GAO-11-692T Commercial Launch Vehicles: NASA Taking Measures to Manage Delays and Risks

Accountability • Integrity • Reliability

Highlights of

GAO-11-692T

, a report to the

Subcommittee on Space and Aeronautics,
Committee on Science, Space, and
Technology, House of Representatives

May 26, 2011

COMMERCIAL LAUNCH VEHICLES

NASA Takin

Measures to Mana

e Delays and Risks

Why GAO Did This Study

Since the National Aeronautics and
Space Administration (NASA) created
the strategy for the Commercial
Orbital Transportation Services
(COTS) project in 2005, the space
landscape has changed significantly—
the Space Shuttle program is retiring
and the Ares I will not be available—
increasing the importance of the
timely development of COTS vehicles.
The lack of alternatives for supplying
the International Space Station and
launching science missions have all
contributed to an increased need for
the COTS vehicles. The two COTS
project partners, Orbital and SpaceX,
have made progress in the
development of their respective
vehicles; however, both providers are
behind schedule. As a result, the
project recently received an additional
$300 million to augment development
efforts with risk reduction milestones.

This testimony focuses on: (1) COTS
development activities, including the
recent funding increase; (2) the
extent to which any COTS
demonstration delays have affected
commercial resupply services (CRS)
missions and NASA’s plans for
meeting the space station’s cargo
resupply needs; and (3) lessons
learned from NASA’s acquisition
approach for COTS.

To prepare this statement, GAO used
its prior relevant work and conducted
additional audit work, such as
analyzing each partner’s agreement
with NASA and interviewing NASA
officials. New data in this statement
was discussed with agency and
company officials who provided
technical comments, which we
included as appropriate.

What GAO Found

SpaceX and Orbital continue to make progress completing milestones under
their COTS agreements with NASA, but both partners are working under
aggressive schedules and have experienced delays in completing
demonstration missions. SpaceX successfully flew its first demonstration
mission in December 2010, but the mission was 18 months late and the
company’s second and third demonstration missions have been delayed by
almost 2 years due to design, development, and production challenges with
the Dragon spacecraft and Falcon 9 launch vehicle. Orbital faced technical
challenges developing the Taurus II launch vehicle and the Cygnus spacecraft
and in constructing launch facilities, leading to multiple delays in completing
program milestones, including its demonstration mission. NASA has amended
its agreements with the partners to include a number of new milestones, such
as additional ground and flight tests, to reduce remaining developmental and
schedule risks; most of the new milestones completed thus far were finished
on time, but many milestones remain.

Based on the current launch dates for SpaceX’s and Orbital’s upcoming COTS
demonstration missions, it is likely that neither will launch its initial CRS
mission on time, but NASA has taken steps to mitigate the short-term impact
to the space station. The launch windows for SpaceX’s first and second CRS
flights are scheduled to occur either before or during its upcoming COTS
demonstration flights and will need to be rescheduled. Orbital’s first CRS
flight will also likely shift due to a Taurus II test flight. NASA officials said that
the agency will have to renegotiate the number of flights needed from each
partner and re-baseline the launch windows for future CRS missions once
COTS demonstration flights are completed. NASA has taken steps to mitigate
the short-term impact of CRS delays through prepositioning of cargo, some of
which will be delivered on the last space shuttle flight. Despite these efforts,
NASA officials said they would still need one flight in 2012 from SpaceX’s and
Orbital’s vehicles to meet science-related cargo needs.

In considering the use of a Space Act agreement for COTS, NASA identified
several advantages. These advantages include sharing costs with agreement
partners and promoting innovation in the private sector. A disadvantage,
however, is that NASA is limited in its ability to influence agreement partners
in their approach. At the time the agreements were awarded, NASA was
willing to accept the risks of using a Space Act agreement given the goals of
the project and alternative vehicles that were available to deliver goods to the
space station. As the project has progressed, however, and these alternatives
are no longer viable or available, NASA has become less willing to accept the
risk involved and has taken steps aimed at risk mitigation. Given a critical
need, the risk is present that the government will be required to make
additional investments to meet mission needs. The amount of investment can
be lessened by ensuring that accurate knowledge about requirements, cost,
schedule, and risks is achieved early on. GAO has made recommendations to
NASA and NASA is taking steps to help ensure that these fundamentals are
present in its major development efforts to increase the likelihood of success.

View

GAO-11-692T

or key components.

For more information, contact Cristina
Chaplain at (202) 512-4841 or
chaplainc@gao.gov.

United States Government Accountability Office

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GAO-11-692T

Mr. Chairman and Members of the Subcommittee:

Thank you for inviting me here today to discuss the status of the National
Aeronautics and Space Administration’s (NASA) Commercial Orbital
Transportation Services (COTS) project. GAO conducted work examining
the COTS project in 2009 and reported that progress was being made, but
several risks persisted given aggressive project schedules.

