NASA IG Skeptical of Major SLS Cost Savings From Services Contract

NASA’s Office of Inspector General is skeptical that NASA will achieve significant cost savings by shifting procurement of future Space Launch System rockets to a commercial services contract. In a report released today, the OIG called NASA’s goal of saving 50 percent “highly unrealistic” and estimated each of the first 10 SLSs under the new contract will cost at least $2.5 billion to produce. Still, it endorsed NASA’s idea of changing how it procures SLS, the space transportation system that will send astronauts back to the Moon.

Many reports by the OIG and Government Accountability Office over the past decade have chronicled the cost growth and schedule delays in the SLS program. Last year, NASA IG Paul Martin told a congressional committee that each of the first four launches will cost $4.1 billion, “a price tag that strikes us as unsustainable.” GAO’s most recent report on SLS last month called the system “unaffordable,” criticizing the agency for not being transparent with Congress about the costs.

Congress directed NASA to build SLS in the 2010 NASA Authorization Act. The first flight finally lifted off last November, the successful Artemis I uncrewed test flight around the Moon.

The next flight, Artemis II, with a crew is not scheduled until the end of next year, a two-year gap. At one time the cadence after that was anticipated to be once a year, but no longer. NASA’s FY2024 budget request shows the third flight, Artemis III, which is designed to put astronauts on the lunar surface for the first time since the Apollo program, launching in late 2025, but many are skeptical that date can be met and then there is a three-year gap to Artemis IV in 2028.

Procurement of those rockets is already set, but NASA wants to change the procurement strategy for later launches to reduce costs. That’s the focus of today’s OIG report.

NASA announced plans last year to gradually shift from the individual cost-reimburseable contracts it now has with Boeing, Northrop Grumman, Aerojet Rocketdyne (now part of L3Harris), and Dynetics to a consolidated commercial services contract under a new Boeing-Northrop Grumman joint venture called Deep Space Transport, LLC (DST).

DST would produce SLS rockets under an Exploration Production Operations Contract (EPOC), starting with a three-year “pre-EPOC” phase to allow NASA time to evaluate DST’s readiness to take on the task.

The OIG anticipates production costs will be $2.5 billion per SLS, not including Systems Engineering and Integration (SE&I). That is for the “Block IB” SLS, an upgraded version with a more capable Exploration Upper Stage. The report notes that NASA itself calls the goal of saving 50 percent by shifting to the commercial services contract for Block IB “aspirational and not based on actual analysis,” and concludes it’s “highly unrealistic.”

Nevertheless, the report says moving to a combined commercial services contract could reduce costs “if a fixed price contract is used to codify a reduced price.”

Launching more often is another way to reduce the per-launch cost, but “efforts to find customers outside of NASA have been unsuccessful to date.”

The report also points out that although SLS is the only rocket capable of meeting NASA’s deep space human exploration needs now, new commercial alternatives may soon become available that NASA might to consider for longer-term exploration plans. That likely is a reference to SpaceX’s Starship, which is getting ready right now for its second test launch (the first was a failure). NASA already contracted with SpaceX to use Starship for the Human Landing System for Artemis III and Artemis IV, but NASA’s crews will travel to the Moon on SLS.

The OIG made seven recommendations.

In its response (published as an appendix), NASA concurred or partially concurred with all of them.