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Report to the Subcommittee on Environment, Technology, and Standards, 
Committee on Science, House of Representatives:

September 2004:

POLAR-ORBITING ENVIRONMENTAL SATELLITES:

Information on Program Cost and Schedule Changes:

GAO-04-1054:

GAO Highlights:

Highlights of GAO-04-1054, a report to Subcommittee on Environment, 
Technology, and Standards, Committee on Science, House of 
Representatives: 

Why GAO Did This Study:

Our nation’s current operational polar-orbiting environmental satellite 
program is a complex infrastructure that includes two satellite 
systems, supporting ground stations, and four central data processing 
centers. In the future, the National Polar-orbiting Operational 
Environmental Satellite System (NPOESS) is to combine the two current 
satellite systems into a single state-of-the-art environment monitoring 
satellite system. This new satellite system is considered critical to 
the United States’ ability to maintain the continuity of data required 
for weather forecasting and global climate monitoring through the year 
2020. Because of changes in funding levels after the contract was 
awarded, the program office recently developed a new cost and schedule 
baseline for NPOESS.

GAO was asked to provide an interim update to (1) identify any cost or 
schedule changes as a result of the revised baseline and determine what 
contributed to these changes and (2) identify factors that could affect 
the program baseline in the future.

In commenting on a draft of this report, DOD, NOAA, and NASA officials 
generally agreed with the report and offered technical corrections, 
which we incorporated where appropriate. 

What GAO Found:

The program office has increased the NPOESS cost estimate by $1.2 
billion, from $6.9 to $8.1 billion, and delayed key milestones, 
including the availability of the first NPOESS satellite—which was 
delayed by 20 months. The cost increases reflect changes to the NPOESS 
contract as well as increased program management costs. The contract 
changes include extension of the development schedule to accommodate 
changes in the NPOESS funding stream, increased sensor costs, and 
additional funds needed for mitigating risks. Increased program 
management funds were added for non-contract costs and management 
reserves. The schedule delays were the result of stretching out the 
development schedule to accommodate a change in the NPOESS funding 
stream.

Other factors could further affect the revised cost and schedule 
estimates. First, the contractor is not meeting expected cost and 
schedule targets of the new baseline because of technical issues in 
the development of key sensors. Based on its performance to date, GAO 
estimates that the contractor will most likely overrun its contract at 
completion in September 2011 by at least $500 million. Second, the 
risks associated with the development of the critical sensors, 
integrated data processing system, and algorithms could also 
contribute to increased cost and schedule slips.

Satellites Collect and Transmit Meteorological Data Worldwide: 

[See PDF for image]

[End of table]

www.gao.gov/cgi-bin/getrpt?GAO-04-1054.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact David Powner at (202) 
512-9286 or pownerd@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

NPOESS Overview:

NPOESS Costs Have Increased, and Schedules Have Been Delayed:

NPOESS Could Experience Further Cost and Schedule Increases:

Conclusions:

Agency Comments:

Appendix:

Appendix I: Objectives, Scope, and Methodology:

Tables:

Table 1: Expected NPOESS Instruments (critical sensors in bold), as of 
August 31, 2004:

Table 2: Cost Increases Resulting from the Revised Plan (dollars in 
millions):

Table 3: Program Schedule Changes:

Figures:

Figure 1: Configuration of Operational Polar Satellites:

Figure 2: Generic Data Relay Pattern for the Polar Meteorological 
Satellite System:

Figure 3: Organizations Coordinated by the NPOESS Integrated Program 
Office:

Figure 4: Cumulative Cost Variance of the NPOESS Program over a 15-
Month Period:

Figure 5: Cumulative Schedule Variance of the NPOESS Program over a 15-
Month Period:

Figure 6: Key Program Risks as Identified by the NPOESS Program Office, 
as of February 2004:

Abbreviations:

CMIS: conical-scanned microwave imager/sounder:

CrIS: cross-track infrared sounder:

DMSP: Defense Meteorological Satellite Program:

DOD: Department of Defense:

NASA: National Aeronautics and Space Administration:

NESDIS: National Environmental Satellite, Data, and Information 
Service:

NOAA: National Oceanic and Atmospheric Administration:

NPOESS: National Polar-orbiting Operational Environmental Satellite 
System:

NPP: NPOESS Preparatory Project:

POES: Polar-orbiting Operational Environmental Satellites:

VIIRS: visible/infrared imager radiometer suite:

Letter September 30, 2004:

The Honorable Vernon J. Ehlers: 
Chairman: 
The Honorable Mark Udall: 
Ranking Member: 
Subcommittee on Environment, Technology, and Standards: 
Committee on Science:
House of Representatives:

Our nation's operational polar-orbiting environmental satellite 
program is a complex infrastructure encompassing two satellite systems, 
the Polar-orbiting Operational Environmental Satellites (POES) and the 
Defense Meteorological Satellite Program (DMSP), as well as supporting 
ground stations and four central data processing centers. The program 
provides general weather information and specialized environmental 
products to a variety of users, including weather forecasters, military 
strategists, and the public. A tri-agency Integrated Program Office--
comprised of officials from the Department of Defense (DOD), the 
National Oceanic and Atmospheric Administration (NOAA), and the 
National Aeronautics and Space Administration (NASA)--is working to 
combine the two current satellite systems into a single state-of-the-
art environment monitoring satellite system called the National Polar-
orbiting Operational Environmental Satellite System (NPOESS). This new 
satellite system is considered critical to the United States' ability 
to maintain the continuity of data required for weather forecasting and 
global climate monitoring through the year 2020.

