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Space Station: Estimated Total U.S. Funding Requirements (Letter Report,
06/12/95, GAO/NSIAD-95-163).
Pursuant to a congressional request, GAO reviewed the current estimated
costs of the National Aeronautics and Space Administration's (NASA)
space station program, focusing on: (1) the total U.S. funding
requirements for the program; and (2) specific program uncertainties
that may affect those requirements.
GAO found that: (1) the amount of U.S. funds needed to design, launch,
and operate the International Space Station will total about $94 billion
through 2012; (2) NASA has made progress in defining its requirements,
meeting scheduled milestones, and remaining within its annual operation
budget, but NASA still faces challenges in trying to complete all of its
program tasks on schedule and within budget; (3) program estimates show
limited annual financial reserves through fiscal year 1997; (4)
inadequate reserves will hinder the program manager's ability to cope
with unanticipated technical problems by causing the program manager to
spend more on the program, defer the program, or rephase other
activities; and (5) the prime contract target cost will increase if the
contractor is unable to negotiate subcontractor agreements for the
expected price.
--------------------------- Indexing Terms -----------------------------
 REPORTNUM:  NSIAD-95-163
     TITLE:  Space Station: Estimated Total U.S. Funding Requirements
      DATE:  06/12/95
   SUBJECT:  Space exploration
             Aerospace research
             Future budget projections
             Cost analysis
             Research and development costs
             Aerospace contracts
             Forward funding
             Subcontracts
             Cost control
             Cost overruns
IDENTIFIER:  Russia
             Japan
             Canada
             NASA Space Station Program
             NASA International Space Station Alpha Program
             Mir Space Station
             Atlantis
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Cover
================================================================ COVER
Report to Congressional Requesters
June 1995
SPACE STATION - ESTIMATED TOTAL
U.S.  FUNDING REQUIREMENTS
GAO/NSIAD-95-163
Space Station Funding
Abbreviations
=============================================================== ABBREV
  CLDF - Clear Lake Development Facility
  EESII - element-to-element systems interface integrity
  FGB - Functional Energy Block
  NASA - National Aeronautics and Space Administration
Letter
=============================================================== LETTER
B-261547
June 12, 1995
The Honorable Dale Bumpers
United States Senate
The Honorable Dick Zimmer
The Honorable Gerald Solomon
House of Representatives
As you requested, we have reviewed the current estimated costs of the
National Aeronautics and Space Administration's (NASA) space station
program.  More specifically, we estimated the total U.S.  funding
requirements for the program and identified program uncertainties
that may affect those requirements. 
   BACKGROUND
------------------------------------------------------------ Letter :1
The space station program was initially approved in the mid-1980s. 
Since then, NASA has had to redesign the station several times to
meet decreasing budgets.  The most recent redesign was done in late
1993 to compensate for additional funding cuts and bring Russia into
the program as a full partner with Japan, Canada, the European Space
Agency, and the United States. 
NASA estimates that the International Space Station can be built and
completely assembled in orbit by June 2002.  NASA said that the
International Space Station would provide more research capacity,
support more crew, and cost less than prior space station
configurations.  NASA is currently planning a 10-year operational
life for the space station following completion of assembly. 
The program is divided into three phases.  The first phase involves
seven space shuttle flights to the Russian Space Station MIR on the
orbiter Atlantis to provide flight experience, demonstrate joint
procedures with the Russians, reduce technical risk during space
station assembly, and conduct scientific research and operations. 
The second phase comprises the launch and assembly of the first
elements of the space station on seven shuttle flights to establish
crew capability for three persons and the initial laboratory
environment.  The second phase also consists of Russian flights to
launch the functional energy block, service module, a Soyuz rescue
vehicle, universal docking module, and two science platforms.  The
last phase involves the completion of the development and assembly of
all international partners' hardware and the habitation module to
establish the station's permanent six-person crew capability. 
   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
We estimate U.S.  funds required to design, launch, and operate the
International Space Station will total about $94 billion through 2012
(about $77 billion in fiscal year 1995 constant dollars).\1 This
total may decrease to the extent NASA accomplishes its goal for
achieving station operational efficiencies over the period 2003 to
2012, or efficiencies currently being studied in the space shuttle
program materialize. 
