NASA:

Lack of Disciplined Cost-Estimating Processes Hinders Effective Program Management

GAO-04-642: Published: May 28, 2004. Publicly Released: Jun 22, 2004.

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For more than a decade, GAO has identified the National Aeronautics and Space Administration's (NASA) contract management as a high-risk area--in part because of NASA's inability to collect, maintain, and report the full cost of its programs and projects. Lacking this information, NASA has been challenged to manage its programs and control program costs. The scientific and technical expectations inherent in NASA's mission create even greater challenges--especially if meeting those expectations requires NASA to reallocate funding from existing programs to support proposed new efforts. Because cost growth has been a persistent problem in a number of NASA programs, GAO was asked to examine NASA's cost estimating for selected programs, assess NASA's cost-estimating processes and methodologies, and describe any barriers to improving NASA's cost-estimating processes. To conduct GAO's work, GAO analyzed a total of 27 NASA programs--10 of which GAO reviewed in detail.

Considerable change in NASA's program cost estimates--both increases and decreases--indicates that NASA lacks a clear understanding of how much its programs will cost and how long they will take to achieve their objectives. For example, the development cost estimates for more than half of the 27 programs that GAO reviewed have increased and for some programs this increase was significant--as much as 94 percent. Cost estimates changed for each of 10 programs that GAO reviewed in detail. For 8 of the 10 programs, the estimates increased. Although NASA cited specific reasons for the changes, such as technical problems and funding shortages, the variability in the cost estimates indicates that the programs lacked the sufficient knowledge needed to establish priorities, quantify risks, and make informed investment decisions, and thus predict costs. Most notably, NASA's basic cost-estimating processes--an important tool for managing programs--lack the discipline needed to ensure that program estimates are reasonable. Specifically, GAO found that none of the 10 NASA programs that GAO reviewed in detail met all of GAO's cost-estimating criteria, which are based on criteria developed by Carnegie Mellon University's Software Engineering Institute. Moreover, none of the 10 programs fully met certain key criteria--including clearly defining the program's life cycle to establish program commitment and manage program costs, as required by NASA. In addition, only three programs provided a breakdown of the work to be performed. Without this knowledge, the programs' estimated costs could be understated and thereby subject to underfunding and cost overruns, putting programs at risk of being reduced in scope or requiring additional funding to meet their objectives. Finally, only two programs have a process in place for measuring cost and performance to identify risks. NASA has limited ability to collect the program cost and schedule data needed to meet basic cost-estimating criteria. For example, as GAO has previously reported, NASA does not have a system to capture reliable financial and performance data--key to using effectively the cost-estimating tools that NASA officials state that programs employ. Further, without adequate financial and nonfinancial data, programs cannot easily track an acquisition's progress and assess whether the program can meet its cost and schedule goals before it incurs significant cost and schedule overruns. NASA identified other barriers, including limited cost-estimating staff. According to NASA officials, several initiatives are under way to remove such obstacles and improve the agency's cost-estimating practices.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The NASA Administrator should direct the Program Executive Officer for IFMP, the Chief Financial Officer, and the Chief Engineer to develop an integrated plan for improving cost estimating that, at a minimum, includes specific actions for ensuring that guidance is established on rebaselining and that rebaselining is consistently applied to provide accountability among programs.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, includes strengthened guidance on cost rebaselining.

    Recommendation: The NASA Administrator should direct the Program Executive Officer for IFMP, the Chief Financial Officer, and the Chief Engineer to develop an integrated plan for improving cost estimating that, at a minimum, includes specific actions for ensuring that true earned value management is used as an organizational management tool to bring cost to the forefront in NASA's management decision-making process.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, includes strengthened requirements for earned value management.

    Recommendation: The NASA Administrator should direct the Program Executive Officer for IFMP, the Chief Financial Officer, and the Chief Engineer to develop an integrated plan for improving cost estimating that, at a minimum, includes specific actions for ensuring that acquisition and earned value management policies and procedures are enforced.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of All NASA programs and projects, includes requirements that should facilitate enforcement of earned value management policies and procedures.

    Recommendation: The NASA Administrator should direct the Program Executive Officer for IFMP, the Chief Financial Officer, and the Chief Engineer to develop an integrated plan for improving cost estimating that, at a minimum, includes specific actions for ensuring that staff and support for cost-estimating and earned value analyses are effectively used.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, includes requirements that should facilitate efficient and effective use of NASA cost-estimating and earned value analyses staff.

    Recommendation: The NASA Administrator should direct the Chief Financial Officer to establish a standard framework for developing life- cycle cost estimates. At a minimum the framework should require each program or project to base its cost estimates on a full life cycle for the program--including all direct and indirect costs for operations and maintenance and disposal as well as planning and procurement--and on a work breakdown structure that encompass both in-house and contractor efforts.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, includes requirements that strengthen NASA's ability to develop life-cycle cost estimates on a full cost basis based on a work breakdown structure that encompasses both in-house and contractor efforts.

    Recommendation: The NASA Administrator should direct the Chief Financial Officer to establish a standard framework for developing life- cycle cost estimates. At a minimum the framework should require each program or project to prepare a cost analysis requirements description.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, includes a new requirement that involves the preparation of a Cost Analysis Data Requirement (CADRe) document to improve NASA project cost estimating. CADRe is a comprehensive document which provides a technical and quantitative description of the project in terms that permit the development of a life-cycle cost estimate.

    Recommendation: The NASA Administrator should direct the Chief Financial Officer to establish a standard framework for developing life- cycle cost estimates. At a minimum the framework should require each program or project to prepare an independent government estimate at each milestone of the program.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, identifies specific requirements for independent assessments at program and project milestones and provides for the preparation of an independent government cost estimate during an independent assessment.

    Recommendation: The NASA Administrator should direct the Chief Financial Officer to establish a standard framework for developing life- cycle cost estimates. At a minimum the framework should require each program or project to conduct a cost risk assessment that identifies the level of uncertainty inherent in the estimate.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C, which governs the formulation, approval, implementation, and evaluation of all NASA programs and projects, improves NASA program and project cost-estimating by requiring the development of risk-based life-cycle cost estimates and use of risk-based acquisition management.

    Recommendation: The NASA Administrator should develop procedures that would prohibit proposed projects from proceeding through the review and approval process when they do not address the elements of the recommended cost-estimating practices.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with this recommendation and has addressed it in its revised procedural requirements document--NASA Procedural Requirements (NPR) 7120.5C, NASA Program and Project Management Processes and Requirements--effective March 22, 2005. NPR 7120.5C governs the formulation, approval, implementation, and evaluation of all NASA programs and projects. It includes enforcement mechanisms for ensuring that project cost-estimating requirements in NPR 7120.5C are met before the project proceeds to the next milestone.

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