GAO-08-1039, Space Acquisitions: Uncertainties in the Evolved Expendable Launch Vehicle Program Pose Management and Oversight Challenges


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Report to the Subcommittee on Defense, Committee on Appropriations, 
House of Representatives: 

United States Government Accountability Office: 

GAO: 

September 2008: 

Space Acquisitions: 

Uncertainties in the Evolved Expendable Launch Vehicle Program Pose 
Management and Oversight Challenges: 

Space Acquisitions: 

GAO-08-1039: 

GAO Highlights: 

Highlights of GAO-08-1039, a report to the Subcommittee on Defense, 
Committee on Appropriations, House of Representatives 

Why GAO Did This Study: 

The Department of Defense (DOD) plans to spend over $27 billion 
acquiring launch services through the Evolved Expendable Launch Vehicle 
(EELV) program over the next 12 years. The EELV program uses two 
families of commercially owned and operated vehicles to launch 
satellites. 

Partly because the commercial space market did not develop as expected, 
the EELV program has undergone significant changes. These include: 
adoption of a new acquisition strategy in 2005 that sought to ensure 
the viability of the two EELV launch vehicle providers, Boeing and 
Lockheed Martin; the subsequent decision by those two companies to form 
a joint venture called the United Launch Alliance (ULA); and a 10-year 
increase in the life of the program. In light of these changes, GAO was 
asked to (1) determine what uncertainties DOD faces in the EELV program 
and in the transition to ULA, and (2) assess how DOD is positioned to 
manage and oversee the effort. To accomplish this, GAO reviewed a wide 
variety of DOD documents and interviewed DOD and program officials. 

What GAO Found: 

The EELV program currently faces uncertainties in the reliability of 
the vehicles used to launch military and other government spacecraft as 
well as its budget for future years and in the merger of its two 
principal suppliers. Taken together, these unknowns require careful 
monitoring and oversight to ensure a fairly long track record of launch 
successes can continue. 

* Though the program has had 21 successful operational launches, no 
single configuration from either family of launch vehicles has been 
launched enough times to demonstrate production process reliability. 
The ULA transition may also influence the demonstration of vehicle 
reliability because ULA plans to relocate production activities and may 
alter manufacturing processes. 

* The consolidation of Boeing and Lockheed into ULA—a massive 
undertaking that seeks to combine two distinct corporate cultures, and 
consolidate launch infrastructure and business operations from five 
locations across the country to two—poses a variety of other cost, 
schedule, and performance uncertainties and risks. 

* DOD does not know whether its EELV program budget is sufficient to 
manage the program in the short term because the Air Force reduced the 
EELV program budget to incorporate anticipated savings from the ULA 
transition, even though savings estimates were based on preliminary 
data. 

DOD has taken steps to position itself to effectively oversee and 
manage the ULA transition and EELV program but still faces significant 
challenges in these areas. More specifically, DOD has established a 
well-defined process for how the ULA transition will be overseen and 
established mechanisms that allow the diverse agencies involved to 
coordinate the analysis and raise critical issues to senior leaders. 
However, when DOD moved the EELV program from the research and 
development phases in 2007 to the sustainment phase, DOD eliminated 
requirements on the program to produce data that would illuminate what 
impacts the transition is having on the program, what cost increases 
are occurring and why, and what other programmatic and technical 
vulnerabilities exist and how they are being addressed. Furthermore, a 
new independent life-cycle cost estimate was not required for the 
program when it moved to the sustainment phase; as a result, DOD will 
not be able to rely on this estimate for making long-term investment 
planning decisions. According to DOD officials, the latest life-cycle 
cost estimate for the program is not realistic. In addition, as part of 
its effort to increase its oversight and gain program knowledge, in 
2005 the Under Secretary of the Air Force expanded the program office’s 
management responsibilities when he approved a new acquisition strategy 
for the EELV program. At the same time, program officials stated that 
they do not have the government staff necessary to perform what they 
consider to be inherently governmental functions related to the 
expansion of oversight. 

What GAO Recommends: 

GAO recommends the Secretary of Defense take actions to: ensure the 
regular reporting of key information on program status, produce an 
independent life-cycle cost estimate, and ensure the program’s staffing 
meets its needs. DOD concurred with the recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1039]. For more 
information, contact Cristina Chaplain at (202) 512-4841 or 
chaplainc@gao.gov 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

DOD Faces Numerous Uncertainties in the EELV Program and ULA 
Transition: 

DOD Has Made Strides to Effectively Oversee and Manage the EELV Program 
but Challenges Exist in These Areas: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Scope and Methodology: 

Appendix I: Comments from the Department of Defense: 

Appendix II: Program Cost, Schedule, and Performance Status Information 
Included in Defense Acquisition Executive Summary: 

Tables: 

Table 1: Evolved Expendable Launch Vehicle Configurations by Number of 
Operational Launches: 

Table 2: Uncertainties of the ULA Transition: 

Table 3: DOD Responsibilities in Monitoring the ULA transition: 

Table 4: OSD Program Cost and Status Reporting Requirements Not 
Applicable to Programs in the Sustainment Phase: 

Table 5: Additional EELV Program Office Responsibilities Resulting from 
New Acquisition Strategy: 

Table 6: Summer 2008 Projected Staffing Levels within the EELV Program 
Office (as of March 2008): 

Table 7: Oversight Information Contained in Defense Acquisition 
Executive Summary Reports: 

Figures: 

Figure 1: Atlas V and Delta IV Families of Launch Vehicles: 

Figure 2: Major Components of Atlas V and Delta IV Launch Vehicles: 

Figure 3: Tenures of EELV Program Directors from June 1995 to the 
Present: 

Figure 4: Aerospace Corporation Assistance Provided to the EELV Program 
Office: 

Abbreviations: 

AFB: Air Force Base: 

CAE: component acquisition executive: 

DAES: Defense Acquisition Executive Summary: 

DCAA: Defense Contract Audit Agency: 

DCMA: Defense Contract Management Agency: 

DOD: Department of Defense: 

EELV: Evolved Expendable Launch Vehicle: 

EVM: earned value management: 

FAR: Federal Acquisition Regulation: 

FFRDC: federally funded research and development center: 

FTC: Federal Trade Commission: 

FTE: full-time equivalent: 

NASA: National Aeronautics and Space Administration: 

NRO: National Reconnaissance Office: 

NSSO: National Security Space Office: 

OSD: Office of the Secretary of Defense: 

PBD: Program Budget Decision: 

PEO: program executive officer: 

SAR: Selected Acquisition Report: 

SETA: systems engineering and technical assistance: 

SMC: Space and Missile Systems Center: 

ULA: United Launch Alliance: 

[End of section] 

United States Government Accountability Office: 

Washington, DC 20548: 

September 26, 2008: 

The Honorable John P. Murtha: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

The Department of Defense (DOD) plans to spend over $27 billion 
acquiring launch services through the Evolved Expendable Launch Vehicle 
(EELV) program over the next 12 years. DOD's investment in the EELV 
program, which uses two families of commercially owned and operated 
vehicles to launch satellites, is intended to reduce the overall cost 
of space launches, assure access to space, and preserve the space 
launch industrial base. 

The EELV program has undergone significant changes since its inception. 
DOD's initial acquisition strategy was to have multiple companies 
develop launch vehicles and then pick one launch vehicle provider in 
1998. However, in November 1997 DOD decided to keep the two contractors 
then competing, Boeing and Lockheed Martin, as EELV providers, and 
later awarded contracts to both companies. DOD officials had expected 
the emergence of a healthy commercial launch market that would support 
two families of launch vehicles and ultimately mean lower costs to the 
government. DOD determined launch service prices in the contracts based 
on an assumption that a robust commercial market would help pay for the 
launch providers' infrastructure costs. However, in the late 1990s the 
commercial launch market collapsed, and in late 2003 DOD estimated that 
average launch cost would increase significantly. DOD responded to 
these developments with a new acquisition strategy in March 2005 that 
recognized the government as the primary customer of EELV services and 
sought to ensure the viability of the two EELV launch vehicle 
providers. 

Additionally, in December 2006 Boeing and Lockheed Martin formed a 
joint venture called the United Launch Alliance (ULA) to provide EELV 
launch services to the government. The ULA intends to maintain two 
separate launch vehicle families while consolidating business, 
engineering, and manufacturing activities to reduce costs. This 
consolidation entails moving launch vehicle production facilities and 
work forces to new locations. Finally, another significant change is a 
recent 10-year extension to the life of the EELV program. 

In light of the changes the EELV program has experienced, you asked us 
to (1) determine what uncertainties DOD faces in the EELV program and 
in the transition to the United Launch Alliance, and (2) assess how DOD 
is positioned to manage and oversee the program. 

To determine what uncertainties DOD faces in the EELV program and ULA 
transition, we reviewed EELV budget and program status documents, 
studies of EELV reliability and launch history, ULA joint venture 
transition plans and status, and DOD risk tracking and mitigation 
documentation. To assess how DOD is positioned to manage and oversee 
the EELV program, we analyzed data on EELV program office[Footnote 1] 
authorized staffing levels and compared them to filled positions. We 
also reviewed reporting requirements under the new EELV acquisition 
strategy, contract data requirements lists for both Atlas and Delta 
contracts, EELV program oversight documentation, and DOD acquisition 
policies. We interviewed officials from various DOD organizations as 
well as launch contractors. We conducted this performance audit between 
June 2007 and September 2008 in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Results in Brief: 

DOD faces numerous uncertainties in the EELV program and ULA transition 
related to the reliability of the launch vehicles, the amount of work 
remaining in the ULA transition, and program budget decisions based on 
preliminary data. First, though the program has had 21 successful 
operational launches, DOD does not yet know whether EELVs are reliable 
because no single configuration from either family of launch vehicles 
has been launched at least 7 times to demonstrate production process 
reliability. According to a widely accepted measurement practice, 
production process maturity can be demonstrated through 7 successful 
launches. Additionally, DOD may be less certain of EELV reliability as 
the ULA transition progresses, because ULA plans to relocate production 
activities and may alter manufacturing processes. Second, DOD faces 
uncertainties relating to the cost, schedule, and performance risks of 
the ULA transition, mainly because the transition is still in its 
initial stages, and numerous unknowns exist in areas such as 
production, personnel management, and cost savings. Furthermore, the 
ULA consolidation is a massive undertaking as it attempts to combine 
two distinct corporate cultures into a unified workforce, and 
consolidate launch infrastructure and business operations from five 
locations across the country to two. Third, DOD does not know whether 
its EELV program budget is sufficient to manage the program in the 
short term because the Air Force reduced the EELV program budget to 
incorporate anticipated savings from the ULA transition, even though 
savings estimates were based on preliminary data. 

