Columbia Accident Investigation Public Hearing
Thursday, June 12, 2003

9:00 a.m. EDT
National Transportation Safety Board
Conference Center
429 L' Enfant Plaza, SW
Washington, D.C.

ADMIRAL HAROLD GEHMAN: Good morning. This public hearing of the Columbia Accident Investigation Board is in session. I'd like first of all to thank Administrator – Chairman Ellen Engleman for allowing the Columbia Accident Investigation Board to use the NTSB conference and briefing facilities. They're magnificent, and we're very appreciative of them.

Today, we're going to review issues having to do with resources and management, and we have two panels of two very distinguished experts who are going to help us understand that. The first panel is made up of Mr. Allen Li and Marcia Smith.

Allen Li is the Director of Acquisition Sourcing Management at the General Accounting Office. He is responsible in his position for several accounts, which include NASA as well as several Department of Defense accounts, like tactical aircraft. Previous to this, his duties included such things as energy and science, nuclear safety and the Department of Energy management issues, which turns out to have been something that we looked at, also. So, we very much appreciate the richness of your background and you're willing to help us here. Mr. Li has been selected to the Senior Executive Service in the GAO, and is a senior member of the American Institute of Aeronautics and Astronauts.

Marcia Smith is a senior level specialist in Aerospace and Telecommunication policy at the Congressional Research Service of the Library of Congress and, at that, of course, she serves as a policy analyst for all the members and all the committees of the Congress on matters concerning U.S. and foreign military and civilian space activities, and on telecommunications issues.

Previously, she held the position of section head for Space and Defense Technologies, as well as Energy, Aerospace and Transportation Technologies in that division, which again bears directly on what we have looked at in this area. She is a Fellow of the American Institute of Aeronautics and Astronautics and the British Interplanetary Society, as well as the American Astronautical Society.

Before we start, I would like to request that the two panel members affirm to the Board that the information you are providing to the board today will be accurate and complete to the best of your current knowledge and belief.

MS. MARCIA SMITH: I do.

MR. ALLEN LI: I affirm so.

ADMIRAL GEHMAN: Thank you very much.

I would ask the panel members to introduce themselves and add anything to their biographical sketch that I may have underplayed or gotten wrong, and if you would – first of all, I would like you both to introduce yourselves, and then we will get an opening statement. Marcia, you want to go first, please?

MS. SMITH: Well, thanks for the very nice introduction that you gave me already.

I would like to explain briefly what CRS is and does. CRS is a department of the Library of Congress but, unlike the rest of the library, which works for both the public and Congress, CRS works exclusively for the members and committees of Congress, providing them with objective, non-partisan research and analysis.

We do not take positions on issues. We don't make recommendations. Our job is to help the members and their staffs sort out the issues, look at the options that they have available to them, and help them understand the pros and cons of those actions. So, we don't have opinions. People often ask me what my opinion is, but I'm afraid that only my teddy bear knows what my opinion is. Everybody else gets pros and cons, and I apologize for that if you were hoping for some opinions this morning. And I have been a policy analyst at CRS since 1975, except for one year from 1985 to '86 when I served as Executive Director of the National Commission on Space that developed a long-term, 50-year plan for the space program.

ADMIRAL GEHMAN: Thank you very much.

Mr. Li?

MR. ALLEN LI: Thank you, Admiral.

My name is Allen Li. I've been with GAO now for almost 23 years. Been working on NASA issues for over five years. Have had the opportunity during that time to look at a lot of the programs that NASA's had, and had the opportunity to work with their top management in that regard.

The only thing I would like to add, similar to what Ms. Smith was talking about in terms of what CRS does, GAO does provide recommendations. When we do our particular reviews, we also are part of the legislative branch, and provide advice and information to the Congress. But, we do provide recommendations, as we do in different programs. If we see there are certain management issues that need to be brought to their attention, we do so.

The statement that I will provide in a few minutes is largely based on a report that we had provided, called the ÒPerformance and Accountability SeriesÓ that we provide to the Congress every two years, and it's our snapshot of what is happening at the agency and what are some of the challenges that that agency faces.

Thank you.

ADMIRAL GEHMAN: Thank you very much, and I – we understand the caveats, but they don't – to me, that – they don't seem to be very inhibiting to what we need to get at, and we're sure that your report will be very, very useful, and we appreciate you – your willingness to help us with this investigation.

Which one of you is ready to go first, and the floor is yours, and if it's all right with you, we'd like to be able to dialogue and ask questions as you go along, if that's all right. You may have been told about the Board's tradition, that we – our tradition is that the briefer never gets past the first few graphs, so let's – if that's all right with you, we'd like to ask the questions as the issue comes up, because it's both fresh in your minds and fresh in our minds.

Thank you very much. The floor is yours.

MS. SMITH: Absolutely. I've watched all of your hearings, so I'm familiar with your tradition, and I'm hoping that I've left the most interesting slides till last so that I can get through the first few. If the folks in the slide room could bring up my presentation? There we go, and we can go to the next slide.

You asked that I speak to you today about the NASA and the space shuttle budgets over the past 10 years. I thought that it would help to first put the NASA budget into context because, of course, budgets have to do with setting priorities. And so, I think it's interesting and important to understand where NASA fits in the total federal budget. So, this shows you, for fiscal 2002, the last completed fiscal year, which I'm using as my benchmark for this 10-year look-back.

This is how the funding was split up in the $2.2 trillion federal budget. Mandatory spending was 56 percent, discretionary spending, which includes NASA, was 36 percent, and the interest on the national debt was 8 percent. And you can see on the slide where NASA fits into the non-defense discretionary account, which is 19 percent of the total federal budget. Next slide, please.

This shows how that 19 percent gets broken up, and how much of that ends up at NASA. The defense discretionary is on the right-hand side, and the non-defense discretionary is on the left-hand side. The agencies that are in the other category, by and large, were smaller in terms of dollar amounts than NASA, so these are sort of the largest of the various agencies that get funded in that account.

NASA is part of the Veteran's Affairs, Housing, Urban Development independent agency's appropriations bill, and I'm sure that everyone on the panel is very familiar with the federal budget process, but it might help if I just gave a 30-second review of how budgets happen in Washington.

ADMIRAL GEHMAN: Are you or Allen – are you going to talk about whether that 2 percent is going up or going down, or what's the historical trend there?

MS. SMITH: I have some trend charts in here.

ADMIRAL GEHMAN: Thank you.

MS. SMITH: In Washington, the way budgets happen is that agencies develop budgets through internal processes. They're submitted to the Office of Management and Budget, which is part of the White House, and so they're looking at various agencies' requests within the total context of the federal budget. That comes to Congress usually in February of each year as the President's request to Congress. It is Congress – under the Constitution, it has the responsibility to decide how this money is going to be spent.

Congress passes a budget resolution that sets the parameters within which the various Appropriations Committees have to decide how to spend the money. And these agencies are all divided up into 13 different Appropriations Committees on Capitol Hill, and NASA is part of the one that's on Veterans, HUD, the Environmental Protection Agency. It used to fund FEMA, the Federal Emergency Management Agency, although that's now been shifted into the Department of Homeland Security. And so, there are a number of different agencies in the appropriations bill that funds NASA.

ADMIRAL GEHMAN: Now, if my understanding of the process is correct, if you take – if you take something like education, for example, that actually rolls up a whole lot of agencies and things like that into an education budget.

MS. SMITH: This education, 7 percent, is what OMB shows in its tables as the amount dedicated to, I believe, it's the Department of Education.

ADMIRAL GEHMAN: Okay. Well, let me rephrase that. In most of those other categories, you have up there a cabinet-level agency rolls up a whole lot of agencies and subordinate budgets into one submission. But, in the case of NASA, they don't – their budget – they don't have a cabinet officer, and they're not in a department. They're an independent agency. So, they're – so, there's a little difference there, isn't there?

MS. SMITH: Well, you may have a department like the Department of Commerce, and within the Department of Commerce you have the National Oceanic and Atmospheric Administration, and you have the Bureau of Export Administration. So, you have different offices within a cabinet department. NASA is a stand-alone independent agency, like EPA is.