When we testified on the NPOESS program in July 2003,[Footnote 1] we 
reported that the program office was working to address changes in 
funding levels after the contract was awarded, and planned to develop a 
new cost and schedule baseline. Concerned with these cost and schedule 
changes, you asked us to provide an interim update on the revised 
baseline. Specifically, our objectives were to (1) identify any cost or 
schedule changes as a result of the revised baseline and determine what 
contributed to these changes, and (2) identify factors that could 
affect the program baseline in the future.

To address these objectives, we reviewed the new NPOESS cost and 
schedule baseline and compared it to the old baseline. Then we 
identified the factors that contributed to any cost increases or 
schedule delays. We also analyzed program cost estimates and project 
management reports and interviewed officials from the NPOESS Integrated 
Program Office, DOD, NOAA, and NASA. In addition, this review builds on 
other work we have done on environmental satellite programs over the 
last several years.[Footnote 2] As agreed with your staff members, we 
plan to continue our oversight of this program.

We conducted our work at NOAA, DOD, and NASA headquarters in the 
Washington, D.C., metropolitan area between November 2003 and August 
2004, in accordance with generally accepted government auditing 
standards. Appendix I contains further details on our objectives, 
scope, and methodology.

Results in Brief:

The program office has increased the NPOESS cost estimate by $1.2 
billion, from $6.9 to $8.1 billion, and delayed key milestones, 
including the expected availability of the first NPOESS satellite--
which was delayed by 20 months. The cost increases reflect changes to 
the NPOESS contract as well as increased program management funds. 
According to the program office, contract changes include extension of 
the development schedule, increased sensor costs, and additional funds 
needed for mitigating risks. Increased program management funds were 
added for non-contract costs and management reserves. The schedule 
delays were the result of stretching out the development schedule to 
accommodate a change in the NPOESS funding stream.

Other factors could further affect the revised cost and schedule 
estimates. Specifically, the contractor is not meeting expected cost 
and schedule targets of the new baseline because of technical issues in 
the development of key sensors. Based on its performance to date, we 
estimate that the contractor will most likely overrun its contract at 
completion in September 2011 by $500 million. In addition, risks 
associated with the development of the critical sensors, integrated 
data processing system, and algorithms, among other things, could also 
contribute to increased cost and schedule slips.

In commenting on a draft of this report, DOD, NASA, and NOAA officials 
generally agreed with the report and offered technical corrections, 
which we incorporated where appropriate.

Background:

Since the 1960s, the United States has operated two separate 
operational polar-orbiting meteorological satellite systems: POES, 
managed by NESDIS of NOAA and DMSP, managed by DOD. The satellites 
obtain environmental data that are processed to provide graphical 
weather images and specialized weather products and are the predominant 
input to numerical weather prediction models. These images, products, 
and models are all used by weather forecasters, the military, and the 
public. Polar satellites also provide data used to monitor 
environmental phenomena, such as ozone depletion and drought 
conditions, as well as data sets that are used by researchers for a 
variety of studies, such as climate monitoring.

Unlike geostationary satellites, which maintain a fixed position above 
the earth, polar-orbiting satellites constantly circle the earth in an 
almost north-south orbit, providing global coverage of conditions that 
affect the weather and climate. Each satellite makes about 14 orbits a 
day. As the earth rotates beneath it, each satellite views the entire 
earth's surface twice a day. Today, there are two operational POES 
satellites and two operational DMSP satellites that are positioned so 
that they can observe the earth in early morning, mid morning, and 
early afternoon polar orbits. Together, they ensure that for any region 
of the earth, the data provided to users are generally no more than 6 
hours old. Figure 1 illustrates the current operational polar satellite 
configuration. Besides the four operational satellites, six older 
satellites are in orbit that still collect some data and are available 
to provide some limited backup to the operational satellites should 
they degrade or fail. In the future, both NOAA and DOD plan to continue 
to launch additional POES and DMSP satellites every few years, with 
final launches scheduled for 2008 and 2011, respectively.

Figure 1: Configuration of Operational Polar Satellites:

[See PDF for image] 

[End of figure] 

Each of the polar satellites carries a suite of sensors designed to 
detect environmental data that is either reflected or emitted from the 
earth, the atmosphere, and space. The satellites store these data and 
then transmit them to NOAA and Air Force ground stations when the 
satellites pass overhead. The ground stations then relay the data via 
communications satellites to the appropriate meteorological centers for 
processing. The satellites also broadcast a subset of these data in 
real time to tactical receivers all over the world.

Under a shared processing agreement among the four processing centers-
-NESDIS, the Air Force Weather Agency, Navy's Fleet Numerical 
Meteorology and Oceanography Center, and the Naval Oceanographic 
Office--different centers are responsible for producing and 
distributing via a shared network different environmental data sets, 
specialized weather and oceanographic products, and weather prediction 
model outputs.[Footnote 3] Each of the four processing centers is also 
responsible for distributing the data to its respective users. For the 
DOD centers, the users include regional meteorology and oceanography 
centers, as well as meteorology and oceanography staff on military 
bases. NESDIS forwards the data to NOAA's National Weather Service for 
distribution and use by government and commercial forecasters. The 
processing centers also use the Internet to distribute data to the 
general public. NESDIS is responsible for the long-term archiving of 
data and derived products from POES and DMSP.

