In June 1995, we reported that the U.S. funds required to design, launch, and operate the space station would be about $94 billion—over $48 billion to complete assembly and almost $46 billion to operate and conduct research. In particular, the development cost estimate has increased by more than 20 percent, in-house personnel requirements have increased dramatically, and eight shuttle flights have been added to the development program. The higher development costs—$21.9 billion versus $17.4 billion—are attributable to schedule delays, additional prime contractor effort not covered by funding reserves, additional crew return vehicle costs, and costs incurred as a result of delays in the Russian-made Service Module. Potential Added Program Costs

A number of potential program changes could significantly increase the current estimate. Assuming NASA would continue to spend at the rate assumed in its current estimate for fiscal year 2003, the program would incur additional costs of more than $100 million for every month of schedule slippage. Potential Debris Tracking Costs

The estimate we derived in 1995 and our latest estimate include those costs related to the space station’s development, assembly, and operations. As mentioned previously, NASA updated its overall requirement for space debris tracking as it relates to supporting the space station, to include the ability to track and catalog objects as small as 1 centimeter. Status of Funding Reserves

We have previously expressed our concern with the adequacy of space station financial reserves. The program has used, or identified specific uses for a significant portion of its available reserves, with almost 6 years left before the last assembly flight is scheduled to be launched. Through September 1997, $398 million in cost growth had already accumulated. On September 30, 1997, Boeing formally asked NASA to consider rebaselining the program using a more “meaningful program baseline against which performance measurements (could) be taken.” In October 1997, NASA granted approval to Boeing to begin tracking cost and schedule performance using a new performance measurement baseline. According to Boeing, this change provides the program with the most accurate cost information and incorporates updated program schedules to reflect the most achievable recovery plans. For reporting purposes, the change had the effect of resetting cost and schedule variances to zero. That analysis shows that, as of February 1998, the total variance was $448 million. While NASA approved the new baseline for reporting purposes, it continues to use Boeing’s estimate of overrun at completion—$600 million—as the basis for calculating the contractor’s incentive award fee. Potential program changes, such as additional schedule slippage and more shuttle flights, could increase our latest cost estimate. Comments From the National Aeronautics and Space Administration

The following are GAO’s comments on the National Aeronautics and Space Administration’s (NASA) letter dated April 27, 1998. GAO Comments

1. 2. 3. 4. 5. 7. 8. 10. 11. 12. 13. We believe these nonrecurring costs are completely relevant to the discussion of space station life-cycle cost estimates. 14. 18. A crew return vehicle is required for space station operations.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed issues associated with the National Aeronautics and Space Administration's (NASA) International Space Station program, focusing on: (1) estimates of the station's development, assembly, and operations costs and comparing this estimate with the estimate in GAO's June 1995 report; (2) program uncertainties that may affect those costs; (3) potential debris tracking costs; (4) the status of program reserves; and (5) recent actions to measure prime contractor performance based on rebaselined information.

What GAO Found

GAO noted that: (1) life-cycle cost is the sum total of direct, indirect, recurring, and nonrecurring cost of a system over its entire life through disposal; (2) overall, the estimated U.S. cost to develop, assemble, and operate the space station is about $96 billion, an increase of almost $2 billion over GAO's last estimate made in 1995; (3) development costs represent the largest increase--more than 20 percent; (4) the development increase is attributable to schedule slippages, prime contract growth, additional crew return vehicle costs, and the effects of delays in delivery of the Russian-made Service Module; (5) overall costs would have been significantly higher had there not been an offsetting reduction in shuttle support costs; (6) a number of potential program changes could significantly increase the updated cost estimate; (7) they include the potential or additional schedule slippage and the need for shuttle launches to test and deliver the crew return vehicle; (8) at the current estimated spending rate, the program would incur additional costs of more than $100 million for every month of schedule slippage; (9) in addition, NASA may have to incur costs related to protecting the station from space debris; (10) in August 1997, the agency updated its overall space debris tracking requirement; (11) the new requirement, as it relates to supporting the space station, includes the ability to track and catalog objects as small as 1 centimeter; (12) the adequacy of the space station program's funding reserves has been a concern of GAO's; (13) the program has used, or identified potential uses for, a significant portion of its available reserves, with almost 6 years left before the last assembly flight is scheduled to be launched; (14) in October 1997, NASA granted approval to Boeing Corporation to begin tracking cost and schedule performance using a new performance measurement baseline; (15) the purpose of the change was to incorporate updated program schedules to reflect the most achievable recovery plans; (16) for reporting purposes, the change had the effect of resetting cost and schedule variances to zero; (17) the original baseline shows that the February 1998 cost variance would have been about $50 million higher than the $398 million Boeing reported prior to the change; and (18) while NASA approved the new baseline for reporting purposes, it continues to use Boeing's estimate of overrun at completion--$600 million--as the basis for calculating the contractor's incentive award fee.