ADMIRAL GEHMAN: That's what I was referring to. There's a step that NASA doesn't have to go through, in the sense that – take the FAA, for example. They submit a budget, but they submit a budget to a cabinet agency, which put – which does things with it, and – whereas NASA's being an independent agency doesn't have to go through that.

MS. SMITH: NASA has an internal process through which the Administrator of NASA submits a budget request to the White House, whereas FAA would submit a budget to the Department of Transportation, and then it would go to the White House, correct.

ADMIRAL GEHMAN: That's correct. Thank you.

MS. SMITH: So, the Appropriations Committees look at how much money they've been allocated, and they divide it up amongst the agencies within their jurisdiction. A budget gets passed. It goes back to the agency. The agency looks at what Congress did with their budget. They then decide if they're going to try and make a little bit of change here and there, and they notify Congress of those changes through something called an operating plan.

There are initial operating plans, intermediate operating plans, final operating plans. Congress also, after the initial appropriation, can pass supplemental appropriations. And so, throughout any given budget year, there are a number of steps that are going on that are deciding exactly what the final amount is that any agency is getting for any particular activity.

UNIDENTIFIED MAN: Marcia, one more question. Are there cabinet agencies with smaller budgets that NASA?

MS. SMITH: I don't know that off the top of my head. Do you know, Allan?

MR. LI: No, I don't know. I wouldn't think so. I don't think so.

UNIDENTIFIED MAN: There are a lot of agencies with smaller budgets that NASA, but not cabinet agencies.

MS. SMITH: Next slide. So, this is the NASA funding trend line over the history of the agency. The top line number is in 2003 dollars, the bottom line number is in current year dollars, and the first big spike you see, of course, is the Apollo program funding, and the next spike you see around 1987 is the funding for the replacement orbiter after Challenger. So, those are the various trend lines. Next slide, please.

For the past 10 years, fiscal '93 to fiscal 2002, this shows how much the President requested for the NASA budget, and it shows how much Congress appropriated for it, and what the change was. Many people are interested to see how NASA's budget as a whole has changed over these years, which have been very difficult years, as President Bush – the first President Bush, President Clinton and Congress all were striving to reduce the federal deficit. And agencies, including NASA, were working under very austere conditions. So, this is how the NASA budget fares overall. Next slide, please.

For fiscal 2002 – again, that's the last fiscal year that's been completed – NASA's budget authority was $14.9 billion. And within NASA, these are the different activities that NASA is engaged in, so when you try to look at the shuttle budget, which I'm getting to, this is what the shuttle must compete with, if you will, in terms of resources, the resources that the head of NASA has to deal with when he's allocating them amongst the various activities. And you can see that the space shuttle was 23 percent of the NASA budget in fiscal 2002, which is the largest single percentage for any of these activities.

ADMIRAL GEHMAN: And manned space flight is just under half.

MS. SMITH: Human space flight is just under half. And there's been a lot of discussion about the replacement programs for the shuttle. Those are funded from a different account. That's in the Office of Aerospace Technology, the X-33 program, X-34, the Space Launch Initiative. So, they are not, if you will, in direct competition with the human space flight side of the bar here. They're being funded within that account. But, of course, within the total NASA budget, there are always competing demands upon the total amount that's available to the agency. Next slide, please.

This shows just the shuttle budget, and I decided to use as my base year – my benchmark year for this as 1981, the year of the first shuttle flight. I thought it would be more useful to see the total trend line over that period of time rather than just the past 10 years initially.

MR. STEVEN WALLACE: May I interrupt, Marcia? We – unless you're going to describe it later, could you perhaps describe a little bit of the division between the space station budget and the space shuttle budget idea? In other words –.

ADMIRAL GEHMAN: – Go back one.

MS. SMITH: Go back one slide, please.

MR. WALLACE: Shuttle, you know, basically, how – are they funded entirely independently, since the programs are so intertwined and sort of rely on each other?

MS. SMITH: They are very interdependent. That was not true historically, but it has been true at least through most of the 1990s as the primary purpose of the space shuttle is to assemble and service the space station program. So, they are very closely intertwined.

You can see changes throughout the years in how NASA has been organized – NASA headquarters has been organized in terms of managing those programs and bringing them under the rubric of the Office of Space Flight, and how the Administrator for Space Flight has handled those programs and bringing them much more closely together. And as you'll see in some of the subsequent slides about space shuttle funding, some of the funding from the space shuttle program has moved over into the space station account as the space station has encountered funding difficulties.

MR. WALLACE: There's sort of a continuing debate, I would assume, about who pays which parts of the bill on this between the programs?

MS. SMITH: Well, in one sense. When NASA talks about the costs of the space shuttle – of the space station program, for example, they do not include the cost of the space shuttle flights. So, when you see budget estimates for space station, that it's going to cost 17.4 billion or 25 billion or whatever it is, that does not include the cost of the space shuttle flights, even though you obviously can't assemble and operate the station without the shuttle. So, in that sense, the space station total funding is not taking into account the amount of funding required for the shuttle launches.

MR. WALLACE: So, if you say there's – the shuttle budget for 2002 is 3.3 billion, if we just – you might say that, what, three-quarters of that is more or less, or three-quarters of the program, or some percentage is in support directly of the space station.

MS. SMITH: Yes, it is. Next slide.

So again, this is the shuttle budget since the first flight, again seeing a spike there for the replacement orbiter.

ADMIRAL GEHMAN: Let me ask a question about graphsmanship or chartsmanship. I understand this, and I appreciate you putting it both in current year dollars and in any year dollars. A lot of times, I've seen this same chart in which, instead of using 2003 dollars, they use 1981 dollars. And, of course, if you did that, the yellow line would show, in real-term spending, shuttle funding is going down.

MS. SMITH: Well, you can choose whatever base you're – you wanted to choose. I put it into the current year dollars because I thought that that would be, you know, most helpful to you. But, one can calculate these numbers in a variety of different ways.

ADMIRAL GEHMAN: That's right, okay. But, what I mean is, would you agree that, if the yellow year line were to be 19 – then-year dollars, 1981, then the yellow line would trend down?

MS. SMITH: I haven't done the calculations, so I couldn't presume what it would show.

ADMIRAL GEHMAN: Okay, all right.

MS. SMITH: Next slide, please. This is getting back to the 10-year time frame that you were interested in, and it's important to notice that this is the President's request up here. This is the request to Congress, what Congress did with it, what happened to it after that in terms of operating plan changes or supplementals that were done to it. What this does not include is the other step in the process, which is going from NASA to the White House, to the Office of Management and Budget. It doesn't show changes that were made from the agency's request to the White House.

They are also, obviously, a very important player in the whole budget ballet that goes on, the NASA number, the White House number, and the Congressional number. What comes to Congress is a White House number, and what happens prior to that process, the negotiations that go on between NASA and the White House, are very closely held, and I do not have data on the so-called pass-backs between OMB and NASA as they formulated these budgets.

ADMIRAL GEHMAN: Excuse me, go ahead, Jim.

DR. JOHN LOGSDON: First, a comment, Marcia. Neither do we. I think the observation that we should look at that chart is that Congress may re-shuffle, as you're gonna show in a while, the money within the shuttle budget slightly, but that Congress has not made major changes in what the president has requested for the shuttle, that the key decisions are what the White House requests.

MS. SMITH: There were some substantial decisions in the early 1990s regarding the advanced solid-rocket motor program –.

DR. LOGSDON: – Right, but in recent – in the more recent years –.

MS. SMITH: – But in the more recent years, a lot of the changes, if there were changes, would have happened prior to the President's request coming to Congress. But, I don't know whether there were changes or not.

ADMIRAL GEHMAN: Let me – would you help me with what the definition of Òfinal amountÓ is? Is that –?

MS. SMITH: – That is what's in NASA's final operating plan. It's the amount at the end of the fiscal year as to how much actually ended up being allocated to the shuttle after all the puts and takes throughout the year.

DR. LOGSDON: This is not the appropriation?

ADMIRAL GEHMAN: No, no, this is how – what actually was spent, obligated.

MS. SMITH: And the subsequent slides will show you the changes that were made to it, both by Congress and by NASA.

DR. LOGSDON: So – but this –?

MS. SMITH: – I have the other data, but I thought that I would be overwhelming you with too many budget charts, so I didn't put in all the tiny little numbers that showed you every step of the way. But, the – it was NASA that developed these numbers. They were developed in advance of the February 12th hearing, the joint Senate/House hearing, and these are NASA's numbers, and they do show a greater level of detail. So, if you need that, I can provide you with an estimate.

