Bezos Surprises with Offer to Pick Up $2 Billion of HLS Tab

Jeff Bezos, who just stepped down as head of Amazon.com, is throwing his energies into his space company, Blue Origin. Newly back from a quick trip to space on his New Shepard rocket, today Bezos sent a letter to NASA offering to waive $2 billion of the $6 billion he bid to build a Human Landing System to return astronauts to the lunar surface. NASA awarded a contract to SpaceX but did not have enough money for a second contractor. Bezos wants to change that.

President Biden has adopted President Trump’s goal to put American astronauts back on the Moon by 2024, just three-and-a-half years from now — the Artemis program.

Trump’s goal was met with widespread skepticism that it was achieveable technically or budgetarily, but that clearly has not deterred Biden.

The pacing item is a Human Landing System (HLS) to get astronauts from lunar orbit down to and back from the surface. The other components have been in development for years: the Space Launch System (SLS) rocket and Orion crew spacecraft to get from Earth to lunar orbit and back, as well as the beginnings of a small lunar-orbiting space station called the Gateway that would be a transfer point.

NASA is procuring HLS as a Public-Private Partnership (PPP) where the government and a contractor share development costs and the contractor retains ownership, selling services to NASA and other customers once it is operational.

NASA used this PPP model for the commercial cargo and commercial crew systems that support the International Space Station. In both cases, NASA picked two contractors to reduce risk and ensure competition: SpaceX and Orbital Sciences (later bought by Northrop Grumman) for commercial cargo, and SpaceX and Boeing for commercial crew.

That is what it wants to do with HLS, too, but for FY2021 Congress appropriated only 25 percent of the $3.4 billion NASA requested. Consequently NASA picked only one contractor, SpaceX, in April, to develop its Starship system.

SpaceX’s two HLS competitors were Dynetics and a “National Team” led by Blue Origin with Lockheed Martin, Northrop Grumman and Draper. Dynetics and Blue Origin are protesting the award. The Government Accountability Office (GAO) is due to make a decision by August 4.

Space X bid $2.9 billion, Blue Origin $5.9 billion, and Dynetics $8.5-9 billion.

SpaceX founder and CEO Elon Musk and Bezos both personally share a passion for space exploration. Musk wants to make humanity a multi-planet species by sending millions of people to Mars, with the Moon as a nearer-term destination. Bezos’ long-term vision is to preserve Earth, “the best planet in the solar system,” by moving heavy industry off of Earth to the Moon and cislunar space. Earth would be rezoned for residential and light industry purposes only.

As the two wealthiest people on the planet, many wonder how much of their own money they are willing to put into these HLS systems on top of whatever comes from taxpayers.

In his open letter to NASA Administrator Bill Nelson today, Bezos offered to put up $2 billion. Blue Origin would also self-fund a descent module demonstrator.

Blue Origin will “bridge the HLS budgetary funding shortfall by waiving all payments” in FY2021-FY2023 “up to $2B to get the program back on track right now.”

• Blue Origin will bridge the HLS budgetary funding shortfall by waiving all payments in the current and next two government fiscal years up to $2B to get the program back on track right now. This offer is not a deferral, but is an outright and permanent waiver of those payments. This offer provides time for government appropriation actions to catch up.

• Blue Origin will, at its own cost, contribute the development and launch of a pathfinder mission to low-Earth orbit of the lunar descent element to further retire development and schedule risks. This pathfinder mission is offered in addition to the baseline plan of performing a precursor uncrewed landing mission prior to risking any astronauts to the Moon. This contribution to the program is above and beyond the over $1B of corporate contribution cited in our Option A proposal that funds items such as our privately developed BE-7 lunar lander engine and indefinite storage of liquid hydrogen in space. All of these contributions are in addition to the $2B waiver of payments referenced above.

Bezos said these offers were “above and beyond the over $1B of corporate contribution” in its original proposal.

Eric Berger, a reporter at Ars Technica who authored a book about Musk and SpaceX, writes that Bezos lost out in the initial round because Musk is paying more out of SpaceX’s own pocket to develop Starship and that’s what NASA wanted to see. After citing an unnamed SpaceX senior official as saying they will invest $6 billion in Starship, Berger adds: “So when NASA was selecting proposals, it knew it was getting a two-for-one return on its money” and now that Bezos realizes his “critical error,” is trying to make up lost ground.

NASA and its congressional supporters all seem to agree on the benefits of having more than one HLS contractor.  NASA’s response these days is that the award to SpaceX was only for the first landing, which is just a prelude to long-term “sustainable” lunar operations that will require more landers. It opened a “Lunar Exploration Transportation Services” (LETS) procurement three weeks ago to bring in additional contractors for those later flights.

Bezos eschewed that approach today arguing it will not “create true competition” because “it is rushed, it is unfunded, and it provides a multi-year head-start to the one funded, single-source supplier.”

In the past few weeks, the shortfalls of this single source selection have been recognized, and NASA has begun to solicit new lunar lander proposals. But, unfortunately, this new approach won’t create true competition because it is rushed, it is unfunded, and it provides a multi-year head-start to the one funded, single-source supplier. The Appendix N and LETS solicitations are just optical substitutes for the real competition that a second, simultaneous dissimilar lander development will provide. The Agency must act now to create the real competition it needs, and it should not repeat work already delivered and investments already made.

Bezos’ offer comes just one week before GAO is expected to rule on the Blue Origin and Dynetics protests of the award to SpaceX.

The three won contracts from NASA in 2020 to mature their proposals under the NextStep-2 Appendix H Broad Agency Announcement (BAA). NASA’s plan was to choose one or two of them to proceed into detailed design in February 2021, but with the change in administrations and less-than-expected congressional funding, it needed time to consider its options and extended the contracts on a no-cost basis.

Alan Chvotkin, a partner and contracts law expert at Nichols Liu LLP, argues in a white paper that the original “Option A” contracts were extended through August and therefore NASA still has time to award another contract without reopening the competition.

Starting over is what could happen if GAO rules against NASA, likely causing a slowdown of the entire Artemis program. If it upholds NASA’s selection, SpaceX could proceed as the sole HLS contractor for now and Blue Origin would have to propose to the LETS solicitation unless NASA agrees with Chvotkin that a second award is still possible. Since Bezos is offering Blue Origin’s own money for FY2021, FY2022 and FY2023, near-term congressional appropriations would not be a stumbling block though there is still the question of what happens in subsequent years.

NASA estimated last year that HLS would cost taxpayers $16 billion over 5 years (FY2021-2025). If Bezos and Musk are willing to foot part of the bill, all the better, but some amount of government funding will be needed — in the short-term for development and in the long-term to pay for services.

The Senate passed a NASA authorization bill in June that includes $10 billion over 5 years to pay for another HLS contractor, but that is only an authorization, not an appropriation.

The House Appropriations Committee approved a $150 million increase over NASA’s FY2022 request of $1.195 billion for HLS in the Commerce-Justice-Science (CJS) appropriations bill, H.R. 4505. The request was only enough for one contractor and an extra $150 million isn’t enough to pay for a second by itself. The House is expected to vote on the CJS bill this week. The Senate Appropriations Committee has not acted yet.

NASA Administrator Bill Nelson is hoping to get as much as $5.4 billion in FY2021 for HLS in the jobs/infrastructure bill, but that entire piece of legislation appears to be in jeopardy in the Senate at the moment.