ultimately procure services. Finally, opportunities
for outsourcing and streamlining, as part of NASA’s ongoing Strategic
Resources Review, must be pursued. Indeed, the task force assumed about a
half billion dollars in savings from these reforms in Human Space

A most important next step – one on which the success of all these
reforms hinges – is to provide new leadership for NASA and its Human Space
Flight activities. NASA has been well-served by Dan Goldin. New
leadership is now necessary to continue moving the ball down the field with
the goal line in sight. The Administration recognizes the importance of
getting the right leaders in place as soon as possible, and I am personally
engaged in making sure that this happens.

Implications for the Future

As stated by the task force, radical reforms to NASA’s Human Space
Flight activities are necessary to fulfill the scientific potential of the
Space Station. These reforms and others are necessary to prepare the
agency for what potentially lies ahead after Station. Human Space Flight
reforms will create a new way of doing business and operating with humans
in space. Shuttle privatization moves NASA away from owning and operating
infrastructure, towards buying services from the private sector, and
focusing on world-class science, technology, and exploration. The Space
Launch Initiative enables a next generation of space access capability that
makes those services much safer and much more affordable. The Strategic
Resource Review promises an agency that is lean, agile, and focused on its
primary objectives.

All of the building blocks for a comprehensive and aggressive strategy
of reform for NASA are now being placed. If we build this foundation
correctly, and I will do everything I can to make sure we do, there should
be a significant reduction in the amount of resources needed to carry out
what is currently on NASA’s plate. Should NASA implement these reforms and
achieve significant efficiencies, the Administration is committed to
reinvesting those savings back into NASA to begin developing the
capabilities necessary for a future of science-driven human exploration.

SpaceRef staff editor.