ADMIRAL GEHMAN: No, I just want to make sure I understand that –.

MS. SMITH: – This is a final amount that is a final final amount. It's not the Congressional appropriation.

ADMIRAL GEHMAN: No, no, I understand, after all the puts and takes and pushes and actions. But, when I read this chart then, at the yellow line, I should assume, then, that NASA actually spent, at each year, less than the President's budget?

MS. SMITH: They would have had the authority to spend less. This is budget authority. I don't believe it's outlay.

ADMIRAL GEHMAN: Well, that's why I was asking what Òfinal amountÓ means, whether or not final amount – I got the impression that this was the final amount at the end of the year after – based on their operating budget.

MS. SMITH: Of budget authority.

ADMIRAL GEHMAN: Of budget authority, yes. That's pretty close to saying that this is what they actually spent.

MS. SMITH: I do not know that these are outlay numbers.

ADMIRAL GEHMAN: Okay, they may not be outlay numbers.

MS. SMITH: But then, sometimes money can shift from one fiscal year to another fiscal year, so it would have been spent eventually. But, whether it was spent in this fiscal year, I don't know. I think this is budget authority.

MR. LI: They have things like carryovers that, when they don't, even though you obligate the funds and we don't spend them, then they carry that.

DR. DOUGLAS OSHEROFF: But, what's true is, from '93 through '98, or something like that, there is, in fact, a constant offset between those – not constant offset, but, obviously, the amount that – the final amount is always lower. So, you're – I mean, you can't carry that over from year to year. You could have a whole pile of money left over.

MR. LI: And we had testified on that actually a few years ago, and some of the issues in what causes a carryover are things like, on the space station, when construction was – did not go as planned, and things were not put up in space and scheduled as they thought, then that expenditure would not have been made during that year, and that causes carryover.

MS. SMITH: And I think the next slide is going to answer some of these questions, as well, because they go into the detail year-by-year as to what the puts and takes were as time applies. If I could have the next slide?

And I emphasize this is NASA's explanation. This all comes from NASA data. This is not something that CRS derived itself. And I think I have five slides that show these. I don't know if you want me to go through all of them. In the interest of time, if you want, I can just show you a couple, because I think what you're interested in is mostly the trend as opposed to specific cuts or additions that were made.

ADMIRAL GEHMAN: Right. Well, why don't you go through the first one, and then we'll see if we get the idea. We're slow learners, but we are solid learners in this.

MS. SMITH: Well, you can see that, in the appropriations process, Congress cut $50 million. They cut that because NASA had terminated one of the upgrade projects, the electric auxiliary power unit. They also added 20 million for upgrades, they added 25 million for repairs to the vehicle assembly building at Kennedy Space Center. So, that's what happened in the appropriations process.

Subsequent to that, NASA transferred $7.6 million to fund other agency requirements, and they cut 1.2 million for a rescission requirement. So, all of that would have happened after the normal appropriations process, bringing the shuttle budget to a net change of minus 13.8 million in that year.

ADMIRAL GEHMAN: Once again, we have that top line up there, where the President's budget requested 3.283 billion, and then we have that final number over there again.

MS. SMITH: Right. It's the final operating plan.

ADMIRAL GEHMAN: It's from their operating plan?

MS. SMITH: Final NASA operating plan.

ADMIRAL GEHMAN: Right. So, their operating plan, again – once again, there were a lot of changes in between there, all kinds of puts and takes in between.

MS. SMITH: These are the changes.

ADMIRAL GEHMAN: Yeah, I know, but they're – okay.

MS. SMITH: This is – these five bullets are what get you from the three – 3.8 to the 3270. That is –.

ADMIRAL GEHMAN: – Some of it was done by Congress, some of it was done by NASA in the execution of their operating plan? They moved money –.

MS. SMITH: – Right, and some was done by Congress because of NASA actions or at NASA requests, and that's the trend that you're gonna see throughout all of these changes, is that, you know, Congress is making changes, NASA was making changes. It – the only part we don't know is what changes the White House might have been making prior to the budget submittal.

And so, for 2001, Congress cut 40 million at NASA's request for a Mars Initiative, and my recollection of that is that there was a joint project between the Human Space Flight part of NASA and the Space Science part of NASA on the Mars program, and the Human Space Flight part decided not to pursue the program, and they didn't want the Space Science side to take the hit – the budget hit, and so they moved the money over. So, this was cut for that reason, and NASA also cut 6.9 million because of a rescission. So that, again, takes you from the 3165.7 to the 3118.8.

DR. OSHEROFF: These are really kind of changes that's a margin. I mean, there's, what, less than 1 percent of the total budget, right?

MS. SMITH: Right, in these years.

DR. LOGSDON: Marcia, what's a rescission requirement?

MS. SMITH: A rescission – Congress can, in the actual appropriation bill or in a supplemental appropriation bill, take back money that they had originally appropriated.

DR. LOGSDON: Tax. It's a tax.

DR. OSHEROFF: But that's not agency-specific. It's throughout the government, isn't it?

MS. SMITH: Very often – this is – I do not believe that this is a tax that various parts of an agency are sometimes required to pay. I know this happens a lot in DOD, that each program gets a certain tax amount to it. This, I believe, is in response to a Congressional rescission where Congress has said all the agencies are gonna take a .0065 percent reduction in order to balance whatever budget amounts they had available to them.

DR. LOGSDON: Rescissions are also congressionally mandated?

MS. SMITH: Yes, Congress can mandate rescissions. We just had a rescission in the fiscal '03 budget. There was a .0065 percent rescission across all the agencies except Defense.

ADMIRAL GEHMAN: Okay. Would you – let's look at the next couple, please, 2000.

MS. SMITH: Next slide. So, you can see these – the things on here that you might find of interest are, under 2000, the two bullets that are in italics do not affect the total amount available to the shuttle, but they do change how the money is being spent within the shuttle program.

And the last one on there was $40 million that was identified for what was called the R2 mission. The STS-107 mission was actually undertaken because of Congress's interest in continuing the ability for scientists to have access to orbit during the phase of space station assembly. The original idea was that NASA would fly shuttle science missions, the space station would get ready, and the science would continue on the station. But, as the station schedule slipped, there was gonna be a long hiatus where scientists would not be able to conduct research.

So, first they allocated money for the STS-107 mission, and then they subsequently said they wanted a second dedicated science flight and, for that, they specified $40 million. They called it R2, for Research Two. Now, in actuality, in 2000 was when NASA was looking at whether or not they had pushed too far on the shuttle budget. They had had the problems with STS-93, they had the McDonald Report, and NASA decided that they needed to put more money back into personnel.

And so, this 40 million, as far as I know, was ultimately spent on plussing up the personnel accounts in the shuttle program, and on shuttle upgrades. And the R2 mission has been canceled. There is no R2 mission any more.

ADMIRAL GEHMAN: It's interesting. When you look at that net change, which is essentially zero, but then you look at all these 25 and $40 million chunks of money moving around, it's kind of fascinating. Congress adds 25 million for upgrades, and then 26 million gets taken away by – for one thing or another, so you wonder about whatever happened to the upgrades. And then, they transferred 25 million for upgrades from operations, so that's not new money, that's just moving money from one account to another, and so you wonder what happened there. And then, Congress specifies how 40 million is gonna get spent –.

MS. SMITH: – But did not add the 40 million.

ADMIRAL GEHMAN: But didn't add any money, but they specified how 40 million was gonna get spent, which restricts NASA's ability to use that.

MS. SMITH: Except that they ended up using it for the shuttle, anyway, for upgrades and personnel.

ADMIRAL GEHMAN: And they used it anyway. So, yeah – all right, thank you. Now, in '99, the 60 million, that is a pretty – that's a pretty healthy cut.

MS. SMITH: Yes, and you can see that Congress cut 31 of that at NASA's request to fund other requirements that I think that were in the mission support category at the time.

ADMIRAL GEHMAN: Fund other NASA requirements?

MS. SMITH: Right. And NASA cut 32 million itself, transferring the money to the space station.

ADMIRAL GEHMAN: To the space station.

