From an e-mail posted by Prof Joanne Gabrynowicz (University of Mississipi)

Testimony of Sean O'Keefe, Deputy Director, OMB before the House Science Committee

Chairman Boehlert, Rep. Hall and members of the Science Committee, it is a pleasure to appear before the Committee this morning in response to your invitation to discuss the International Space Station (ISS) and the report of the ISS Management and Cost Evaluation (IMCE) task force. First, let me begin by sharing with you how pleased I am with the technical progress of this program. The nearly flawless integration of hardware and software in orbit from numerous nations and cultures from around the globe is a testament to the hard work and dedication of the thousands of people who made it happen. We are now beginning to see the fruits of those efforts, as research is underway on orbit, already producing important results. The resourcefulness and dedication of the international crew members on-board the Station have allowed them to spend more time than hoped for on important research activities, all this during some of the busiest periods of assembly. The Administration is very proud of the technical accomplishments of this program, as we all should be.

However, technical excellence at any cost is not an acceptable approach. Managing the program within cost and schedule must be elevated in importance - particularly within the culture of NASA's Human Space Flight activities - to be on a par with technical excellence. This notion, I believe, is the fundamental tenet of what the IMCE task force found, and one with which I strongly agree. It also provides the foundation for the necessary reforms that must be undertaken by NASA to restore credibility and secure its future in human space flight. Let me pause at the outset to express the gratitude of the Administration for the contribution of the IMCE task force and their chairman, Tom Young.

A Program at a Crossroads

In January 2001, NASA informed us that the estimated cost of the Space Station program had grown by roughly $4 billion over the next five years -- that represented a 50 percent increase over what was projected about six months prior. This continued a history of cost growth that saw nearly $4 billion added to the cost of completing assembly of the Space Station over the last three years. What made this latest projected overrun particularly troubling is that it came with little warning and it was so much larger than what was projected only a little while ago. I testified before the House Appropriations Veterans, Housing, and Independent Agencies Subcommittee in May on that $4 billion figure, a figure we were told was conservative. But within days after my hearing, NASA informed OMB that the number had grown an additional $800 million to $4.8 billion. With numbers that large, and no certainty that even this additional $5 billion would be sufficient, there was no doubt that this was a program facing a management and financial crisis.

Administration Strategy

Faced with this crisis, the Administration was determined not to repeat a history of continued cost growth and instead to learn from the past. Therefore, we worked with NASA senior management to make the tough decisions, and chose a solution called the "U.S. core complete." This solution was based on the principles of establishing permanent human presence in orbit; conducting world-class research; and accommodating the international elements. This vision was highlighted in the President's FY 2002 Budget Blueprint. We were and still are determined that none of this cost growth be offset by cuts to NASA's Space and Earth Science and Aerospace Technology activities. Instead, we sought the offsets from within the Human Space Flight program, especially Station itself. The core complete Station addressed about $2 billion of the cost growth by redirecting funding from three elements with significant high-cost and high-risk development remaining -- the habitation module, crew return vehicle, and propulsion module. Reducing the planned budget for research equipment and utilization offset about a billion dollars of the cost growth in development and operations. This left about a billion dollars to go, which would be addressed by NASA with further cost scrubs and management reforms.

After the FY 2002 Budget came out in April, we continued to work with NASA in crafting a strategy to deal with this crisis. In June, OMB and NASA reached an agreement on the next step towards a solution. This included further adjustments within the Space Station program, and NASA applied funds from other Human Space Flight activities to address the Space Station cost growth. At that point, there was an estimated $484 million that was yet to be resolved in the FY 2004-2006 time period. However, we also recognized that there was no real precision to that estimate and it would take more than money and design changes to complete the Station and get cost growth under control. That is why the Administration charged NASA with undertaking whatever management reforms are necessary to get the program back on track.

To assist NASA in understanding both the cost credibility of current estimates and the needed management reforms, the IMCE task force was formed and announced in July. I am very pleased to report that the task force met a very aggressive schedule. The Chairman and members did a superb job of distilling the complex problems facing the Space Station program and the agency. The task force made solid recommendations of steps that are necessary and that NASA can act on. We are still in the midst of reviewing the report and expect to develop with NASA a plan of action that can accompany NASA's FY 2003 Budget submission to Congress. Nonetheless, I do have some initial reactions to the report that I would like to share with the members of the Committee.

Cultural Change is Essential

The task force found that the cost estimate for the core Station program, if it proceeds with business as usual, is not credible. Even with the content removed for the U.S. core complete Station, it could cost as much as a billion or two more, unless what the task force called "radical" reforms are achieved. It would be a big mistake to begin adding content back to the program now, when we still do not have confidence that NASA can manage to finish the core complete Station and operate it within the available budget. To establish that confidence, culture change in the way NASA conducts its Human Space Flight activities must occur. Such change is not just desirable, it is essential.

