Mr. Chairman and Members of the Subcommittee, I am pleased to appear before the Subcommittee to discuss the current status of the International Space Station (ISS) program. As we approach first element launch, I want the Subcommittee to know that there is a strong sense of confidence and determination across the NASA, contractor, and international team concerning the approaching initiation of assembly of the ISS, the premier space research platform, on-orbit. I see it in the clear focus on the details of tasks at hand by the employees at the various production and integration sites. I hear it in their voices and see it in the attitude with which problems are attacked and resolved. These devoted men and women are now seeing their individual efforts come together with those of others into integrated flight hardware. Hours of concentration on design drawings, welding, qualification and test planning, and hundreds of other activities are resulting in flight elements that have been, or will soon be delivered to the Kennedy Space Center (KSC) for integration and launch. This confidence is not limited to the United States; it radiates across our partnerships. The trust and confidence built between the joint teams established with Russia through the Shuttle-Mir program is growing daily and is integral to the success of the ISS. As on-orbit assembly begins, we will continue to develop similarly strong operational teams with our other International Partners.

We are now in our fourth year of development since President Clinton asked NASA to redesign the Space Station in the spring of 1993. Since then, the ISS program has moved steadily and aggressively toward overcoming many challenges to develop this unprecedented international orbital research facility, the doorway to the future of human space flight.

One of the tools we use to assess our progress is termed "earned value management." Using that tool, we can assess our current status as having completed (or "earned") 98% of the scheduled work while spending at 105% of the planned expenditures. Program funding reserves have been used to offset this difference. Another tool we use to track the program is the number of changes to the baseline of hardware and software system designs. For a development program of this magnitude, the number of baseline design changes has been about average.

We are currently at the peak period of hardware and software development activities and are concurrently completing the development of the pre-operational support infrastructure of control, training, and processing facilities. The process of preflight simulation is underway, so that the personnel and systems responsible for flight and ground operations are fully trained. On an overall basis, I am proud of the performance of our people-civil servants and contractors alike. We set extremely high standards for their performance, so as to push everyone to peak efficiency and effectiveness. Given the complexity of this undertaking, meeting those very high expectations is a constant challenge.

As you know, following a review which we concluded late this summer, I recommended to the Administrator that additional funds be made available in FY 1998 for the International Space Station program. I concluded that, as the program is going through its peak period of development activity and is preparing for initial assembly and operations, the budget request was insufficient to cover both known and unknown challenges. For one, we had initiated a program to provide assurance against further delays or shortfalls in the planned contributions of the Russian Space Agency. No funds were included for that work in the FY 1998 budget request. Second, there were insufficient reserves available to the program manager to address unknown development challenges. Third, the program manager faced the prospect of further shortfalls in the contractor performance against admittedly tough, but doable, contract performance standards. My estimate at that time was that an increase of $430 million was warranted, with somewhat more than half of that amount to cover the changes in scope and shortfalls in performance to date, and the remainder to cover future unanticipated problems.

While we are grateful for the partial accommodation in the FY 1998 VA-HUD-Independent Agencies appropriations bill (P.L. 105-65) of this requirement, the funding appropriated for the ISS is still $200 million short of the amount necessary. We are disappointed that the appropriations bill did not include the flexibilities sought by NASA to identify the remaining $200 million within the Science, Aeronautics and Technology and Mission Support appropriations accounts; we believe these adjustments could have been made without direct impacts on the productivity of our science and technology program.

NASA stands by our stated requirement of an additional $430 million to conduct the Program in FY 1998. The Space Station program is assessing the feasibility of maintaining Program schedules within the amount provided in P.L. 105-65. Based on this assessment, NASA, working with the Administration, will make a determination as to steps necessary to maintain the Program launch schedule including, if necessary, options to bring additional resources to the Program. We will outline our proposed approach for the Committee in the initial FY 1998 operating plan.

Prime Contractor performance problems have indeed contributed to our current funding situation. However, before discussing performance issues in greater detail, I would like to first review the progress made on near-term ISS flights. In addition, I will highlight the progress of each of our International Partners.

The design and development of ISS elements for the first six flights is largely complete, and we are well into integration, and qualification testing. By this time next year, all the elements for these flights will be delivered to their respective launch sites for integration and checkout prior to flight. In this same time frame the next series of flight elements will be completing manufacturing and outfitting and will begin qualification testing. Maintaining current ISS program plans will more than double the quarter of a million pounds of flight hardware already completed and will result in the completion of over 80 percent of the total development activity by the close of FY 1998.

The first flight to be launched, the U.S. funded-Russian built Functional Cargo Block (FGB), is proceeding approximately one month ahead of schedule toward a June 1998 launch from the Baikonur Cosmodrome. A full integrated systems test as well as new propulsion system modifications to provide more robust capability have been completed. The modified FGB is now in the process of going back through integrated testing. Shipment to the Baikonur launch facility is scheduled for January.