In addition to the infrastructure supporting satellite data processing 
noted above, properly equipped field terminals that are within a direct 
line of sight of the satellites can receive real-time data directly 
from the polar-orbiting satellites. There are an estimated 150 such 
field terminals operated by U.S. and foreign governments, academia, and 
many are operated by DOD. Field terminals can be taken into areas with 
little or no data communications infrastructure--such as on a 
battlefield or a ship--and enable the receipt of weather data directly 
from the polar-orbiting satellites. These terminals have their own 
software and processing capability to decode and display a subset of 
the satellite data to the user. Figure 2 depicts a generic data relay 
pattern from the polar-orbiting satellites to the data processing 
centers and field terminals.

Figure 2: Generic Data Relay Pattern for the Polar Meteorological 
Satellite System:

[See PDF for image] 

[End of figure] 

NPOESS Overview:

Given the expectation that combining the POES and DMSP programs would 
reduce duplication and result in sizable cost savings, a May 1994 
Presidential Decision Directive[Footnote 4] required NOAA and DOD to 
converge the two satellite programs into a single satellite program 
capable of satisfying both civilian and military requirements. The 
converged program, NPOESS, is considered critical to the United States' 
ability to maintain the continuity of data required for weather 
forecasting and global climate monitoring. To manage this program, DOD, 
NOAA, and NASA formed a tri-agency Integrated Program Office located 
within NOAA.

Within the program office, each agency has the lead on certain 
activities. NOAA has overall program management responsibility for the 
converged system, as well as satellite operations; DOD has the lead on 
the acquisition; and NASA has primary responsibility for facilitating 
the development and incorporation of new technologies into the 
converged system. NOAA and DOD share the costs of funding NPOESS, while 
NASA funds specific technology projects and studies. Figure 3 depicts 
the organizations coordinated by the Integrated Program Office and 
their responsibilities.

Figure 3: Organizations Coordinated by the NPOESS Integrated Program 
Office:

[See PDF for image] 

[End of figure] 

Program acquisition plans call for the procurement and launch of six 
NPOESS satellites over the life of the program, as well as the 
integration of 13 instruments, consisting of 11 environmental systems 
and 2 subsystems. Together, the sensors are to receive and transmit 
data on atmospheric, cloud cover, environmental, climate, 
oceanographic, and solar-geophysical observations. The subsystems are 
to support nonenvironmental search and rescue efforts and environmental 
data collection activities. According to the program office, 7 of the 
13 planned NPOESS instruments involve new technology development, 
whereas 6 others are based on existing technologies. In addition, the 
program office considers 4 of the sensors involving new technologies 
critical because they provide data for key weather products; these 
sensors are shown in bold in table 1, which presents the planned 
instruments and the state of technology on each.

Table 1: Expected NPOESS Instruments (critical sensors in bold), as of 
August 31, 2004:

Instrument name: Advanced technology microwave sounder; 
Description: Measures microwave energy released and scattered by the 
atmosphere and is to be used with infrared sounding data from NPOESS' 
cross-track infrared sounder to produce daily global atmospheric 
temperature, humidity, and pressure profiles; 
State of technology: New.

Instrument name: Aerosol polarimetry sensor; 
Description: Retrieves specific measurements of clouds and aerosols 
(liquid droplets or solid particles suspended in the atmosphere, such 
as sea spray, smog, and smoke); 
State of technology: New.

Instrument name: Conical-scanned microwave imager/sounder; 
Description: Collects microwave images and data needed to measure rain 
rate, ocean surface wind speed and direction, amount of water in the 
clouds, and soil moisture, as well as temperature and humidity at 
different atmospheric levels; 
State of technology: New.

Instrument name: Cross-track infrared sounder; 
Description: Collects measurements of the earth's radiation to 
determine the vertical distribution of temperature, moisture, and 
pressure in the atmosphere; 
State of technology: New.

Instrument name: Data collection system; 
Description: Collects environmental data from platforms around the 
world and delivers them to users worldwide; 
State of technology: Existing.

Instrument name: Earth radiation budget sensor; 
Description: Measures solar short-wave radiation and long-wave 
radiation released by the earth back into space on a worldwide scale 
to enhance long-term climate studies; 
State of technology: Existing.

Instrument name: Ozone mapper/profiler suite; 
Description: Collects data needed to measure the amount and 
distribution of ozone in the earth's atmosphere; 
State of technology: New.

Instrument name: Radar altimeter; 
Description: Measures variances in sea surface height/topography and 
ocean surface roughness, which are used to determine sea surface 
height, significant wave height, and ocean surface wind speed and to 
provide critical inputs to ocean forecasting and climate prediction 
models; 
State of technology: Existing.

Instrument name: Search and rescue satellite aided tracking system; 
Description: Detects and locates aviators, mariners, and land-based 
users in distress; 
State of technology: Existing.

Instrument name: Space environmental sensor suite; 
Description: Collects data to identify, reduce, and predict the 
effects of space weather on technological systems, including 
satellites and radio links; 
State of technology: New.