The program has made major progress since last year in defining its
requirements, meeting its schedule milestones, and remaining within
its annual operating budgets.  Nevertheless, the program faces
formidable challenges in completing all its tasks on schedule and
within its budget.  The program estimates through fiscal year 1997
show limited annual financial reserves--about 6 percent to 11 percent
of estimated costs.  These reserves are even lower when reduced by
the estimated value of pending items that have a medium to high
probability of being added to the program.  Inadequate reserves would
hinder program managers' ability to cope with unanticipated technical
problems.  If a problem could not be covered by available reserves,
program managers could be faced with either spending more than
planned on the program or deferring or rephasing other activities,
thus possibly delaying the space station's development schedule or
increasing its future cost. 
In addition, the space station's current launch and assembly schedule
is ambitious, and the shuttle program may have difficulty supporting
it.  Moreover, the prime contract target cost could increase if the
contractor is unable to negotiate subcontractor agreements for the
expected price.  NASA plans to complete an independent internal
assessment of space station program costs later this fiscal year. 
--------------------
\1 Constant 1995 dollars do not include estimated future years'
inflation.  All dollar estimates in this report include inflation
unless stated in 1995 dollars. 
   U.S.  FUNDING REQUIREMENTS FOR
   THE SPACE STATION
------------------------------------------------------------ Letter :3
Estimating total funding requirements requires aggregating past
spending, current budgets, and estimated future funding needs related
to the development and operation of the space station.  As shown in
table 1, we estimate U.S.  funding requirements for the design,
launch, assembly, and 10-year operation of the International Space
Station at about $94 billion--over $48 billion to complete the
assembly in June 2002 and almost $46 billion to operate and conduct
research for 10 years thereafter.\2 The $94 billion estimate is
discussed by program component after the table. 
                           Table 1
           Estimated U.S. Funding Requirements for
                        Space Station
                (Current dollars in billions)
Program component
----------------------------------------  --------  --------
Contract and in-house costs from 1985        $11.2
 through 1993
Current development budget from 1994 to
 June 2002
Development\a                                 $8.1
Utilization support\b                          0.7
Operations\c                                   3.0
Payloads\d                                     2.6
Financial reserves                             3.1   $17.4\e
Station-related requirements through June 2002
------------------------------------------------------------
In-house personnel                            $0.9
Principal investigator support                 0.3
Contract with Russia                           0.4
Shuttle performance enhancements               0.3
Shuttle launch support                        17.8     $19.6
============================================================
Subtotal--requirements through June 2002               $48.2
U.S. requirements after assembly is completed\f
------------------------------------------------------------
Operations/utilization                       $13.0
Shuttle launch support                        32.7   $45.7 \
============================================================
Total                                                  $93.9
------------------------------------------------------------
Note:  Totals may not add due to rounding. 
\a Includes funding for the prime development contract and other
contracts to develop operational ground-based and on-orbit
capability. 
\b Includes funding to provide the capability to support researchers
and use station resources. 
\c Includes funding to provide the capability to conduct ground and
on-orbit sustaining engineering for maintaining and operating the
space station. 
\d Includes funds for developing the primary space station research
facilities, such as the centrifuge and furnace; flying payloads to
the MIR during the first phase; and modifying the shuttle and
acquiring docking hardware for the MIR missions.  This portion of the
space station program is managed by NASA's Office of Life and
Microgravity Sciences and Applications. 
\e NASA agreed that it could design and develop the space station for
this amount under a $2.1 billion annual funding cap imposed by the
executive branch in June 1993. 
\f Does not include funding for in-house personnel to operate and
utilize the station, station disassembly and disposal, or any
development activities after June 2002. 
--------------------
\2 These amounts represent NASA's funding requirements and do not
include the value of the international partners' contributions to the
International Space Station program.  A NASA official estimated the
contributions to be about $9.4 billion through June 2002, exclusive
of Russia's contribution. 
      CONTRACT AND IN-HOUSE COSTS
      FROM 1985 THROUGH 1993
---------------------------------------------------------- Letter :3.1
NASA spent $11.2 billion designing and developing earlier versions of
the space station during fiscal years 1985 through 1993, including
contractor costs and the cost of NASA's civil service staff working
on the program.  When the International Space Station design was
adopted, NASA estimated that about 75 percent of the previously
prepared design work could be incorporated into the new
configuration. 