MS. SMITH: But, they also added back in two million that they had for space station, so it ended up a net of 30, basically.

MAJOR GENERAL JOHN BARRY: Marcia, I know you're gonna talk a little bit on the remaining slides here, but since '94, when they combined space station and the shuttle in the Office of Space Flight, could you give us an indication of the dance of monies that have been moving between space station and the shuttle? Can you characterize – ?

MS. SMITH: – Well, according to this NASA table from which this is all extracted, between – in that time frame, there's 330 million that was transferred from shuttle to station.

MAJOR GENERAL BARRY: Over what years?

MS. SMITH: From '96 to 2000, I think.

ADMIRAL GEHMAN: And no flow the other direction?

MS. SMITH: Correct.

MAJOR GENERAL BARRY: And would it be safe to characterize also that the increase in the space station has resulted in funding, but the space shuttle has been held back to an inflation level growth pattern? We have one character reference that made reference to that, and I just want to see if you share the same point of view.

MS. SMITH: The goal for the shuttle program, especially since the initiation of the space flight operations contract, was to hold the line on shuttle spending while not compromising safety. That was the goal.

MAJOR GENERAL BARRY: And that goal was stated when?

MS. SMITH: Well, it's been a goal for the shuttle program through the 1990s. And when they signed the Space Flight Operations Contract, SFOC, that – it was clear that that was the point that they were trying to make by getting more contractor workforce involved in the program. So, in essence, if you see a level budget for the shuttle, that is exactly what they were shooting for, as long as it did not compromise safety.

They were always careful about this. And during these years when the shuttle budget was very constrained, there was a lot of discussion about the fact that the budget was very constrained. There were hearings about it almost every year. I mean, there are hearings on the NASA budget every year. But, in addition to that, there were separate hearings on the shuttle program and on shuttle safety almost every year during this 10-year time frame. There were reports from the Aerospace Safety Advisory Panel. The reports – you know, the McDonald Report that came out, GAO reports. So, it was well known that there were stresses on the shuttle budget during this period of time.

ADMIRAL GEHMAN: We better let Marcia move on.

MS. SMITH: Okay, why don't you go to the next slide? These get shorter and shorter. Why don't we just go to the next one? Here, you start seeing bigger cuts. Why don't you go to the last one?

ADMIRAL GEHMAN: Wait a minute, go back one. We want to see where those cuts are coming from.

MS. SMITH: In '96, Congress cut 53 million for the Yellow Creek facility. This was a facility that was being built to support the Advanced Solid Rocket Motor program, the ASRM. The ASRM program was canceled, which you see on the next two slides, and there was interest, when they first canceled ASRM, in transferring some of the other SRB work to Yellow Creek. So, they didn't cancel the facility at the same time they canceled the rest of the program. But, when they got to '96, they did finally cancel that facility, as well. So, that's all part of the decision to terminate the ASRM program.

ADMIRAL GEHMAN: In the – '96, there was a transfer to – of shuttle – from shuttle to the space station.

MS. SMITH: That's right.

ADMIRAL GEHMAN: In '95, there – that's just a cut.

MS. SMITH: That was just an across the – that was a cut, and you'll see a note on there. My colleagues, Dan Morgan and Amanda Jacobs, went back through appropriations reports to try and look at all of these numbers, and we have our own report about what the House did and what the Senate did, and what the final appropriation was. And we couldn't find this one in the appropriations reports. It's not that we doubt that this is what happened, because the NASA people are very meticulous about these things. But, we just put a note on there that we couldn't find that. We did find 141 million in cuts in the appropriations conference report.

ADMIRAL GEHMAN: Okay, thank you.

MS. SMITH: Next slide. And here, you see the termination of ASRM in '94. In '93, Congress had actually tried saving ASRM. The last year of the first Bush Administration had decided to terminate the program, but Congress thought that it still should proceed. And so, in '93, they were saving ASRM, but by '94 they were convinced that it was no longer necessary, considering the slips to the space station assembly schedule. And part of the reason for ASRM was to increase safety, and they were feeling comfortable that the Re-Designed Solid Rocket Motor, the RSRM, had demonstrated sufficient safety that they didn't need to go to the ASRM for that.

And that is my last slide –.

ADMIRAL GEHMAN: – Thank you.

MS. SMITH: I think the overall message of all this is that, you know, people want to know who cut what, and the answer is we know that Congress made cuts and NASA made cuts, and we don't know whether or not the White House made cuts. And so, there have – it's been a give and take, and that's what the budget process is, by and large. And one can argue that, and there's certainly people that argue that the shuttle budget has been cut too deeply, and that there may have been negative impacts on the shuttle program because of those budget cuts.

It's very difficult, I think, to, perhaps, tie this into a specific situation like the Columbia tragedy and trying to say that, because of budget cuts, the Columbia tragedy happened. I know that you still remain flexible as to what the actual cause of the Columbia tragedy was. You haven't come out and made a statement but, obviously, a lot of people are thinking that it was foam hitting the orbiter. And if NASA did not fully appreciate the dangers associated with foam hitting the orbiter, it's not clear that an increased budget would have helped that situation.

So, everyone's, you know, looking to budget issues, trying to determine whether or not budget cuts are responsible, and it may well be that you'll conclude, as others have before you, that the shuttle budget was cut too far, but it will be interesting to see whether or not you can tie that directly to this catastrophe.

ADMIRAL GEHMAN: One last question, then we'll let Allen get on stage here. But, if you look at '93, '94, '95, my – the big numbers were back in the mid-90s. If you look at '98, '99, 2000, the – usually the cuts or the transfers are little numbers, 13 million, one million, 40 million. But, when you get up to the 400 millions and the 180 millions and the – things like that, 190 millions, those are back in the '95, '96, '97. So, my – what I take away is that the really big transfers or cuts were in the late 90s and not so much recently.

MS. SMITH: Yes. They were back when the focus was on cutting the deficit, and all the federal agencies, including NASA, were suffering cutbacks in order to reduce the deficit.

ADMIRAL GEHMAN: And also, there were – this was the first couple of years of the SFOC contract.

MS. SMITH: No, it was '96.

ADMIRAL GEHMAN: That's what I said, '95, '96, '97, '98, and so there were perceived savings there. Whether they were real or not, we don't – we'll get to. Okay.

MS. SMITH: And NASA had metrics to show that the restraints on shuttle funding were not affecting safety. They had charts showing that there were fewer in-flight anomalies despite the cutbacks in personnel.

ADMIRAL GEHMAN: Last question, Mr. Wallace.

MR. WALLACE: Well, just as sort of a process question, we've heard a lot in that – the history of the program about various compromises in the design of the shuttle, that – sort of part of making the whole thing go, you know, military requirements or cross-range requirements or payload base size requirements, and things like that. And I'm curious.

So, we hear about compromises which may have resulted in designing a vehicle which was not optimized for the mission to end up flying, or perhaps not even optimized for safety, and I'm wondering – I have sort of a two part question – is are those compromises typically before the submission comes to Congress in the White House/OMB/NASA part of the process, or are they after the submission to Congress?

That's the first part of my question, and the second part is, does Congress have a process to sort of technically vet these things, experts they rely on to, sort of, understand the technical consequences of these decisions?

MS. SMITH: In terms of the original design of the shuttle and decisions on how much money was going to be spent on the shuttle, and how they finally got down to that $5.15 billion for research and development, that was all done before the President approved the program. So, that was what started the program, which then led to the annual budget request to fund it. So, those negotiations as to how big it was gonna be and whether it was gonna have – be fully reusable or partially reusable, those were discussions that happened prior to President Nixon's 1972 approval of the program.

And Congress does have a mechanism to vet any agency request. They have a hearing process where they will call upon a variety of witnesses. GAO often does studies for Congress and testifies about them. They can always come to CRS so – but we don't have the investigative powers that GAO has. And they rely on outside experts in industry, they – the Aerospace Safety Advisory Panel testifies to Congress, so they have a number of people that they can rely on in formal settings, and they also can discuss with people in informal settings if they're concerned.

ADMIRAL GEHMAN: Thank you very much, Ms. Smith, and Mr. Li?

MR. LI: Before I start my summary of my presentation, I wanted to address one of those issues, because I think it's important.