Instrument name: Survivability sensor; 
Description: Monitors for attacks on the satellite and notifies other 
instruments in case of an attack; 
State of technology: Existing.

Instrument name: Total solar irradiance sensor; 
Description: Monitors and captures total and spectral solar irradiance 
data; 
State of technology: Existing.

Instrument name: Visible/infrared imager radiometer suite; 
Description: Collects images and radiometric data used to provide 
information on the earth's clouds, atmosphere, ocean, and land 
surfaces; 
State of technology: New. 

Source: GAO, based on NPOESS Integrated Program Office data.

[End of table]

In addition, the NPOESS Preparatory Project (NPP), which is being 
developed as a major risk reduction initiative, is a planned 
demonstration satellite to be launched in 2006, several years before 
the first NPOESS satellite launch in 2009. It is scheduled to host 
three of the four critical NPOESS sensors (the visible/infrared imager 
radiometer suite, the cross-track infrared sounder, and the advanced 
technology microwave sounder), as well as one other noncritical sensor 
(the ozone mapper/profiler suite). NPP will provide the program office 
and the processing centers an early opportunity to work with the 
sensors, ground control, and data processing systems. Specifically, 
this satellite is expected to demonstrate the validity of about half of 
the NPOESS environmental data records[Footnote 5] and about 93 percent 
of its data processing load.

NPOESS Acquisition Strategy:

When the NPOESS development contract was awarded, program office 
officials identified an anticipated schedule and funding stream for the 
program. The schedule for launching the satellites was driven by a 
requirement that the satellites be available to back up the final POES 
and DMSP satellites should anything go wrong during the planned 
launches of these satellites. In general, program officials anticipate 
that roughly 1 out of every 10 satellites will fail either during 
launch or during early operations after launch.

Key program milestones included (1) launching NPP by May 2006, 
(2) having the first NPOESS satellite available to back up the final 
POES satellite launch in March 2008, and (3) having the second NPOESS 
satellite available to back up the final DMSP satellite launch in 
October 2009. If the NPOESS satellites were not needed to back up the 
final predecessor satellites, their anticipated launch dates would have 
been April 2009 and June 2011, respectively.

These schedules were changed as a result of changes in the NPOESS 
funding stream. A DOD program official reported that between 2001 and 
2002 the agency experienced delays in launching a DMSP satellite, 
causing delays in the expected launch dates of another DMSP satellite. 
In late 2002, DOD shifted the expected launch date for the final DMSP 
satellite from 2009 to 2010. As a result, DOD reduced funding for 
NPOESS by about $65 million between fiscal years 2004 and 2007. 
According to NPOESS program officials, because NOAA is required to 
provide no more funding than DOD provides, this change triggered a 
corresponding reduction in funding by NOAA for those years. As a result 
of the reduced funding, program officials were forced to make difficult 
decisions about what to focus on first. The program office decided to 
keep NPP as close to its original schedule as possible because of its 
importance to the eventual NPOESS development and to shift some of the 
NPOESS deliverables to later years. This shift affected the NPOESS 
deployment schedule. To plan for this shift, the program office 
developed a new program cost and schedule baseline.

NPOESS Costs Have Increased, and Schedules Have Been Delayed:

The program office has increased the NPOESS life cycle cost estimate by 
$1.2 billion, from $6.9 to $8.1 billion, and delayed key milestones--
including the expected availability of the first NPOESS satellite, 
which was delayed by 20 months. The cost increases reflect changes to 
the NPOESS contract as well as increased program management funds. The 
contract changes include extension of the development schedule, 
increased sensor costs, and additional funds needed for mitigating 
risks. Increased program management funds were added for non-contract 
costs and management reserves. The schedule delays were the result of 
stretching out the development schedule to accommodate the change in 
the NPOESS funding stream. In addition, the delayed launch dates of the 
NPOESS satellites have extended the maintenance and operation of the 
satellite system from 2018 to 2020.

When we testified on the NPOESS program in July 2003, we reported that 
the program office was working to develop a new cost and schedule 
baseline due to a change in the NPOESS funding stream. The program 
office completed its efforts to revise the NPOESS cost and schedule 
baseline in December 2003.

As a result of the revised baseline, the program office increased the 
NPOESS cost estimate by $638 million, from $6.9 to $7.5 billion. The 
program office attributed the $638 million cost increase to extending 
the development schedule to accommodate the changing funding stream, 
increased sensor costs, and additional funds needed for mitigating 
risks. The program office has since increased funds for non-contract 
costs and management reserves, which raised its estimate by an 
additional $562 million to bring the NPOESS life cycle cost estimate to 
$8.1 billion. According to program officials, non-contract costs 
included oversight expenses for the prime contract and sensor 
subcontracts. Management reserves, which are a part of the total 
program budget and should be used to fund undefined but anticipated 
work, are expected to last through 2020.[Footnote 6] Table 2 shows a 
breakdown of the cost increases resulting from the revised plan.

Table 2: Cost Increases Resulting from the Revised Plan (dollars in 
millions):

Effort: NPOESS cost estimate before revised plan; 
Amount: $6,950.

Effort: Changes to the NPOESS Contract: Inflationary impacts of delays 
to accommodate funding cuts; 
Amount: $112.

Effort: Changes to the NPOESS Contract: Impact of slowed start and 
contract extension resulting from delaying the first NPOESS satellite 
and stretching out several sensor deliveries; 
Amount: $406.