DOD has taken steps to position itself to effectively oversee and 
manage the ULA transition and EELV program but still faces significant 
challenges in these areas. More specifically, DOD has a well-defined 
process for how the ULA transition will be overseen and established 
mechanisms that allow the diverse agencies with oversight 
responsibilities to coordinate the analysis of the transition and raise 
critical issues to senior leaders. However, by moving the EELV program 
in 2007 to the sustainment phase, as opposed to the research and 
development and production phases, DOD eliminated requirements on the 
program to submit data to DOD offices responsible for program 
oversight--data which could illuminate program variances and technical 
risks and how they are being addressed. Furthermore a new independent 
life-cycle cost estimate was not required for the program when DOD 
moved it from the research and development phases to the sustainment 
phase. As a result, DOD will not be able to depend on a reliable life- 
cycle cost estimate for making long-term investment planning decisions 
because, according to DOD officials, the latest life-cycle cost 
estimate for the program is not realistic. In addition, as part of its 
effort to increase its oversight and gain program knowledge, in 2005 
the Under Secretary of the Air Force expanded the program office's 
management responsibilities when it approved a new acquisition strategy 
for the EELV program. However, program officials stated that they do 
not have the government staff necessary to perform these expanded 
duties, which include activities such negotiating contracts, performing 
earned value management reviews, determining award fees, and assessing 
contractor performance. 

To improve DOD's ability to effectively oversee and manage the EELV 
program, we are recommending that DOD (1) continue to produce and share 
data with senior leaders on program cost and status using criteria that 
apply to major research and development and procurement programs and 
(2) prepare an independent life-cycle cost estimate once the ULA joint 
venture transition is completed so that senior leaders and the program 
can make decisions based on an estimate that reflects the span of 
changes that have occurred in recent years. We are also recommending 
that the Air Force assess the EELV program's staffing needs to 
determine the extent to which personnel shortages exist, particularly 
as they relate to functions integral to achieving DOD's goals for 
enhanced program oversight. DOD agreed with our recommendations. 

Background: 

DOD initiated the EELV program in 1995 to develop a new generation of 
launch vehicles. The EELV program--designed to provide assured, 
affordable access to space for government satellites--consists of two 
families of commercially owned and operated launch vehicles, the Atlas 
V and Delta IV launch vehicles. It also includes manufacturing and 
launch site facilities, and ground support systems. Each family of 
launch vehicles consists of medium-, intermediate-, and heavy-lift 
vehicles. To simplify the design and manufacture of the vehicles, 
common components (such as booster engines) are being extensively used. 
See figures 1 and 2 for depictions of the Atlas V and Delta IV launch 
vehicle families and major components of the launch vehicles. 

Figure 1: Atlas V and Delta IV Families of Launch Vehicles: 

This figure is a picture of Atlas V and Delta IV families of launch 
vehicles. 

[See PDF for image] 

Source: Copyright 2008 United Launch Alliance, LLC. All rights 
reserved. Used with Permission. 

Note: The Atlas V heavy-lift vehicle has not been built. 

[End of figure] 

Figure 2: Major Components of Atlas V and Delta IV Launch Vehicles: 

This figure is a picture of major components of Atlas V and Delta IV 
launch vehicles. 

[See PDF for image] 

Source: Copyright 2008 United Launch Alliance, LLC. All rights 
reserved. Used with Permission. 

[End of figure] 

In 1995, the Air Force awarded $30 million firm fixed-price contracts 
to four companies to define EELV system concepts and complete 
preliminary system designs. In December 1996, two of those companies, 
McDonnell Douglas (which became part of Boeing in 1997) and Lockheed 
Martin, were each awarded an 18-month, $60 million cost-plus fixed-fee 
contract to continue EELV design activities. At the end of their 
contracts, DOD planned to down-select to one contractor with the most 
reliable and cost-effective launch vehicle design. However, in November 
1997 the Office of the Secretary of Defense (OSD) approved maintaining 
competition between the two contractors. This decision was based on 
forecasts that growth in the commercial space launch services market 
would support more than one launch provider and translate into lower 
costs for the government. More specifically, the strategy was designed 
to: 

* promote competition for launch services over the life of the program; 

* encourage contractor investment and innovation for launch vehicle 
development; 

* procure launch services that include the vehicle, the lift-off, and 
flight to orbit under one contract at a fixed price instead of 
procuring launch vehicles and launch operations under two or more 
separate contracts; and: 

* leverage the benefits of a robust commercial marketplace. 

In October 1998, the Air Force competitively awarded two $500 million 
"other transaction agreements" to McDonnell Douglas before it merged 
with Boeing and Lockheed Martin for the development of EELV families of 
launch vehicles and launch infrastructure. Other transaction agreements 
are transactions that are other than contracts, grants, or cooperative 
agreements that are subject to federal laws and regulations applicable 
to contracts, grants, or cooperative agreements. The Air Force used 
other transaction agreements to provide flexibility in accommodating 
the unique needs of the EELV program and the government. Simultaneous 
with the Air Force's execution of the other transaction agreements, the 
Air Force also competitively awarded firm fixed-price contracts, one 
each to McDonnell Douglas (now Boeing) and Lockheed Martin, to procure 
28 launches. At the time of award, the launch services contracts had a 
combined value of $2.03 billion. 

The robust commercial launch market upon which OSD based the EELV 
acquisition strategy did not materialize. As a consequence, estimated 
prices for future contracts for launch services increased, along with 
the total cost of the program. DOD's December 2003 cost estimate for 
the program showed an average procurement unit cost for EELV launch 
services that was 77 percent higher than its 2002 cost estimate. This 
resulted in a Nunn-McCurdy unit cost breach, which occurs when a major 
defense acquisition program experiences a unit cost increase of at 
least 15 or 25 percent.[Footnote 2] In April 2004, in response to the 
unit cost breach, the Secretary of Defense sent Congress a 
certification that the program was essential to national security and 
established a new cost estimate. The new cost estimate increased the 
launch service's average procurement unit costs by an additional 29 
percent, due primarily to a reduction in the number of planned EELV 
launches. 

In March 2005, DOD revised the EELV acquisition strategy to reflect 
changes in the commercial market assumptions since 1998 and the role of 
the government as the primary EELV customer. The revised approach 
involved a new contracting strategy consisting of two negotiated 
contracts--EELV Launch Capability and EELV Launch Services--for each of 
the two launch service providers. The EELV Launch Capability cost-plus 
award fee contract is primarily for launch infrastructure, while the 
EELV Launch Services fixed-price incentive fee contract is for launch 
services. Under this contract approach, the government purchases launch 
services through competitive negotiated acquisitions that provide more 
government insight into contractor costs than contracts awarded under 
commercial item acquisition procedures.[Footnote 3] This enables the 
Air Force to collect previously unavailable certified cost or pricing 
data. As with the original acquisition strategy, there are no 
government ownership costs--the EELV program continues to provide 
launch services and ownership of hardware and facilities is retained by 
the contractors. 

In May 2005, Boeing and Lockheed Martin announced plans to create a 
joint venture that would combine the production, engineering, test, and 
launch operations associated with U.S. government launches of Boeing's 
Delta and Lockheed Martin's Atlas rockets. According to both 
contractors, the joint venture, named the United Launch Alliance, would 
reduce the cost of meeting critical national security and National 
Aeronautics and Space Administration (NASA) expendable launch vehicle 
needs. By joining together, the companies stated they could provide the 
government with assured access to space at the lowest possible cost. 

The ULA was structured as a 50-50 joint venture between Boeing and 
Lockheed Martin--combining services provided separately by Boeing 
Integrated Defense Systems' Expendable Launch Systems division and by 
Lockheed Martin's Space Systems Company--for launches of each company's 
respective rockets. Based upon initial contractor estimates, annual 
savings to the government resulting from the joint venture were 
expected to be approximately $100 million to $150 million. 

The ULA joint venture--which was subject to government and regulatory 
approval in the United States and internationally--drew initial 
criticism from various organizations. The Federal Trade Commission 
(FTC) was initially opposed to the ULA joint venture because of the 
potential to limit competition in the launch industry--an industry with 
already high barriers to entry. Other companies in the launch industry 
also submitted formal concerns citing unfair competition. In response, 
DOD stated that having two launch vehicle families would present unique 
national security benefits that would outweigh the loss of competition. 
FTC agreed to allow the joint venture to move forward under the 
conditions of a consent order, which requires ULA to be 
nondiscriminatory to other companies seeking launch services. FTC 
provided preliminary approval of the consent order in October 
2006,[Footnote 4] and the joint venture officially began operations in 
December 2006. To ensure that ULA follows the provisions of the consent 
order, the order requires the Secretary of Defense to appoint a 
compliance officer, currently the Director of the National Security 
Space Office (NSSO),[Footnote 5] to have broad investigative and 
remedial powers to ensure compliance. In addition, the consent order 
requires ULA to establish--no later than 24 months after the formation 
of ULA, or December 2008--separate communication networks and 
management information systems from its parent companies, Boeing and 
Lockheed Martin. 

The first Atlas V and Delta IV launches occurred in 2002. According to 
the Air Force, all 21 Atlas V and Delta IV launches through June 2008 
have been successful.[Footnote 6] DOD estimates its investment in the 
EELV program through fiscal year 2008 to be about $8.2 billion, and 
future investment to be about $27.5 billion. 

DOD Faces Numerous Uncertainties in the EELV Program and ULA 
Transition: 

DOD faces numerous uncertainties in the EELV program and ULA transition 
related to the reliability of the launch vehicles, the amount of work 
remaining in the ULA transition, and program budget decisions based on 
premature data. First, DOD does not yet have enough launch experience 
with EELVs to demonstrate their reliability, which may be accomplished 
by carrying out a set number of successful launches. While all Atlas V 
and Delta IV operational launches conducted thus far have been 
successful, launch vehicle design and production reliability have yet 
be demonstrated due to the limited number of launches. Additionally, 
DOD may be even less certain of EELV reliability as the program 
progresses as plans to relocate production activities under the ULA 
transition may undo some of the progress made toward demonstrating EELV 
reliability. Second, DOD faces uncertainties relating to the cost, 
schedule, and performance risks of the ULA transition, mainly because 
the transition is still in its initial stages, and numerous unknowns 
exist in areas such as business and production processes, personnel 
management, and cost savings. Third, DOD does not know whether its EELV 
program budget is sufficient to manage the program over the next 5 
years because the Air Force accounted for anticipated savings from the 
ULA transition in the program budget,[Footnote 7] even though savings 
estimates were based on preliminary data. 