A few years ago, when I testified before the Senate, we were talking about the issue of upgrades, and this is an issue that I think permeates some of the discussion here. It's very important to know what your end state and goal is before you make whatever decisions you have to make. And the thing that, Mr. Wallace, I wanted to bring to your attention, because I know you're familiar with the commercial side of the aviation industry and not so much on the space side.

The analogy that I used that I thought was effective in conveying my feelings was I was talking about my 1986 Volvo, and I had to make a decision – it's like making a decision whether or not you want to replace the – what components, are there some things that are less expensive? Is the water pump worth fixing this year, or do I want to do a full-blown ring change for the engine? That – my decision is based upon whether I'm gonna keep it for one year or five years.

And the issue that I would like to raise to the Board is that I believe that, at the time that Ms. Smith was talking about those cuts and whatever, that was never well-focused in terms of how long are we going to keep the shuttle. And I think that that uncertainty has a lot to do with, well, how much money should we spend? It's a lot easier to make an argument to OMB or to somebody else and say, ÒLook, I'm gonna keep this vehicle for X amount of time and, therefore, I need to make this investment.Ó

When that changes from year to year – and luckily now, I think we have – or, at least before the tragedy – we had a good idea that it was going to be now 2020, but at least they put the line in the sand. They drew it. We knew what we had to do and, therefore, they came up with the – a sort of slight extension program. But, before that time, that particular line in the sand had not been drawn. So, I just wanted to raise that to your attention, that's a consideration that they should have.

Okay, let me move onto my prepared statement. Chairman Gehman and members of the Columbia Accident Investigation Board, thank you for asking GAO to highlight its work at NASA. We recognize the Board's daunting task of not only establishing the cause of the Columbia accident, but also in understanding the agency's environment in which management decisions are made. We believe our body of work at NASA can help the Board in this area.

In January of this year, we identified four challenges facing NASA, namely one; strengthening strategic human capital management; two, correcting weaknesses in contract management; three, controlling the costs of the international space station; and four, reducing launch costs. I will highlight these four challenges, and then provide an observation on the effectiveness of knowledge sharing at NASA, an issue I understand is of high interest to the Board.

The first challenge is for NASA to strengthen strategic human capital management. It may sound like a clichŽ, but an agency's most important asset is its people. NASA, like many federal agencies, faces ongoing difficulty in attracting and retaining a highly skilled workforce. This was no more evident than when we reviewed the shuttle workforce.

In January of 2001, we reported that the shuttle workforce had declined significantly to the point of reducing NASA's ability to safely support the shuttle program. Recognizing the need to revitalize the shuttle program's workforce, NASA discontinued downsizing plans and initiated efforts to hire new staff. As we reported in January of 2003, this problem has yet to be fully resolved. Staffing shortages in many key skill areas of the shuttle program, such as electrical engineering, remain a problem despite the new hires. New shortage areas have recently emerged, such as subsystems engineering and flight software engineering.

NASA believes that similar workforce problems affect the entire agency. Currently, the average age of NASA's workforce is over 45, and 15 percent of NASA's science and engineering employees are eligible to retire. Looking down the road, 25 percent will be eligible to retire in five years. At the same time, the agency is finding it difficult to hire people with science, engineering and information technology skills. Several bills have been introduced in this Congress to provide NASA with requested flexibilities for attracting, retaining and developing its skilled workforce.

NASA's second challenge is to correct weaknesses in contract management. Much of NASA's success depends on the success of its contractors. I'm sure you've heard that. These contractors receive more than 85 percent of NASA's funding in fiscal year '02. However, this reliance does not come without problems.

ADMIRAL GEHMAN: Excuse me for interrupting. Could we ask – I think if we want to ask a workforce question, this is probably – you're about to go onto contracting.

MR. LI: Yes. Yeah, right.

ADMIRAL GEHMAN: In your statement, you said that, in your January 2001 report, that the report – and I've read all these – the report states that NASA's workforce has declined to the point of reducing NASA's ability to safely support the shuttle program.

MR. LI: Yes, and I wanted – I'm glad you mentioned that, and the issue and the point that we were making was not that it had declined to the point where it was unsafe to fly. It was within the context of what was happening in the near future, that increased flight rates were about to happen to support the space station. And what our concern was was that, if this trend of downsizing were to continue, and with the increase in the number of shuttle flights that was to happen, then we saw some problems. But, you're absolutely right, Mr. Chairman. We were not saying that it was unsafe to fly.

ADMIRAL GEHMAN: Right, but it was declining?

MR. LI: That's correct.

ADMIRAL GEHMAN: In the January of 2003 report, you say that the challenges have not been mitigated.

MR. LI: Yes, and by that, I'm saying that all the new hires, in terms of having a critical skill that had, like, a backup, that that had not been fixed, that people are still very thin as far as expertise.

ADMIRAL GEHMAN: Right. Good. Thank you very much. Now – and we are also reviewing those things, and will come to our own conclusion on that, but we thank you for that.

One of the areas that we are focused on – and you listed a whole number of areas, training programs not attended because the people are working to hard, leave – not – annual leave not taken, the amount of overtime, advanced degrees not pursued because there's no time to give sabbaticals, and – I mean, all kind.

One of the areas that we have been looking at is the area of – and maybe I'm – this kind of balances toward your next section of contracting, but one of the areas that I'm concerned is the area of cases in which NASA no longer manages subsystems. In other words, the subsystem manager is a contractor. Did you – do you have any insights into that, or maybe – and I don't – it may be that – it may be not so much a workforce problem as it is a – the level at which the line between contractor and government oversight is maybe moving up and down. And can you –?

MR. LI: – I think that, you know, rather than just talking specifically about shuttle, I think you can extrapolate that to the entire government. The issue is that there is always pressure to reduce the number of government employees associated with any program. That said, the terminology in NASA that is often used to describe the situation that you were describing, Admiral, is one of oversight and insight. And that really came – it was really clear when I was looking at the X-33 program.

In the X-33 program, it was one of those instances where they decided a very minimal government participation was going to occur. It was primarily one in which the contractor was developing the X-33 demonstrator. The feeling was that the government insight, which is working alongside with the contractor, was going to provide them as good information as doing oversight, which is checking things, that they had a certain milestone, certain product delivery that they had to provide, and then they would check that.

There is a lot of controversy associated with that insight and oversight. As a matter of fact, when we brought that issue up, I believe that when they restructured after X-33 and they did the strategic launch initiative, there was additional government oversight associated with a lot of those contents.

ADMIRAL GEHMAN: Yes, Dr. Osheroff?

DR. OSHEROFF: Well, I'd just like to bring up one specific example. The constant shedding of foam from the external tank, whether it caused the accident or not, is irrelevant. It cost NASA a tremendous amount of money in maintenance costs for the orbiters. And yet, it seemed like rather little was being done to understand the properties of the foam and why it shed. Now, the question is, whose responsibility was it to actually do this work?

MR. LI: I'm afraid I can't answer that particular – your question, sir. I believe that, had they known that that was a problem, I think that NASA would have stepped up to the plate and said we need to do something about this.

DR. OSHEROFF: I beg your pardon. I think that they knew that it was costing them a lot of money. That's not an issue. I think that was very clear. And yet, my statement still stands.

ADMIRAL GEHMAN: Let me rephrase the question, or let me add my question onto Dr. Osheroff's question. In the manpower review that you did, did you analyze, or did you consider the issue of whether or not, in a unique technical enterprise like human space flight, which nobody else does this, whether or not a rich and robust U.S. government technology workforce is necessary for a whole number of reasons, including career progression, including for the government to exercise property fiduciary contract management, and if – I could name seven or eight reasons why a robust, rich technology workforce should be paid for by the government.

One of the reasons is to be able to have the technical competence to answer Dr. Osheroff's question, but I can think of seven or eight other reasons. To kind of boil my question down to the issue of did you consider, or did you look at, whether or not it should be just a cost of doing business to fund a rich technological workforce as just a cost of doing business?

MR. LI: No, we did not, but I understand. I think it's a matter of philosophy. When I was talking to some of the engineers, and this is an important issue that, I think, in looking at the future, when I talked to engineers at NASA, they say, ÒHey, I came to NASA to design aircraft, to design spaceships. I did not come to be a project manager/contract overseer,Ó and I think that gets to your point.

