NASA’s $6 billion mistake: Report exposes SLS contract mismanagement
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The NASA Office of Inspector General (OIG) has issued a report that finds NASA's management of the Space Launch System (SLS) booster and engine contracts inadequate.
The report— released on May 25— scrutinized four contracts the agency signed: two with Aerojet Rocketdyne for RS-25 engines, and the rest with Northrop Grumman for rocket boosters, and deemed the refurbishment of RS-25 engines and the manufacture of new ones to have cost the agency an additional $6 billion and six years of delays.
To give you some perspective, it is expected to cost the agency a similar $6 billion to procure two reusable lunar landers from BlueOrigin and SpaceX.
Cost plus
The report questions NASA’s choice of awarding cost-plus contracts usually reserved for bleeding-edge research and development when Aerojet and Northrop modify engines and boosters used multiple times.
Although cost-plus contracts give the agency more control over the design and final product, it brings a considerable increase in cost, schedule, and outcome risks. In contrast, fixed-price contracts put the onus and risk on the contractor.
Furthermore, the negotiated award fee percentage of costs for the RS-25 Restart and Production contract was observed to be higher than typically found in contracts of this type: 10 to 13 percent as opposed to the usual 6 to 8 percent.
The report addresses NASA’s and Aerojet’s projections of achieving a savings cost of 30 percent by the end of the decade and points out several glaring flaws in their calculations.
An estimated cost increase of 13 percent resulting from the overhead and other associated costs with recertification and the production of 24 new engines was found to be neglected.
The OIG questions the use of Shuttle cost data— data from an era of stable design and streamlined production— as a benchmark to calculate the agency’s cost savings goal for the SLS and new RS-25 engines.
These issues could be a lack of experienced staff and limited opportunities to review contract documentation at the Marshall Space Flight Center, also highlighted in the report.
The SLS is NASA's next-generation heavy-lift launch vehicle, and it is essential for the Artemis program, which aims to return humans to the Moon by 2024.
The OIG report is a wake-up call for NASA. The agency needs to make significant changes to the way it manages the SLS program if it wants to meet its ambitious goals. The future of the Artemis program depends on it.
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