Since NASA

devised its strategy for the COTS project in 2005, the space landscape has
changed quite significantly, increasing the importance of the timely
development and success of COTS vehicles to NASA. Specifically, with the
impending retirement of the space shuttle in July 2011, the United States
will lack a domestic capability to send crew and cargo to the International
Space Station and face a cargo resupply shortfall between 2012 and 2020
that cannot be met by international partners’ space vehicles alone.

The

Ares I project, which was originally intended to be operational in 2010 and
to fill the gap between the retirement of the Space Shuttle program and the
availability of the COTS vehicles, pushed its launch readiness date to 2015
and is now being restructured into a new program that will not be
operational until at least 2016. Further, the Delta II launch vehicle, which
has carried the majority of NASA’s science missions over the last several
years, is retiring, the impact of which is beginning to be felt by NASA’s
science projects.

These changes have resulted in an increased need for

the vehicles being developed for COTS not only to address the cargo
resupply shortfall as intended, but also to support a large number of future
science missions at a reasonable cost to NASA. While COTS partners have
made progress in the development of their vehicles, they have also
experienced delays and NASA has provided additional funding to the
partners to reduce the risk that their vehicles would experience further
delays.

Against this backdrop, my testimony today will focus on: (1) the COTS
development activities, including a discussion of the need for the recent

GAO,

NASA: Commercial Partners Are Making Progress, but Face Aggressive Schedules

to Demonstrate Critical Space Station Cargo Transport Capabilities,

GAO-09-618

(Washington, D.C.: June 16, 2009).

International partners’ vehicles include the Russian Federal Space Agency’s Progress

(cargo) and Soyuz (crew), the European Space Agency’s Automated Transfer Vehicle
(cargo), and the Japan Aerospace Exploration Agency’s H-II Transfer Vehicle (cargo).

GAO,

NASA: Medium Launch Transition Strategy Leverages Ongoing Investments but is

Not Without Risk,

GAO-11-107

(Washington, D.C.: Nov. 22, 2010).

funding augmentation; (2) the extent to which any COTS demonstration
delays have affected Commercial Resupply Services (CRS) missions to the
space station and NASA’s plans for meeting space station cargo resupply
needs; and (3) lessons learned from NASA’s acquisition approach for
COTS.

In preparing this statement, we relied on our prior report related to the
COTS project and conducted additional audit work in May 2011 to update
information from that report.

Specifically, we analyzed each COTS

partner’s agreement with NASA, amendments to those agreements,
documentation from NASA and partner quarterly program management
reviews, and each partner’s CRS contract. We interviewed NASA COTS
and International Space Station program officials and company officials.
We discussed new information presented in this statement with agency
and company officials who provided technical comments that we
incorporated as appropriate. Our prior work on the COTS project, as well
as the work conducted for this statement, was performed in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our
audit objectives.

In 2004, President George W. Bush announced his Vision for Space
Exploration that included direction for NASA to pursue commercial
opportunities for providing transportation and other services to support
the space station after 2010. When the project was established in 2005, the
approach that NASA laid out was a marked change in philosophy for how
the agency planned to service the space station—by encouraging
innovation in the private sector with the eventual goal of buying services
at a reasonable price. As a result, the agency chose to utilize its other
transaction authority under the National Aeronautics and Space Act of
1958,

as opposed to a more traditional Federal Acquisition Regulation

(FAR) based contract. Generally speaking, other transaction authority

Background

GAO-09-618

Pub. L. No. 85-568, § 203 (1958). This act is commonly referred to as the Space Act and

agreements signed utilizing NASA’s other transaction authority are known as Space Act
agreements.

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GAO-11-692T

enhances the government’s ability to acquire cutting-edge science and
technology, in part through attracting companies that typically have not
pursued government contracts because of the cost and impact of
complying with government procurement requirements. These types of
agreements are not considered federal government contracts, and are
therefore generally not subject to those federal laws and regulations that
apply to federal government contracts.

NASA established the Commercial Crew and Cargo program office at
Johnson Space Center in 2005 and budgeted $500 million for fiscal years
2006 through 2010 for the development and demonstration of cargo
transport capabilities. COTS partners, Orbital Sciences Corporation
(Orbital) and Space Exploration Technologies Corporation (SpaceX), have
also made significant investments in developing these capabilities. The
COTS project was originally intended to be executed in two sequential
phases: (1) private industry development of cargo transport capabilities in
coordination with NASA and (2) procurement of commercial resupply
services to the space station once cargo transport capabilities had been
successfully demonstrated. In August 2006, NASA competitively awarded a
$278 million Space Act agreement to SpaceX to develop and demonstrate
end-to-end transportation systems, including the development of the
Falcon 9 launch vehicle and Dragon spacecraft, ground operations, and
berthing with the space station. In February 2008, NASA awarded a $170
million Space Act agreement to Orbital to develop two COTS cargo
capabilities, unpressurized and pressurized

cargo delivery and disposal,

to culminate in one demonstration flight of its Taurus II launch vehicle an
Cygnus spacecraft.