ADMIRAL GEHMAN: Well, I think that – what we're concerned about – and I don't want to speak for Dr. Osheroff, but we're concerned about – there are a number of reasons why the government should have government technologists and government expertise. There's other reasons – there's other places where the government doesn't need to do this, where if it's duplicated in industry or academia, fine, go hire them. But, we are wondering whether or not, if you're gonna send men into space and nobody else does this, whether or not the government should just have to bear this cost as part of doing business.

MR. LI: I think there's some merit to that philosophy. One side of me, in terms of being – having had the engineering background, tells me yes, in order for me to be able to oversee something, I need to understand that process, and I need to be able to understand whether or not somebody is doing something wrong. That is correct.

But, I also am reminded of a saying, and when I'm asked the question of my own staff at GAO, when people are saying, ÒWell, how can you go ahead and review these programs when you're not engineers?Ó And I'm reminded of a saying that says, ÒYou don't have to be a chicken to smell a rotten egg.Ó

DR. OSHEROFF: I think the full issue is very complicated. Let me make one more point if I can, and that is that the people that produce the external tanks, that apply the foam, had rather little to gain by investing in research to solve a problem which NASA was not complaining about. USA was repairing the tiles repeatedly and, presumably, they had every reason to do that, but it wasn't in their venue. The one organization that would profit by solving this problem was the parent organization.

ADMIRAL GEHMAN: Dr. Ride?

DR. SALLY RIDE: I wanted to ask a question related to the workforce, as well. In your 2001 report, as you said, you identified constraints on the workforce, that you didn't identify as safety of flight problems at the time, but as something that needed attention, and rather desperately. And I was wondering if you could comment on how you related that to the flight rate, and to the work that was foreseen to be coming in the next few years, because I think that that – you know, the level of people related to the level of anticipated work, I suspect, was a major issue.

MR. LI: My recollection, Dr. Ride, was that, when the flight rate increases above the eight per year, that's when you – things are getting really dicey in terms of that workforce and how much they're going to be stretched. But, I believe it was in that general area between eight and 10, and there was talk at that point in time, as you perhaps recall, that at the peak of construction, they were planning to – almost a dozen flights were being planned out in the future. So, that was of concern, and I – to NASA's credit, they recognized that particular weakness and, as I said, they did stop their downsizing and start hiring again.

DR. RIDE: Did you look at that same issue in your 2003 – January 2003 report, in relation to the projected flight rate?

MR. LI: We updated – no, no, that part we did not. But, however, as you probably know, at that point in time, the decision had already been made to completely change the space station. When we did that original work in 2001, there was no talk about core complete, and things like that.

Now, we're in the situation where the space station is truly not an apples and oranges type of thing. The – as you know, the original space station was one where we were supposed to have seven crew, and now we're talking about something much smaller and, as a result, the number of flights would probably be more in the four per year, four to five per year.

DR. RIDE: I think it was set to be around six left to core complete.

ADMIRAL GEHMAN: Dr. Logsdon?

DR. JOHN LOGSDON: Allen, in your testimony, you say the agency is finding it difficult to hire people. Why? Have you done any reflection – I mean, is it not competitive with other federal high technology agencies, or is it not competitive with private sector opportunity?

MR. LI: I've had – I've had many conversations, actually, with the agency, and with the – NASA's chief Human Capital Officer, Vicky Novak, and they have some aggressive things that they are planning right now. The issue is one – and this is in their justification for the legislative relief that they're asking for, and has translated into those three bills that I mentioned. The issue is that, yes, there is difficulty throughout the country in terms of hiring science and engineering. The Aerospace Commission recently mentioned the same thing. So, NASA's not alone.

That said, it's incumbent, and the responsible thing for the administrator of NASA, is to find ways in which his particular agency can weather this particular issue and, as a result, they have made those proposals. The types of flexibilities that they have asked for, Dr. Logsdon, include things like retention bonuses for the people that are there already, but in terms of recruiting, they are trying to go now at the – even the base level, at the – from the kindergarten on up, they're trying to enhance their participation in many programs such that there would be greater interest in NASA.

ADMIRAL GEHMAN: I think we better move on. I actually have a couple more questions, but let's move on. I'll save them for later.

MR. LI: Since 1990, we have identified NASA's contract management function as an area of high risk due to ineffective systems and processes for overseeing contract – contractor activities. I think that rings a bell there. Specifically, NASA has lacked accurate and reliable information on contract spending, and has placed little emphasis on end results, product performance and cost control.

While NASA has addressed several of its acquisition-related weaknesses, key tasks remain, including completing the design and implementation of its planned financial management system. As the agency implements this system, it will need to ensure that its systems and processes provide the right data to oversee its program and contractors. Data must allow comparisons of actual costs to estimates, and provide an early warning of cost overruns or other related difficulties.

NASA's third challenge is to control the costs of the international space station. We had a perfect example of that when Ms. Smith was talking about some of those changes. As the Board knows, the estimated cost of the station has mushroomed, and expected completion has been pushed out several years. These weaknesses have affected the utility of the station with substantial cutbacks in construction, the number of crewmembers and scientific research.

The grounding of the shuttle fleet has a significant impact on the continued assembly and operation of the station. The station is not only the primary vehicle for transferring crew and equipment to and from the station, but it is also used to periodically re-boost the station into a higher orbit. While controlling costs and schedule and retaining proper workforce levels has been difficult in the past, the grounding of the shuttle fleet will likely exacerbate those challenges. Because the return to flight date for the shuttle fleet is unknown, and manifest changes are likely, the final cost and schedule impact on the station is undefined at this time.

The fourth challenge is –.

ADMIRAL GEHMAN: – Let me – let's stop here a second. General Barry?

MAJOR GENERAL BARRY: I'd like to ask a question about contracts. Let me run this by you. The Board is looking at the issue whether the space shuttle is an operational vehicle or a flight test vehicle, and we're debating that rather vigorously. When you look at contracts, right now, NASA, particularly for this shuttle, when you look at the SFOC contracts and the other contracts for the other components of the space shuttle system, NASA uses primarily the cost plus award fee contract formula, with the incentive fees, performance fees and so forth.

Is it your opinion that that focus on that kind of a contract, rather than maybe fix the – or as the SPC used to be before the SFOC before 1996, would it be fair to say that maybe this award fee/performance fee focus does not encourage technical competence? Is there any issue there in your mind, insofar as what the motivations are insofar as a contractor? You said 85 percent of the budget goes –.

MR. LI: – Right, contractors.

MAJOR GENERAL BARRY: For contractors. So, can you give us some impression – some of your views on whether this award fee/performance fee focus is the right one for a flight test vehicle as opposed to an operational vehicle?

MR. LI: Let me – let me answer this this way, and I preface this by saying that we have not done a thorough review of the SFOC contract, and so I am not as familiar with that contract as the Board is.

However, in – with regards to your question as to what type of contract would be applicable for a vehicle that was either not in full operational use and one that's in an experimental, I don't believe that the contract – there is that sort of relationship where I would change a contract in order to reflect what state the aircraft or spacecraft was. I don't believe that that is the salient point.

I also don't believe that the incentives, or some of the discussion that I've read in the media about what the Board has been asking questions about with regards to whether or not USA had the proper incentives, and perhaps disincentives, to, you know – with regards to trying to meet a schedule as opposed to ensuring safety. I don't believe – and I've had many, many interactions with the USA folks – and, regardless of whether or not they're contractors or government people, some of those people at one time used to be NASA people.

And I think that, while I understand that – and I heard some comment in one of your hearings where they said the heart is there, but that does not necessarily mean that safety was – could be ensured. I really believe that their heart was there. I have had many interactions with USA staff up and down, and I don't believe that they ever had any such malicious intent.

ADMIRAL GEHMAN: Okay, thank you very much. Let me – I'm sorry, but let me – you said that you had not looked in depth at the SFOC contract itself. Really, this section on contracting is really a section on financial management and –.

MR. LI: – It's on financial management, but it's – also reflects the work that – and the cost overruns problems that we have found. For example, I mentioned earlier that the shuttle is being used to re-boost the station. That was not the original intent. The original intent a few years ago was that they would have a propulsion module that was attached to the space station to do that. That propulsion module was canceled, and part of the problem was this fantastic cost overrun associated with the propulsion module.

