Members of the House Science Committee lambasted the oversight of the National Polar-orbiting Operational Environmental Satellite System (NPOESS) program in a May 11 hearing, citing soaring costs, schedules missed and performance fees paid to the contractor when some performance goals were not met.

During an hours-long, heated hearing, Johnnie Frazier, the U.S. Department of Commerce inspector general, stated that even though NPOESS is more than $3 billion over initial cost estimates and 17 months behind schedule, prime contractor Northrop Grumman Corp. has received $123 million in incentive payments, or some 84 percent of the maximum possible under the contract.

NPOESS, a constellation of six satellites providing an environmental and climate monitoring system, is designed to combine weather satellite programs operated by the U.S. Departments of Defense and Commerce. TRW Inc., subsequently acquired by Northrop Grumman, was awarded a $4.5 billion contract in 2002 to develop the satellites, heading a team that includes Raytheon Co. A U.S. Governmental Accountability Office report released in November predicted that price tag for the program may swell to an eventual $9.7 billion.

Although elements of the NPOESS program are “technically very, very challenging,” it still is true that there should have been more “audit-able meetings” on NPOESS problems, Conrad Lautenbacher, administrator of the U.S. National Oceanic and Atmospheric Administration (NOAA), the division of the Department of Commerce that is overseeing development of NPOESS, said. He added that “there were not enough independent reviews.”

Rep. Sherwood Boehlert (R-N.Y.), chairman of the Science Committee, responded that Lautenbacher’s words sounded like “a mea culpa,” according to sister publication Defense Daily. As for the program being challenging, Boehlert said, “You don’t get paid for the easy ones. You get paid for the difficult ones.”

Lautenbacher said he sees that more program management reviews are needed to set the NPOESS program right.

One point where Boehlert and Lautenbacher agree is that NPOESS experience has been “an expensive lesson learned.” Still, Boehlert said, this lesson would not have been so expensive if corrective action had been taken sooner.

Rep. Bart Gordon, the ranking Democrat from Tennessee, termed the Frazier findings “bizarre,” and accused NOAA of “poor management oversight” as the program fell behind schedule “and well over budget.”

On the original $4.5 billion contract award, Frazier said that “NPOESS was more than $3 billion over budget.” That, he said, threw the NPOESS program into breach of the Nunn- McCurdy Act, which mandates that Congress be notified if a program exceeds original cost estimates by 15 percent or more, and says that a defense program can be halted if costs are 25 percent or more above original estimates unless the secretary of defense certifies that the program is essential to national security, more cost-effective alternatives do not exist and a new cost estimate is reasonable.

Because the Department of Defense and NOAA jointly support the NPOESS program, withdrawal of the Pentagon’s share of program financing would impose “a devastating impact,” Frazier said. NASA also is involved in the development program.

Frazier said it is unclear at this point how the Nunn-McCurdy review will end, pointing to “two overarching management and contract weaknesses that contributed to the unchecked cost and schedule overruns.”

First, he said, officials did not challenge optimistic assessments as to just how problems with a sensor, the Visible/Infrared Imager Radiometer Suite (VIIRS), would affect the overall NPOESS program. Second, there were “excessive” award fees for the contractor, despite problems in the program.

That is not how award fees are supposed to work, Frazier said. “Award fees are supposed to motivate a contractor to strive for excellence,” he said. But with NPOESS, despite “ongoing, significant delays and cost overruns, the prime contractor received close to the maximum fee amounts for the first five billing periods,” or “an average 90 percent of available incentive payments.”

Only when the sixth billing period was reached was contractor performance rated unsatisfactory, Frazier reported. Even then, “Northrop Grumman received 48 percent of the potential fee amount — $10.7 million,” he said.

“These payments appear excessive and reflect an award fee plan whose evaluation criteria do not sufficiently focus on the completion of the most critical or high-risk tasks,” Frazier said. In sum, the award fee system “allows incentive payments for poor performance and, by rolling over unearned fee amounts from one period to another, gives the contractor multiple opportunities to earn incentive dollars,” he said.

Also, the system leaves too much discretionary authority in the hands of a “fee determining official.” Frazier asserted.

Stepping back and viewing the broader picture, however, Frazier said the payments in the NPOESS program are not unique. “This is not an anomaly,” Frazier said. “In this community [of contractors and agencies], this often happens.”

Rep. David Wu (D-Ore.) repeatedly attempted to get Lautenbacher to say that the NPOESS woes mean that some capabilities planned for the satellites will have to be jettisoned to save money, at least for the time being, with those capabilities to be added to the satellites later. Wu said those costs are being pushed into the out years.

But Lautenbacher declined to do so. While it might be that “you cannot buy the program that was originally forecast” with money likely to be available, Lautenbacher declined to state just how this crunch will be resolved.

–Dave Ahearn