DOD Does Not Yet Know if EELVs Are Reliable: 

DOD does not yet have enough launch experience with EELVs to 
demonstrate their reliability. According to the Air Force, since the 
first launches in 2002, all 21 Atlas V and Delta IV operational 
launches have been successful.[Footnote 8] However, these launches 
represent experience with only 9 of 15 possible EELV configurations 
across both families of launch vehicles. As depicted in table 1, only 1 
EELV configuration has been launched more than 3 times. This is 
significant because the number of times a configuration has been 
successfully launched can be an indicator of a configuration's design 
and production process reliability, according to an Aerospace 
Corporation[Footnote 9] study of EELV launch risk.[Footnote 10] 

Through a study of the causes of worldwide launch vehicle success and 
failures over a 13-year period, the Aerospace Corporation developed a 
widely accepted measurement for demonstrating launch vehicle design and 
production process reliability called the "3/7 Reliability Rule." 
According to this rule, if a failure occurs during a configuration's 
first three launches, the problem is most likely a design issue, and if 
a failure occurs after the third successful launch but before the 
seventh, the problem is most likely a production process issue. Once a 
launch vehicle configuration is launched successfully three times, its 
design can be considered to have demonstrated maturity; similarly, if a 
vehicle is successfully launched seven times, both the design and 
production process maturity of that launch vehicle configuration can be 
considered as having been demonstrated. Until a launch vehicle 
configuration demonstrates maturity, problems encountered during 
launches of these configurations are more likely to uncover fleetwide 
design or production process issues that could cause significant cost 
and schedule impacts to the program. 

Table 1 shows that only 3 of the 15 EELV configurations have been 
launched three or more times, and none has been launched seven times. 
The EELV program office agrees that the 3/7 Reliability Rule is 
applicable to EELV configurations, and program officials state that the 
program will continue to apply the rule when assessing the requisite 
level of quality assurance activities for each configuration. However, 
according to OSD officials, the 3/7 Reliability Rule is only partially 
applicable to EELV configurations because of the commonality among the 
vehicles. For example, the same common core boosters are used on all 
Atlas vehicles; therefore, according to these officials, reliability on 
the Atlas launch vehicle line can be demonstrated through fewer 
launches of individual configurations than the 3/7 Reliability Rule 
dictates. The same is true of Delta launch vehicles. Nevertheless, 
these officials agreed that inherent risk lies in the integration of 
launch vehicle configurations, which can be lessened with each 
consecutive flight. 

Table 1: Evolved Expendable Launch Vehicle Configurations by Number of 
Operational Launches: 

1; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 401; 
Vehicle configuration[A]: 4 - 0; 
Number of operational launches: 6. 

2; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 411; 
Vehicle configuration[A]: 4 - 1; 
Number of operational launches: 2. 

3; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 421; 
Vehicle configuration[A]: 4 - 2; 
Number of operational launches: 2. 

4; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 431; 
Vehicle configuration[A]: 4 - 3; 
Number of operational launches: 1. 

5; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 501; 
Vehicle configuration[A]: 5 - 0; 
Number of operational launches: 0. 

6; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 511; 
Vehicle configuration[A]: 5 - 1; 
Number of operational launches: 0. 

7; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 521; 
Vehicle configuration[A]: 5 - 2; 
Number of operational launches: 2. 

8; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 531; 
Vehicle configuration[A]: 5 - 3; 
Number of operational launches: 0. 

9; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 541; 
Vehicle configuration[A]: 5 - 4; 
Number of operational launches: 0. 

10; 
Launch vehicle name: Atlas V; 
Launch vehicle name: 551; 
Vehicle configuration[A]: 5 - 5; 
Number of operational launches: 1. 

11; 
Launch vehicle name: Delta IV; 
Launch vehicle name: Medium; 
Vehicle configuration[A]: 4 - 0; 
Number of operational launches: 3. 

12; 
Launch vehicle name: Delta IV; 
Launch vehicle name: Medium+ (4,2); 
Vehicle configuration[A]: 4 - 2; 
Number of operational launches: 3. 

13; 
Launch vehicle name: Delta IV; 
Launch vehicle name: Medium+ (5,2); 
Vehicle configuration[A]: 5 - 2; 
Number of operational launches: 0. 

14; 
Launch vehicle name: Delta IV; 
Launch vehicle name: Medium+ (5,4); 
Vehicle configuration[A]: 5 - 4; 
Number of operational launches: 0. 

15; 
Launch vehicle name: Delta IV; 
Launch vehicle name: Heavy[B]; 
Vehicle configuration[A]: Heavy; 
Number of operational launches: 1. 

Total; 
Launch vehicle name: [Empty]; 
Vehicle configuration[A]: [Empty]; 
Number of operational launches: 21. 

Source: GAO analysis of Air Force data. 

[A] The first number refers to the diameter (in meters) of the 
compartment on the launch vehicle that houses the payload and the 
second number refers to the number of add-on solid rocket boosters 
mounted to the primary booster. The heavy configuration refers to a 
launch vehicle consisting of three primary boosters. See figs. 1 and 2 
for depictions of the launch vehicles and their components. 

[B] Does not include a 2004 Delta IV heavy demonstration launch which 
did not deliver the payload to the proper orbit. 

[End of table] 

ULA Transition Activities May Undermine Progress Made in Demonstrating 
EELV Reliability: 

Transition activities under the ULA joint venture include moving 
production equipment to different facilities and possibly changing 
manufacturing processes, and could reverse some of the progress made 
toward demonstrating production process maturity of those EELV 
configurations launched previously. Specifically, part of the ULA 
transition plan includes relocating production of the Atlas line of 
launch vehicles from San Diego, California, and Denver, Colorado, to 
Decatur, Alabama. According to Aerospace Corporation officials and a 
2007 study by Booz Allen Hamilton,[Footnote 11] relocating highly 
calibrated production equipment from one facility to another and 
changing manufacturing processes increases risk to launch vehicle 
quality and may detract from progress made toward demonstrating 
production process maturity. This means that launch vehicle 
configurations (shown in table 1) that have been successfully launched, 
and have therefore begun the process of establishing production process 
maturity, may lose some of their accumulated progress. 

The ULA transition plan also allows for changing one of its key 
manufacturing processes. While the process may be more effective, it 
has not been used before in Atlas production, though it is currently 
used in the production of Delta launch vehicles. According to ULA 
officials, incorporating the new process on Atlas vehicles could 
potentially reduce the need for some rework. Risk reduction testing 
through July 2008 has shown the technical viability of the new process, 
according to the EELV program office, and additional discussions with 
ULA will determine whether ULA will pursue it on the Atlas line of 
vehicles. 

Given the limited EELV launches to date, and the possibility that some 
progress toward demonstrating maturity may be lost due to relocation of 
production or changes to the process, DOD can not be fully confident in 
the design and production process maturity of most of the EELV 
configurations. According to program officials, although some EELV 
configurations may never demonstrate design or production process 
maturity throughout the life of the EELV program because of their 
limited demand, using data from launches of other configurations 
provides insight into the reliability estimates for those vehicles that 
have not yet flown. 

DOD Faces Numerous Uncertainties about the Cost, Schedule, and 
Performance Risks of the ULA Transition: 

Any corporate consolidation on the scale of the ULA joint venture poses 
challenges and a great deal of uncertainty. In addition to bringing 
together diverse cultures and ways of doing business, such endeavors 
may involve complicated personnel relocations, the closing and opening 
of facilities, implementation of new information technology systems, 
and rethinking of business processes, while at the same time 
maintaining high-quality customer service. Because many ULA transition 
activities have only recently begun or are still in the planning 
stages, numerous uncertainties exist, many of which are inherent in the 
transition itself. They span business and production operations, 
personnel management, and cost savings, and have the potential to 
significantly affect the cost of the transition, and ultimately, launch 
vehicle quality. Following are a few examples of these uncertainties. 

* In addition to possibly introducing a new manufacturing process as 
stated earlier, ULA will incorporate Atlas manufacturing equipment into 
the Decatur facility. Current plans include a physical reconfiguration 
of the facility to accommodate the influx of Atlas production, 
including the movement of interior walls and a change in production 
flow for the Delta production line, both of which could affect launch 
vehicle quality. 

* As Atlas production operations move to Decatur, ULA will try to 
relocate as many Atlas staff as possible. ULA's goal is to move roughly 
30 percent of staff from San Diego and Denver to Decatur, but Defense 
Contract Management Agency (DCMA) officials state that they expect it 
will be a challenge for ULA to retain even 10 percent of targeted Atlas 
staff. The loss of manufacturing knowledge likely to result from the 
relocation of Atlas production operations is regarded by DOD, Aerospace 
Corporation, and ULA officials as one of the top risks of the 
transition because the loss of critical manufacturing skills and 
process knowledge could ultimately affect launch vehicle quality. The 
relocation of Delta engineering and program operations from Huntington 
Beach, California, to Denver as part of the ULA consolidation may also 
result in the loss of critical engineering skills, according to 
Aerospace Corporation officials, as many experienced staff will not 
remain under ULA employment. ULA offered positions in Denver to all of 
its salaried employees in the Huntington Beach facility, and 41 percent 
reportedly accepted the offer to relocate. 

* Efforts to separate information technology and management networks 
from parent companies and to set up accounting practices are proving 
more complex and time consuming than originally anticipated and a 
recent 10-month extension to the goal date of separation is expected to 
result in higher-than-anticipated costs. As it moves toward separation, 
ULA is buying infrastructure support services from its parent 
companies, through "transition service agreements," and the additional 
costs associated with prolonging the use of these agreements could 
ultimately increase the cost of the separation effort. Furthermore, 
financial repercussions are possible due to the large amount and 
complexity of the work remaining to accomplish the FTC-mandated 
information systems separation. The ULA recently requested a formal 
extension to the FTC's specified deadline of December 2008, which was 
granted by the NSSO Compliance Officer. The revised deadline for 
separation is October 2009, representing a 10-month delay. 

* ULA has provided DOD with a restructure proposal which projects the 
cost and savings of the transition. According to DCMA, as a result of 
review, the proposal currently meets federal statutory requirements for 
the reimbursement of restructuring expenses. An advance agreement that 
accompanies the proposal specifies the maximum amount of reimbursement 
ULA may recover from DOD for restructuring expenses. DOD is currently 
reviewing the proposal and advance agreement, in part, to determine if 
they are based on sound business judgment and are equitable to all 
parties. However, much of the transition has yet to occur, and some of 
the transition activities that have begun are proving more complex than 
anticipated. ULA estimates that consolidation of launch infrastructure 
and operations under the ULA joint venture from fiscal years 2008 
through 2012 will cost about $205 million, and it plans to recover much 
of this expense from the government. According to federal statute, the 
government may not reimburse a contractor--in this case ULA--for the 
costs of the restructure, unless DOD determines in writing that (1) the 
savings to DOD are at least twice the amount of the costs allowed, or 
(2) the amount of projected savings to DOD will exceed the amount of 
the costs allowed and that the business combination will result in the 
preservation of a critical capability that otherwise might be lost to 
the department.[Footnote 12] Should the cost of transition activities 
exceed ULA's estimate, then according to DCMA, ULA may face pressure to 
meet the requirements for reimbursement of restructure costs. We agree 
with DCMA that if this happens, ULA may be at risk of making decisions 
based more on cost considerations than on assuring quality within the 
launch vehicle manufacturing process. 