      CURRENT DEVELOPMENT BUDGET
      FROM 1994 TO JUNE 2002
---------------------------------------------------------- Letter :3.2
During the past year, program managers refined their development
estimate for the program's elements.  However, while cost estimates
for the individual elements changed, NASA's total development
estimate remained at $17.4 billion.  As a result of the refinements,
NASA program managers recognized significant increases in the costs
of flight hardware items that they had excluded from prior budgets
and increased total financial reserves.  The managers also identified
cost reductions by negotiating with contractors, economizing and
modifying user requirements and operating methods, delaying the
procurement of some spares and replacement parts, and reducing the
amount of testing. 
For example, in one case, program managers identified about $93
million in savings in the utilization support category by eliminating
the requirement for developing payload analytical software.  This
requirement was eliminated when station managers opted to make
station users--that is, principal investigators
(researchers)--responsible for developing the software needed to run
their experiments.  The research community's representative to the
space station program office generally concurred with these changes. 
However, users may require additional support to finance their
software development activities. 
Program managers also reduced budget estimates by transferring
management responsibility for developing station hardware to
organizations that are more directly responsible for carrying out
such missions.  For example, officials of NASA's Office of Life and
Microgravity Sciences and Applications agreed to manage the
development of some laboratory support equipment and a rack to
accommodate small payloads.  Transferring these items decreased the
value of the space station program's utilization support budget by
about $151 million but increased the program's payload category by
$99 million, a tentative savings of about $52 million.  However,
precise equipment needs are still being studied. 
      STATION-RELATED REQUIREMENTS
      THROUGH JUNE 2002
---------------------------------------------------------- Letter :3.3
In addition to NASA's space station development budget and prior year
costs, we included in our life-cycle estimate other funding
requirements that are related to the International Space Station
program.  These total about $19.6 billion through June 2002 and are
discussed as follows. 
         IN-HOUSE PERSONNEL
-------------------------------------------------------- Letter :3.3.1
NASA estimated that approximately 1,285 civil service staff will be
required annually through the completion of assembly at approximately
$77,000 per year--a total of $892 million.  NASA expects some
reductions in the number of in-house personnel during the assembly
period, but estimates of such reductions are not yet available. 
         PRINCIPAL INVESTIGATOR
         SUPPORT
-------------------------------------------------------- Letter :3.3.2
NASA plans to conduct scientific research during the space station's
development and assembly.  NASA estimates it will spend about $134
million through 2000 to fund principal investigators' preparation of
scientific experiments to be flown on the partially assembled station
and on flights to MIR during the first phase.  We extrapolated NASA's
estimates for the remaining 2 years of the development program, for a
total of about $300 million. 
         CONTRACT WITH RUSSIA
-------------------------------------------------------- Letter :3.3.3
Before bringing Russia into the space station program as a full
partner, NASA negotiated a $400 million contract with the Russian
government for hardware and managerial and technical expertise useful
to space station development. 
         SHUTTLE PERFORMANCE
         ENHANCEMENTS
-------------------------------------------------------- Letter :3.3.4
The space shuttle program is funding shuttle upgrades to provide
additional lift capability needed to support station element launches
to the space station's 51.6-degree inclination orbit.  Enhancements,
currently estimated about $300 million, include the super lightweight
external tank and other modifications and operational changes to
increase the shuttle's performance.\3
--------------------
\3 This estimate excludes funding requirements that are already
included in NASA's average cost-per-flight estimates. 
         SHUTTLE LAUNCH SUPPORT
-------------------------------------------------------- Letter :3.3.5
The space station's development program requires 35 shuttle flights
to carry out all three phases.  The sequence consists of 7 flights to
MIR as part of the technology development program during the first
phase, 6 utilization flights to the partly completed space station to
begin conducting research, and 22 station assembly flights.  At
estimated average costs, these flights total about $17.8 billion. 
