The Boeing Company is proud to be NASA's prime contractor for the Space Station. As you know, the International Space Station is the largest and most complex international scientific project ever undertaken. It involves 16 nations from around the globe working together to develop a world class laboratory in space. Since I testified in the Senate, Brazil has become the latest nation to join the Space Station team.
By building the International Space Station we are creating an international laboratory in space that will speed discoveries in health, environmental and materials research. It will serve as an investment in America's future, creating thousands of high technology jobs and inspiring our youth to pursue studies in science and engineering.
As a model for international cooperation, the Space Station also presents unique engineering and management challenges. Ensuring that the hardware, software, people and processes from 16 nations all work together to produce a safe and productive laboratory in the harsh environment of space is an unprecedented undertaking. This is why Boeing was so honored to be chosen by NASA as its Space Station prime contractor in 1993. We pride ourselves on our expertise in large scale, complex systems integration. We view the International Space Station as an opportunity to take up a complex challenge on behalf of America's space program and its foreign partners.
Background
When Boeing was selected as the prime contractor about four short years ago, work on the predecessor to the International Space Station--Space Station Freedom--was parceled out among multiple NASA Centers and contractors, each working on discreet "work packages." A separate program office existed in Northern Virginia. And Russia was not yet a participant on the program.
We believe NASA and Boeing have come a long way since that time. The Space Station has been redesigned and the"work packages" consolidated into one streamlined prime contract structure (NASA contract 15-10000). A single program office has been set up the Johnson Space Center to manage the project. And Russian participation, while not without its challenges, has been incorporated into the program.
We believe we are making great progress. Over 220,000 pounds of flight hardware have been produced to date. The first element of the Space Station, the Russian FGB which is being built under a subcontract to Boeing, is on schedule for launch next June. The second elements, including Node 1 and both Pressurized Mating Adapters, are at Kennedy Space Center undergoing final preparations for a July 1998 launch. Additional Space Station hardware is being completed around the clock throughout the country and the world. By the end of FY98 we will be more than 80% complete with Boeing's portion of the program and most of the development risk will be behind us.
Management Challenges and Improvements
Notwithstanding the success experienced to date, technical issues encountered during the ongoing development phase of the program continue to create management challenges in both schedule and cost performance. The program is currently approximately five weeks behind schedule to our baseline plan, but in-place work around plans support all hardware delivery and launch dates. Although our recent estimate at completion (EAC) reflects a $600 million variance at completion, we are continuing to pursue any and all alternatives to optimize cost performance over the remaining contract period. In fact we have committed to improve our performance in six specific areas and, I believe, we are demonstrating progress in all of them.
Second, we are working to improve our subcontractor performance. We convened a summit this summer with the top executives of our suppliers. We have reinforced their commitment to performance and we are employing additional management tools to ensure their success. And we plan to schedule a follow-on summit to continue to see that their performance improves. We are seeing some progress in some of our subcontractors' performance, but we will need to see more before we will be satisfied.
Third, we are working around the clock to meet critical schedule milestones. When I testified before the Senate six weeks ago, I said one of our key schedule milestones was to turn on the power to the "heart" of the Space Station, the complex laboratory this November. I am pleased to say that this occurred on November 1. Another major milestone is delivering the lab next August. Meeting these key milestones will allow us to conduct both disciplined and aggressive destaffing, thereby reducing the costs of the Space Station. We have developed and are tracking detailed plans to meet these milestones and we expect to do so.
Fourth, we have created special incentives to acquire and retain key software engineers and managers. Software skills are in high demand around the country and we need to ensure the Space Station retains the "best and the brightest" software experts. At this point I am pleased to say we have filled all outstanding needs for critical design and test personnel in Houston and we have expanded this initiative to other Boeing sites.
Fifth, Boeing has committed $30 million to build a Software Integration Facility. This will improve our ability to conduct an effective multi-element integrated test program. The initial design review for this facility has been completed, long lead purchase orders have been released and some of these purchased items have begun arriving at Boeing.
Finally, we have added even more senior management involvement and visibility on the program. My management has made it clear that the time, talent and resources of the entire Boeing Company are available to address any technical management and financial issues on the Space Station. Our entire executive management ream is intimately involved in working to resolve critical Space Station issues.
Summary: Evidence of Progress
I believe we are making progress in fulfilling our commitments and improving our performance on Space Station. As I mentioned earlier, over 220,000 pounds of flight hardware has been built. Critical hardware is on track for delivery and launch next year and additional space station hardware will follow shortly. Even in the six short weeks since my Senate testimony, we have made significant progress.
As I noted before, we have recently successfully turned power on to the lab. In addition, we have just completed a series of very important tests of the electrical performance, launch environments and orbital durability of the P6 electrical power cargo element. This massive, 45 foot-long element has now been moved from its test site in Colorado to Huntsville, Alabama where it will begin structural testing. Last week we successfully tested an engineering version of our first flight software with the Node 1 flight hardware at Kennedy Space Center. We also recently completed all of the structural testing of the Node and have now confirmed its structural suitability for launch. This past weekend we completed assembly of the first integrated truss element structural test article (known as SO) at Huntington Reach and have now begun assembly of the flight article.
While significant technical, schedule and funding challenges remain, our performance trends show we are moving in the right direction. With the continued support of both the Administration and Congress, NASA and Boeing will deliver on our promise to start launching the world's first permanent, international laboratory in Space next year.
I appreciate the opportunity to appear before the Subcommittee and I would be happy to answer any questions you have.