Table 2 provides a more complete description of ULA transition 
uncertainties. 

Table 2: Uncertainties of the ULA Transition: 

ULA uncertainties: Business and production uncertainties; 
Description: 
* Implementation of information technology systems has experienced 
multiple delays, and actual implementation time frames are unknown; 
* Implementation of the Enterprise Resource Planning system is taking 
significantly longer than expected, and DCMA expects deployment of this 
system to cost nearly twice as much as originally estimated; 
* According to DCMA, milestones for implementing the Manufacturing 
Execution System, a part of the Enterprise Resource Planning system, 
have slipped as much as 1 year because ULA's original schedule was too 
aggressive; 
ULA agrees schedule was inadequate; 
* Several company stand-up activities have experienced delays and as of 
September 2008 approval is still pending for; 
* disclosure statement amendments outlining new accounting practices 
and rate structures, and; a restructure proposal which finalizes the 
transition plan and resulting cost savings; 
* Separation of information technology and management networks from 
parent companies is taking longer than planned, and has required a 10-
month extension to FTC's December 2008 deadline; 
* Relocating Atlas production and reconfiguring Delta equipment may 
reverse some of the progress made toward establishing production 
process reliability; 
* Modifications to the Decatur facility's building to accommodate Atlas 
production could disrupt current processes for Delta production, 
resulting in potential loss of progress toward demonstrating production 
process reliability; 
* Changing one of the key manufacturing processes on the Atlas family 
of launch vehicles may reverse some of the progress made toward 
establishing production process reliability. 

ULA uncertainties: Personnel management uncertainties; 
Description: * Loss of critical Atlas manufacturing and process 
knowledge could result from inadequate personnel relocation and could 
impact launch vehicle quality; 
* Loss of engineering knowledge could result from impending separation 
of senior Delta engineering staff from ULA, in turn impacting launch 
vehicle quality; 
* Combining two distinct corporate cultures while maintaining a 
motivated, workforce may be difficult and morale could suffer. 

ULA uncertainties: Cost savings uncertainties; 
Description: * Many ULA activities have yet to begin; if ULA 
underestimated resources needed for these activities, costs could 
increase; 
* Extending the FTC deadline for ULA separation of information 
technology and management networks from parent companies could result 
in prolonged need to purchase infrastructure support services from 
parents, potentially increasing costs; 
* Additional training costs could arise if ULA does not retain adequate 
personnel following relocation of Atlas production; 
* According to DCMA, if ULA does not pursue the new manufacturing 
process on Atlas vehicles as originally planned, ULA will have to 
replace the equipment currently used, potentially increasing cost, as 
relocating this equipment to the Decatur facility is not an option; 
* The EELV program office and DCMA are evaluating the qualification 
requirements for the first Centaur tank produced following relocating 
production to Decatur. One option could entail the production of a tank 
solely for testing purposes, and if this option is executed, it would 
deviate from ULA's baseline, which includes testing a tank intended for 
operational use. This means production of the testing tank and the 
associated testing regimen could increase costs. 

Source: GAO analysis of data from DCAA, DCMA, the EELV program office, 
and ULA. 

[End of table] 

DOD Adjusted the EELV Program Budget Using Premature Savings Estimates: 

As described in table 2, despite the magnitude of activities that have 
yet to be completed under the ULA transition, DOD has accounted for 
over $100 million in savings in the EELV program budget, beginning in 
2011. In 2005, before the joint venture was finalized, a small 
contractor team that was formed to review the proposed joint venture 
estimated the likely implementation costs and projected the savings 
that would result. Preliminary calculations showed that the 
consolidation of launch infrastructure and operations would yield up to 
$150 million in savings per year, beginning in 2011. The Air Force 
portion of these savings was projected at $105 million per 
year.[Footnote 13] Program officials stated that while formulating the 
program budget in 2006, prior even to final government approval of the 
ULA joint venture, the Air Force was confident enough in the estimates 
to subtract $105 million in savings per year from the EELV program 
budget, to begin in 2011. Given the many activities remaining in the 
transition, and the preliminary nature of the data used to calculate 
the savings, it may have been premature for DOD to reflect the 
anticipated savings in the EELV program budget. Furthermore, some 
transition activities that have begun are expected to take longer than 
originally planned, as discussed above. DOD officials stated that ULA's 
current proposed savings estimate undergoing DOD review shows greater 
annual savings than originally estimated. However, if the cost or 
duration of the ULA transition is different than anticipated, actual 
savings could differ from the predicted $105 million per year beginning 
in 2011, leaving DOD at risk of EELV program budget shortfalls. 

DOD Has Made Strides to Effectively Oversee and Manage the EELV Program 
but Challenges Exist in These Areas: 

In recent years, DOD has taken steps to effectively oversee and manage 
the EELV program by closely monitoring the ULA transition and changing 
its strategy for acquiring launch services. However, OSD's decision to 
advance the program into the sustainment phase is limiting its ability 
to provide effective oversight. In addition, the EELV program office 
believes a shortage of staff with the right skills and experience is 
limiting its ability to effectively manage the program. Air Force 
staffing initiatives have done little to alleviate this shortage. 

Multiple Offices within DOD Are Monitoring the ULA Transition: 

DOD has taken positive steps to oversee the ULA transition. Various 
organizations are monitoring the transition efforts and providing input 
to OSD, the Air Force, and ULA on ways to mitigate risk. These efforts 
range from activities by high-level OSD offices such as the Under 
Secretary of Defense for Acquisitions, Technology and Logistics, down 
to the day-to-day monitoring activities coordinated by the EELV program 
office. For example, the Secretary of Defense assigned the Director of 
the National Security Space Office as the FTC consent order compliance 
officer to meet periodically with ULA to determine progress made and 
formally report to FTC on an annual basis, while the EELV program 
office holds regular meetings with ULA and provides progress updates to 
Air Force leadership. DCMA conducts ongoing technical risk evaluations, 
and advises the program office and ULA on a consistent basis of 
relevant risk reduction measures. As table 3 shows, multiple 
organizations coordinate with each other to monitor the transition. 

Table 3: DOD Responsibilities in Monitoring the ULA transition: 

Organization: National Security Space Office (NSSO); 
Responsibilities: 
* Verifies compliance with the FTC decision and order; 
* Meets periodically with ULA to determine progress made; 
* Reviews written reports by Lockheed Martin, Boeing, and ULA showing 
progress made in achieving compliance with the FTC consent order; 
* Reports conclusions to the FTC annually. 

Organization: Defense Contract Management Agency (DCMA); 
Responsibilities: * Performs the majority of transition monitoring 
efforts, conducts surveillance through communications with ULA, 
conducts risk assessments, and documents and reports results of its 
evaluations to the program office; 
* Participates in periodic Executive Board meetings to review progress 
of transition; 
* Provides status updates and raises critical issues to DCMA 
Headquarters for guidance; 
* Set up "Red Teams" consisting of DCMA officials at ULA facilities in 
Decatur, Alabama, San Diego, California, and Denver, Colorado, to 
monitor transition operations; 
* Makes determinations and recommendations including, but not limited 
to, indemnification packages, cost accounting system acceptability, 
novation[A] agreements, and restructure proposal. 

Organization: EELV Program Office; 
Responsibilities: * Reviews documents such as indemnification packages, 
novation agreements, and the restructure proposal and coordinates with 
DCMA and other appropriate offices; 
* Holds regular meetings with ULA to obtain updates of transition; 
* Provides progress updates to Air Force leadership in Executive Board 
meetings; 
* Monitors, with Aerospace Corporation assistance, the risks of the ULA 
transition to launch success. 

Organization: Defense Contract Audit Agency (DCAA); 
Responsibilities: * Supports DCMA and the program office by reviewing 
and providing audit findings on ULA proposals. 

Organization: Office of the Under Secretary of Defense for 
Acquisitions, Technology and Logistics[B]; 
Responsibilities: * Approves final restructure proposal. 

Source: GAO presentation of DOD data from DCAA, DCMA, EELV program 
office, and NSSO. 

[A] With respect to government contracts, a novation agreement is a 
legal instrument executed by the contractor (transferor), successor in 
interest (transferee), and government, and by which, among other 
things, the transferor guarantees performance of the contract, the 
transferee assumes all obligations under the contract, and the 
government recognizes the transfer of the contract and related assets. 
FAR 2.101. 

[B] The Under Secretary of Defense for Acquisitions, Technology and 
Logistics serves as an advisor to the Secretary of Defense for all 
matters involving acquisitions, technology, and logistics. 

[End of table] 

DOD officials stated that frequent coordination and communication 
between the contractor and the government and among the various offices 
within DOD have ensured a good understanding of progress and issues to 
date. For example, according to a DCMA senior official, DCMA--which is 
responsible for many of the transition monitoring efforts--actively 
participates in Executive Board meetings where all issues pertaining to 
the transition are raised. The Executive Board consists of senior 
representatives of several organizations and is chaired by the Air 
Force Program Executive Officer for Space, who is responsible for all 
acquisition programs at the Air Force Space Command's Space and Missile 
Systems Center. The EELV program office, DCMA, NASA, DCAA, National 
Reconnaissance Office (NRO), and the consent order compliance team are 
all members of the Executive Board, which convenes approximately 
quarterly to discuss transition issues, discuss major obstacles, and 
collectively resolve them. For example, at an Executive Board meeting 
earlier this year, it was noted that the ULA transition efforts 
required a detailed master schedule in order to review all schedules 
for each critical work stream. Consequently, the transition plans now 
include a much more detailed master schedule that has made it easier to 
track all critical work activities. 

OSD's Capability to Provide Effective Oversight Hampered by Sustainment 
Decision: 

While DOD has taken positive steps to oversee and manage the ULA 
transition, another action within DOD will make it more difficult to 
monitor the ongoing progress of the EELV program. OSD's decision to 
advance the EELV program from the development and production phases, 
which began in 1998, to the sustainment phase will significantly reduce 
EELV's reporting requirements to OSD, such as program cost and status 
information, limiting its own ability to oversee the program.[Footnote 
14] According to OSD, the program was placed in sustainment in August 
2007 because OSD had determined EELV had completed its development and 
production phases. However, according to OSD officials, the sustainment 
decision may have been influenced by other factors such as avoiding 
imminent Nunn-McCurdy unit cost breaches and possible subsequent 
certification efforts that invariably would have led to decisions to 
continue DOD's investment in the EELV program. According to these 
officials, in 2006 the program was facing one or more possible Nunn- 
McCurdy unit cost breaches, as a result of unplanned cost increases 
resulting from the change in the acquisition strategy and a decrease in 
the demand for EELV launches (factors include satellite program 
development delays and cancellations, and operational satellites 
lasting longer than anticipated). These officials stated that even 
given the anticipated cost savings associated with the ULA joint 
venture, the program would still have faced a unit cost breach. 

