NASA IG: ISS Cost U.S. $75 Billion So Far, Estimates of Future Costs Overly Optimistic

NASA’s Office of Inspector General (OIG) released a report today examining cost and technical challenges NASA faces in extending operations of the International Space Station (ISS) through 2024.   Among its conclusions is that NASA’s estimate that ISS operations will cost $3-4 billion a year is overly optimistic especially because the cost of commercial crew services purchased from U.S. companies are expected to be higher than what NASA currently pays Russia.

Before looking at future ISS costs, the OIG first calculated how much the ISS has cost the United States already (it did not include funds spent by the international partners).   The figure of $100 billion has become an urban legend, but there has been no clarity on its provenance or accuracy.  NASA officials often use $60 billion.  One challenge in calculating ISS costs is how to account for space shuttle launches.  NASA typically uses marginal costs, while the Government Accountability Office (GAO) uses average costs.

The OIG report uses GAO estimates for space shuttle launch costs, adjusted for inflation.  In total, it calculated that the United States spent approximately $75 billion on the ISS through 2013:  $43.7 billion for construction and program costs plus $30.7 billion for 37 shuttle launches. 

Another difficulty in calculating sunk costs, however, is when to begin counting the dollars spent.  The space station program began in FY1985 (President Ronald Reagan announced it in his January 1984 State of the Union Address).  NASA spent $11.2 billion on the program, then called Freedom, before cost overruns and the desire to add Russia to the partnership led to a restructuring in 1993.  Since then it has simply been called the International Space Station and some people consider that the starting point, though it is easy to argue that the first nine years should be included since the design of the Freedom and the design of the ISS are very similar.  Even if the designs were not similar, the cost should be for the space station program in its entirety, not just the phase named ISS (otherwise anytime a program goes over budget, officials could simply change the name and start anew).  The OIG report is not explicit about the starting point for its calculations, but in response to a question from SpacePolicyOnline.com, the report’s project manager, Kevin Fagedes, confirmed that the report uses 1994 as the starting point. 

Thus, it is more accurate to say that the space station cost the United States $75 billion from 1994 through 2013 and does not include the first nine years of spending (FY1985-FY1993).  It also does not include the costs borne by the international partners.

The overall thrust of the OIG report is not the past, but the future, in any case.   The OIG identified a number of issues and, as is customary, provided a draft of the report to NASA to allow the agency an opportunity to respond.   NASA’s comments are included in their entirety as an appendix and summarized in the text.

Future ISS Costs.  The OIG disagreed with NASA’s estimate that future operations will be in the $3-4 billion a year range.  Calling the NASA estimate “overly optimistic,” the OIG noted that NASA assumed the cost for transporting crews to and from the ISS using commercial crew systems would be the same as what Russia charges even though “the Program’s independent government cost estimates project significantly higher costs” for commercial crew.  NASA is using the Soyuz figure ($70.3 million per seat in FY2016) as “a planning tool and tracking the cost of commercial crew as a program risk…”, the OIG reports.

It also cautions that the other ISS partners have not agreed to the extension to 2024 and if any do not participate, the remaining partners may have to pay more.   The OIG recommended that NASA solicit commitments from the other partners to “improve ISS cost sharing.”  NASA concurred.

The OIG also is concerned about a projected shortfall in Cost Management Reserves between FY2015 and FY2018 of $663 million.  The OIG notes that those are particularly critical years for reserves as NASA begins paying for new commercial cargo and commercial crew contracts.

Technical Challenges.  Apart from cost issues, the OIG also concluded that technical challenges may be encountered, even though NASA has not identified any “major obstacles.”  The OIG focused especially on the potential need to augment the ISS’s power generating capacity because of “continued degradation of the solar arrays.”  Those and other replacement parts will be difficult to transport to the ISS, it noted.

ISS Utilization.  ISS utilization in another area of concern.  Using ISS for research for four additional years still will not be enough to address all the risks involved in long-term human spaceflight, one of the major research goals for the program, the OIG said.  It wants NASA to prioritize its research to focus on human health risks for long duration exploration.  NASA agreed, but has not yet completed that prioritization so the OIG considers it an open issue.

Furthermore, the Center for Advancing Science in Space (CASIS), an entity created by NASA to facilitate use of ISS by non-NASA researchers, faces challenges in attracting customers.   NASA provides $15 million a year to CASIS, but apart from that it has raised “just $14,550 in cash and received pledges of $8.2 million to supplement” the NASA funding.

NASA requirements that researchers assign certain patent rights and data rights to the Government is one obstacle, the report says, and NASA has sent a request to Congress to change the law so researchers may retain all rights, but the language has not made its way into legislation yet.  NASA concurred with the OIG recommendation that a legislative remedy be pursued.

Boeing Award Fees.  Finally, the OIG found that NASA has not been accurately performing evaluations for award fees to Boeing for sustaining engineering.  NASA is supposed to use weighted scoring with grades in four categories, but has only been doing so in two.  The OIG concluded that NASA has “paid Boeing between $6.7 and $13.2 million in award fees we could not validate…”  

NASA disagreed with this finding, the report says, arguing that it is not required to do that and instead uses a qualitative assessment.   The OIG report goes on to note that this is not the first time it has questioned NASA’s award-fee practices: “In our view, NASA’s policy promotes a philosophy that as long as a mission ultimately provides good science data the Agency will overlook cost and schedule overages that occur during project performance.”

Note:  This article, originally published on September 18, 2014, was updated on September 19, 2014 with the response from the OIG office about how it calculated the costs of the space station program.