The US DOE has initiated a program for advanced turbine systems (ATS) that will serve industrial power generation markets. The ATS will foster (1) early market penetration that enhances the global competitiveness of US industry, (2) public health benefits resulting from reduced exhaust gas emissions of target pollutants, (3) reduced cost of power used in the energy-intensive industrial marketplace and (4) the retention and expansion of the skilled US technology base required for the design, development and maintenance of state-of-the-art advanced turbine products. The Industrial ATS Development and Demonstration program is a multi-phased effort. Solar Turbines Incorporated (Solar) has participated in Phases 1 and 2 of the program. On September 14, 1995 Solar was awarded a Cooperative Agreement for Phases 3 and 4 of the program. Phase 3 of the work is separated into two subphases: Phase 3A entails Component Design and Development; Phase 3B will involve Integrated Subsystem Testing. Phase 4 will cover Host Site Testing. Forecasts call for completion of the program within budget as originally estimated. Scheduled completion is forecasted to be approximately 3 years late to original plan. Significant efforts were spent this quarter to reforecast and control expenditures due to Solars and DOEs current funding and resource constraints. Selective reductions and delays in program activities were identified and implemented. Although these actions will increase technical risk and the attainment of stretch goals, it is not anticipated that the schedule for initial test units or the attainment of basic program performance requirements will be impacted. As of the end of the reporting period work on the program is 22.80% complete based upon milestones completed. This measurement is considered quite conservative as numerous drawings on the Mercury 50 are near release. Variance information is provided in Section 4.0-Program Management.