NASA plans 21 station assembly flights, but it has not included a
flight to launch the crew rescue vehicle, a necessity to outfit the
space station for permanent habitation.  The launch vehicle for the
crew rescue vehicle is yet to be determined, but providing the crew
rescue capability at the completion of assembly is NASA's
responsibility.  Program officials told us they are taking steps to
negotiate with the international partners the provision of the crew
rescue vehicle and its launch requirement, which could reduce the
U.S.  portion of total funding requirements.  However, since no
agreement has yet been reached, we included an extra station assembly
flight in our estimate. 
Costs of shuttle launches are based on NASA's estimates of the
average cost per flight.\4 Because NASA has budgeted to launch seven
shuttle flights a year, the average cost per flight has increased
over prior years' estimates as total shuttle costs are averaged over
fewer flights.  NASA estimates that the average shuttle flight will
cost over $475 million in fiscal year 1998, when the shuttle begins
launching space station hardware. 
We have used average launch costs as the basis for costing shuttle
launches instead of marginal costs.\5 Marginal costs are expenses
that are incurred or avoided when one flight is added to or deleted
from the shuttle program.  The use of average launch costs is
appropriate because the majority of shuttle flights will be devoted
to the space station for many years.  The space station either
lengthens the life of the shuttle program, requiring ground support
facilities to be operated for additional years, or displaces years of
shuttle flights devoted to other uses. 
--------------------
\4 NASA's average cost of a shuttle flight includes the estimated
cost of safety and performance upgrade projects of a recurring
nature.  NASA estimated the average cost of a shuttle flight for each
year up to 2000.  For subsequent years, we inflated the average cost
per flight using the gross domestic product inflation index. 
\5 See Space Station:  Program Instability and Cost Growth Continue
Pending Redesign (GAO/NSIAD-93-187, May 18, 1993); Space
Transportation:  The Content and Uses of Shuttle Cost Estimates
(GAO/NSIAD-93-115, Jan.  28, 1993; and Questions Remain on the Costs,
Uses, and Risks of the Redesigned Space Station (GAO/T-NSIAD-91-26,
May 1, 1991). 
      U.S.  REQUIREMENTS AFTER
      ASSEMBLY IS COMPLETED
---------------------------------------------------------- Letter :3.4
NASA estimated that the space station will require an average of $1.3
billion annually for operations, research, and utilization support
during the
10 years after completion of assembly.  NASA is studying how to
reduce operating costs to approximately $800 million annually.  If
NASA achieves these station operational efficiencies, total estimated
development and operations costs of the space station would drop to
about $89 billion. 
NASA planning models predict that an annual average of five of seven
available shuttle flights will be needed to support or use the space
station.  At estimated average costs, shuttle launch support during
this period totals about $32.7 billion.  NASA is currently studying
how to further reduce its shuttle operations costs.  The
station-related funding requirements would decrease further if
additional shuttle program efficiencies were realized.  NASA has not
yet estimated these potential shuttle operations savings. 
When using average costs per flight, total shuttle launch costs to
support the space station during assembly and 10-year operational
life are an estimated $50.5 billion, or about 54 percent of the total
space station funding requirement. 
   MAJOR CHALLENGES TO THE
   PROGRAM'S COST AND SCHEDULE
------------------------------------------------------------ Letter :4
Since 1994, station managers have made progress in better defining
requirements and identifying potential costs and risks.  However,
they still have a difficult task in completing the program on
schedule and within the estimated budget.  Among their challenges are
(1) the low financial reserves for the next few years; (2)
significant cost, schedule, and technical risk for the shuttle
program in supporting the space station's assembly schedule; and (3)
the lack of final agreements between the prime contractor and all its
major subcontractors. 
      FINANCIAL RESERVES LOW IN
      CERTAIN YEARS
---------------------------------------------------------- Letter :4.1
Maintaining adequate financial reserves for the space station program
appears prudent to compensate for unanticipated program requirements. 
However, low reserves in fiscal years 1996 and 1997 raise questions
as to whether NASA can implement the program within the $2.1 billion
annual funding cap the administration established in June 1993. 
