Nelson Blasts Cost-Plus Contracts, Says Russia Not Leaving ISS

Nelson Blasts Cost-Plus Contracts, Says Russia Not Leaving ISS

At a Senate hearing today. NASA Administrator Bill Nelson praised the agency’s shift to public-private partnerships and fixed price contracts, calling cost-plus contracts a “plague” that increases program costs.  He also reassured the committee that nothing has changed in the U.S.-Russian space station relationship despite “misleading headlines” in recent days that Russia will soon withdraw from the program.

A former Senator himself, Nelson testified to the Senate Appropriations Commerce-Justice-Science subcommittee on the very day that he celebrated one-year at the helm of the agency.

At several points in the hearing, he talked about the value of competition and why NASA’s recent embrace of public-private partnerships (PPPs) is such a benefit to the agency.  First used for the commercial cargo and commercial crew programs that support the International Space Station (ISS), NASA is now using them for many of its programs, including building commercial space stations to succeed the ISS and for the Artemis program to return astronauts to the lunar surface.

The topic first came up when Nelson talked about the schedule for getting astronauts back on the Moon, which requires Human Landing Systems that are being procured through PPPs. SpaceX was competitively awarded the contract for the first Artemis landing in 2025 and a second competition is underway for additional landers later in the decade.

“With that competitive spirit, you can get it done cheaper, and that allows us to move away from what has been a plague on us in the past, which is a cost-plus contract, and move to an existing contractual price.”

NASA traditionally has used cost-plus contracts where the government assumes the risk that a product may cost more than the contracted amount and pays for any overruns, and also pays award fees often based on performance. In a fixed price contract, the company assumes the risk and must absorb any overruns.  NASA’s PPP contracts are milestone-based and the company is paid only when it achieves the designated milestones.

Later he said “It’s a new day. The government can’t do it all.  You give us x amount of money and … we can leverage that money by working with the commercial industry and through competition bring those costs down to NASA.” He cited former Vice Chairman of the Joint Chiefs of Staff Gen. John Hyten as telling him that SpaceX’s Falcon 9 and Falcon Heavy rockets have saved the military $40 billion in launch costs. Falcon 9 was funded in part through one of NASA’s commercial cargo PPPs.

Still later in the hearing, Nelson specifically criticized the agency’s cost-plus contract with Bechtel to build a new Mobile Launcher needed for a larger version of the Space Launch System that is under development.

“There is no excuse for cost overruns. … Because Bechtel underbid on a cost-plus contract … and they couldn’t perform. And NASA is stuck.What I have done is called in the CEO of Bechtel … and they have readily acknowledged it, but there’s no way under the contract, since it’s a cost-plus contract, that we can do anything but eat it. And that’s not right. The times they are a’changin’.”

He has named Deputy Administrator Pam Melroy to serve as the agency’s Chief Acquisition Officer “to elevate the importance of acquisition” to address these issues.

Nelson also disputed media reports over the weekend that Russia was about to give one-year’s notice that it is leaving the ISS partnership.

“They are not pulling out. In the last day or so there [have been] misleading headlines. If you read the articles it says something else, comments that were made by people in Roscosmos, the Russian space agency. … I see nothing in the very even-keeled professional relationship between the cosmonauts and the astronauts, between Mission Control in Moscow and Houston, in the training of Russian cosmonauts in America and American astronauts in Moscow and Baikonur. I see nothing that has interrupted that professional relationship no matter how awful Putin is conducting a war with such disastrous results in Ukraine. …

“… We see every reason that the Russians are going to continue on the space station for the immediate future and, of course, we personally hope that they will continue with us all the way to 2030.”

The ISS is a partnership among the United States, Russia, Canada, Japan and 11 European countries working through the European Space Agency. All of the partners have agreed to keep the ISS operating through 2024, although the Intergovernmental Agreement (IGA) that governs the program permits withdrawal with one-year’s notice.

President Biden announced on December 31 the U.S. intention to extend the operating period through 2030 and negotiations are underway to get the other partners to agree.

Russia’s invasion of Ukraine has upended its space cooperation with many countries and companies, but the ISS has not been affected so far in large part because it was built as interdependent facility. It would be extremely difficult for either Russia or the United States to operate it without the other.

Nonetheless, the head of Roscosmos, Dmitry Rogozin, has been making bombastic remarks about Russia possibly leaving ISS despite the fact that three Russian cosmonauts are now aboard and conducting spacewalks to activate a Russian module that was just added to the ISS last summer.

This weekend, Bloomberg News reported that Rogozin told state media that the decision had been made to “quit” the ISS  and would give the one-year’s notice. Bloomberg cited reports in two Russian media outlets, TASS and RIA Novosti as the source. The story was picked up by other news outlets and quickly spread on social media.

However, the TASS story is quite different. It cites Rogozin as saying that if Russia were to decide to leave the ISS, it would give one-year’s notice, but there is no hurry in saying what it will do and in the meantime work is continuing under the current agreement through 2024.

“‘We should not hustle now declaring our stance and will carry on with our work within the timeframe set by the government, which is until 2024,’ Rogozin said. ‘A decision regarding the ISS future will depend to a great extent on the developing situation both in Russia and around it.’

“He also said that if Russia decided to withdraw from the ISS project, it would notify its foreign partners about this decision a year in advance.” — TASS


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