Cost reserves  are used to mitigate issues during the development of a project. We recommended that NASA conduct an updated joint cost and schedule  risk analysis to address the issues we identified and use more detailed  cost information to adjust its cost estimates. Specifically, in the past 14 months, the  overall project schedule reserve declined from 14 months to 11 months.With less than 4 years until the planned launch in October 2018, the  project’s overall schedule reserve is above the Goddard standard and  JWST plan—which was set above the Goddard standard and included  more reserve than required—for schedule reserve at this point in the  project. The JWST  project has used over 20 percent of the schedule reserve it held in the  past 14 months with almost 4 years remaining for its integration and test  effort, where GAO’s prior work has shown and NASA has concurred  problems are commonly found and schedules tend to slip. All individual element and major subsystem schedules have lost schedule  reserve since last year. This is particularly  the case with JWST given its complexity. With schedule losses having  already occurred on most elements and major subsystems across the  project prior to most of the project’s integration and testing efforts, the  fiscal year 2016 funding may arrive too late to prevent further schedule  delays and the risk of such delays impacting the launch date is  heightened. The project continues to address other technical risks and challenges as  it continues development and testing of the various JWST elements and  major subsystems. GAO best practices call for programs to regularly update cost risk  analyses to account for new risks. The project did  subsequently agree to conduct its own cost risk analysis of the prime  contractor’s remaining work. If properly conducted, its analysis will  provide the project with the reliable information necessary to gauge  whether the contractor’s budget is on target or at risk of future cost  overruns. Project and Prime Contractor Have Not Updated Risk Analyses to Account for New Risks

Neither NASA’s joint cost and schedule confidence level (JCL) analysis  nor Northrop Grumman’s cost risk analysis to support the prime contract  has been updated since 2011. Recommendations for Executive Action

We recommend that the NASA Administrator take the following two  actions:  In order to provide additional information and analyses to effectively  manage the program and account for new risks identified after the  2011 replan, direct JWST project officials to follow best practices  while conducting a cost risk analysis on the prime contract for the  work remaining and ensure the analysis is updated as significant risks  emerge. These  comments are reprinted in appendix V. In responding to a draft of this  report, NASA partially concurred with one recommendation and  concurred with another. Furthermore, NASA noted the JWST project initiated a cost risk analysis  of the prime contract that is incorporating best practices and will update it  when required by NASA policy. As the telescope is one of NASA's most complex  and expensive projects, both JWST and NASA officials have a  tremendous stake in the success of the JWST project. Appendix I: Objectives, Scope, and Methodology

Our objectives were to assess the extent to which (1) technical  challenges are impacting the James Webb Space Telescope (JWST)  project’s ability to stay on schedule and budget, (2) budget and cost  estimates reflect current information about project risks, and (3) the  project uses award fee contracts to motivate and assess contractor  performance.
Why GAO Did This Study

JWST is one of NASA's most complex and expensive projects, at an anticipated cost of $8.8 billion. With significant integration and testing planned until the launch date, the JWST project will need to address many challenges before NASA can conduct the science the telescope is intended to produce. GAO has made a number of prior recommendations to NASA, including in December 2012 that the project perform an updated joint cost and schedule risk analysis to improve cost estimates. NASA initially concurred with this recommendation, but it later indicated that the tracking of information it already had in place was sufficient and ultimately decided not to conduct another joint cost and schedule risk analysis.
GAO was mandated to assess the program annually and report on its progress. This is the third such report. This report assesses, among other issues, the extent to which (1) technical challenges are impacting the JWST project's ability to stay on schedule and budget, and (2) budget and cost estimates reflect current information about project risks. To conduct this work, GAO reviewed monthly and quarterly JWST reports, interviewed NASA and contractor officials, reviewed relevant policies, and conducted independent analysis of NASA and contractor data.

What GAO Found

With just under 4 years until its planned launch in October 2018, the James Webb Space Telescope (JWST) project reports it remains on schedule and budget. Technical challenges with JWST elements and major subsystems, however, have diminished the project's overall schedule reserve and increased risk. During the past year, delays have occurred on every element and major subsystem schedule—especially with the cryocooler—leaving all at risk of negatively impacting the overall project schedule reserve if further delays occur.
The project reports its overall schedule reserve is above its plan and standards. However, JWST is one of the most complex projects in the National Aeronautics and Space Administration's (NASA) history and has begun integrating and testing only two of the five elements and major subsystems. As such, maintaining as much schedule reserve as possible to navigate through almost 4 more years of integration and testing that remains, where prior work has shown problems are commonly found and schedules tend to slip, is critical. While the project has been able to reorganize work when necessary to mitigate schedule slips, this flexibility will diminish going forward. JWST is also facing limited short-term cost reserves to mitigate additional project schedule threats.
The JWST project and prime contractor's cost risk analyses used to validate the JWST budget are outdated and do not account for many new risks identified since 2011. GAO best practices for cost estimating call for regularly updating cost risk analyses to validate that reserves are sufficient to account for new risks. NASA officials said they conduct sufficient analysis to monitor the health of the budget. These efforts, however, do not incorporate potential impacts of risks identified since 2011 into estimates. While the project has subsequently agreed to conduct a cost risk analysis of the contract, it is important that they follow best practices, for example, by regularly updating that analysis. Doing so would provide the project with reliable information to gauge whether the contractor is at risk of future cost overruns.

What GAO Recommends

Among other actions, NASA should follow best practices when updating its cost risk analysis to ensure reliability. In commenting on a draft of this report, NASA partially concurred with this recommendation.