As I said in my opening remarks, this means putting management excellence - as measured by controlling total program cost as affected by cost-growth and schedule slips - on a par with technical excellence driven by true safety and science requirements. In an engineering-dominated culture like NASA's Human Space Flight programs, this is a daunting challenge. While safety is a top priority, the task force believed that the Station program did not need to mirror its operational staffing approach to that of the Space Shuttle. I should point out, however, that the Human Space Flight elements within NASA would be well-served to learn from the NASA's Space Science and Earth Science elements, which have made major strides in addressing scientific priorities, managing to total cost, and appropriately managing risks.

Focus on Research

The Administration believes in the research potential of the Space Station and is committed to making the necessary reforms to realize that potential. As Tom Young said in his remarks last week, the Space Station is not primarily an engineering or infrastructure project, but a research project. Research is the appropriate and necessary focus of the Space Station program. However, there is a further need to clearly prioritize the research objectives to be achieved by the Space Station and, as required, shift resources within Human Space Flight and associated Biological and Physical Research activities to realize those priorities.

Some have argued that the research to be done at U.S. core complete is insufficient and we should commit now to providing "just" 10 to 15 percent more to the total cost to restore the original design. I would like to counter this argument with the following points:

First, the $2 to 4 billion to make this happen is a lot of money; money that is not readily available.

Second, even if the funds were available, it represents a significant investment compared to other research opportunities. For example, as the adjacent chart shows, the annual Federal investment in Human Space Flight is considerable and is significantly more than other major Federal research investments. So, it is a huge amount when compared to other science and technology opportunities.

Third, in response to those who say that a three-person Station does not provide useful science, I would point out that conducting good science with a three-person Station has always been a program requirement. In fact, even prior to the $5 billion overrun, the plan had assumed a three-person crew through at least FY 2006. So what we are really discussing is what level of scientific productivity might we accomplish for later this decade. I am pleased to see the seeds of innovation begin to sprout as new ideas are being explored to improve scientific productivity. This is something that would not have happened previously, as some would have assumed that additional funding would always be the solution.

And, finally, as highlighted in the IMCE report, until we receive a good independent cost estimate of U.S. core complete and NASA implements changes to control costs, we run a major risk that spending more money would only go to the next budget overrun on Station. It might make some feel better today, but regretful tomorrow. Space Station must restore management and cost credibility.

NASA's Human Space Flight Program Must Build Credibility

The concept presented by the task force of a decision gate in two years that could lead to an end-state other than the U.S. core complete Station is an innovative approach, and one the Administration will adopt. It calls for NASA to make the necessary management reforms to successfully build the core complete Station and operate it within the $8.3 billion available through FY 2006 plus other human space flight resources. If NASA can show it is on track to meet this performance standard after two years, against a checklist of specific actions and conditions, then the Administration will reassess the resource needs to achieve an expanded end-state beyond core complete. If NASA fails to meet the standards, then an end-state beyond core complete is not an option. The strategy places the burden of proof on NASA performance to ensure that NASA fully implements the needed reforms.

OMB will work with NASA and the IMCE task force, building on suggestions from the task force, to assemble a specific checklist of actions for this two-year decision gate. We want to be very clear about these action items and the performance necessary to meet them, so that we are not reinforcing old expectations and status quo operations. Cultural change is required.

End-State Defined by Research Priorities

Understanding what the research priorities are for the Space Station is critically important to making the greatest use of the core complete Station, and to formulating those capabilities to be the focus of any potential end-state beyond core complete. I have consulted with the President's Science Advisor, Jack Marburger, about this and we are in complete agreement. Space Station must be driven by a clear set of research priorities. OMB and the Office of Science and Technology Policy will be working closely with NASA and the research community in firmly setting these priorities. We welcome the suggestions of members of the Committee. Working hard over the next several months, we will identify science priorities and begin to lay out longer term directions. The IMCE task force has provided us an important starting point.

Any end-state must be driven by research priorities, and it must be fueled by innovation. As the Station begins to demonstrate the value of its research agenda and Station costs are brought under control, we anticipate the potential for enhancing Station research. I have seen, and I know the task force has as well, the seeds of creativity that are out there in NASA, the academic community and industry, and with our international partners. This will help achieve much more cost-effective solutions and to make sure that the best ideas are being pursued to get the most research out of the Station. The program has already moved past the point at which the previously envisioned habitation module and crew return vehicle is the presumptive solution to an expanded end-state. When and if the time comes to reassess resource needs for the program, any increases to fund an expanded end-state for the Space Station must be prioritized against other research activities of the agency and the nation. It is doubly important, therefore, that NASA nurture those seeds of creativity that will reduce costs and increase the likelihood that an end-state for Space Station will yield the research potential we had all hoped the Station would attain.