When the program was placed into sustainment, however, certain program 
cost and status information was no longer required because sustainment 
programs, having completed their development and production phases, 
generally do not generate the types and kinds of information 
traditionally produced during development or production. Since this 
information is generally not produced, program offices are not required 
to report it to OSD or Congress. For example, the EELV program will no 
longer be required to submit to OSD a quarterly cost and status report 
called the Defense Acquisition Executive Summary (DAES). The DAES is a 
detailed, multipart document that serves as an early-warning report to 
OSD by describing actual program problems, or warning of potential 
program problems, and describing mitigating actions taken or planned. 
According to DOD guidance, the DAES report contains the minimum 
necessary information for oversight purposes. (See app. II for a more 
extensive list of what the DAES contains.) Table 4 lists other OSD 
oversight reporting requirements that do not apply to sustainment 
programs. According to officials in the program office and the office 
of the Assistant Secretary of Defense for Networks and Information 
Integration, the EELV program is still required to prepare and submit 
annual budget request documentation and congressional program status 
briefings, and the program office still reviews earned value management 
data and produces monthly program cost and status reports for the Air 
Force Program Executive Officer for Space. Additionally, the OSD 
officials stated that while at this time there were no plans to 
continue performing oversight analysis of the data required by the 
reports we cite, they agreed that finding a way to continue reporting 
these data would be valuable. 

Table 4: OSD Program Cost and Status Reporting Requirements Not 
Applicable to Programs in the Sustainment Phase: 

Reporting requirement: Defense Acquisition Executive Summary (DAES); 
Description: At a minimum, the DAES should report program assessments, 
unit costs, and current estimates. It should also report the status of 
exit criteria and vulnerability assessments; 
Primary user: OSD. 

Reporting requirement: Nunn-McCurdy unit cost tracking provisions; 
Description: The Secretary of Defense is required to notify Congress 
when a major defense acquisition program exceeds certain thresholds; 
Primary user: Congress. 

Reporting requirement: Updated program life-cycle cost estimate; 
Description: Contains summary of program office cost estimate and Cost 
Analysis Improvement Group independent cost estimate and compares or 
reconciles the two estimates, includes assessment of program risks, 
compares (time-phased) Cost Analysis Improvement Group cost estimate to 
current program funding, and makes recommendations concerning program 
funding; 
Primary user: OSD and program office. 

Reporting requirement: Earned value management (EVM) data; 
Description: Contains pertinent data that combine measurements of 
contractor technical performance, such as accomplishment of planned 
work, schedule performance, and cost performance; 
Primary user: OSD and program office. 

Reporting requirement: Selected Acquisition Report (SAR); 
Description: Submitted to Congress, contains details on major defense 
acquisition program cost, schedule, and performance changes on a 
periodic basis, summarizing the latest estimates of a program's cost, 
schedule, and technical status; 
Primary user: Congress. 

Source: GAO presentation of DOD data. 

[End of table] 

In addition, a new independent life-cycle cost estimate was not 
required for the program when it transitioned into the sustainment 
phase. As a result, OSD will not be able to rely on an updated life- 
cycle cost estimate for making long-term investment planning decisions. 
According to DOD officials, the latest life-cycle cost estimate for the 
program is not realistic, due in part to an optimistic launch vehicle 
production rate. Additionally, Air Force Space Command recently 
extended the life of the program by 10 years to fiscal year 2030, 
making the current life-cycle cost estimate--which only includes costs 
up until 2020--even less realistic. An updated independent life-cycle 
cost estimate for the program (developed once the ULA joint venture 
transition is completed and periodically updated thereafter to account 
for significant changes, such as fluctuations in launch vehicle demand) 
could help DOD to establish relevant and reliable baselines for the 
program as it moves forward and increase congressional insight into 
program costs. As we reported in 2006, costs for DOD space acquisitions 
over the past several decades have been consistently underestimated-- 
sometimes by billions of dollars--because DOD typically does not update 
life-cycle cost estimates frequently enough to account for significant 
events and changes.[Footnote 15] As we reported, at times the only 
mechanism that forced an updated estimate was DOD policy that the OSD 
Cost Analysis Improvement Group support the Nunn-McCurdy certification 
process for programs breaching a certain unit cost threshold. Prior to 
the August 2007 OSD decision to move EELV into the sustainment phase, 
the Air Force revised its acquisition strategy in part to obtain 
greater insight into contractor performance. 

DOD Expanded Its Program Management Responsibilities: 

As part of its effort to increase its oversight and gain program 
knowledge, in 2005 the Under Secretary of the Air Force expanded the 
program office's management responsibilities when he approved a new 
acquisition strategy for the EELV program. Under the previous 
acquisition strategy, the government had less insight into contractor 
performance because it did not collect or have access to cost or 
pricing data and contractor performance data, making program costs 
difficult to estimate and limiting congressional insight into the 
program. Additionally, due to the size of the program office, there 
were limited opportunities to review and provide comments on launch 
vehicle technical design and production. The new acquisition strategy, 
"Buy 3," allows the government significantly more insight into the 
contractor's technical, cost, and schedule performance information 
because of the change in contract type and contracting strategy. For 
example, program officials told us that the launch capabilities 
contract now requires full earned value management[Footnote 16] reviews 
that assess cost, schedule, and performance. In addition, contractor 
performance is more thoroughly evaluated and documented through 
assessment reports. Table 5 summarizes some of the additional primary 
program office responsibilities under the new acquisition strategy. 

Table 5: Additional EELV Program Office Responsibilities Resulting from 
New Acquisition Strategy: 

Program office responsibilities: Award fee criteria determination and 
evaluation; 
Sets criteria for award fees including fee determination, evaluates 
contractor performance, and recommends the amount of the award fee. 

Program office responsibilities: Earned value management (EVM) reviews; 
Reviews new data requirements and cost data reports and complies with 
defense acquisition regulations for EVM data monitoring requirements. 

Program office responsibilities: Report reviews/new reporting 
requirements; 
Reviews contractor cost data reports that include financial information 
on the costs that DOD contractors will incur while working on the 
program; Generates a Contractor Performance Assessment Report that 
assesses and records a contractor's performance on a given contract 
during a specific period; each assessment is based on objective facts 
and supported by program and contract management data, such as cost 
performance reports, quality reviews, etc. 

Program office responsibilities: Integrated business reviews; 
Attends meetings to discuss cost performance and business issues 
resulting from EVM data reviews. 

Program office responsibilities: Contract negotiations (the procuring 
contracting officer, who resides in the program office, performs these 
activities); 
On behalf of the government, conducts complex contract negotiations for 
both Atlas and Delta launch vehicles whenever a new launch is ordered 
and/or major changes are made to the infrastructure contracts; Is 
responsible for all oversight operations at the launch ranges including 
operations and maintenance associated with facilities and facility 
upgrades; consequently, the program office must validate requirements 
for facility maintenance and upgrades and determine the roles and 
responsibilities for paying for these activities including: 
* determining cost-sharing responsibilities because facilities are used 
for both commercial and governmental purposes, and; 
* addressing issues such as how to provide additional facilities for 
the contractor's use and making modifications to contractor property 
(leaky roofs, rusting tooling, etc.) 

Program office responsibilities: New entrant process; 
Certifies whether launch providers other than ULA meet program 
requirements, including key performance parameters and cost savings, 
via formal reviews of design, cost, and flight data. 

Engineering responsibilities: Pedigree reviews; 
Reviews vehicle and component data packages to ensure that the subject 
articles have been manufactured and tested in accordance with approved 
processes. 

Engineering responsibilities: Design reviews; 
Conducts many design engineering analysis evaluations (as resources 
permit) due to earlier nonparticipation in launch vehicle design, 
larger number of launch vehicle configurations than heritage launch 
vehicles, and executing first-time satellite-to- launch vehicle 
integration activities. 

Engineering responsibilities: Flight worthiness certification; 
Evaluates systems analyses, mission design and integration tasks, 
unplanned technical issue resolution, etc. to support certification of 
launch vehicle as ready to launch. 

Engineering responsibilities: Launch Operations; 
In conjunction with launch base personnel, conducts day-of-launch 
operation to execute mission assurance activities leading to launch and 
deployment of DOD payloads. 

ULA transition responsibilities: Monitoring teams; 
Will monitor the technical transitions from both California to Colorado 
and from California and Colorado to Alabama. 

ULA transition responsibilities: Senior leadership involvement; 
Are responsible for coordinating key transition goals such as the 
approval of the restructure proposal by the Under Secretary of Defense 
for Acquisition, Technology and Logistics, novation of contracts, and 
negotiation of leases. 

Source: GAO presentation of EELV program office data. 

[End of table] 

Staffing Shortage Impacts Program Office Ability to Manage the EELV 
Program: 

Although the increase in program management responsibilities has 
positioned the program office to better manage the EELV program, 
program officials told us that staffing in the EELV program office has 
not grown commensurately. As a result, they said the program now faces 
a shortage of government personnel with the right skills and experience 
to fulfill these new responsibilities. Program officials told us the 
staff shortage is a result of funding limitations, including the recent 
"force shaping" initiative to reduce Air Force military positions, as 
well as overall Air Force-wide recruiting challenges. According to 
program officials, this shortage of staff has hampered the program 
office's ability to complete the current workload. Currently, the 
program office has approximately 211 military and civilian personnel, 
as well as over 290 contractor staff.[Footnote 17] However, given the 
change to the acquisition strategy, the program office has found it 
challenging to complete all tasks requiring a greater degree of 
specialized skills. 

According to program officials, personnel shortages have occurred 
particularly in highly specialized areas such as avionics and launch 
vehicle groups. For example, program officials stated that 7 of 12 
positions in the engineering branch for the Atlas group are now vacant. 
These engineers work on issues such as reviewing components responsible 
for navigation and control of the rocket. As table 6 shows, only half 
the government jobs in some key areas were projected to be filled. 