Before either partner had successfully demonstrated its COTS cargo
transport capabilities, the International Space Station program office
awarded two CRS contracts in December 2008 to Orbital and SpaceX
under a separate competitive procurement from COTS. These FAR-based
contracts were for the delivery of at least 40 metric tons (approximately

Pressurized cargo refers to cargo that is carried inside the spacecraft. This cargo includes

items such as food, water, and materials to support scientific experiments.

NASA originally awarded a $207 million Space Act agreement to Rocketplane Kistler

(RpK), but the agreement was terminated in October 2007 after RpK had missed technical
and financial milestones. Subsequently, Orbital was awarded the remaining funds—$170
million. In March 2009, Orbital and NASA amended this agreement, removing its
unpressurized cargo demonstration and replacing it with a pressurized demonstration,
scheduled for March 2011.

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GAO-11-692T

88,000 pounds) to the space station between 2010 and 2015. Orbital was
awarded 8 cargo resupply missions for approximately $1.9 billion and
SpaceX was awarded 12 cargo resupply missions for approximately $1.6
billion.

In June 2009, we found that while SpaceX and Orbital had made progress
against development milestones, the companies were working under
aggressive schedules and had experienced schedule slips that delayed
upcoming demonstration launch dates by several months. In addition, we
reported that the vehicles being developed through the COTS project were
essential to NASA’s ability to fully utilize the space station after its
assembly was completed and the space shuttle was retired. Finally, we
found that NASA’s management of the COTS project generally adhered to
critical project management tools and activities.

Since our 2009 report, the two COTS project partners, Orbital and SpaceX,
have made progress in the development of their respective vehicles.
SpaceX successfully flew its first COTS demonstration mission in
December 2010 and Orbital is planning to fly its COTS demonstration
mission in December 2011. Both providers, however, are behind
schedule—SpaceX’s first COTS demonstration mission slipped 18 months
and Orbital’s first mission was initially planned for March 2011. Such
delays are not atypical of development efforts, especially efforts that are
operating under such aggressive schedules. Nonetheless, the criticality of
these vehicles to the space station’s operations, as well as NASA’s ability
to affordably execute its science missions has heightened the importance
of their timely and successful completion and lessened the level of risk
that NASA is willing to accept in this regard. As a result, the project
recently requested and received an additional $300 million to augment the
partner development efforts with, according to NASA, risk reduction
milestones.

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GAO-11-692T

Demonstration
Missions Have Been
Delayed, but Progress
Against New
Milestones Could
Reduce Further
Technical and
Schedule Risk

SpaceX: Performance
Against Prior Milestones

SpaceX has successfully completed 18 of 22 milestones to date, but has
experienced lengthy delays in completing key milestones since we last
reported on the company’s progress in June 2009. SpaceX’s agreement
with NASA established 22 development milestones that SpaceX must
complete in order to successfully demonstrate COTS cargo capabilities.
SpaceX’s first demonstration mission readiness review was completed 15
months behind schedule and its successful first demonstration mission
was flown in December 2010, 18 months late. The company’s second and
third demonstration missions have been delayed by almost 2 years to
November 2011 and January 2012, respectively.

Several factors

contributed to the delay in SpaceX’s first demonstration mission readiness
review and demonstration mission. These factors include, among others,
delays associated with (1) launching the maiden Falcon 9 (non-COTS
mission), such as Falcon 9 software and database development; (2)
suppliers; (3) design instability and production; (4) Dragon spacecraft
testing and software development; and (5) obtaining flight safety system
approval. For example, SpaceX encountered welding issues during
production of the Dragon propellant tanks and also had to redesign the
Dragon’s battery.

In preparing for its second COTS demonstration flight, SpaceX has
experienced additional design, development, and production delays. For
example, several propulsion-related components needed to be redesigned,

According to the COTS program manager, NASA is also discussing with SpaceX about the

possibility of combining the second and third demonstration missions into a single mission.
SpaceX officials told us they have already begun building the Dragon spacecraft for the
second COTS demonstration mission so that it can be fully capable of berthing with the
space station.

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the Dragon spacecraft’s navigation sensor experienced development
testing delays, and delays were experienced with launch vehicle tank
production. For example, SpaceX’s decision to incorporate design changes
to meet future CRS mission requirements has delayed the company’s
second demonstration mission. Integration challenges on the maiden
Falcon 9 launch and the first COTS demonstration mission have also kept
SpaceX engineers from moving on to the second COTS demonstration
mission.