Effort: Changes to the NPOESS Contract: Additional tasks related to 
sensors; 
Amount: $64.

Effort: Changes to the NPOESS Contract: Preparation cost of the 
revised plan effort; 
Amount: $13.

Effort: Changes to the NPOESS Contract: Additional funds required for 
risk mitigation; 
Amount: $43.

Effort: Total revised plan costs; 
Amount: $638.

Effort: Changes to Program Management Costs: Additional non-contract 
costs and management reserves; 
Amount: $536.

Effort: Changes to Program Management Costs: Increase in program office 
costs; 
Amount: $26.

Effort: NPOESS cost estimate after revised plan; 
Amount: $8,150.

Source: NPOESS Integrated Program Office data.

[End of table]

Recently, program officials reported that a new life cycle cost 
estimate would be developed by the contractor and program office. The 
program office expects to brief its executive oversight committee on 
the results of its cost estimate analysis by December 2004. The new 
cost estimate will be used to help develop the NPOESS fiscal year 2007 
budget request. Officials reported that the new estimate is necessary 
in order to ensure that the program will be adequately funded through 
its life.

In addition to increasing the cost estimate, the program office has 
delayed key milestones, including the expected availability of the 
first satellite, which was delayed by 20 months. The program office 
attributed the schedule delays to stretching out the development 
schedule to accommodate the changing funding stream. Table 3 shows 
program schedule changes for key milestones.

Table 3: Program Schedule Changes:

Milestones: NPP launch; 
As of August 2002 contract award: May 2006; 
As of February 2004 after the revised plan: October 2006; 
Change from contract award to the revised plan: 5-month delay.

Milestones: Final POES launch[A]; 
As of August 2002 contract award: March 2008; 
As of February 2004 after the revised plan: March 2008.

Milestones: First NPOESS satellite available for launch; 
As of August 2002 contract award: March 2008; 
As of February 2004 after the revised plan: November 2009; 
Change from contract award to the revised plan: 20-month delay[B].

Milestones: First NPOESS satellite planned for launch; 
As of August 2002 contract award: April 2009; 
As of February 2004 after the revised plan: November 2009[C]; 
Change from contract award to the revised plan: 7-month delay.

Milestones: Final DMSP launch[A]; 
As of August 2002 contract award: October 2009; 
As of February 2004 after the revised plan: May 2010[D].

Milestones: Second NPOESS satellite available for launch; 
As of August 2002 contract award: October 2009; 
As of February 2004 after the revised plan: June 2011; 
Change from contract award to the revised plan: 20-month delay.

Milestones: Second NPOESS satellite planned for launch; 
As of August 2002 contract award: June 2011; 
As of February 2004 after the revised plan: June 2011; 
Change from contract award to the revised plan: No change.

Milestones: Third NPOESS satellite available for launch; 
As of August 2002 contract award: March 2011; 
As of February 2004 after the revised plan: May 2013; 
Change from contract award to the revised plan: 26- month delay.

Milestones: Third NPOESS satellite planned for launch; 
As of August 2002 contract award: May 2013; 
As of February 2004 after the revised plan: June 2013; 
Change from contract award to the revised plan: 1- month delay.

Milestones: Fourth NPOESS satellite available for launch; 
As of August 2002 contract award: June 2012; 
As of February 2004 after the revised plan: May 2014; 
Change from contract award to the revised plan: 23- month delay.

Milestones: Fourth NPOESS satellite planned for launch; 
As of August 2002 contract award: November 2015; 
As of February 2004 after the revised plan: November 2015; 
Change from contract award to the revised plan: No change.

Milestones: End of operations and maintenance; 
As of August 2002 contract award: 2018; 
As of February 2004 after the revised plan: 2020; 
Change from contract award to the revised plan: 2-year extension. 

Source: GAO analysis, based on NPOESS Integrated Program Office data.

[A] POES and DMSP are not part of the NPOESS program. Their launch 
dates are provided because of their relevance to the NPOESS satellite 
schedules.

[B] In our July 2003 testimony (GAO-03-987T), we reported a 21-month 
delay with launch availability in December 2009. However, since then, 
the program office has accelerated this date.

[C] A program official reported that if the first NPOESS satellite is 
needed to back up the final POES satellite, the contractor will prepare 
the satellite to be launched in a different orbit with a different 
suite of sensors. These factors will prevent launch from taking place 
until February 2010.

[D] In commenting on a draft of this report, DOD officials noted that 
the current launch date is October 2011.

[End of table]

A result of the program office extension of several critical milestone 
schedules is that less slack is built into the schedules for managing 
development and production issues. For example, the first NPOESS 
satellite was originally scheduled to be available for launch by March 
2008 and to launch by April 2009. This enabled the program office to 
have 13 months to resolve any potential problems with the satellite 
before its expected launch. Currently, the first NPOESS satellite is 
scheduled to be available for launch by November 2009 and to launch the 
same month. This will allow the program office less than one month to 
resolve any problems. The program office has little room for error, and 
should something go wrong in development or production, the program 
office would have to delay the launch further.

NPOESS Could Experience Further Cost and Schedule Increases:

NPOESS costs and schedules could continue to increase in the future. 
The contractor's continued slippage of expected cost and schedule 
targets indicates that the NPOESS contract[Footnote 7] will most likely 
be overrun by $500 million at contract completion in September 2011. 
Program risks, particularly with the development of critical sensors to 
be demonstrated on the NPP satellite, could also increase costs and 
delay schedules for NPOESS.