They've had cost overruns on many, many other things, some of the things on the upgrades that were canceled. For example, the CLCS that the Board is well aware of had that problem. And the issue that we're raising here, Admiral Gehman, is they did – they do not have that financial management system that provides them the real-time, accurate information that they can project this is where I am and, therefore, the next few months we're gonna be in trouble.

ADMIRAL GEHMAN: Right.

MR. LI: But that was the issue.

DR. LOGSDON: Could I – quick follow-up?

ADMIRAL GEHMAN: Yes, absolutely.

DR. LOGSDON: You, GAO, had been looking at the almost billion-dollar investment that NASA's making in new financial management systems. What level of confidence have you developed about the success of this, since it's the third time – third try?

MR. LI: I think the issue – the – right now, the feeling is a mixed one. We just issued a report that was released just last week, and the issue there was that we do believe that the current core financial module, which is one of the components of the IFMP, is providing NASA, for the first time, with information that's consistent across all centers.

Up until this time, they've had separate accounting systems pretty much throughout all their centers, and that's the reason why they were never able to provide their top management with accurate information. They had to go through heroics in terms of manual spreadsheets in bringing that all together. So, from that standpoint, that's positive.

We, however, as we identified in our report, we have several concerns associated with how they are testing the core financial module. We're worried about – that some of the issues associated with providing the project managers and cost estimators with information, that that is not going to be provided just yet because they had not consulted with them early on in the program. So, we had – to answer you, Dr. Logsdon, it's mixed.

The fourth challenge is for NASA to reduce launch cost. In our earlier identification of cost to build the station, we listed shuttle launch cost as being a substantial cost component, almost $50 billion. NASA recognized the need to reduce such costs as it considered alternatives to the shuttle. A key goal of the agency's earlier effort to develop a shuttle replacement vehicle was to reduce launch costs from $10,000 per pound on the shuttle to $1,000 per pound by using such a vehicle.

As we testified in June of 2001, NASA's X-33 program, an unsuccessful attempt to develop and demonstrate advanced technologies needed for future vehicles, ended when the agency chose not to fund continued development of the demonstrator. Subsequently, NASA initiated a five-year, $4.8 billion program to build a new generation of space vehicles to replace the shuttle. In September of 2002, we reported that NASA was incurring a high level of risk in pursuing its plans to select potential designs for the new vehicle without first making other critical decisions such as identifying the overall direction of its integrated space transportation plan. NASA agreed with our findings.

In November of 2002, the administration submitted to Congress an amendment to NASA's fiscal year 2003 budget request to implement a new plan. The new plan makes investments to extend the shuttle's operational life for continued safe operation, and refocuses the earlier effort to develop an orbital space plane and conduct development of next-generation launch technology.

As I indicated at the onset, I will now comment on the effectiveness of knowledge sharing at NASA. In January of 2002, we reported on the results of a survey we conducted of NASA program and project managers. The survey revealed that lessons are not routinely identified, collected or shared. Respondents reported that they were unfamiliar with lessons generated by other centers or programs.

Many indicated that they were dissatisfied with NASA's lessons-learning processes and systems. Managers identified challenges or cultural barriers to the sharing of lessons learned, such as the lack of time to capture or submit lessons, and their perception of intolerance for mistakes. They further offered suggestions for areas of improvement, including implementing mentoring, storytelling and after-action reviews as additional mechanisms for lessons learning.

In closing, I will conclude with the following observation: to successfully implement its programs, NASA will need sustained commitment from its top management to focus attention on strategic planning, organizational alignment, the human capital strategy, performance management and other elements necessary for transformation success. The challenge ahead for NASA is to impart top management's commitment and vision to the rest of NASA by establishing the framework necessary for its successful implementation.

Chairman Gehman, this concludes my verbal statement. Thank you again for requesting my participation in today's public hearing. Be happy to answer any questions that you or other members may have at this time.

ADMIRAL GEHMAN: Thank you very much, Mr. Li.

MAJOR GENERAL BARRY: Just one real quick question. Do you think NASA as an agency is platform-centric, or does it have, in your view, a focus on a strategic plan and where it wants to go?

MR. LI: That is a very difficult question. I think that the strategic plan that the administrator put forth establishes that the agency is no longer one in which it is platform-centric. It is the science, and there's no longer a destination-specific mission. It's one in which there are certain goals that have to be achieved. So, to answer you from that perspective, I believe that they are not platform-centric.

MAJOR GENERAL BARRY: Thank you.

MR. LI: To use a DOD term, kind of remembering that platform-centric versus network-centric.

ADMIRAL GEHMAN: Mr. Li, in your – you have a tremendous amount of experience in this area. I'm talking about reducing launch costs and launch reliability and things like that, which you've done at least two studies on this.

If you look at the space station, for example, you have reports in here, and I won't quote them, and I'm not gonna get hung up on statistics here. But, you submit a report on this ISS that it's behind schedule and over budget, and then a year later, you submit another report in which everything is doubled. I mean, just in one year, the costs double and you get another year behind, and then another year goes by and you submit another report, and, you know – and costs have gone up, and it's behind again.

Which – I'm not being – I mean, it may sound like I'm being critical, but I'm not really being critical. This is the nature of exploration and doing things that mankind has never done before. To me, we should expect that. Now, maybe we could do a better job of cost accounting and things like that, but I don't find that the process of going places and building things that mankind has never done before, I don't find that there's a lot of slop and error in there, and a lot of unexpected kinds of things in there, but that's my own view.

Okay. So now, we talk about space launch initiatives, and we set a set of requirements like reducing the – you know, you used the number that cost to launch a pound is $10,000. We actually calculate it to be way higher than that, but that depends on how you calculate it. And so, now we have – let's get it down to $1,000 and have a fully reusable vehicle that doesn't take six or 700 man-years in between each flight, etc., etc., and all that kind of stuff. And then, we spend $1 billion and we find out we can't do it.

And then – so then, we launch another initiative, and – do you find that – do you agree with me, or would you characterize in your own words whether or not we continually fall into the same trap of setting goals which are unachievable, underestimating their costs, and then not following through? And we seem to repeat this – we as a nation. I'm not talking about NASA here, because there are a lot of parties involved in this. We seem to repeat this pattern, and then punish ourselves when we realize that space exploration is so hard. And consequently, we find ourselves today without a replacement vehicle for the shuttle.

Am I way off base here, or could you – could you relate that in your own terms, based on your experiences?

MR. LI: As I've faced General Barry, I have to be careful because, you know, I just recently testified on the FA22, and that is not a spacecraft, and that has also had many cost increases associated with it.

The issue is that, yes, technology is making it very difficult for some things to happen, and people do underestimate the complexity. Again, the – like, on the FA22, the software complexity of integrating all different avionics into this aircraft is causing tremendous problems, and you would think that by now our technology would be such that we can do that, but it doesn't happen that way.

On the issue of the reusable launch vehicles, and especially on the international space station, one thing that perhaps you have found in your analysis is that NASA has been trying to force-fit projects within their budget. And one of the criticisms of the international space station and why we've had these overruns and why does it – suddenly somebody says, ÒHey, by the way, we have a $5 billion overrun.Ó How does that happen?

Well, it happens because the focus is primarily on the budget year and trying to fit everything within that budget year. They are not looking at the cost to complete a project. If they had that particular perspective, and I believe that they are now, we perhaps would not be achieving those – and seeing those sorts of cost overruns.

ADMIRAL GEHMAN: Do you believe that this tendency, or this characteristic – we're not just talking about NASA here. We're talking – I mean, this is shared among several agencies and branches of the U.S. government. I mean, NASA has to work in a certain environment, you know. NASA has several bosses, and they get this characteristic of focusing on the budget year with some help.

MR. LI: And you're right, and just not to – kind of tooting GAO's horn, but one of the issues, in terms of when we're talking about weapons systems development, and one way to control cost overruns is to make sure that you have mature technologies before you go to production.

Now, I understand that, from the standpoint of NASA, that is not a good similarity. But, the issue still is that, in the budget process and trying to get that particular political support for something, there is a tendency to try to establish a cost that everybody is going to be agreeable to supporting. And unfortunately, as more things are known and as technologies are found to not be as mature as they are, then cost overruns will happen. I don't have a solution to that.

