Case Studies 1, 14: From Space Acquisitions, GAO-07-96, November 17, 2006

Estimated costs for the Department of Defense’s (DOD) major space acquisition programs had increased by about $12.2 billion from initial estimates for fiscal years 2006 through 2011. Cost growth for ongoing Air Force programs above initial estimates accounted for a substantial portion of this 44 percent increase. For example, Space Based Infrared System High program costs were originally estimated at $4 billion, but the program was now estimated to cost over $10 billion. Estimated costs for the National Polar-orbiting Operational Satellite System program had grown from almost $6 billion at program start to over $11 billion.

For the most part, cost growth had not been caused by poor cost estimating, but rather the tendency to start programs before knowing whether requirements could be achieved within available resources—largely because of pressures to secure funding. At the same time, however, unrealistic program office cost estimates had exacerbated space acquisition problems. Specifically, with budgets originally set at unrealistic amounts, DOD had to resort to continually shifting funds to and from programs, and such shifts had costly, reverberating effects.

GAO’s analyses of six space programs found that original cost estimates were particularly unrealistic about the promise of savings from increased contractor program management responsibilities, the constancy and availability of the industrial base, savings that could be accrued from heritage systems, the amount of weight growth that would occur during a program, the availability of mature technology, the stability of funding, the stability of requirements, and the achievability of planned schedules. At times, estimates that were more realistic in these areas were available to the Air Force, but they were not used.

GAO reported its findings on November 17, 2006, in Space Acquisitions: DOD Needs to Take More Action to Address Unrealistic Initial Cost Estimates of Space Systems, GAO-07-96.