NASA told to slow down CRS payment schedule for Orbital’s cargo runs
NASA’s Office of Inspector General (OIG) has issued a report that recommends the Agency should slow down its payments to Orbital for their Commercial Resupply Services (CRS) missions. Despite Orbital’s successful test flight of their Antares launch vehicle, the OIG is concerned by the “financial risk” of paying the company too far ahead of schedule.
Orbital and SpaceX won a combined $3.5 billion Commercial Resupply Services (CRS) contract back in 2008, required due to the ISS’ cargo resupply needs in the post-shuttle era. The award from NASA ordered eight flights valued at about $1.9 billion from Orbital and 12 flights valued at about $1.6 billion from SpaceX.
SpaceX are already preparing for their third CRS mission (CRS-3/SpX-3) via their Dragon spacecraft, while Orbital are set to launch their first Cygnus spacecraft (OrB-D) to the ISS – the final part of their final Commercial Orbital Transportation Services (COTS) requirements – in September.
Orbital’s first CRS run (CRS-1/OrB-1) could occur before the end of the year, dependent on the success of the OrB-D mission and the ISS’ Visiting Vehicle schedule constraints.
Citing the official – but highly unlikely – scenario that the ISS will be decommissioned in 2020, the OIG created an audit report on the status of NASA’s commercial program, focusing on the cargo resupply status.
“NASA’s commercial cargo program is at a critical stage with Orbital poised to come online later this year and the scheduled decommissioning of the ISS in 2020 rapidly approaching,” noted the OIG report.
“The successes and challenges experienced by NASA’s commercial cargo program will prove to be instructive to its commercial crew effort. Given the importance of the commercial cargo program to the continued viability of the ISS, we examined NASA’s management of the program.”
While the report over-viewed both SpaceX and Orbital, the OIG appeared to be more concerned with NASA’s dealings with the Virginia-based company.
“Orbital has experienced delays of over two years in its COTS Program, including an early change from an unpressurized to pressurized capsule and construction delays on its Wallops Island, Virginia, launch facility,” the report noted.
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“NASA has paid Orbital a total of $910 million as of the end of FY 2012, including funding for both development efforts under its COTS Space Act Agreement and CRS contract. Under the current payment schedule, the company is on track to receive up to 70 percent of the funds associated with six of its eight CRS missions prior to having flown a demonstration flight.”
Despite what was a hugely successful test flight of the Antares launch vehicle in April, the OIG claimed they have concerns the next launch still holds the “possibility” of incurring issues that would delay Orbital’s CRS schedule. No validation of their concerns were provided in the document.
“Orbital successfully completed a maiden test flight of its Antares rocket on April 21, 2013. NASA and Orbital officials noted the maiden flight has reduced technical risk and that the costs of any system modifications needed as a result of the demonstration flight will be borne by Orbital given that the CRS contract is fixed price.
“Nevertheless, the possibility remains that the demonstration flight could expose issues that require costly rework and redesign, resulting in major adjustments to the current CRS launch schedule.”
The OIG claim they don’t wish to “second guess” the reasons behind how NASA contracted the CRS companies on fixed priced contracts. However, they have recommended the Agency revises the payment schedule to reflect slips in the respective schedules.
“In our judgement, NASA has been too slow to adjust its payment schedule to Orbital under the CRS contract given the substantial slippage in the launch schedule for the company’s resupply missions,” the document continued. “As such, given the risks inherent in concurrent development, we question NASA’s decision to pay Orbital approximately $150 million for costs associated with their fourth and fifth resupply missions.
“We believe NASA should have deferred this amount to future fiscal years in order to avoid spending funds too far in advance of each mission’s launch dates.”
The report added that NASA already took steps to adjust its payment schedule – in light of the development delays – by negotiating a contract modification in December 2012 for “Mission 6”, that tied payment to a successful Antares maiden test flight. However, the OIG believe the Agency should have tied the payment schedule to the success of the upcoming OrB-D mission.
“In our view, NASA instead should have tied payment for this mission to a successful full system demonstration flight. (Also) Orbital requested to begin work on resupply Mission 7 by May 2013, a request from our perspective that, if approved, would result in an additional estimated $70 million in premature payments to the company in FY 2013.”
The OIG added they have already discussed their concerns with program officials about the advance procurements and that NASA recognized the need to slow down the pace of NASA’s payment for Orbital’s rocket systems production. “For example, officials said they tied future Mission 4 and 5 payments to an adjusted launch schedule and completion of ISS integration activities by the company.”
Despite this, the OIG “believe the Agency has accepted too much financial risk by funding Orbital’s fabrication of rocket systems for Missions 4, 5, and 6 so far in advance of the time needed to meet the ISS resupply schedule and prior to Orbital completing a successful system demonstration flight.”
As part of the OIG’s “Management Action”, a recommendation has been made to Associate Administrator for Human Exploration and Operations Mission Directorate, William Gerstenmaier, to ensure that contractual agreements for the commercial cargo providers are updated to reflect the lead times required to meet any revised launch dates.
“If launch dates slip,” the OIG added, “NASA should adjust contract work plans to ensure that the authorized lead times and NASA payments reflect the revised schedules.”
The document claims Mr Gerstenmaier concurred with the recommendation after seeing a draft report of the document, although it was stated he disagreed that NASA has accepted too much financial risk in the way it has implemented the Orbital CRS contract.
“He (Mr Gerstenmaier) stated that NASA determined that the programmatic risks of not starting hardware development needed for cargo resupply were substantially greater than the financial risks posed to the Agency by doing so. He further stated that NASA uses existing payment cap protections and other contractual provisions to reduce financial risks and align payments with technical performance.”
The OIG agree that “balancing programmatic and financial risk is critical to ensure the success of the commercial cargo program. However, as outlined in the report we continue to believe that NASA has been too slow to adjust its payment schedule to Orbital given the substantial slippage in the launch schedule for the company’s resupply missions.”
Ironically, a large amount of the document cited the critical need for a healthy CRS program, not least because two of the vehicles capable of large upmass capabilities are coming to the end of their ISS resupply life cycles.
The penultimate European cargo mission (ATV-4) docked with the ISS on Saturday, with the final mission – the “George Lemaitre” (ATV-5) – scheduled for June, 2015. HTV will pass the mid-way point for its ISS role when HTV-4 launches this August.
“NASA officials stated that because European cargo missions are scheduled to end in mid-2014, these vehicles (HTV and Dragon) would not provide sufficient capability to meet the Agency’s ISS cargo transportation needs beginning in 2015,” the OIG report continued.
“In addition, Program officials said the last two scheduled HTV flights in 2015 and 2016 are slated to carry 24 primary batteries for the ISS, which significantly reduces the available pressurized resupply capability of these flights.
“The costs per mission for cargo resupply both by SpaceX and by Orbital are expected to be lower than the costs associated with the European and Japanese vehicles.”
In a scanned letter, added to the document, Mr Gerstenmaier noted the Agency will further review the recommendations over the coming months.
If they plan not to accept the contract realignment recommendation, NASA “will document the logic for that decision.”
(Images: via L2’s Antares/Cygnus Section – Containing presentations, videos, images, interactive high level updates and more, with additional images via Orbital and NASA).
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