I think, in terms of the X-33 that I spoke of, and I think you were implying with – talking about the $1 billion, that wasn't an instance where it was hoped that, even if there was increases, Admiral Gehman, that private industry would have been willing to pick up that slack because of that brass ring that was going to happen at the end, which is the Venture Star, which Lockheed Martin thought that they were going to build and capture all that for our – from a commercial perspective.

ADMIRAL GEHMAN: Except in that particular case, we have a built-in set of checks and balances that, once a commercial entity realizes that there is no brass ring out there, they back away. I mean, there's an automatic check and balance here, whereas in space exploration sponsored by the U.S. government, sometimes you really want to get it done. You just have to keep – you just have to – you have to overpower the problems, and I don't know a better solution, but it does seem to be – it seems that the process has left us here with a space shuttle program which is entering its third decade. People are talking about it having to enter a fourth decade, and we do not have a viable replacement vehicle because of a couple of false starts and things like that. We seem to be repeating this process.

Dr. Logsdon?

DR. LOGSDON: I have a question for Marcia Smith. If we could get her presentation back to chart number seven, I want to try to ask you, Marcia, to talk a little bit about what was going on in the program, see whether that works.

MS. SMITH: Could you bring up my slide number seven?

DR. LOGSDON: If you look at that and look at the current dollars, you see that, between fiscal '92 and fiscal '95 that the shuttle budget went rather dramatically down, and it's been more or less level since then. What was going on in the program in those three years? How much of that is ASRM cancellation? How much is –?

MS. SMITH: – And budget deficit reduction, you know, the general reductions that were made at the agency's discretion, which are some of those larger numbers that you saw on the later slides.

But, during the early 1990s, there were still plans to build the ASRM, the orbital maneuvering vehicle was still being planned at that time, another project that was ultimately cancelled. And so, there were funds being spent on ways to upgrade the shuttle, basically, and the decision was made not to proceed with those, and that, coupled with the struggle to reduce the federal budget deficit, brought the numbers down by the mid-1990s.

Also, at the time after they'd had the Chris Kraft report in 1995 that suggested going to something like SFOC, and then in '96 they went to SFOC to try and level out those shuttle budget numbers so that it was not consuming such a large percentage of the NASA budget.

DR. LOGSDON: But this chart shows that, from SFOC on, the budget hasn't – there hasn't been big cost savings because of SFOC, or maybe there have been savings that have been offset by upgrade investments. I mean, you know, what –?

MS. SMITH: – Well, I think it's that, if you had not had SFOC, then the line would not have been able to stay stable. That's my understanding of it, that although, you know, it goes down to a number and it stayed pretty level, that if you hadn't had SFOC in there, it wouldn't have gotten down there and it might have kept going up. But, that – SFOC has saved significant money for NASA compared to where the program would be had there never been an SFOC.

ADMIRAL GEHMAN: Or cost avoidance systems. I mean, it's avoided having the program go up in cost.

MS. SMITH: Right.

ADMIRAL GEHMAN: All right. Dr. Ride?

DR. RIDE: Let me just make a point that's going back to, I think, a point that Mr. Li made right at the very beginning of your discussion, in fact, before your prepared remarks, in that is related to this discussion of the repeated tendencies to start an initiative to replace the space shuttle or to develop a new vehicle which then overruns in cost, turns out to be harder than everyone thought it was going to be, and is ultimately canceled.

One of the – one of the ramifications of that continued tendency has been that we're always ten years or less away from what we think is going to be the replacement to the shuttle. As a result, we don't put a lot of investment into upgrading the shuttle, and giving it the ability to last beyond those 10 years. So, we've been kind of trading off those investments, investing in new vehicles versus the upgrades to the shuttle. Could you just comment on that?

MR. LI: What you're saying is absolutely true, and the starts and stops have affected it, and with the hope that the shuttle would not have to go beyond the 2012 at one time frame. Whether or not these were, in hindsight, not the right things to do, the X-33 was a technologically complex program. It was – they had decided to do a single stage to orbit as opposed to a two stage. They were trade-offs. It was going to be less costly, and that's the other aspect, Dr. Ride, that we should remember is that, not only were they looking for something that was going to replace the shuttle, but they wanted something that was going to reduce launch costs of significant magnitude, and that's a very difficult nut to crack.

ADMIRAL GEHMAN: Mr. Turcotte?

REAR ADMIRAL STEPHEN TURCOTTE: I might piggyback up on that a little bit, but let's talk a little bit about the effects of budget and indecision, I guess, on infrastructure.

Looking at a lot of the facilities that – specifically, the Cape comes to mind. A lot of indecision on where the program is going over the years has caused us a lot of delays, and there literally are a lot of facilities that are crumbling. Could you comment on that?

MR. LI: Yeah. When I was at Kennedy just a few months ago, I did notice that, and you're right. As far as the investment in those particular structures, many of those structures were built for the Apollo projects and, as a result, things are starting to fall apart. I was there when the crawler had that problem, which is the transport mechanism that takes the shuttle to the pad. And for the want of a giant $10,000 shock absorber, that crawler was immobile there for a while.

And you're right. It's that sort of investment, but I am not prepared to criticize NASA management for not having made those investments, because I recognize the fact that they had a lot of other priorities. And just as I have to manage my home budget, I realize how difficult it is, and you make trade-offs. And I think the trade-offs were made, and when those particular problems were not one that was immediately on the screen, they did not make those.

But, in retrospect, they should have, and I'm hopeful, Admiral, that the current extension program and the monies that they're going to be putting in the shuttle is going to also address that, because I understand they're going to put money in the infrastructure, as far as the shuttle expansion program.

MS. SMITH: If I could just add one data point that you might find interesting, I didn't put in a slide showing how much money had been spent on upgrades over the past few years. But, since upgrades have been separately identified in the budget, which began in 1995, NASA spent $4 billion on upgrades from '95 to '02. So, there was an investment being put into upgrades. It was starting to tail off there towards the end, I think a lot, because of the uncertainty as to how long it was they were going to be keeping the shuttle around. But, they did invest 4 billion in upgrades during that period of time.

ADMIRAL GEHMAN: Mr. Li, no one's asked any questions on the last part of your report, which is the knowledge sharing kind of a section of the report. And I have not – I actually have not read that particular report, or that particular work by the GAO. But, in your statement, you make some comments about cultural resistance and the requirement for various centers and stovepipes and things like that to work better together on lessons learned and knowledge sharing, and things like that. You have some relatively strong words in there. Do you feel that this is a relatively significant issue that NASA needs to address?

MR. LI: Absolutely.

ADMIRAL GEHMAN: Stovepipes and –?

MR. LI: – Absolutely, and I think that, to Administrator O'Keefe's credit, he recognizes that his program of one NASA is one that addresses that particular issue.

Some of the infrastructure sorts of things that they're doing, I mentioned the integrated financial management program is one that I believe is going to provide that sort of consistency. But, I – more important than that is this issue of, yes, the individual centers at one time were very competitive with one another and trying to bring them together and make them feel that this is a team effort is something that's very difficult. And lessons learning is one in which right now I think you're asking me do I think it's important.

Yes, I think it's important because people like myself are gonna be retiring pretty soon. We're gonna take away a lot of knowledge that our institution should have. Now is the time for NASA to be investing in that and ensuring that that knowledge is transferred to the younger people. And if I can say so, you know, one of the things that has concerned me through this whole process of – and especially in reading in the media about the bureaucracy that perhaps NASA's had, and the slowness of its decision-making, I want to – if there's anything that I wanted to convey to the young people of America is that – please don't look at this as additional vindication that government service and public service is not one that's important. If any time we need good, young people to come into the workforce, now is the time because, you know, I remember when I wanted to be in the federal service, after I got my degree in Aerospace Engineering. I remembered those words of our President. That said, we don't do things because they're easy – we do them because they're hard. And with what's happening with NASA right now, we need young people to come in. So, I think it's extremely important that people be able to disassociate the fact that yes, NASA has had problems, but this is an opportunity for them to make a difference with us.

ADMIRAL GEHMAN: I certainly – speaking for myself, I certainly agree with your statement, that almost everything NASA attempts to do is very hard. I know that for myself, until I began to understand a little bit more about this, I didn't realize how difficult it is to put an obj