NASA is planning to hold about $3 billion of the total development
estimate of $17.4 billion as financial reserves.  However, as shown
in table 2, the estimated reserve levels for fiscal years 1996 and
1997 are 0.3 and 5.3 percent, respectively, after deducting possible
cost increases that program officials believe have a medium to high
likelihood of occurring.  Because the funding requirements for many
of these potential increases are not well defined, the actual
remaining reserves could be less.  The estimated value and a brief
description of these potential increases are discussed in appendix I. 
NASA officials pointed out that these estimates represent only a
point in time and are considered internal planning numbers. 
                           Table 2
            Estimated Status of Financial Reserves
                (Current dollars in millions)
              1995  1996  1997  1998  1999  2000  2001  2002
------------  ----  ----  ----  ----  ----  ----  ----  ----
Station       $2,1  $1,8  $1,6  $1,2  $1,0  $929  $802  $584
 program        59    19    00    17    97
 baseline\a
Financial       98   102   182   525   621   603   534   394
 reserves
Potential       52    97    97   121   170   377   280    79
 cost
 increases
Balance of      46     5    85   404   451   226   254   315
 reserves
Reserves as    4.5   5.6  11.4  43.1  56.6  64.9  66.6  67.5
 a percent
 of station
 program
 baseline
Reserves as    2.1    .3   5.3  33.2  41.1  24.3  31.7  53.9
 a percent
 of station
 program
 baseline
 after
 potential
 cost
 increases
------------------------------------------------------------
Note:  Percentages have been rounded. 
\a This baseline excludes financial reserves, and the payload funding
requirements managed by NASA's Office of Life and Microgravity
Sciences and Applications. 
Inadequate reserves would hinder program managers' ability to cope
with unanticipated technical problems.  If a problem could not be
covered by available reserves, program managers could be faced with
either exceeding the annual cost cap or deferring or rephasing other
activities, thus possibly delaying the space station's development
schedule or increasing its future cost. 
      OTHER POSSIBLE SIGNIFICANT
      CHALLENGES
---------------------------------------------------------- Letter :4.2
NASA's list of potential cost increases does not include at least two
items that could have significant future cost and/or schedule
impacts.  These items are (1) the possibility that the prime contract
target cost could increase if the contractor is unable to reach
agreement with its major subcontractors for the expected price and
(2) the ability of the shuttle program to support the space station's
launch requirements. 
In January 1995, NASA and the prime contractor signed a contract for
$5.6 billion, about $600 million less than the original target figure
agreed to in August 1994.  However, because the prime contractor had
not completed negotiations with all of its major subcontractors, the
contract contains a clause that allows an increase in the target cost
if the prime contractor is unable to negotiate subcontractor
agreements within the $5.6 billion price.  The prime contractor has
reached agreement with two of its three major subcontractors and is
continuing negotiations with the third.  If the prime contractor is
unsuccessful in negotiating a price with this subcontractor that is
within the $5.6 billion figure, the contract costs could increase. 
Any increase would have to be funded by available financial reserves
or by reductions made elsewhere.  However, program managers are not
considering this possibility on the list of potential cost increases. 
Thus, any increase in the contract price could further erode the
already slim margin of reserves in the early years and further
decrease program managers' flexibility to deal with unanticipated
program cost increases.  The prime contract contains incentive
features that encourage the prime contractor to effectively manage
its subcontract negotiations and costs.\6
The ability of the space shuttle program to adequately support its
planned station assembly schedule is uncertain, particularly in view
of the ongoing efforts to reduce program costs.  A February 1995 NASA
workforce review concluded that the cost reductions had increased the
risk that NASA could not meet future flight schedules.\7 A space
shuttle program official told us in May 1995 that the shuttle program
would be facing its most demanding operational challenge--supporting
the space station's assembly schedule--at a time when, due to budget
cuts, it will have lost much of its flexibility to adjust for
contingencies.  In addition, any problems with the modifications
needed to increase the shuttle's lift capacity so that it can support
assembly of the station at the 51.6-degree inclination orbit would
also adversely impact the station's assembly schedule.  We will be
issuing a report later this year that provides more detail about the
shuttle program's requirements for supporting the station.  NASA
managers said that the shuttle program is committed to meet the
challenge and that the current performance upgrade program is
proceeding well with adequate technical, schedule, and budget
margins.  As evidence, the managers said that they recently canceled
two of the higher cost hardware items (lightweight booster and
extended nozzle) because they were not needed. 