Current Shortfalls in Cost and Schedule Targets Could Require 
Additional Funds to Meet Launch Deadlines:

To be effective, project managers need information on project 
deliverables and on a contractor's progress in meeting those 
deliverables. One method that can help project managers track progress 
on deliverables is earned value management. This method, used by DOD 
for several decades, compares the value of work accomplished during a 
given period with that of the work expected in that period. Differences 
from expectations are measured in both cost and schedule variances.

Cost variances compare the earned value of the completed work with the 
actual cost of the work performed. For example, if a contractor 
completed $5 million worth of work and the work actually cost $6.7 
million, there would be a -$1.7 million cost variance. Schedule 
variances are also measured in dollars, but they compare the earned 
value of the work completed to the value of work that was expected to 
be completed. For example, if a contractor completed $5 million worth 
of work at the end of the month, but was budgeted to complete $10 
million worth of work, there would be a -$5 million schedule variance. 
Positive variances indicate that activities are costing less or are 
completed ahead of schedule. Negative variances indicate activities are 
costing more or are falling behind schedule. These cost and schedule 
variances can then be used in estimating the cost and time needed to 
complete the program.

Using contractor-provided data, our analysis indicates that NPOESS cost 
performance was experiencing negative variances before the revised plan 
was implemented in December 2003, and continued to deteriorate after 
the implementation of the revised plan. Figure 4 shows the 15-month 
cumulative cost variance for the NPOESS contract. From March 2003 to 
November 2003, the contractor exceeded its cost target by $16.1 
million, which is about 4.5 percent of the contractor's budget for that 
time period. From December 2003 to May 2004, the contractor exceeded 
its cost target by $33.6 million, or about 5.7 percent of the 
contractor's budget. The contractor has incurred a total cost overrun 
of about $55 million with NPOESS development less than 20 percent 
complete. This information is useful because trends tend to continue 
and can be difficult to reverse. Studies have shown that, once programs 
are 15 percent complete, the performance indicators are indicative of 
the final outcome.

Figure 4: Cumulative Cost Variance of the NPOESS Program over a 15-
Month Period:

[See PDF for image] 

[End of figure] 

Our analysis also indicates that the program is showing a negative 
schedule variance. Figure 5 shows the 15-month cumulative schedule 
variance of NPOESS. From March 2003 to November 2003, the contractor 
recovered almost $11 million worth of planned work in the schedule. 
Program officials reported that within this time period, the program 
office ordered the contractor to stop some work until the new baseline 
was established. This work stoppage contributed to schedule degradation 
between March 2003 and August 2003. In September 2003, the program 
office implemented portions of the revised plan, which resulted in an 
improvement in schedule performance. The revised plan alleviated some 
of the cumulative schedule overrun by delaying the deadline for first 
unit availability by 20 months. However, based on our analysis, the 
cumulative schedule variance indicates slippage in the new schedule. 
Since December 2003, the contractor has been unable to complete 
approximately $19.7 million worth of scheduled work. The current 
inability to meet contract schedule performance could be a predictor of 
future rising costs, as more spending is often necessary to resolve 
schedule overruns.

Figure 5: Cumulative Schedule Variance of the NPOESS Program over a 15-
Month Period:

[See PDF for image] 

[End of figure] 

According to program office documents, cost and schedule overruns that 
occurred before December 2003 were caused by planning activities 
related to the revised plan, as well as by technical issues related to 
the development of the critical sensors and the spacecraft 
communications software. Since the completion of the revised plan, the 
program's ability to meet the new performance goals continues to be 
hampered by technical issues with the design complexity, testing, and 
integration, among other things, of the critical sensors. These 
technical issues could cause further cost and schedule shortfalls.

Based on contractor performance from December 2003 to May 2004, we 
estimate that the current NPOESS contract--which ends in September 2011 
and is worth approximately $3.4 billion--will overrun its budget by 
between $372 million and $891 million. Our projection of the most 
likely cost overrun will be about $534 million, or about 16 percent of 
the contract. The contractor, in contrast, estimates about a $130 
million overrun at completion of the NPOESS contract.

Risks Could Further Affect NPOESS Cost and Schedule:

Risk management is a leading management practice that is widely 
recognized as a key component of a sound system development approach. 
An effective risk management approach typically includes identifying, 
prioritizing, resolving, and monitoring project risks.

Program officials reported that they recognize several risks with the 
overall program and critical sensors that, if not mitigated, could 
further increase costs and delay the schedule. In accordance with 
leading management practices, the program office developed a NPOESS 
risk management program that requires assigning a severity rating to 
risks that bear particular attention, placing these risks in a 
database, planning response strategies for each risk in the database, 
and reviewing and evaluating risks in the database during monthly 
program risk management board meetings.

The program office identifies risks in two categories: program risks, 
which affect the whole NPOESS program and are managed at the program 
office level, and segment risks, which affect only individual 
segments[Footnote 8] and are managed at the integrated product team 
level. The program office has identified 21 program risks, including 14 
medium to medium-high risks. Some of these risks include the 
development of three critical sensors (the visible/infrared imager 
radiometer suite (VIIRS), the cross-track infrared sounder (CrIS), and 
the conical-scanned microwave imager/sounder (CMIS)) and the integrated 
data processing system; the uncertainty that algorithms will meet 
system performance requirements; and the effort to obtain a security 
certification and accreditation. Figure 6 includes the 21 program risks 
and their assigned levels of risk.