Strengthening Management

NASA is on the path to full-cost management, which is a principle the Administration is aggressively pursuing on a government-wide basis. I chair the President's Management Council, which coordinates management reforms and issues across the government. We are beginning to do things that move the full cost of doing business to the agencies, such as shifting retirement funding to all agencies so it is part of their integrated human capital strategy. I believe strongly that this approach will greatly strengthen the hand of managers to pursue the most efficient and effective solutions.

Many of the reforms proposed by the IMCE task force are, in effect, promoting full-cost management for the Space Station. I wholeheartedly agree to restructuring the Johnson Space Center and other NASA reporting arrangements so that the Space Station is a project-based organization with full authority and accountability over planned U.S. use of its resources. This is the right thing to do. This is an important step towards full-cost management.

Once the credibility of the program management is established and the program is in a more routine operational phase, we should consider taking full-cost management a step further. The user of the Space Station is primarily the research community - the Space Station is but a means toward the end of scientific discovery. For instance, the Space Science and Earth Science enterprises manage not only their research activities, but also the means to achieve them (i.e., spacecraft). Similarly, at some point in the future, the science enterprise that primarily uses the Space Station should be given the full-cost management authority over this orbiting laboratory. This way, the Station and other research platforms can be most effectively used for successfully addressing the high priority research objectives.

Next Steps

The IMCE task force report provides an excellent foundation that sets the direction for necessary reforms, but much more work is required to bring the reforms to fruition. NASA must move swiftly to assess and then implement the recommendations of the task force. We stand ready to help NASA meet the challenges that will come with implementation, and I ask that the Congress also commit to providing necessary flexibilities and authorities to enable the success of needed reforms. I know that at times, this may cause discomfort for members who are concerned that their districts may be impacted. At those times, I ask that each of you take a few steps back and think about the bigger future that these needed changes will enable. Realize that while unpleasant in the near-term, these reforms are the medicine that will restore NASA's health and produce great benefits to the nation in the long run.

The Administration will work with NASA to achieve success in this endeavor - no one wants this to fail. We already have government-wide legislative proposals before Congress that will provide NASA some important tools. For example, the proposed Freedom to Manage Act and the Management Flexibility Act would, among other things, give NASA and other federal agencies increased discretion and flexibility in attracting, managing, and retaining a high quality workforce. These proposals would give NASA more flexibility needed to compete with the private sector, fill skill gaps, and hire the needed financial, engineering and management experts needed to pursue state-of-the-art management and financial information systems as recommended by the IMCE.

We also plan to work closely with our international partners in Japan, Europe, Canada and Russia. We are committed to accommodating the Station partner elements and working with the partners so we can all realize the research potential of the Station. This will be an important aspect of the work as we go forward with necessary management reforms and new ways of doing business.

Beyond the specific recommendations of the task force, which were appropriately constrained by their terms of reference, there are other reforms that NASA is pursuing. Initiation of a non-government organization (NGO) to manage Space Station research is critical during these next two years. By all accounts, such an organization would improve the quality and productivity of the research results we can expect from the Space Station. Another priority reform is continued privatization of the Space Shuttle. This is an important step to free NASA from the burden of operating infrastructure that, in the long run, is the purview of the private sector from which NASA will ultimately procure services. Finally, opportunities for outsourcing and streamlining, as part of NASA's ongoing Strategic Resources Review, must be pursued. Indeed, the task force assumed about a half billion dollars in savings from these reforms in Human Space Flight.

A most important next step - one on which the success of all these reforms hinges - is to provide new leadership for NASA and its Human Space Flight activities. NASA has been well-served by Dan Goldin. New leadership is now necessary to continue moving the ball down the field with the goal line in sight. The Administration recognizes the importance of getting the right leaders in place as soon as possible, and I am personally engaged in making sure that this happens.

Implications for the Future

As stated by the task force, radical reforms to NASA's Human Space Flight activities are necessary to fulfill the scientific potential of the Space Station. These reforms and others are necessary to prepare the agency for what potentially lies ahead after Station. Human Space Flight reforms will create a new way of doing business and operating with humans in space. Shuttle privatization moves NASA away from owning and operating infrastructure, towards buying services from the private sector, and focusing on world-class science, technology, and exploration. The Space Launch Initiative enables a next generation of space access capability that makes those services much safer and much more affordable. The Strategic Resource Review promises an agency that is lean, agile, and focused on its primary objectives.

All of the building blocks for a comprehensive and aggressive strategy of reform for NASA are now being placed. If we build this foundation correctly, and I will do everything I can to make sure we do, there should be a significant reduction in the amount of resources needed to carry out what is currently on NASA's plate. Should NASA implement these reforms and achieve significant efficiencies, the Administration is committed to reinvesting those savings back into NASA to begin developing the capabilities necessary for a future of science-driven human exploration.

Raoul