Evolved Expendable Launch Vehicle:

DOD Needs to Ensure New Acquisition Strategy is Based on Sufficient Information

GAO-11-641: Published: Sep 15, 2011. Publicly Released: Oct 17, 2011.

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The Department of Defense (DOD) and the National Reconnaissance Office (NRO) plan to spend about $15 billion for launch services from fiscal year 2013 to fiscal year 2017 through DOD's Evolved Expendable Launch Vehicle (EELV) program. The program launches satellites for military, intelligence, civil, and commercial customers. In 2009, DOD and the NRO decided the program's business model needed improvement, and initiated studies to determine the best approach. The studies addressed potential business models, cost reductions, and the nation's assured access to space. Given expected changes to the EELV acquisition strategy, GAO was asked to (1) determine whether DOD has the knowledge it needs to develop a new EELV acquisition strategy, and (2) identify issues that could benefit future launch acquisitions. To address these questions, GAO reviewed launch studies, a supplier survey, and interviewed DOD and other officials.

DOD officials believe the launch industrial base is unstable and plan to implement an acquisition strategy they believe will help stabilize it. The leading proposal would commit the government to a block buy of eight common booster cores--the main component of a launch vehicle--each year, for a 5-year term. However, this approach may be based on incomplete information and although DOD is gathering data that it needs as it finalizes the new acquisition strategy, some critical knowledge gaps remain. DOD expects the strategy to be finalized in the next few months, but this may not allow DOD sufficient time to leverage the knowledge it continues to gain as it develops the strategy. DOD analysis on the health of the U.S. launch industrial base is minimal, and officials continue to rely on contractor data and analyses in lieu of conducting independent analyses. Additionally, some subcontractor data needed to negotiate fair and reasonable prices are lacking, according to Defense Contract Audit Agency (DCAA) reports, and some data requirements were waived in 2007 in exchange for lower prices. Mission assurance comprises numerous activities to ensure launch success, but DOD has little insight into the sufficiency or excess of these activities. The expected block buy may commit the government to buy more booster cores than it needs, and could result in a surplus of hardware requiring storage and potentially rework if stored for extended periods. Also, DOD is gaining insight into the rise in some engine prices, expected to increase dramatically in the near term, but it is unclear how this knowledge will inform the expected acquisition approach or subsequent negotiations. Program decisions at the National Aeronautics and Space Administration (NASA) later this year could impact EELV engine prices, but DOD may lock in higher prices before it fully understands NASA's plans. Further, DOD intends to allow companies other than the current sole-source contractor to compete for EELV launches as they prove vehicle reliability, but DOD is still developing criteria to facilitate this competition. A recent memorandum of understanding between the Air Force, NRO, and NASA committed to publish a coordinated certification strategy by July 31, 2011, but did not meet that date. Broader issues exist as well, regarding the U.S. government's acquisition of, and future planning for, launch services--issues which GAO believes should be addressed, given that they could reduce launch costs and assure future launch requirements are met. For example, (1) Federal agencies--like the Air Force, NRO, and NASA--could more closely coordinate their acquisitions of launch services, and recently committed to do so, but many details are yet to be determined. (2) Resource planning focused on launch technology development could inform the next generation of launch vehicles particularly with respect to engines, for which the United States is partially reliant on foreign suppliers. Policymakers could benefit from additional insight into these issues, but it is not clear that DOD will address these issues in its upcoming strategy. Among other things, GAO recommends DOD assess engine costs and mission assurance activities, reassess the length of the proposed block buy, and consider how to address broader launch acquisition and technology development issues. DOD generally concurred with the recommendations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In September 2011, GAO issued a report on DOD's new acquisition strategy for its Evolved Expendable Launch Vehicle (EELV) program that also highlighted opportunities for increased coordination and efficiency among federal government agencies using launch services. Specifically, GAO recommended DOD examine how launch issues, such as increased coordination among federal agencies, could influence future acquisitions to generate cost savings and efficiencies. Two areas GAO highlighted were increased coordination of federal agency launch acquisitions and launch technology development. Since GAO's report, significant formal and ad hoc coordination has taken place across the DOD, the National Aeronautics and Space Administration (NASA) and the National Reconnaissance Office (NRO), in areas such as new launch provider certification and launch technology development. DOD finalized a certification guide for new launch providers in October 2011 following collaboration with NASA and NRO. Officials at DOD, NASA and NRO are meeting regularly to discuss launch vehicle design, technology development, and the space industrial base, and DOD and NASA are collaborating on engine technology research and development. Identifying opportunities to coordinate launch acquisitions and technology development could yield launch cost efficiencies and maximize the government's overall investment in launch services.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should examine how broader launch issues, such as greater coordination across federal agencies, can be factored into future launch acquisitions to increase efficiencies and cost savings.