Table 6: Summer 2008 Projected Staffing Levels within the EELV Program 
Office (as of March 2008): 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Program Management; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 86; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 28; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 67.4%. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Program Management: Commander Wing; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 5; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 2; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 60.0. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Program Management: Management Operations; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 4; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 1; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 75.0. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Program Management: Program Control; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 39; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 16; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 59.0. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Program Management: Contracting; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 38; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 9; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 76.3. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Engineering; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 26; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 13; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 50.0%. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Atlas Group; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 32; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 16; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 50.0%. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Atlas Group: Engineering; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 12; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 7; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 41.7. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Atlas Group: Integration; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 11; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 7; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 36.4. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Atlas Group: Mission Support; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 7; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 2; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 71.4. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Atlas Group: Management; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 2; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 0; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 100.0. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Delta Group; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 37; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 17; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 54.1%. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Delta Group: Delta IV; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 12; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 4; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 66.7. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Delta Group: Delta II; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 11; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 6; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 45.5. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Delta Group: Delta Program Integration; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 13; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 7; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 46.2. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Delta Group: Management; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 1; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 0; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 100.0. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Space Lift Range Groups; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 129; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 26; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 79.8%. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Space Lift Range Groups: Spacelift Range Group 
(Los Angeles, AFB); 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 31; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 14; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 54.8. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Space Lift Range Groups: Spacelift Range Group-
Eastern Range (Patrick AFB, FL); 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 31; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 2; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 93.5. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Space Lift Range Groups: Spacelift Range Group-
Western Range (Vandenberg AFB, CA); 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 27; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 7; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 74.1. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Space Lift Range Groups: Range Sustainment 
(Peterson AFB, CO); 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 40; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 3; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 92.5. 

Launch & Range Systems Wing staffing profile (as of March 2008): 
Program office group: Total; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Authorized: 310; 
Launch & Range Systems Wing staffing profile (as of March 2008): 
Vacant: 100; 
Launch & Range Systems Wing staffing profile (as of March 2008): % 
Staffed: 67.7%. 

Source: GAO analysis of EELV program office data. 

[End of table] 

In addition to the perceived shortage of skilled personnel, turnover in 
leadership could also hamper the program office's ability to 
effectively manage the program. As GAO recently reported in 
congressional testimony on accountability issues in the acquisition 
environment, lack of program management tenure makes it difficult to 
hold program officials accountable for the business cases they are 
entrusted to manage and deliver.[Footnote 18] According to the program 
office, the EELV program has recently experienced a loss in leadership, 
including the Wing Commander, or program director, responsible for the 
program office; the Delta Group Commander; the ULA Formation Program 
Manager; and the ULA Formation Contract Manager. While the Wing 
Commander has been replaced and the previously vacant Vice Commander 
position has been filled, there remains the loss of some of the most 
experienced personnel familiar with program execution and critical 
issues such as the ULA transition and current contract negotiations, 
according to the program office. Since the inception of the EELV 
program, the tenure for an EELV program director has ranged from 8 
months to 49 months (the current program director has been with the 
program since June 2008), as shown in figure 3. With the exception of 
the first program director, this tenure falls short of DOD's workforce 
policy, which provides that the tenure period for program managers of 
major defense acquisition programs is the program milestone closest to 
4 years or as tailored by the acquisition executive based on unique 
program requirements[Footnote 19].: 

Figure 3: Tenures of EELV Program Directors from June 1995 to the 
Present: 

This figure is a bar graph showing tenures of EELV program directors 
from June 1995 to the present. The X axis represents the program 
tenure, and the Y axis represents the months. 

Program Tenure: June 1995-July 1999; 
Months: 49. 

Program Tenure: July 1999-May 2002; 
Months: 34. 

Program Tenure: May 2002-Dec 2003; 
Months: 19. 

Program Tenure: Dec 2003-Dec 2005; 
Months: 24. 

Program Tenure: Dec 2005-August 2006; 
Months: 8. 

Program Tenure: August 2006-June 2008; 
Months: 22. 

Program Tenure: June 2008-present; 
Months: 3. 

[See PDF for image] 

Source: GAO analysis of EELV program office data. 

[End of figure] 

While program officials could not specifically quantify the amount of 
work not being performed, they stated that the staffing shortage has 
affected the program's ability to complete programmatic and 
administrative tasks on time. According to program officials, the EELV 
program is also experiencing an increase in unplanned engineering work, 
which is considered critical to launch success and therefore 
prioritized over other tasks. These officials stated a portion of 
unplanned work has increased as a result of the lack of DOD's 
involvement in design engineering reviews early in the EELV program 
(during the design phase of the program under the previous acquisition 
strategy when DOD had limited oversight). For example, the program 
office became aware that the design assumptions for a Centaur inter- 
stage adapter[Footnote 20] were flawed because they were based on old 
assumptions and no longer valid. As a result, the program office had to 
redesign the adapter, which currently does not meet load-carrying 
requirements. This redesign could have been averted had the Air Force 
been involved sooner, according to Air Force officials. In essence, the 
program has been trying to "catch up" by conducting engineering 
analyses or reviews that would have typically been conducted much 
earlier during the EELV design phase, which began in 1998 and ended in 
2003. Additionally, program officials stated that an increase in the 
number of first-time integrations of new generations of satellites to 
EELVs adds to the number of design issues the program needs to address. 
Usually, the EELV program has been able to avoid delaying launches in 
order to complete unplanned work because the schedules for the programs 
developing the launch vehicle payloads have been delayed as a result of 
development difficulties. However, a launch delay resulting from the 
need to complete unplanned work has recently occurred. Specifically, an 
anomaly experienced during a June 2007 Atlas V launch resulted in a 2- 
month delay to the subsequent launch of another DOD satellite. Without 
enough personnel to complete the work, program officials are concerned 
that the EELV program may soon face additional launch delays. 

Air Force Initiatives Have Not Alleviated the EELV Program's Staffing 
Shortages: 

Air Force officials reported that recent Air Force personnel reductions 
had a disproportionate impact on the EELV program and its acquisition 
center. Beginning in 2006, the Air Force cut over 40,000 positions 
across the board in an effort to save money under Program Budget 
Decision (PBD) 720.[Footnote 21] In addition, PBD 720 directed 
reductions to staffing levels of contractors that provide assistance to 
acquisition programs, particularly federally funded research and 
development centers (FFRDC) and systems engineering and technical 
assistance (SETA) contractors. Senior officials at the Manpower and 
Personnel Directorate at the Air Force Space and Missile Systems Center 
(SMC)--where EELV is managed--told us that PBD 720 affected SMC 
disproportionately because it relied heavily on FFRDC and SETA 
contractors to provide an array of services. According to SMC 
officials, PBD 720 may have further disproportionately affected the 
EELV program because it relied more heavily on uniformed personnel and 
assistance contractors than other space programs at SMC. EELV program 
officials told us they are in the process of awarding an engineering 
contract for technical assistance, but PBD 720 now limits the amount of 
contractor technical assistance the program can obtain due to funding 
limitations. Figure 4 shows how the program had increasingly relied on 
the Aerospace Corporation--its largest support contractor--for EELV 
engineering work over the past 10 years. This increase is largely due 
to efforts to prevent launch failures of legacy vehicles which occurred 
shortly after the EELV program was initiated. As figure 4 indicates, 
Aerospace Corporation's assistance to EELV, as shown by the number of 
personnel, increased slightly after 2006 but leveled off by 2008 as 
funding became more limited.[Footnote 22] 

Program officials cautioned that although Aerospace Corporation 
personnel have assisted with technical tasks the program office can not 
complete due to the staff shortage, the program can not rely on 
contractors to perform inherently governmental functions.[Footnote 23] 
As we reported in September 2007, an increasing reliance on contractors 
to perform services for core government activities challenges the 
capacity of federal officials to supervise and evaluate the performance 
of these activities.[Footnote 24] As one program official noted, 
mission assurance is an inherently governmental function, 
accountability for which should fall solely on the government. 

Figure 4: Aerospace Corporation Assistance Provided to the EELV Program 
Office: 

This figure is a line graph showing aerospace corporation assistance 
provided to the EELV program office. The X axis represents the years, 
and the Y axis represents the number of personnel. 

Year: 1998; 
Number of personnel: 22.2. 

Year: 1999; 
Number of personnel: 45.8. 

Year: 2000; 
Number of personnel: 71.8. 

Year: 2001; 
Number of personnel: 117.7. 

Year: 2002; 
Number of personnel: 162.1. 

Year: 2003; 
Number of personnel: 189.1. 

Year: 2004; 
Number of personnel: 213.5. 

Year: 2005; 
Number of personnel: 228.6. 

Year: 2006; 
Number of personnel: 270.5. 

Year: 2007; 
Number of personnel: 294.5. 

Year: 2008; 
Number of personnel: 292. 

[See PDF for image] 

Source: GAO analysis of program office data. 

[End of figure] 

Program officials stated that Air Force-wide efforts to address 
staffing shortages have not alleviated the EELV program's staffing 
shortages. Among these efforts was an attempt to counter the impacts of 
PBD 720 by converting some military positions to civilian positions--a 
move that would allow some of the military personnel who accepted the 
Air Force buy-out and left the service to return to the program as 
civilians. For example, when the Air Force initiated voluntary 
reductions by offering buy-outs to officers, 142 officers at SMC 
accepted. When SMC attempted to refill these positions as civilian 
positions, only 15 percent of the officers accepted the option to be 
rehired as civilians. In addition, the hiring process often takes too 
long to process such conversions, according to the program office. For 
example, when the EELV program was given eight military positions to 
convert to civilian positions, the program office lost all the 
candidates for these positions. In the time it took the program to 
create the new civilian positions, the candidates had found jobs 
elsewhere. (In a recent testimony, the Under Secretary of Defense for 
Acquisition, Technology and Logistics acknowledged that the hiring 
process takes too long and has contributed to the problem of retaining 
competent people in the acquisition field.) In addition, program 
officials said it was difficult to recruit and retain civilians in the 
Los Angeles, California, area given its high cost of living and its 
many opportunities for government contractor work for greater pay. 
Moreover, although manpower studies conducted by various DOD 
organizations have shown Air Force-wide staffing shortfalls, EELV 
program officials contend that these studies have not led to actions 
directed towards alleviating these shortfalls. 

Conclusions: 

Early in the EELV program, DOD was faced with two primary challenges: 
(1) reducing technical, design, and production risk to a point where it 
could avoid problems that caused previous, costly launch failures and 
(2) adopting an appropriate acquisition and supplier strategy that 
would help contain costs. By adding technical staff--primarily FFRDC-- 
and strengthening quality assurance practices, DOD largely met the 
first challenge and has subsequently enjoyed a long string of 
successful launches though more experience is needed to fully prove 
reliability. At the same time, however, costs have increased 
significantly because assumptions supporting the first acquisition 
strategy never materialized and because DOD never pared down to one 
supplier as originally envisioned. 

With the transition to ULA and the new acquisition strategy, it is 
hoped that cost savings can be achieved and the government can have 
more insight into cost drivers as well as technical risks. DOD has 
recognized that the transition itself presents enormous challenges and 
adds risk to the program by coordinating oversight efforts and 
expanding the program office's role in oversight. At the same time, 
however, OSD has limited these positive steps by designating EELV as 
being in sustainment, which effectively stops the formal transmittal of 
research and development and procurement data on program costs and 
vulnerabilities to entities involved in overseeing the program, 
including Congress. The Air Force may have also limited these steps by 
constraining program office staff. Given the broad span of changes 
affecting the program, the high cost of launching military and other 
government spacecraft, and assumptions that have been made about cost 
savings that will result from the consolidation of suppliers, DOD 
cannot afford to pare back acquisition and supplier oversight on any 
front. 