For assembly Flight 2A, Node 1 and Pressurized Mating Adapters 1 and 2 (PMA-1 and PMA-2) have been delivered to KSC, where acceptance testing is underway. We are making progress in preparation for this flight, but it has not been without challenges. We are working to recover from late deliveries of Common Berthing Mechanism components and have started integrated hardware and software testing. The Node and PMA-1 have completed early stages of electrical power and communications testing. This is the first time Space Station flight hardware and software have operated together.

The major flight element for Flight 3A is the Z1 Truss, on which control moment gyros (CMGs) and the S-Band and Ku-Band communication and telemetry equipment will be attached. The CMGs have successfully completed qualification testing. The Z1 flight unit is in assembly in Tulsa and is progressing toward completion in April 1998. The Spacelab Pallet Manual Berthing Mechanisms are also in final assembly. After a month delay, qualification testing started and is slated to run through next March. Work-arounds have been identified to keep test completion on schedule. This flight element will be delivered to KSC in May 1998.

Flight 4A will place the first U.S. photovoltaic array for Station on orbit. It also launches the Integrated Electronics Assembly (IEA), which contains many Orbital Replacement Units (ORUs). An integrated qualification unit containing the IEA, solar arrays, photovoltaic radiators and ORUs is fully assembled and has successfully completed electromagnetic interference and acoustic testing in Denver. The IEA will be delivered to KSC in January 1998. While there are several ORUs that have had manufacturing problems that the Prime Contractor is addressing, all other elements are tracking to their plans. The major components for flight 4A have been transported to Huntsvilleís Marshall Space Flight Center for static testing.

Flight 5A, the U.S. Laboratory, is our most significant challenge. The Lab structure has been outfitted with one endcone and all four of its standoffs, which contain the elementís electrical cable trays and fluid lines. Just last Saturday, we achieved a significant milestone by conducting the first power-up of the Lab. The Common Module, which is the structural test article for the Lab, completed modal survey and vibroacoustic tests ahead of plan. It is in preparation for shipment to Seattle, where it will undergo static testing later this year. The first avionics rack is in stand-alone testing. Other internal Lab racks containing systems equipment and experiments are proceeding in build up, but are working around late parts deliveries. Risks have been identified in the area of flight software. The main schedule concern that we are addressing is the ability of the Lab to support element-to-element integrated testing at KSC prior to launch. While schedules remain tight, we believe that recovery plans will support the integrated test and meet the current launch date of May 1999.

Relative to Russian progress, a complete integrated review of Russian development schedules and revisions to these schedules occurred at the Service Module (SM) (GDR) Designer's Review held on September 12 in Russia and was attended by senior NASA managers and technical staff. Significant progress had been made; however, as with our own schedules, there were areas where work-arounds were needed to recover schedule slippage. Our assessment at the GDR was that NASA had no specific reason to doubt Russian commitment to a SM launch in December 1998. All known problems were understood and work-around plans indicated that the launch would not be impacted. Significant work was occurring, funding was flowing, and deliveries were being made by the Russian contractors. The majority of the internal secondary structure has been installed. However, the flight article shipment to RSC-Energia for testing in the integrated test stand was behind schedule due to thermal control system modifications resulting from Mir lessons learned, recent electrical cable production problems, and late delivery of some equipment for installation. Relative to other SM subsystems, the Electrical Analog (i.e. flight test unit) assembly was completed and arrived at Energia on September 1, 1997.

It is also worth noting that Russia has made significant progress on other elements supporting the ISS such as the Progress M1, the docking modules, and the Soyuz modifications. Understanding the schedule risks, the Space Station Control Board (SSCB) held in late September confirmed the decision to retain the SM in the December 1998 time-frame. This decision was made by all the International Partners.

In the months since the SSCB, our observation is that the Russians have not made significant schedule recovery and, in fact, have continued to lose schedule due to continued cable production problems. Although we have assurances from the Russians that they will meet their December 1998 launch date, schedule erosion is estimated at two months and we have not seen data that show how the schedule can be recovered. We will continue to monitor their progress, and a further assessment will be made in January at the third GDR in Moscow. Let me state that even if the SM is delayed by two months, the modifications that have been made to the FGB allow us the flexibility to maintain our schedule for the launch of the FGB and the U.S. Node 1.

Last year, and into the spring of this year, the Russian Space Agency experienced difficulties in meeting their ISS objectives due to a lack of funding from the Russian government. Since April 1997, adequate funding has been supplied. Most recently, in August, President Yeltsin signed a decree providing an additional 580 billion rubles

(~ $99.5 million) to the program. Russian contractors have not raised any recent concerns about adequacy of funding, and it is expected that remaining funding will be available when required. We continue to closely monitor funding progress.