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD restructured the EELV Launch Capability contract from a cost-plus award fee-, to a cost-plus incentive fee contract, to incentivize ULA to find efficiencies and reduce costs while maintaining mission assurance. This change affords ULA flexibility in determining the areas in which efficiencies can be gained without being overly prescriptive. Additionally, Air Force officials recently conducted a comprehensive evaluation of missions in the launch manifest with an eye toward reducing redundant steps in the independent launch verification matrix. Air Force officials said that while the verification activities for each mission have always been tailored on a case-by-case basis at the start of a launch vehicle acquisition, the current missions in the launch manifest represent a unique opportunity to revisit the matrix and identify potential efficiencies because the current launch manifest contains more second-, and third-flight missions, or re-flights, than it has in decades. The "re-flight era," as some officials called it, presented Air Force officials with an opportunity to revisit the activities typically undertaken prior to a first-flight launch, and effect the suspension of redundancies.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should ensure launch mission assurance activities are sufficient and not excessive, and identify ways to incentivize the prime contractor to implement efficiencies without affecting mission success as DOD develops a new contracting structure for the EELV program.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: In September 2011, GAO issued a report highlighting critical knowledge gaps in DOD's development of a new acquisition strategy for its Evolved Expendable Launch Vehicle (EELV) program. Specifically, the lack of prime- and sub-contractor cost or pricing data was limiting DOD's ability to negotiate fair and reasonable contracts. GAO recommended DOD refrain from waiving requirements for certified cost or pricing data as it finalized development of its new EELV acquisition strategy. In a March 2012 report to the Congress, DOD indicated it does not intend to waive requirements for certified cost or pricing data for the EELV program. Additionally, according to DOD officials, a government cost assessment team is obtaining some previously unavailable subcontractor cost or pricing data, and DOD intends to delay new EELV contract awards until it can sufficiently analyze the data. Obtaining and analyzing this data will position DOD to make informed decisions as it negotiate new launch contracts.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should refrain from waiving FAR requirements for contractor and subcontractor certified cost and pricing data as DOD finalizes its new EELV acquisition strategy.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In September 2011, GAO issued a report highlighting critical knowledge gaps in DOD's development of a new acquisition strategy for its Evolved Expendable Launch Vehicle (EELV) program. To ensure the government's investment would be maximized under DOD's new launch contracts, GAO recommended that DOD work closely with NASA to ensure DOD was informed of NASA heavy-lift program decisions given the potential bearing those decisions could have had on EELV engine prices. Since GAO's report last September, DOD has worked with NASA to keep apprised of Space Launch System (SLS) heavy-lift decisions that could have bearing on EELV contract negotiations, leverage knowledge across agencies, and coordinate some limited technology development, all of which will better position DOD to negotiate upcoming launch contracts in the government's best interests.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should work closely with NASA to ensure DOD has sufficient knowledge of NASA heavy-lift program decisions--given the potential bearing those decisions could have on EELV engine prices--to facilitate DOD's ability to negotiate EELV launch contract prices that maximize the government's investment.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: DOD reassessed the terms of the block buy using the additional information they collected. In November 2012, the Under Secretary of Defense issued an Acquisition Decision Memorandum authorizing the Air Force to negotiate with the current launch vehicle provider (the United Launch Alliance) to procure up to 36 launch vehicle booster cores over the period of 2013-2017, with an additional 14 cores to be made available for certified competitors to the incumbent provider. According to the Office of the Assistant Secretary of the Air Force for Acquisition, Program Executive Office for Space Launch, the decision to reassess the duration and quantity of the Air Force's block buy of launch vehicles was prompted by the results of GAO's 2011-2012 review of the Air Force's acquisition strategy development effort.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should reassess the block buy contract length given the additional knowledge DOD is gaining as it finalizes its new acquisition strategy.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: In September 2011, GAO issued a report highlighting critical knowledge gaps in DOD's development of a new acquisition strategy for its Evolved Expendable Launch Vehicle (EELV) program. To provide DOD with a better understanding of the condition of U.S. launch industrial base, the stability of which was a stated goal of DOD's new strategy, GAO recommended that the Secretary of Defense conduct an independent assessment of the health of the U.S. launch industrial base, paying special attention to engine manufacturers. Since GAO's report, DOD has completed or obtained independent cost estimates for two engines, completed a study of the liquid rocket engine industrial base, and begun efforts to develop a national rocket propulsion strategy with the National Aeronautics and Space Administration. DOD is also participating in an in-depth assessment of the space sector industrial base. These efforts will afford DOD a better understanding of the health of the U.S. space launch industrial base, enabling DOD to make informed decisions regarding its acquisition of launch vehicles.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should conduct an independent assessment of the health of the U.S. launch industrial base, paying special attention to engine manufacturers.

    Agency Affected: Department of Defense

  7. Status: Closed - Not Implemented

    Comments: DOD so far has taken no action to develop a science and technology plan for improving launch technologies that links to the broader space science and technology plans mandated by the 2010 National Defense and NASA Authorization Acts.

    Recommendation: To gain a better understanding of the condition of the U.S. space launch industrial base, facilitate fair and reasonable launch contract negotiations, ensure consistent grounds for evaluating launch providers, and identify the best path forward for U.S. space launch operations and technology development, the Secretary of Defense should develop a science and technology plan for improving and evolving launch technologies. This plan should link to the broader space science and technology plans mandated by the 2010 National Defense and NASA Authorization Acts.

    Agency Affected: Department of Defense

 

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