Recommendations for Executive Action: 

To improve DOD's ability to effectively oversee and manage the EELV 
program, we recommend that the Secretary of Defense direct the Under 
Secretary of Defense for Acquisition, Technology and Logistics to: 

* require the program to continue to provide OSD, and Congress as 
appropriate, with updates of program cost and status information using 
criteria that apply to major research and development and procurement 
programs; and: 

* direct the Director of the Cost Analysis Improvement Group to conduct 
an independent life-cycle cost estimate of the EELV program once the 
ULA joint venture transition is completed, and periodically update the 
estimate to account for significant program changes. 

Additionally, we recommend that the Secretary of Defense direct the 
Secretary of the Air Force to assess the EELV program's staffing needs, 
including those that are inherently governmental, to confirm whether 
shortages exist, and if they do, develop a plan for addressing them. 

Agency Comments: 

We provided a draft of this report to DOD for review and comments. DOD 
concurred with our findings and recommendations. DOD's response can be 
found in appendix I. 

Scope and Methodology: 

To determine what uncertainties the Department of Defense (DOD) faces 
in the Evolved Expendable Launch Vehicle (EELV) program and United 
Launch Alliance (ULA) transition and to assess how DOD is positioned to 
manage and oversee the EELV program, we reviewed and analyzed documents 
from and interviewed officials in Washington, D.C., at the Office of 
the Undersecretary of Defense for Acquisition, Technology and 
Logistics; Office of the Director, Program Analysis and Evaluation; 
Office of the Secretary of Defense, Cost Analysis Improvement Group; 
Congressional Budget Office; and Federal Trade Commission. We also 
reviewed and analyzed documents from and interviewed officials in 
Virginia at the Office of the Assistant Secretary of Defense for 
Networks and Information Integration; Office of the Under Secretary of 
the Air Force for Space Acquisitions; Office of the Joint Chiefs of 
Staff; Office of the Director, Operational Test and Evaluation; and 
Orbital Sciences Corporation. In addition, we reviewed and analyzed 
documents from and interviewed officials at Air Force Space Command and 
Booz Allen Hamilton, Peterson Air Force Base, Colorado; the Launch and 
Range Systems Wing, Air Force Space and Missile Systems Center, Los 
Angeles Air Force Base, California; Defense Contract Audit Agency, Fort 
Belvoir, Virginia, Huntington Beach, California, and Littleton, 
Colorado; Defense Contract Management Agency, Springfield, Virginia, 
Lakewood and Littleton, Colorado, and Decatur, Alabama; National 
Aeronautics and Space Administration, Washington, D.C. and Cape 
Canaveral Air Force Station, Florida; National Reconnaissance Office, 
Aerospace Corporation, and Space Exploration Technologies, El Segundo, 
California; National Security Space Office, Washington, D.C. and El 
Segundo, California; U.S. Strategic Command, Offutt Air Force Base, 
Nebraska; Microcosm, Inc., Hawthorne, California; and United Launch 
Alliance, Littleton, Colorado and Decatur, Alabama. 

We will send copies of the letter to the Department of Defense and 
other interested congressional committees. We will also make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

Should you or your staff have any questions on matters discussed in 
this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. Principal 
contributors to this report were Art Gallegos, Assistant Director, Greg 
Campbell, Jeremy Cockrum, Claire Cyrnak, Tim DiNapoli, Gayle Fischer, 
Laura Hook, Rich Horiuchi, Ken Patton, Sylvia Schatz, Josie Sigl, and 
Hai Tran. 

Signed by: 

Cristina Chaplain: 
Director Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Comments from the Department of Defense: 

Office Of The Assistant Secretary Of Defense: 
6000 Defense Pentagon: 
Washington, DC 20301-6000: 

Networks And Information Integration: 

September 16, 2008: 

Ms. Cristina Chaplain, 
Director: 
Acquisition and Sourcing Management: 
U.S. Government Accounting Office: 
441 G Street, N.W.: 
Washington D.C. 20548: 

Dear Ms. Chaplain,  

Enclosed is the Department of Defense (DoD) response to the Government 
Accounting Office (GAO) draft report (GAO-08-1039), "Defense 
Acquisitions: Uncertainties in the Evolved Expendable Launch Vehicle 
Program Pose Management and Oversight Challenges," dated August 14, 
2008 (GAO Code 120652). 

DoD appreciates the opportunity to review and comment on this draft 
report. After reviewing the draft report, DoD concurs with all three 
recommendations. Point of contact for this draft report is Colonel 
Thomas Doyne at 703-607-1091.  

Signed for: 

Dr. Steven Huybrechts: 
Director, Space Programs & Policy  

Enclosure: 
As Stated: 

Government Accounting Office (GAO) Draft Report Dated August 14, 2008 
GAO-08-1039 (GAO CODE 120652):   

"Defense Acquisitions: Uncertainties In The Evolved Expendable Launch 
Vehicle (EELV) Program Pose Management And Oversight Challenges":   

Department Of Defense (DoD) Comments To The GAO Recommendation: 

Recommendation I: The GAO recommended that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics to require the EELV program to continue to provide the Office 
of the Secretary of Defense and Congress, as appropriate, with updates 
of program cost and status information using criteria that apply to 
major research and development and procurement programs. DOD RESPONSE: 
Concur.  

Recommendation 2: The GAO recommended that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology and 
Logistics to direct the Director of the Cost Analysis Improvement Group 
to conduct an independent lifecycle cost estimate of the EELV program 
once the United Launch Alliance joint venture transition is completed 
and periodically update the estimate to account for significant program 
changes.  

DOD Response: Concur.  

Recommendation 3: The GAO recommended that the Secretary of Defense 
direct the Under Secretary of the Air Force to assess the EELV 
program's staffing needs, to include those that are inherently 
governmental, to confirm whether shortages exist, and if they do. 
develop a plan for addressing them.  

DOD Response: Concur. Attachment

[End of section] 

Appendix II: Program Cost, Schedule, and Performance Status Information 
Included in Defense Acquisition Executive Summary: 

The Defense Acquisition Executive Summary (DAES) is a detailed, 
multipart document which reports program information and assessments 
and serves as an early-warning report to the Office of the Secretary of 
Defense by describing actual program problems, or warning of potential 
program problems, and describing mitigating actions taken or planned. 
According to Department of Defense guidance, the DAES report contains 
the minimum necessary information for oversight purposes. The DAES 
consists of eight sections. Table 7 contains a description of each of 
the sections. 

Table 7: Oversight Information Contained in Defense Acquisition 
Executive Summary Reports: 

Section: Executive summary; 
Description: Provides a summary-level assessment of and key information 
on the status of the program, including a synthesis of the issues that 
follow in the report (e.g., design problems exist that affect cost, 
schedule, and test and evaluation). This section also provides 
information on general program status (e.g., acquisition category and 
date and type of next major program oversight review) and the program's 
cost, schedule, and performance baseline history. 

Section: Assessments; 
Description: Represents the program manager's best independent judgment 
on program performance and serves an early indication of the risk in 
various aspects of the program. Using a color-coded rating system, the 
program manager applies performance ratings against the following 
indicators: 
* Performance characteristics: assesses the status of a broad range of 
mission performance criteria, including, but not limited to, essential 
physical, technical, operating, software, reliability, availability, 
maintainability, durability, manpower, training system effectiveness, 
and other similar characteristics needed to meet field or fleet needs; 
* Test and evaluation: assesses the status of system test planning, 
system testing, test article availability, test support, test center 
and range availability and funding, test success, and achievement of 
test schedules; 
* Logistics requirements and readiness objectives: assesses initiatives 
to achieve or maintain logistics management and support requirements 
(e.g., manpower, support equipment, training) and the ability of a 
system to undertake a specified set of missions or capabilities at 
planned peacetime and wartime utilization rates (e.g., for a missile 
system, established time to launch; for aircraft, previously agreed 
upon number of planes ready for take-off or time for take-off); 
* Cost performance: assesses the program's cost performance status 
based on performance to date, including the executability of the 
program within approved resources (based on cost and schedule 
performance status of the program's major contracts and the probable 
effects of those contracts on cost estimates for future effort on the 
program); and considers potential unit cost reporting threshold 
breaches and status of cost reduction or cost/performance tradeoff 
initiatives; 
* Funding: assesses the overall adequacy and availability of programmed 
and budgeted funds by fiscal year, including effect of potential 
funding shortfalls, reductions or nonavailability due to congressional, 
Office of the Secretary of Defense, component, and/or cooperative 
allied country actions; program areas not funded to the approved 
acquisition program baseline; and whether the program is executable to 
the baseline, or if actual obligation rates are as planned; 
* Schedule performance: compares program's overall schedule performance 
and deliveries to date with program schedule milestones and annual 
delivery schedules; and considers the effect of schedule variations on 
major decision points, operational capability dates, and whether any 
major component of the system being developed or procured is not 
meeting the planned schedule; 
* Contracts: reviews all aspects of contract performance including 
technical and schedule achievement, cost performance, deliveries, 
contract change proposals and negotiations, and quality; identifies 
potential contract adjustments and their impact on ability to properly 
execute the contract; assesses all significant aspects of the contract 
award schedule, including definitization dates; and considers the 
effect of delays that threaten to extend major contract award dates 
that are on the critical path of program master schedule activities or 
that threaten to expose the government to unnecessary cost risk; 
* Production: assesses the overall status of the planning and execution 
of production and continuous process improvement activities, including 
all hardware and software aspects of the program; and considers key 
production requirements such as configuration management, technical 
data package availability, contractor capital investment, material 
availability, surge and mobilization planning, and capacity to meet 
delivery requirements; 
* Management structure: assesses areas that do not fit the above 
assessment areas, such as the status of documentation, effect of 
problems from interrelated programs on this program, dependence of and 
problems for this program on government-or contractor-furnished 
equipment that are not managed or controlled by the program manager, 
adequacy of program office manpower to accomplish current or planned 
future requirements, relevant national security issues, or other areas 
of significance to the program office. 

Section: Program manager comments; 
Description: Summarizes and explains observations, advisory comments, 
and potential or significant program problem areas for the categories 
shown in Defense Acquisition Executive Summary (DAES) Section 2, with 
emphasis on changes since the previous reporting period. At a minimum, 
this section is to include a description of problems and their 
significance relative to major program objectives; discussion of 
actions to be taken to accomplish program objectives and whether and 
how the program objectives need to be changed; an assessment of the 
status of corrective actions since the last DAES report; an assessment 
of any pending or proposed acquisition program baseline parameter 
changes, reasons for the changes, and associated risk assessments; and 
an assessment of changes made to any data parameters contained in 
approved program data (see DAES Section 5) that are not part of the 
acquisition program baseline. 