Our other International Partners -- Europe, Japan and Canada -- are proceeding with their commitments to the Program, investing approximately $6 billion to date for design and development of their contributions. The European Space Agency (ESA) is continuing development, on schedule, of its key contributions to the ISS program of the Columbus Orbital Facility (COF), a pressurized laboratory, and the Automated Transfer Vehicle, a transfer vehicle which will be used for ISS logistics and propellant resupply and reboost activities. The Japanese program is also on schedule with the development of the Japanese Experiment Module (JEM), which includes a pressurized laboratory, an experimental logistics module, a robotic arm, an exposed facility for research, and automated transfer vehicle for logistic resupply of the ISS. Despite continuing budget constraints in Canada, the Canadian Space Agency has recently completed the acceptance review of the Space Station Remote Manipulator System and have committed to the development of the Special Purpose Dexterous Manipulator.

On a bilateral basis, NASA's cooperation with the Italian Space Agency (ASI) is proceeding on schedule for their contribution of the Mini Pressurized Logistics Modules (MPLMs). On October 9, 1997, a revised Memorandum of Understanding was signed between NASA and ASI to include their contribution of additional MPLM flight units with enhanced operational capabilities. In addition, on October 14, 1997, NASA and the Brazilian Space Agency (AEB) signed an Implementing Arrangement for Brazil's contribution of Space Station hardware and payload facilities in exchange for utilization from NASA's allocation.

NASA has also been working with Europe and Japan on arrangements for the offset of their cost commitments to NASA for launch and operation of their elements. On October 8, 1997, NASA and ESA signed an arrangement for the offset of COF launch costs. Under this arrangement, ESA is committed to provide NASA with ISS Nodes 2 and 3 together with other Space Station hardware. Similarly, on September 10, 1997, NASA and the National Space Development Agency of Japan (NASDA) signed an Agreement in Principle for Japan's provision of the Centrifuge Accommodation Module and associated hardware in exchange for launch of its elements on the Space Shuttle.

The ISS Partners Europe, Japan, Canada and Russia are planning to sign a new Intergovernmental Agreement later this year or early next year to include Russia's participation in the International Space Station program. In parallel, NASA will also sign Memoranda of Understanding with each of the respective Cooperating Agencies.

It is obvious that the United States and its International Partners have made significant progress, now having passed the 60% completion mark. At the same time, the Committee is aware that NASA has sought funding for ISS beyond amounts assumed in the President's FY 1998 budget. We have experienced manufacturing difficulties including shortages and delayed delivery of critical parts such as electrical connectors. We have determined through our development and qualification test programs that modifications had to be made to our flight hardware to ensure that Program performance requirements are met. Examples include the addition of struts to the Node structure to ensure on-orbit pressure integrity and recovery from performance problems with the Common Berthing Mechanism. We have also resolved design difficulties with many components in the Stationís electrical power system. These types of problems are routinely identified and resolved through planned development and qualification testing. While we feel that sufficient up-front design work has been done, these kinds of discoveries are nearly always made during the test phase of any program, and changes will not be limited to those encountered to date. As you know, this is a major reason to maintain Program reserves.

Other issues encountered as the Program has moved from design and development to integration and testing of flight hardware and software include definitization of requirements for sustaining engineering and Program spares. Sustaining engineering pays for the cost of maintaining a minimum workforce level to handle modifications and issues after the hardware has been delivered to the Government. The ISS Program chose to negotiate these costs separately from the base contract to allow for better definition of the systems and hardware/software prior to negotiating cost. Like sustaining engineering, sparing requirements were not included in the original Prime contract in order to allow systems designs and flight planning to mature. The annual cost cap and flat funding profile of the ISS budget have made it difficult for us to apply adequate Program reserves toward these areas at a level proportional to the amount of work being performed during the peak development phase of the ISS. Despite this severe restriction, we have been successful to date in finding ways to maintain most development schedules. Additionally, Program decisions have been made to obtain significant components of the Program through offsets negotiated with our International Partners, which include the recent decision to use a third Node element (Node 3), built by the European Space Agency, as the habitation module until late in the assembly sequence when the U.S. Habitation module will be launched. In several cases the hardware being provided through these offsets has allowed cost avoidance through the minimization of U.S. effort associated with these elements.