NASA is planning to complete an independent assessment of the space
station program's cost estimate by the end of fiscal year 1995.  This
assessment is being done to provide the NASA Administrator's Program
Management Council\8 an independent internal review of the program's
technical and financial status. 
--------------------
\6 The contract allows for adjustment of the contractor's potentially
available fee.  The available fee is adjustable based on the outcome
of negotiations at a rate of 25 percent of any increase or decrease
in target subcontract costs.  For example, an increase in target
subcontract costs would result in the amount of potentially available
fee being reduced by 25 percent of such increase. 
\7 NASA Budgets:  Gap Between Funding Requirements and Projected
Budgets Has Been Reopened (GAO/NSIAD-95-155BR, May 12, 1995). 
\8 The Program Management Council is composed of the Associate
Administrators of NASA and is chaired by the Deputy NASA
Administrator.  The council annually reviews major NASA programs
throughout their life cycles and makes recommendations to the
Administrator. 
   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :5
In commenting on a draft of this report, NASA said that our report
implied that a significant portion of the total life-cycle cost
estimate would represent budget savings if the space station was
canceled.  NASA said that unless the space shuttle program was also
terminated, a substantial life and microgravity sciences effort would
be conducted aboard the shuttle in the event of the termination of
the space station program.  We have previously reported that we
believe that space shuttle costs should be included in any life-cycle
cost estimate for the space station program.  We continue to believe
it is appropriate to include requirements related to the space
shuttle.  The use that might be made of the space shuttle should the
space station program be terminated would have to be separately
considered. 
NASA's complete comments and our evaluation of them are reprinted in
full in appendix II. 
   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6
We reviewed NASA program planning and budgeting documents and
interviewed officials in the Space Station Program Office, the Space
Shuttle Program Office, the Office of Human Space Flight, the Office
of Life and Microgravity Sciences and Applications, and the Office of
the Comptroller.  We reviewed actual to-date costs, budget and
future-year cost information for fiscal years 1995 through 2002, and
estimated future cost information through the current design life of
the project.  The information provided in this report is based on
NASA estimates.  We performed our review from March to June 1995 in
accordance with generally accepted government auditing standards. 
---------------------------------------------------------- Letter :6.1
Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days from its issue date.  At
that time, we will send copies of this report to appropriate
congressional committees, the NASA Administrator, and the Director of
the Office of Management and Budget.  We will also make copies
available to others on request. 
Please contact me at (202) 512-8412 if you or your staff have any
questions about this report.  Major contributors to this report were
Frank Degnan, James Berry, and Vijay Barnabas. 
David R.  Warren
Director, Defense Management and NASA Issues
POTENTIAL PROGRAM COST INCREASES
THAT THREATEN SPACE STATION
FINANCIAL RESERVES
=========================================================== Appendix I
Table I.1 shows the space station reserves and the items that
managers categorize as having a medium or high likelihood of having
to be incorporated into the space station program and funded.  A
brief explanation of each item follows the table. 
                                    Table I.1
                      Potential Cost Increases That Threaten
                         Space Station Financial Reserves
                          (Current dollars in millions)
            1995    1996    1997    1998    1999    2000    2001    2002   Total
--------  ------  ------  ------  ------  ------  ------  ------  ------  ======
Financia     $98    $102    $182    $525    $621    $603    $534    $394  $3,059
 l
 reserve
 s
Threats against reserves
--------------------------------------------------------------------------------
Crew           0       0       0       0     112     237     181      56     586
 rescue
 vehicle
Logistic       1      23      19      44       3     100      83      17     290
 s and
 mainten
 ance
Prime         20      20      20      24       0       0       0       0      84
 contract
 changes
EESII          1      24      18      12      10       0       0       0      65
 impleme
 ntation
 \a
Centrifu       1       1       1       5      15      22      10       0      55
 ge
 accommo
 dations
Shuttle        0      10      12       5      11       7       3       3      51
 integra
 tion
FGB\b          0       5      10       5       0       0       0       0      20
Pending        1       1       1       9       2       2       0       0      16
 changes
Water          2       2       0      14      14       6       0       0      38
 unit
 process
 es
Internat       5       9      13       0       0       0       0       0      27
 ional
 partner
 s
Freedom       21       0       0       0       0       0       0       0      21
 closeout
CLDF\c         0       2       3       3       3       3       3       3      20
 operati
 ons and
 mainten
 ance/
 liaison
 office
 support
================================================================================
Subtotal      52      97      97     121     170     377     280      79   1,273
================================================================================
Balance      $46      $5     $85    $404    $451    $226    $254    $315  $1,786
--------------------------------------------------------------------------------
\a Element-to-element systems interface integrity. 
