2018 as schedule reserve and the $1.3 billion difference between the  $8.4 billion goal and the $9.7 billion baseline as funding for that schedule  reserve. The SLS Cost and Schedule Estimates Were Generally Developed in Accordance with Best Practices, but Officials Have No Plans to Update the Cost Estimate with Actual Costs

NASA generally followed best practices in preparing the SLS cost and  schedule baseline estimates for the limited portion of the program life  cycle covered, that is, through launch readiness for the first test flight of  SLS. GAO’s cost estimating best  practices call for estimates to be continually updated through the life of  the project, ideally every month as actual costs are reported in earned  value management reports. Unless properly updated on a  regular basis, the cost estimate cannot provide decisionmakers with  accurate information to assess the current status of the project. Credible: The SLS cost estimate only partially met the criteria for  credibility because the SLS program did not cross-check the results of the  estimate and did not commission an independent cost estimate. The  purpose of developing a separate independent estimate and cross- checking the estimate is to test the program’s estimate for  reasonableness and, ultimately, to validate the estimate. Cost reserves are additional funds that  can be used to mitigate problems during the development of a program. The SLS program,  however, is planning to use 7 of the 11 months of schedule reserve,  which would delay its planned goal for launch readiness for EM-1 from  December 2017 to, tentatively, July 2018. As a result, the agency would have only 4 months of schedule reserve  remaining between July 2018 and November 2018 to address any further  problems that it may encounter. Complex development efforts like SLS must plan to address myriad risks  and unforeseen technical challenges. Earned Value Management System Remains Incomplete and Provides Limited Insight into Progress toward External Committed Cost and Schedule Baselines

NASA is using contractor earned value management (EVM) data as an  additional means to monitor costs for SLS, but the EVM data remain  incomplete and provide limited insight into progress toward the program’s   Program officials  external committed cost and schedule baselines.indicated that the current SLS contractor performance measurement  baselines—which establish the program scope, schedule, and budget  targets to measure progress against—are all based on the program’s  more aggressive internal goal for launch readiness for EM-1 in December  2017 and not its external committed date of November 2018. Specifically,  our analysis of the contractors’ EVM data for the three prime contracts— main engines, boosters, and core stage—indicates that the contracts  could incur cost overruns ranging from about $367 million to about $1.4  billion, which is substantially higher than the combined overrun of $89  million that the three contractors were projecting at the time of our review. The SLS program is in the process of instituting a program-level EVM  system that may improve insight into the program’s progress by providing  aggregated tracking of both in-house and contractor performance on the  SLS program that will present a more comprehensive assessment of  program progress at least to internal cost and schedule goals. NASA officials stated that this SLS program- level EVM system would allow the program to better monitor progress  relative to the committed cost and schedule baselines by comparing the  aggregated EAC for both NASA and contractor work to the committed  cost and schedule baselines. Both contractor and program-level EVM data, however, is only reported  relative to the December 2017 date, according to program officials. To ensure that decisionmakers are able to track progress toward the  agency’s committed launch readiness date, the NASA administrator  should direct the SLS program to include as part of the program’s  quarterly reports to NASA headquarters a reporting mechanism that  tracks and reports program progress relative to the agency’s external  committed cost and schedule baselines. We are  encouraged that NASA plans to update its cost estimate for SLS annually. Appendix I: Scope and Methodology

To assess the reliability of the National Aeronautics and Space  Administration’s (NASA) Space Launch System (SLS) cost and schedule  estimates, we determined the extent to which the estimates were  consistent with best practices for cost estimating and scheduling as  identified in GAO’s Cost Assessment Guide and Schedule Assessment  Guide. In addition,  we met with program and agency officials to discuss the baseline cost  and schedule estimates, potential program schedule changes, and the  program’s cost and schedule reserve postures, among other issues.
Why GAO Did This Study

SLS is NASA's first heavy-lift launch vehicle for human space exploration in over 40 years. For development efforts related to the first flight of SLS, NASA established its cost and schedule commitments at $9.7 billion and November 2018, respectively. The program, however, has continued to pursue more aggressive internal goals for cost and schedule.
GAO was asked to assess a broad range of issues related to the SLS program. This report focuses on NASA's cost estimate for the initial phases of SLS and other management tools needed to control costs. Specifically, this report examines the extent to which SLS's (1) cost and schedule estimates for its first test flight are reliable; (2) cost and schedule reserves are available to maintain progress toward this flight test; and (3) EVM data provides meaningful insight into progress. To do this work, GAO examined documents supporting the cost and schedule estimates, contractor EVM data, and other relevant program documentation, and interviewed relevant officials.

What GAO Found

The cost and schedule estimates for the National Aeronautics and Space Administration's (NASA) Space Launch System (SLS) program substantially complied with five of six relevant best practices, but could not be deemed fully reliable because they only partially met the sixth best practice—credibility. While an independent NASA office reviewed the estimate developed by the program and as a result the program made some adjustments, officials did not commission the development of a separate independent estimate to compare to the program estimate to identify areas of discrepancy or difference. In addition, the program did not cross-check its estimate using an alternative methodology. The purpose of developing a separate independent estimate and cross-checking the estimate is to test the program's estimate for reasonableness and, ultimately, to validate the estimate. The continued accuracy of the estimates is also questionable because officials have no plans to update the original estimates created in 2013. GAO's cost estimating best practices call for estimates to be continually updated through the life of the program to provide decisionmakers with current information to assess status. Moreover, as stressed in prior GAO reports, SLS cost estimates only cover one SLS flight in 2018 whereas best practices call for estimating costs through the expected life of the program.
Limited cost and schedule reserves place the program at increased risk of exceeding its cost and schedule commitments. Although the SLS program is committed to a November 2018 launch readiness date, it has been pursuing an internal goal for launch readiness of December 2017, with the time between December 2017 and November 2018 being designated as schedule reserve. The SLS program expects to use a significant amount of schedule reserve, in part to address some technical challenges, and plans to shift its internal goal from December 2017 to tentatively July 2018. This shift will reduce the amount of available schedule reserve from 11 months to just 4 months. In addition, the program planned for cost reserves of less than 4 percent each year and has already allocated those funds for this year, which leaves no reserve funding available to address unanticipated issues.
Earned value management (EVM) data for SLS remains incomplete and provides limited insight into progress toward the program's external committed cost and schedule baselines because it tracks progress relative to the program's internal goals—which have proven unrealistic. EVM data is intended to provide an accurate assessment of program progress and alert managers of impending schedule delays and cost overruns. GAO analysis of available SLS contractor EVM data indicated that the contractors may incur cost overruns ranging from about $367 million to about $1.4 billion, which is significantly higher than what the contractors were reporting—$89 million. SLS is implementing a program-level EVM system that, once complete, will include all contractor work and work conducted in-house by NASA and may provide more comprehensive information on program progress relative to internal goals. Tracking to internal goals, however, provides limited information relative to progress toward external commitments. At present, the SLS program lacks comprehensive program-level reporting to alert managers of impending delays and cost overruns to external commitments.

What GAO Recommends

NASA should direct SLS program officials to update the cost and schedule estimates at least annually, and to implement a mechanism that reports progress relative to external committed cost and schedule baselines on a quarterly basis, among other actions. NASA concurred with GAO's recommendations.