NASA Changes Course on Commercial Crew — Congress Tepid, Industry Thrilled

On the same day that the Government Accountability Office (GAO) praised NASA for adopting a firm fixed price contract approach for the next phase of its commercial crew program, NASA announced that it changed its mind and will stick with its current Space Act Agreement (SAA) procurement strategy instead.   The agency also officially acknowledged that a funding shortfall for commercial crew in FY2012 means that commercial crew services will not be available until at least 2017 and therefore it will need to purchase more seats on Russian Soyuz spacecraft to get astronauts to and from the ISS.  NASA’s current contract with Russia ends in 2016.

Driven by budget uncertainty that makes the firm fixed price contract procurement strategy unattractive, NASA Associate Administrator for Human Exploration and Operations Bill Gerstenmaier said he will continue to use SAAs for the next phase of work.  SAAs allow the agency to pay companies for meeting agreed-upon milestones, but not for NASA to have close oversight of what the companies are doing.   NASA has set its requirements for taking astronauts to and from the ISS, but with the modest authority it has over SAAs, could not direct a company to meet them, for example.   It is possible, therefore, for companies to misunderstand a NASA requirement, develop a system based on the misunderstanding, and not realize it until a formal contract is issued when it might be too late or too expensive to remedy.

The need to have close interactions with the companies vying to build commercial crew systems was stressed by NASA earlier this year when it announced that it no long would use SAAs for this purpose.   The agency insisted that at this phase of the program, it needed to use traditional contract procurement.   Gerstenmaier said today that budget realities changed his mind.

Gerstenmaier explained that when the agency looked out for the next several years at the budget uncertainty it faces, signing firm fixed price contracts simply would not work.   The plan had been to issue a request for proposals (RFP) this coming Monday and announce multiple winners next summer.  

Ironically, GAO released a report today congratulating NASA for its earlier decision to use traditional contracts:  “Among the good practices NASA adopted in its planned approach is the use of firm-fixed-price, performance-based contracts for the remaining program phases.”  Overall, however, the congressional watchdog agency was pessimistic about the commercial crew program’s chances for success for a variety of reasons from the aggressive schedule to the lower-than-requested funding levels.

Under the revised plan announced today, NASA will issue an announcement for proposals in January, though Gerstenmaier indicated that many of the details have yet to be determined.   The goal still is to announce the winners by next summer. He is hopeful that there will be at least two winners to ensure there is competition in this business to keep prices down.   Others argue that there simply is not enough human spaceflight business to keep two companies profitable and NASA should be thinking in terms of a single supplier.

The agreements would cover 21 months of work.  Because the agency received only $406 million instead of the $850 million requested for FY2012 to support the commercial crew program, Gerstenmaier said that the earliest such services will be available now will be 2017 instead of 2015 or 2016 as earlier projected.

Nonetheless, he thanked Congress for the $406 million, saying it was more than the number that appeared in earlier versions of appropriations legislation.    He added that Congress had been briefed on this new plan, and they “understand our position and our logic.”

Reaction from Congress has been tepid, however.    Rep. Ralph Hall (R-TX), chairman of the House Science, Space and Technology Committee, said in a statement that he “continues to be concerned about NASA’s ability to afford contracting with two or more companies” and he hopes “that two commercial companies would team together to jointly develop a cost-effective and safe launch system.”   He added that he plans to hold hearings early next year on this issue.

His Democratic counterpart, Rep. Eddie Bernice Johnson (D-TX), ranking member of the committee, similarly sounded a cautious note.  Saying that she was “sympathetic” to the challenges facing NASA, she worries that “NASA’s plan does not appear to contain sufficient margins and other risk reduction measures to give Congress confidence that it has a high probability” of being able to obtain commercial crew services “by 2016 or even 2017.”

Gerstenmaier’s acknowledgement that 2017 is the earliest date by when commercial crew will be ready means that NASA definitely will have to purchase additional crew launch services from Russia.   With the termination of the space shuttle program, Russia is the only country that can take astronauts to and from the ISS using its Soyuz spacecraft launched on Soyuz rockets.   Soyuz spacecraft also serve as lifeboats for the ISS.

Under the Iran, North Korea, Syria Nonproliferation Act (INKSNA), NASA is not allowed to pay Russia for anything connected with the ISS program.  When it nonetheless must pay Russia for services associated with the ISS, it needs to convince Congress to grant a waiver from that law.   It most recently did so in 2008, which allowed NASA to sign a contract with Russia last year for services through the spring of 2016.

Gerstenmaier told Congress in October that NASA expected to need another INKSNA waiver for other ISS-related services even if commercial crew was ready by 2016.   He added that NASA had begun working the issue within the Administration and was not certain when the request would be sent to Congress, but the waiver would be needed in the 2013 time frame.   He reiterated that today.

Also in October while Congress was debating NASA’s FY2012 appropriations bill, NASA Deputy Administrator Lori Garver said that NASA would have to pay Russia $450 million a year for every year of delay in the availability of commercial crew.

Gerstenmaier said today that NASA made this decision on its own, without consulting with the companies who are working on commercial crew.   However, the Commercial Spaceflight Federation, an industry association, heralded the decision, enthusing that using SAAs would “shorten the gap in U.S. access to space, help spur additional private investment, reduce America’s dependence on Russia, save taxpayer money, ensure the future of the International Space Station, and increase industry competition.”