\b Functional energy block. 
\c Clear Lake Development Facility. 
   CREW RESCUE VEHICLE
--------------------------------------------------------- Appendix I:1
As we reported in 1994, the National Aeronautics and Space
Administration (NASA) initially anticipated that Russia would provide
Soyuz vehicles that would serve as crew return vehicles.\1 However,
Russia has agreed to provide Soyuz vehicles only through the
completion of station assembly.  NASA will be responsible for
providing a crew return/rescue capability after assembly is
completed.  NASA is studying various options to determine the best
way to provide this capability.  The $586 million estimate is based
on a contractor's estimate for using an Apollo-era capsule as the
return vehicle.  However, if a different option is chosen, the
estimate may change.  NASA is also considering purchasing Soyuz
vehicles from Russia or having the European Space Agency develop and
provide a crew rescue vehicle.  According to space station program
control office personnel, NASA has time to decide which option to
pick because development does not have to start until 1998 for the
vehicle to be available in 2002. 
--------------------
\1 Space Station:  Update on the Impact of the Expanded Russian Role
(GAO/NSIAD-94-248, July 29, 1994). 
   LOGISTICS AND MAINTENANCE
--------------------------------------------------------- Appendix I:2
The logistics and maintenance figure represents the procurement of
flight hardware spares.  Funding for many spares was deferred during
a prior cost-reduction exercise until spares' requirements could be
better defined.  However, program managers recognize that it may be
preferable to purchase spares while the manufacturer has an ongoing
production capability.  Purchasing spares once the production line
has been shut down could be more expensive and, in some instances,
not feasible (for example, if the manufacturer went out of business). 
The $290 million is an estimate; the actual amount of spares to be
purchased is under study using a Navy-developed computer model. 
   PRIME CONTRACT CHANGES
--------------------------------------------------------- Appendix I:3
Although NASA and the prime contractor signed the contract in January
1995, they had not agreed on certain technical requirements for
developing the space station.  At issue was the amount of analysis
necessary to verify that the hardware provided by international
partners could be effectively integrated with U.S.  components.  To
avoid further delaying the program, both parties agreed that the
contractor would continue studies to determine if any additional
integration and verification work was necessary.  An amount of $24
million was set aside to support these efforts.  Program managers
also reserved about $60 million to fund additional technical
requirements, if necessary. 
   EESII IMPLEMENTATION
--------------------------------------------------------- Appendix I:4
EESII tests and analyses are required to ensure that all the
interfaces in the flight hardware will function as planned.  During
cost-reduction exercises in 1994, some of this testing was
eliminated.  However, program managers have since realized that it
would be required.  The $65 million estimate is based on earlier
estimates of the resources required to conduct such testing.  NASA
teams are currently studying how much testing will actually be
required and the best way to accomplish it.  A better estimate of
required funding may also result from the teams' work.  Space station
program control officials told us that this item would be
incorporated into the program and funded during the next budget
cycle. 
   CENTRIFUGE ACCOMMODATIONS
--------------------------------------------------------- Appendix I:5
NASA will have to provide housing for the centrifuge facility and is
reviewing four options:  a duplicate U.S.  laboratory module provided
by Boeing-Huntsville, a Spacelab "long module" provided by McDonnell
Douglas, a Spacelab double module provided by McDonnell Douglas, and
an additional Mini Payload Logistics Module provided by Alenia Spazio
of Italy.  Space station program officials told us that the
$55-million figure is based on a rough order of magnitude estimate
from the various competitors, and that this item would be
incorporated into the program and funded during the next budget
cycle. 