Figure 6: Key Program Risks as Identified by the NPOESS Program Office, 
as of February 2004:

[See PDF for image] 

[End of figure] 

Managing the risks associated with the development of VIIRS and CrIS, 
the integrated data processing system, and algorithm performance is of 
particular importance because these are to be demonstrated on the NPP 
satellite currently scheduled for launch in October 2006. Any delay in 
the NPP launch date could affect the overall NPOESS program because the 
success of the program depends on the lessons learned in data 
processing and system integration from the NPP satellite.

At present, the program office considers the three critical sensors--
VIIRS, CMIS, and CrIS--to be key program risks because of technical 
challenges that each is facing. VIIRS's most severe technical issue, 
relating to flight-quality integrated circuits, was recently resolved; 
however, the program office continues to consider the schedule for the 
VIIRS sensor acquisition to be high risk. The prime contractor's 
analysis of the current schedule indicated that the present schedule is 
unlikely to be achieved, considering the technical risks, the 
optimistically planned integration and test phase, and the limited 
slack in the schedule at this stage of the program. VIIRS is 
experiencing ongoing technical issues on major subcontracts related to 
the motors, rotating telescope, and power supply. As a result of the 
numerous ongoing issues--many of which affect system performance--
significantly more modeling, budget allocation work, and performance 
reviews have been required than were originally planned. Until the 
current technical issues are resolved, delays in the VIIRS delivery and 
integration onto the NPP satellite remain a potential threat to the 
expected launch date of the NPP.

The CMIS and CrIS sensor acquisitions are experiencing schedule 
overruns that may threaten their respective expected delivery dates. 
CMIS technical challenges include unplanned redesigns for receiver and 
antenna components, system reliability issues, and thermal issues. A 
significant amount of CrIS's developmental progress has been impeded by 
efforts to address a signal processor redesign, vibration issues in an 
optical instrument, and the late subcontract deliveries of some parts.

To the program office's credit, it is aware of these risks and is using 
its risk management plans to help mitigate them. We plan to further 
evaluate the risk mitigation strategies of the Integrated Program 
Office in a follow-on review.

Conclusions:

The next generation polar-orbiting environmental satellite program, 
NPOESS, recently underwent a replanning effort that increased the 
NPOESS cost estimate by $1.2 billion, from $6.9 to $8.1 billion and 
delayed key milestones, including the expected availability of the 
first satellite by 20 months.

Other factors could further affect the revised cost and schedule 
estimates. Specifically, the current shortfalls in performance targets 
indicate that the NPOESS contract will most likely be overrun by $500 
million at completion in September 2011 and program risks could 
contribute to additional cost and schedule slips. The program office is 
planning to develop new cost estimates but has not yet determined the 
impact of these risks.

Given the history of large cost increases and the factors that could 
further affect NPOESS costs and schedules, continued oversight is more 
critical than ever. Accordingly, we plan to continue our review of this 
program.

Agency Comments:

We provided a draft of this report to the Secretary of Commerce, 
Secretary of Defense, and the Administrator of NASA for review and 
comment. The departments generally agreed with the report and provided 
written and oral technical corrections, which have been incorporated as 
appropriate.

NOAA, Integrated Program Office, DOD officials, including the System 
Program Director of the NPOESS Integrated Program Office and the 
Assistant for Environmental Monitoring from the Office of the Assistant 
Secretary of Defense, noted that changes in funding levels, triggered 
after the contract was awarded, were the primary reason for 
rebaselining the program's costs and schedules. These funding level 
changes caused them to delay the development of the NPOESS system and 
led them to renegotiate the NPOESS contract. We revised our report to 
clarify the factors leading up to revising the baseline.

Additionally, NOAA officials commented that the Integrated Program 
Office continues to aggressively manage the NPOESS program to ensure it 
is completed within cost, schedule, and performance. In regard to our 
estimate that the contract will overrun by at least $500 million, NOAA 
officials reported that the agency will manage the contract to ensure 
that any cost overrun is identified and addressed. To this end, NOAA 
has asked the contractor to develop a new life cycle cost estimate.

NOAA and DOD officials also noted that in August 2004, the President 
directed the Departments of Defense, the Interior, Commerce, and NASA 
to place a LANDSAT-like imagery capability on the NPOESS platform. This 
new capability will collect imagery data of the earth's surface similar 
to the current LANDSAT series of satellites, which are managed by the 
Department of Interior's U.S. Geological Survey, and are reaching the 
end of their lifespans. Officials expect that this new sensor will be 
funded separately and will not affect the NPOESS program's cost or 
schedule. Accordingly, while this recent event is important to the 
NPOESS program, it does not change the results of our report.

We are sending copies of this report to the Secretary of Commerce, the 
Secretary of Defense, and the Administrator of NASA. In addition, 
copies will be available at no charge on the GAO Web site at 
[Hyperlink, http://www.gao.gov]. Should you have any questions about 
this report, please contact me at (202) 512-9286 or Colleen Phillips, 
Assistant Director, at (202) 512-6326. We can also be reached by e-mail 
at [Hyperlink, koontzl@gao.gov] and [Hyperlink, deferrarij@gao.gov], 
respectively. Other key contributors to this report included Carol 
Cha, Barbara Collier, John Dale, Neil Doherty, Karen Richey, and Eric 
Winter.