The Committee has been briefed on the latest cost estimate made by Boeing, the ISS Prime Contractor. I would like to clarify the effect of the Prime overrun, particularly the effect on FY 1998. In July, Boeing issued a revised cost Estimate at Completion (EAC) reflecting a $600 million Variance at Completion (VAC) from their current contract. This estimate includes $389 million of overrun against work completed through September 1997, leaving an estimated ìoverrun to goî of $211 million, of which they believe $111 million will be needed in FY 98. NASA has also evaluated the work remaining to be performed and feels that the contract could overrun by $800 million (rather than $600 million), of which $207 million will be required in

FY 1998. It should be noted that $77 million of the NASA estimate for FY 1998 was already included in the President's FY 1998 budget, with an additional $130 million being requested by NASA for Prime Contractor cost growth. I feel that it is prudent to plan for the more conservative estimate.

With that background on the Prime Contractor performance, the next item to understand is NASA's FY 1998 forecast, where NASA has stated that an additional $430 million is required beyond the Presidentís FY 1998 budget submit. The $430 million is comprised of the additional $130 million estimated for the Boeing overrun discussed above, as well as other adjustments where we have better cost definition for sustaining engineering (+$13.4 M), spares (+$29 M), and make operable changes (+$166 M). It also includes an additional $162 million for Russian-driven changes, of which $100 million has been allocated for step one of the Russian Program Assurance. Lower level adjustments in non-Prime activities such as Government furnished equipment, research programs, and extravehicular activity preparation resulted in a decrease in funding requirements of $34 million from the Presidentís FY 1998 budget. Finally, assuming that the areas of concern listed above were augmented as specified, FY 1998 reserves could have been reduced by $36 million. This leaves the Program with approximately $200 million in reserves, including the anticipated $50 million in uncosted carryover from FY 1997, to cover the unforeseeable problems which will occur in FY 1998.

Make no mistake, there are still development issues remaining - particularly in the areas of command and data handling; software; qualification test activities for thermal control and outboard truss segments, photovoltaic electronics system and other electrical orbital replaceable units; and in the area of Lab software and Lab hardware assembly and test. However, even at current trends, future cost growth will be substantially less than it would be if work must be deferred due to budget limitations.

Several "cutback" options are under consideration by the Program if the additional $200 million in FY 1998 funding is not secured. None of these options are without significant pain and risk to the Program. However, the inadequate level of reserves for FY 1998 requires some action to be taken. Options under consideration include (1) deferring work in the baseline program, thereby delaying the Phase III schedule, (2) delaying the planned research activities during assembly, or (3) terminating our Russian contingency activity, including the ICM, which would increase the risk of incurring significant cost if there are further Russian launch delays. The ICM is intended not only to protect against further delays of the Service Module, but also to provide risk reduction from delays in Progress propellant resupply to the ISS.

As the Associate Administrator for Space Flight, I believe the above options would place the program at risk to (1) deal with the technical development challenges of this highly complex international endeavor; (2) continue to mitigate the risks of Russian government problems; and, (3) maintain an adequate level of research activity as early as possible. I am convinced that maintaining the baseline technical and schedule plan for Space Station in FY 1998 is the key to controlling total costs. I am working with the NASA Administrator and the Administration to address these issues

In conclusion, I believe the FY 1998 VA-HUD-Independent Agencies appropriations bill, as enacted, does not provide the necessary level of funding to maintain the International Space Station baseline technical and schedule plan. I am convinced that the total FY 1998 funding requirement as outlined by NASA represents a prudent path to bring this Program to its operational phase at minimum cost to the U.S. taxpayer.

At a hearing before the Senate Subcommittee on Science, Technology, and Space earlier this year, the Chairman of the Commerce committee, Senator John McCain brought up the issue of developing a realistic program cap on Space Station. NASA is working with the GAO so that our cost estimates are understood and has impaneled a group of experts independent from NASA to look at the issue of total program cost. Mr. Jay Chabrow, an expert from the private sector with over 30 years experience in contracts, pricing, cost estimating, analysis and procurement for aerospace projects has formed an external review team and that team is in the process of collecting data from the various Program elements. Mr. Chabrow currently serves as a member on the Advisory Committee on the International Space Station. This team consists of experts from outside of NASA capable of performing a detailed cost analysis. I anticipate this team to first conduct its assessment independent of the GAO, but remain in existence for a period thereafter to work together with the GAO to address its analyses and any additional concerns the GAO might have.

We are less than nine months from launch and know of no major technical impediments in our path. As U.S. flight elements continue to be delivered to their KSC launch site, development staffing levels will continue to drop. We are not on the homeward slide, but the mountain is no longer before us. There will be many challenges to overcome, but we will forge ahead as surely as we have come this far.

NASA, the U.S. aerospace industry, and our foreign partners have formed teams comprised of exceptional individuals who are working closely together to build a space station which will have a profound impact on the whole world. We have worked through a daunting set of problems and have made outstanding progress in this complex and challenging endeavor, and I am confident that with this dedicated International Space Station team and with the support of the Administration and the Congress we will deliver as promised.