   SHUTTLE INTEGRATION
--------------------------------------------------------- Appendix I:6
Currently, station and shuttle program managers are evaluating
requirements and the allocation of costs among programs.  Station
program managers have estimated that up to $51 million of reserves
would be needed if requirements cannot be reduced.  NASA headquarters
officials plan to include these integration issues in the fiscal year
1997 budget formulation process for resolution. 
   FGB
--------------------------------------------------------- Appendix I:7
The FGB spacecraft will be the first space station element to be
launched.  It will provide the initial propulsion, guidance,
navigation, and control functions for the space station.  The FGB is
a Russian-built spacecraft that NASA is purchasing, and funding for
it is included in the space station development budget.  The
$20-million threat against reserves is for installing a backup
command and control ability for the FGB in the mission control center
in Houston, Texas, and changing the FGB specifications so that it can
function in a depressurized environment.  According to NASA
officials, this amount decreased from an initial estimate of $25
million because NASA will not have to pay for a remote manual docking
capability. 
   PENDING CHANGES
--------------------------------------------------------- Appendix I:8
The $16 million shown represents several modifications that need to
be included in the baseline but have not been approved by space
station program management. 
   WATER UNIT PROCESSES
--------------------------------------------------------- Appendix I:9
The amounts shown for fiscal years 1995 and 1996 are to fund flight
experiments during the shuttle flights to the Russian MIR space
station to verify the design for the water processing system that
will be used in the U.S.  habitation module.  The total amount of $38
million also includes funds earmarked in later years for any design
changes that may be needed based on the results of the early flight
experiments. 
   INTERNATIONAL PARTNERS
-------------------------------------------------------- Appendix I:10
The $27 million is for purchasing, modifying, and repairing
components provided by international partners. 
   FREEDOM CLOSEOUT
-------------------------------------------------------- Appendix I:11
The $21 million shown reflects an indirect rate issue with Boeing-
Huntsville related to the closeout of the space station Freedom
contract for Work Package 1.  This issue is pending resolution by the
Defense Contract Audit Agency. 
   CLDF OPERATIONS AND
   MAINTENANCE/LIAISON OFFICE
   SUPPORT
-------------------------------------------------------- Appendix I:12
NASA plans to build the Neutral Buoyancy Laboratory, a large
underwater facility for simulating a weightless environment, at the
newly acquired CLDF near the Johnson Space Center in Houston, Texas. 
The new laboratory will be used to train astronauts for space station
assembly and other space shuttle operations and will replace an older
facility at Johnson.  Currently under negotiation is the station
program's share of the new facility's operations and maintenance
costs and the program's share of the costs to support liaison offices
in international partner countries.  Program managers have earmarked
$20 million for these purposes. 
(See figure in printed edition.)Appendix II
COMMENTS FROM THE NATIONAL
AERONAUTICS AND SPACE
ADMINISTRATION
=========================================================== Appendix I
(See figure in printed edition.)
The following are GAO's comments on the NASA's letter dated June 6,
1995. 
GAO COMMENTS
1.  We added this position to the report. 
2.  Our report addresses program life-cycle cost.  We have included
language in the report to recognize NASA's concerns and emphasized
our reporting objectives. 
3.  We revised our estimate to use the gross domestic product
inflation index.  We initially used NASA's "new start" index to
project future shuttle and other outyear costs principally because
NASA used it to estimate average costs per shuttle flight through
2000. 
4.  Our purpose was to show that shuttle development costs were not
part of the estimated cost to launch the space station and not to
imply that these costs should be allocated to the space station
program.  To clarify, we deleted the footnote reference to shuttle
development costs. 
5.  We revised the report to reflect that NASA has no plans to
operate beyond the planned 10-year period.  Accordingly, we did not
include costs in our estimate of operating the space station longer
than 10 years.  However, it is possible that the space station life
could be extended.  In the event that Congress and the administration
decide to continue using the station beyond the planned 10-year
period, we estimate funding requirements would be about $5.1 billion
a year.  This is based on estimates of projected operations and
launch costs at the end of the 10-year operations period. 
6.  We recalculated the reserves as a percentage of the space station
baseline program.  We also added language to reflect the tentative
nature of these potential cost increase estimates. 



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