Signed by: 

David A. Powner: 
Director, Information Technology Management Issues:

[End of section]

Appendixes:

Appendix I: Objectives, Scope, and Methodology:

Our objectives were to (1) identify any cost or schedule changes as a 
result of the revised baseline and determine what contributed to these 
changes and (2) identify factors that could affect the program baseline 
in the future. To accomplish these objectives, we focused our review on 
the Integrated Program Office, the organization responsible for the 
overall National Polar-orbiting Operational Environmental Satellite 
System (NPOESS) program.

To identify any cost or schedule changes as a result of the revised 
baseline, we reviewed the new NPOESS cost and schedule baseline and 
compared it to the old acquisition baseline, as reported in our July 
2003 testimony.[Footnote 9] To determine the factors that contributed 
to the cost and schedule changes in the new baseline, we reviewed 
program office plans and management reports. We also interviewed IPO 
officials to discuss these contributing factors.

To identify factors that could affect the program baseline in the 
future, we assessed the prime contractor's performance related to cost 
and schedule. To make these assessments, we applied earned value 
analysis techniques[Footnote 10] to data captured in contractor cost 
performance reports. We compared the cost of work completed with the 
budgeted costs for scheduled work for a 15-month period, from March 
2003 to May 2004, to show trends in cost and schedule performance. We 
also used data from the reports to estimate the likely costs at the 
completion of the prime contract through established earned value 
formulas. This resulted in three different values, with the middle 
value being the most likely. We used the base contract without options 
for our earned value assessments. We reviewed these cost reports and 
program risk management documents and interviewed program officials to 
determine the key risks that negatively affect NPOESS's ability to 
maintain the current schedule and cost estimates. We reviewed 
independent cost estimates performed by the Air Force Cost Analysis 
Agency and compared them with the program office cost estimates in 
order to determine possible areas for cost growth. To assess the 
potential effect of the NOAA-N Prime satellite incident on the current 
program baseline, we reviewed documentation related to the POES 
accident and alternatives for moving forward and interviewed officials 
from the National Aeronautics and Space Administration (NASA) and 
NOAA's National Environmental Satellite, Data, and Information Service.

We obtained comments on a draft of this report from officials at the 
Department of Defense (DOD), NOAA, and NASA, and incorporated these 
comments as appropriate.

We performed our work at the Integrated Program Office, DOD, NASA, and 
NOAA in the Washington, D.C., metropolitan area between November 2003 
and August 2004 in accordance with generally accepted government 
auditing standards.

(310453):

FOOTNOTES

[1] GAO, Polar-orbiting Environmental Satellites: Project Risks Could 
Affect Weather Data Needed by Civilian and Military Users, GAO-03-987T 
(Washington, D.C.: July 15, 2003).

[2] GAO, Polar-orbiting Environmental Satellites: Project Risks Could 
Affect Weather Data Needed by Civilian and Military Users, GAO-03-987T 
(Washington, D.C.: July 15, 2003); Polar-orbiting Environmental 
Satellites: Status, Plans, and Future Data Management Challenges, GAO-
02-684T (Washington, D.C.: July 24, 2002); National Oceanic and 
Atmospheric Administration: National Weather Service Modernization and 
Weather Satellite Program, GAO/T-AIMD-00-86 (Washington, D.C.: Mar. 29, 
2000); and Weather Satellites: Planning for the Geostationary Satellite 
Program Needs More Attention, GAO-AIMD-97-37 (Washington, D.C.: Mar. 
13, 1997).

[3] These environmental data sets, specialized weather and 
oceanographic products, and weather prediction model outputs are 
produced through algorithmic processing. An algorithm is a precise set 
of procedures that enable a desired end result, such as a measurement 
of natural phenomena. 

[4] NSTC-2, May 5, 1994.

[5] Environmental data records are weather products derived from sensor 
data records and temperature data records. 

[6] The prime contract provides options available to the program office 
that would enable the contractor to support the NPOESS system through 
2020. 

[7] The prime contract includes the development of the first two NPOESS 
satellites as well as instruments and support for NPP. It is worth 
about $3.4 billion. The contract also includes options to procure four 
more satellites and operate the NPOESS system through 2020, which would 
bring the total value of the contract up to $4.5 billion. The program 
cost estimate of $8.1 billion includes this contract, its options, 
program office costs, sensor developments prior to contract award, and 
satellite operations and maintenance.

[8] These segments are identified as (1) overall system integration, 
(2) the launch segment, (3) the space segment, (4) the interface data 
processing segment, and (5) the command, control, and communications 
segment. 

[9] GAO, Polar-orbiting Environmental Satellites: Project Risks Could 
Affect Weather Data Needed by Civilian and Military Users, GAO-03-987T 
(Washington, D.C.: July 15, 2003).

[10] The earned value concept is applied as a means of placing a dollar 
value on project status. It is a technique that compares budget vs. 
actual costs vs. project status in dollar amounts. For our analysis, we 
used standard earned value formulas to calculate cost and schedule 
variance and forecast the range of cost overrun at contract completion.

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