Government Failure: The NPOESS Mess

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The House will soon again look into a government failure called "NPOESS," which is a set of weather related satellites now being built at exorbitant cost by the usual array of defense contractors. (NPOESS stands for National Polar-Orbiting Observing Satellite System.) Hearings on its mammoth cost overruns will commence in June. One year ago, in similar hearings, the House Committee on Science and Technology reported that the initial baseline cost of the project of $6.8 billion had grown to $11.5 billion. The original delivery date of 2008 had stretched out to 2013. This cost is over $100 for every one of the 105 million households in the U.S. and nearly three times the already excessive $4 billion annual budget of the National Oceanic and Atmospheric Administration (NOAA) that helps coordinate the program. The eventual delivery date will be beyond 2013, and the eventual costs will be higher than $11.5 billion. In addition, the plans have been scaled back and the equipment delivered will fall far short of the original plans.

Last year, Rep. David Wu pointed out that "there are enormous risks built into" the plan, and that "Given this project’s track record, no one can be certain how it will perform in orbit." He said that "The plan also assumes that we will have 13 successful launches of 13 satellites constructed by four different agencies on schedule in each case." He added that "risk also overshadows the cost assessment." He expressed little confidence in the $11.5 billion number, because "we are canceling one of the two key instruments for weather forecasting and starting an entirely new acquisition…And even those items that are moving forward have had problems; problems that will need to be addressed and therefore, will cost money."

Acting upon a 1992 recommendation of the National Space Council, President Clinton authorized NPOESS in 1994. Incredibly, twelve years later at the 2006 hearings, Rep. Gordon said "I have only a bare-bones, heavily-censored description of the redesigned polar satellite program. That is simply not sufficient…we are on a path to purchase four satellites instead of six, with fewer instruments and reduced capability." Representative Wu noted that "Today’s hearing is premature. Neither the Members nor the staff has received sufficient, substantive materials on the Nunn-McCurdy decision that would allow us to exercise real oversight; to do our job and be accountable for tax-payer dollars. The result is that the witnesses before us today can pretty much tell us anything they want and we can’t sort out the hard facts from the hopeful scenarios."

The failure of the government bureaucracies to provide information about NPOESS was not new. One year earlier at the 2005 hearings, "NOAA Administrator Vice-Admiral Conrad Lautenbacher (ret.) and Undersecretary of the Air Force Ronald Sega promised at the hearing to provide the Committee with fuller and more rapid information following repeated complaints from Members on both sides of the aisle that NOAA has withheld information in the past. Specifically, Lautenbacher and Sega pledged that they will quickly provide the Committee with the new cost and schedule estimates and policy options that they will be discussing at a meeting next Tuesday on the future of NPOESS."

Clinton merged two weather satellite programs, the one run by NOAA for civilian purposes and the one run by the Department of Defense for military purposes. Three government agencies, NOAA, DoD, and NASA, managed the merged program. The first steps were easy ones, involving re-arranging control over existing satellite technology and launching. This led an NOAA public affairs official in late 2002 to make this unaudited statement: "The NPOESS program has provided more than $670 million in savings through Fiscal Year 2001, and it is expected to save $1.6 billion in acquisition and operational costs through the System Life Cycle."

However, the real test, which the program failed, was to develop a single satellite to accomplish all the civilian and military measurement tasks with advanced technologies. These tasks involved "55 atmospheric, oceanic, terrestrial, climatic and solar-geophysical data products…guiding the development of advanced technology visible, infrared, and microwave imagers and sounders that will provide enhanced capabilities to users and improve the accuracy and timeliness of observations. The data that will be collected by the NPOESS suite of instruments fully encompass the Earth science disciplines. When operational, NPOESS will truly be an u2018environmental observing system,’ not just an advanced u2018weather’ satellite."