Section: Program executive officer/component acquisition executive[A] 
comments; 
Description: Provides program executive office and component 
acquisition executive assessments and perspectives on the program, 
including changes in the relative level of risk associated with the 
program, the significance of problems reported by the program manager, 
the program manager's proposed corrective actions, the level of risk 
associated with these actions and other significant changes to the 
program; and comments on any pending or proposed acquisition program 
baseline parameter changes or changes to additional data elements that 
are not part of the acquisition program baseline but are contained in 
official program documentation and are integral to achieving the 
program objectives. 

Section: Approved program data; 
Description: Displays, in tabular form, key program parameters 
(including initial and current acquisition program baseline parameters 
as well as any additional data contained in other official program 
documents such as the acquisition plan or acquisition decision 
memoranda) in the following categories: performance characteristics, 
schedule milestones, and program acquisition cost. Data also include 
the program manager's current estimates for performance, schedule, and 
cost. This section is a key starting point for the program manager's 
evaluation of the program status in section 2; Performance 
characteristics: mission performance criteria needed to meet the 
significant objectives required by the end users (such as physical, 
technical, operational, software, survivability, reliability, and 
durability characteristics); initial and current acquisition 
performance baselines; results of demonstrated performance through 
testing; the program manager's current estimates relating to 
performance; and differences between the current estimates from major 
program objectives are to be explained in the appropriate part of 
Section 3; Schedule milestones: include initial and current approved 
schedule milestones as well as the program manager's current estimate 
for achieving schedule milestones. When the current estimates differ 
from the approved schedule milestones, the differences are explained in 
the appropriate part of Section 3; Program acquisition cost: displays 
total program costs for the entire acquisition process-
-from concept exploration and definition through production and 
deployment--as well as the program manager's current estimates of 
program costs. Costs include those related to research, development, 
test, and evaluation; procurement; program-specific military 
construction; and program acquisition-related operation and 
maintenance. This section also includes information on quantities of 
end items as well as unit costs. 

Section: Program background data; 
Description: Provides descriptive program-related information on total 
costs and total quantities for all years through the end of the 
acquisition phase for all DOD components, including information on and 
assessment of (as appropriate), program elements and procurement lines 
by appropriation, unit cost reporting data, procurement deliveries, 
contractor costs, international cooperative programs, other 
participating DOD components, and vulnerability assessments. 

Section: Supplemental contract cost information; 
Description: Displays, in tabular form, summary-level contract 
identification, schedule, and performance information; Contract 
identification data: include contract name, number, and type; 
contractor name and location; program acquisition phase for which work 
is being done; negotiated contract cost or not-to-exceed value; target 
price; and ceiling price; Contract schedule data: include contract 
definitization date; work start date; dates of critical contract 
schedule milestones; and program manager's estimate of contract 
completion date; Contract performance data: include earned value 
management data for the most recent reporting period; the contractor's 
and program manager's current estimates of costs at completion; program 
manager comments on contract performance; and assessment of any changes 
to unit costs. 

Section: Funding summary; 
Description: This section enables program offices to provide the 
approved funding profile and is intended to be used as the basis for 
identifying funding changes that could result in acquisition program 
baseline breaches, Nunn-McCurdy unit cost breaches, or other changes. 

Source: GAO presentation of guidance on preparing Defense Acquisition 
Executive Summaries located on the Defense Acquisition University Web 
site. 

[A] A program executive officer (PEO) is a military or civilian 
official who has responsibility for directing several major defense 
acquisition programs and for assigned major system and nonmajor system 
acquisition programs. A PEO has no other command or staff 
responsibilities within the component, and only reports to and receives 
guidance and direction from the DOD component acquisition executive 
(CAE). The CAE is a secretary of a military department or head of a 
military agency with the power of redelegation. In the Air Force, the 
delegated CAE is the Assistant Secretary of the Air Force 
(Acquisition). CAEs are responsible for all acquisition functions 
within their components. 

[End of table] 

Footnotes: 

[1] The EELV program office's official name is the Launch and Range 
Systems Wing. 

[2] The Nunn-McCurdy provision (10 U.S.C. § 2433) currently requires 
DOD to take specific actions when a major defense acquisition program's 
growth exceeds certain cost thresholds. Some of the key provisions of 
the law require, for example, that for major defense acquisition 
programs, (1) Congress must be notified when a program has an increase 
of at least 15 percent in program acquisition unit cost above the unit 
cost in the current baseline estimate and (2) the Secretary of Defense 
must certify the program to Congress when the program has unit cost 
increases of at least 25 percent of the current baseline estimate or at 
least 50 percent of the original baseline estimate. The current law 
also includes cost growth thresholds from the program's original 
baseline estimate. 

[3] Under Federal Acquisition Regulation (FAR) Part 12 procedures, the 
government had less insight into a contractor's costs since cost or 
pricing data cannot be required in the acquisition of commercial items. 

[4] The FTC finalized the consent order on May 1, 2007, following a 
public comment period. 

[5] NSSO facilitates the integration and coordination of defense, 
intelligence, civil, and commercial space activities. 

[6] Of these 21 launches, 10 have been for DOD, 3 for civil government 
agencies (NASA and the National Oceanic and Atmospheric 
Administration), and 8 for commercial companies (based on payload). 

[7] The fiscal year 2008 EELV program budget spans 6 years: fiscal 
years 2008 through 2013. 

[8] The program office defines launch success as placing a satellite 
into orbit such that the payload is able to perform its mission. For 
example, during a June 2007 Atlas V launch of a National Reconnaissance 
Office (NRO) payload, an upper stage engine cut off 4 seconds early, 
placing the payload in a lower-than-desired orbit; however, the Air 
Force is confident the payload will be able perform its mission, and 
thus considers the launch a success. 

[9] The Aerospace Corporation is a federally funded research and 
development center that provides objective technical analyses and 
assessments for military, civil, and commercial space programs. 

[10] This 2002 report, entitled "Building Confidence in EELV," was an 
assessment of EELV launch risk and was prepared for the Air Force 
Assured Access Study. 

[11] Booz Allen Hamilton, Launch Mission Assurance Assessment Study 
(April 2007). This study was requested by the Director, National 
Reconnaissance Office and the Commander, U.S. Air Force Space Command. 

[12] 10 U.S.C. § 2325 (a) (1) (A) and (B). 

[13] he Air Force portion of savings corresponds to the proportion of 
program costs for which it pays--70 percent (the NRO pays 30 percent)-
-and the resulting annual savings to the Air Force were projected at 
$105 million (70 percent of $150 million), beginning in 2011. 

[14] Typically, for nonspace major defense acquisition programs, the 
sustainment phase begins when the acquired weapons or automated 
information systems have been fielded or deployed. In this phase, DOD 
oversight is normally reduced and program emphasis is on activities 
such as supply, maintenance, and transportation. 

[15] GAO, Space Acquisitions: DOD Needs to Take More Action to Address 
Unrealistic Initial Cost Estimates of Space Systems, GAO-07-96 
(Washington, D.C.: Nov. 17, 2006). 

[16] Earned value management (EVM) is a program management tool that 
integrates the technical, cost, and schedule parameters of a contract. 
During the planning phase, an integrated baseline is developed by time- 
phasing budget resources for defined work. As work is performed and 
measured against the baseline, the corresponding budget value is 
"earned". Using this earned value metric, cost and schedule variances 
can be determined and analyzed. EVM provides significant benefits to 
both the government and the contractor. An EVM system is required on 
all DOD space program-related contracts meeting certain thresholds 
unless waived by the DOD Space Milestone Decision Authority. National 
Security Space Acquisition Policy, No. 03-01 (Dec. 27, 2004). 

[17] The EELV program office was unable to provide us with the total 
number of personnel from all contractors providing assistance to the 
program office; therefore, we were only able to analyze numbers of 
Aerospace Corporation personnel. Military and civilian personnel 
figures are as of March 2008 and Aerospace personnel figures are as of 
May 2008. 

[18] AO, Defense Acquisitions: Better Weapon Program Outcomes Require 
Discipline, Accountability, and Fundamental Changes in the Acquisition 
Environment, GAO-08-782T (Washington, D.C.: June 3, 2008). 

[19] Department of Defense Instruction No. 5000.66, Operation of the 
Defense Acquisition, Technology and Logistics Workforce Education, 
Training, and Career Development Program (Dec. 21, 2005), p.21. 

[20] The inter-stage adapter connects the Atlas booster stage to the 
Centaur upper stage. 

[21] Program Budget Decisions (PBD) reflect the decisions of the Office 
of the Secretary of Defense as to appropriate program and funding to be 
included in the annual defense budget request which, in turn, may be 
included in the President's Budget. PBD 720 outlines how manpower 
reductions will be accomplished to ensure the Air Force meets the force 
reduction mandated by PBD 720 and maintain mission capability. With PBD 
720, the Air Force planned to eliminate 40,000 Active Duty, National 
Guard, and Reserve full-time equivalent (FTE) positions in order to 
self-finance the recapitalization and modernization of their aircraft, 
missile, and space inventories. PBD-720 also accelerated the retirement 
of a portion of the Air Force's aircraft inventory (F-117s, some B-52s, 
C-21s, and U-2s). 

[22] In the late 1990s, the United States experienced a series of 
major, and costly, heritage launch vehicle failures. As a result, DOD 
commissioned a Space Launch Vehicles Broad Area Review to examine the 
causes of the launch vehicle failures and make recommendations to help 
ensure success for the remaining launches of heritage vehicles and for 
the transition to EELVs. Among the recommendations made by the review 
was for the Air Force to formulate a formal EELV launch risk management 
program, including an increased focus on launch success by identifying 
opportunities and resources needed for value-added government 
independent reviews of launch vehicle development and production. As a 
result of this recommendation, the EELV program office and Aerospace 
Corporation developed a rigorous launch mission assurance process, and 
Air Force investment in independent assessments increased 
substantially. For example, Aerospace Corporation involvement in the 
EELV program has increased from 25 personnel at EELV program initiation 
to the current level of about 290. 

[23] The FAR provides that contracts must not be used for the 
performance of inherently governmental functions. FAR 7.503(a). 
Inherently governmental functions are so intimately related to the 
public interest that they should only be performed by government 
personnel. These functions include those activities which require 
either the exercise of discretion in applying Government authority or 
making value judgments in making decisions for the government, and 
should not be performed by contractors. 

[24] GAO, Defense Management: DOD Needs to Reexamine Its Extensive 
Reliance on Contractors and Continue to Improve Management and 
Oversight, GAO-08-572T (Washington, D.C.: Mar. 11, 2008). 

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