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Internal Audit Hits NASA for Station Resupply Payments to Orbital

Orbital Sciences launches the first demonstration mission of its Antares rocket. Credit: NASA photo

WASHINGTON — NASA is taking heat from its Office of Inspector General (OIG) for giving Orbital Sciences Corp. more than $600 million to build hardware for six space station resupply missions before the Dulles, Va.-based firm has fully demonstrated that its fledgling Antares rocket and Cygnus cargo tug are up to the task.

Orbital holds a $1.9 billion NASA contract to fly a total of eight resupply missions to the international space station through 2016. The contract was awarded in December 2008, several months after NASA picked Orbital as a late addition to a Commercial Orbital Transportation Services (COTS) program that since 2006 had been subsidizing Space Exploration Technologies Corp. (SpaceX) in its now-completed effort to develop a competing space station logistics system. 

By the end of 2012, according to an OIG report released June 13, SpaceX had been paid a total of $858 million between its $396 million COTS agreement and a $1.6 billion Commercial Resupply Services (CRS) contract, also awarded in December 2008, that calls for the Hawthorne, Calif., company to make 12 space station runs.

Orbital, meanwhile, had been paid a total of $910 million between its $288 million COTS agreement and its $1.9 billion CRS contract. 

While both SpaceX and Orbital have banked roughly one-third of their CRS contract payments, SpaceX has made two successful cargo deliveries to the international space station since a May 2012 demonstration run of its Dragon capsule. Orbital, in contrast, is not expected to launch Cygnus on its COTS demo mission until mid-September, a flight that, if successful, would enable the company to begin executing on its CRS contract.   

According to the OIG, NASA is on track to pay Orbital up to 70 percent of the funds associated with the company’s first six CRS missions “all before Orbital demonstrates that its system can successfully launch and rendezvous with the [international space station].” 

An industry source said Orbital’s CRS contract was deliberately structured to ensure steady production of Antares and Cygnus components. “That’s cheaper than building them at slow-rate production,” the industry source said. “Orbital negotiated a contract to that effect.”

“If NASA had behaved the way the [inspector general] is suggesting the cost to government would have been much higher,” the industry source said.

“We understand that NASA accepted the risks of concurrent development with both SpaceX and Orbital out of a need to ensure a redundant cargo capacity to meet the [space station] resupply schedule, and we do not second guess the Agency’s decision to concurrently fund up to three spaceflight systems for each company,” the OIG wrote. “However, in the case of Orbital, we believe that NASA has leaned too far forward by continuing to fund the company’s CRS missions when Orbital did not meet major developmental milestones specified in its Space Act Agreement, which in turn delayed launch dates for its CRS resupply missions.”

The OIG says NASA was “too slow” to adjust CRS milestone payments when Orbital, like SpaceX before it, fell behind schedule. As a result, NASA is paying Orbital to build or buy hardware for missions that will not be flown for several years, exposing the government to too much financial risk. 

NASA’s associate administrator for human exploration and operations, William Gerstenmaier, disagreed that NASA has accepted too much financial risk in the way it implemented the CRS contracts, but concurred with the OIG’s recommendation that the contracts be updated to reflect the revised launch schedule, according to the OIG’s report.

NASA spokesman Trent Perrotto said in a statement that NASA manages its commercial crew program  "to meet the cargo delivery needs of the space station and to limit the financial risk to the American taxpayer.

"The CRS contracts provide for the necessary contract protections to balance programmatic requirements and meet the agency's obligations to the nation and to our international partners. NASA will continue to pursue contract consideration when appropriate and hold the CRS contractors to their original mission prices," Perrotto's statement concludes.

Orbital spokesman Barron Beneski said in a statement that the OIG "missed 'the forest for the trees' on the current status and accomplishments of the CRS cargo delivery program."

The rest of Orbital's statement is reproduced here:

Orbital has expressed to the NASA OIG our strong disagreement with its methodology and conclusions in a number of specific areas of the report  However, when viewed with a “big picture” lens, Orbital would point out the following:

  • Other comparable cargo delivery systems that support the ISS such as the European ATV and Japanese HTV took far longer and were vastly more expensive to develop under a traditional government run contract than the approach NASA has instituted under the COTS and CRS programs.  
     
  • To date, Orbital has invested more than twice what NASA has invested in the COTS development program, and has expended far more than it has been paid by NASA on the CRS program.  So it is clear Orbital has significant “skin in the game” and we are highly incentivized to successfully carry out the eight CRS mission currently under contract.  In addition, at the outset of the CRS program, NASA instituted a larger-than-normal cash payment hold back contingent upon successful completion of the CRS missions, a contractual protection for the Agency far greater than traditional government contracts normally provide.
     
  • When compared to traditional NASA-contracted space system development programs, the COTS and CRS programs have been carried out in a remarkably efficient and cost effective manner.  For example, in a five-year timeframe, NASA’s current investment of approximately $350 million has helped produce an all-new medium-class launch vehicle that successfully carried out a test flight in April; a new world-class liquid-fuel launch complex at a NASA facility and range site; and a new multipurpose cargo logistics spacecraft to resupply the ISS.
     
  • By the end of 2013, Orbital will have launched the Antares rocket three times (two COTS missions and the first CRS mission) and will have delivered cargo to the ISS with the Cygnus spacecraft twice (COTS Demonstration Mission and the CRS-1 Mission).  The development work and these operations will have been completed in just five years from the signing of the CRS contract.  
     
  • Orbital is committed to completing the COTS R&D effort late this summer and carrying out the first CRS mission in the fall.  This schedule will be among the fastest and most cost efficient NASA has ever supported.

 

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