The scope of the NPOESS missions and the demand for sophisticated measurements went well beyond weather measurement. They were clearly shaped by politically popular environmental and climate change themes. NPOESS was to collect and distribute "remotely-sensed land, ocean, and atmospheric data to the meteorological and global climate change communities…It will provide atmospheric and sea surface temperatures, humidity sounding, land and ocean biological productivity, and cloud and aerosol properties." One document promises "oceanic and terrestrial applications, such as harmful algal blooms, volcanic ash and wildfire detection." Northrop Grumman promised not only "more precise advance warning of hurricanes and severe weather," but also to "revolutionize battlefield situational awareness," by cutting weather observations from hours down to 15 minutes.

One writer on space matters, Taylor Dinerman, traces the NPOESS mess to two factors. The proximate factor is that NPOESS was too ambitious, requiring that 7 out of the 13 instruments have new technology. "This is contrary to the well-known principle that only one or — at most — two new technologies should be incorporated into any new space system. It was NASA’s decision to ignore this principle that led to the demise of the X-33 program." The underlying factor he opines is that "In those days, the fact that two of the most powerful men in Washington, Al Gore and Newt Gingrich, were both technophiles and true believers in the digital revolution made it easy for proponents of extremely ambitious projects to sell their ideas."

Dinerman’s view is helpful, as far as it goes, because it does pinpoint the factor of overconfidence that contributes to government failures. But we need to look more deeply if we are to understand this root of government failure and see why government failure is and always will be a necessary feature of government as we know it. It does not depend on the presence of an Internet Revolution that turns men like Al Gore and Newt Gingrich into uneducated and foolish technophiles.

In explaining government failure in the case of the Iraq War, which has several roots, I presented a partial theory: "Economics teaches us that as the penalty for overconfidence imposed on our rulers declines, they indulge in more of it. As the checks and balances of American government weakened from 1787 onwards, the rulers in Washington in all branches of government became more and more insulated from voting sanctions. Impeachment and other tools proved ineffective. The rulers learned how to control voters. They displayed more arrogance and hubris in everything they did. Today, when policies fail, their proponents often rationalize and move on to nice jobs elsewhere. Some with pangs of conscience re-examine their lives and make money selling books. Almost none look their mistakes in the face, speak out, and behave honorably while they are still in office. In sum, the Iraq War is a big blunder committed by our boastful rulers in our Executive Branch who didn’t know any better. Our institutional system of education and state encourages know-nothing and arrogant power-seekers to gain office and, once in office, it lets them behave overconfidently (underestimating costs and overestimating benefits), commit costly errors, and get away with them."

The same analysis applies to the NPOESS mess.

More broadly, government failure and the accompanying destruction of wealth is automatic the instant that government takes upon itself the provision of any and all goods and services such as providing weather data, launching satellites, exploring space, etc. that can be provided by free markets. The oversight of science and technology by government and its huge presence in research and development are guaranteed seriously to slow down and distort the market processes of wealth and value creation that would otherwise occur. Government failure deprives us all.

The state has monopoly powers that give it an incentive to deliver less and less value to voters. But those who run the state are restrained to some extent by the electorate and various other factors such as bureaucratic in-fighting. This produces an equilibrium in which significant waste and wealth destruction are omnipresent. The system of holding those powers in check, always a leaky dike, is gushing with massive breaks. As a consequence, those who man the state’s posts and make the decisions are not only not held to account for their dreadful decisions but are rewarded with celebrity status, cushy post-administration jobs, book contracts, and pensions, etc. They have every incentive to act overconfidently and create one government failure after another.

Science and technology touch almost every enterprise in America. Being aware of its benefits and thinking of it as some kind of manna, the public has a soft spot for science and technology. Consequently, the number of groups wishing to hawk their wares to scientifically-challenged and over-optimistic government officials and bureaucracies is very large. The forces are in place for further government failure and wealth destruction in the name of science and technology.

Michael S. Rozeff [send him mail] is a retired Professor of Finance living in East Amherst, New York.

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