SpaceX officials cited the completion of Dragon development efforts,
NASA’s safety verification process associated with berthing with the space
station, and transitioning into efficient production of the Falcon 9 and
Dragon to support space station resupply missions as key drivers of
technical and schedule risk going forward. For completing 18 of the 22
milestones, SpaceX has received $258 million in milestone payments thus
far, with $20 million yet to be paid. Appendix I describes SpaceX’s
progress meeting the COTS development milestones in its agreement with
NASA.

Orbital: Performance
Against Prior Milestones

Orbital has successfully completed 15 of 19 COTS milestones to date—8
more than when we initially reported on the program in June 2009.
Programmatic changes and developmental difficulties, however, have led
to multiple delays of several months’ duration and further delays are
projected for completing the remaining milestones. For example,
according to Orbital officials, the demonstration mission of Orbital’s
Taurus II launch vehicle and Cygnus spacecraft has been delayed primarily
due to an increase in design effort to develop a pressurized cargo carrier in
place of the original Cygnus unpressurized cargo design. After NASA
awarded Orbital a CRS contract for eight pressurized cargo missions,
NASA and Orbital amended their COTS demonstration agreement to
replace the unpressurized cargo demonstration mission with a pressurized
cargo demonstration. This delayed existing milestones, and the schedule
was revised to shift the COTS demonstration mission from December 2010
to March 2011. Since that time, the schedule for some of Orbital’s
milestones has been revised again and the demonstration mission is now
planned for December 2011.

COTS program and Orbital officials also noted technical challenges as
reasons for milestone delays. For example, Orbital officials said there are
several critical Taurus II engine and stage one system tests that need to be
completed by the end of the summer, but that the risk inherent in these
tests is mitigated through an incremental approach to testing. Specifically,
single engine testing has been successfully completed, and testing will be

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extended this summer to the full stage one (i.e., two-engine) testing. COTS
program and Orbital officials also noted delays in Cygnus avionics
manufacturing, primarily driven by design modifications aimed at
increasing the safety and robustness of the system. According to these
officials, integration and assembly of the first Cygnus spacecraft has begun
and is now in the initial electrical testing phase.

Additionally, the completion of the company’s launch facilities at the Mid-
Atlantic Regional Space Port in Wallops Island, Virginia, remains the key
component of program risk. NASA COTS program and Orbital officials cite
completion of the Wallops Island launch facilities as the critical factor for
meeting the COTS demonstration mission schedule. Orbital officials said
additional resources have been allocated to development of the launch
complex to mitigate further slips, and an around-the-clock schedule will be
initiated later this summer to expedite the completion of verification
testing of the liquid fueling facility, which is the primary risk factor in
completing the launch facility.

For completing 15 of the 19 milestones, Orbital has received $157.5
million, with $12.5 million remaining to be paid. Appendix I depicts
Orbital’s progress in meeting the COTS development milestones in its
agreement with NASA.

Risk Reduction Milestones
Recently Added to COTS
Agreements

In addition to the prior milestones negotiated under the COTS project,
NASA has amended its agreements with SpaceX and Orbital to include a
number of additional milestones aimed at reducing remaining
developmental and schedule risks. COTS officials told us that some
milestones reflect basic risk reduction measures, such as thermal vacuum
testing, that NASA would normally require on launch vehicle or spacecraft
development. A series of amendments were negotiated from December
2010 to May 2011 after Congress authorized $300 million for commercial
cargo efforts in fiscal year 2011. These amendments add milestones to (1)
augment ground and flight testing, (2) accelerate development of
enhanced cargo capabilities, or (3) further develop the ground
infrastructure needed for commercial cargo capabilities. These milestones
were added incrementally due to NASA operating under continuing
resolutions through the first half of fiscal year 2011.

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In May 2009, the President established a Review of U.S. Human Space
Flight Plans Committee composed of space industry experts, former
astronauts, government officials, and academics.

In its report, the

committee stated that it was concerned that the space station, and
particularly its utilization, may be at risk after Shuttle retirement as NASA
would be reliant on a combination of new international vehicles and as-
yet-unproven U.S. commercial vehicles for cargo transport. The committee
concluded that it might be prudent to strengthen the incentives to the
commercial providers to meet the schedule milestones. NASA officials
stated that if funding were available, negotiating additional, risk reduction
milestones would improve the chance of mission success, referring
specifically to the companies’ COTS demonstration missions. Of the $300
million, $236 million, divided equally between SpaceX and Orbital, will be
paid upon completion of the additional milestones.

Additionally, NASA

officials stated the International Space Station program office will pay
SpaceX and Orbital $10 million each to fund early cargo delivery to the
space station on the companies’ final COTS demonstration missions. The
COTS program manager stated that SpaceX and Orbital recognize their
responsibility under the COTS agreements for any cost overruns
associated with their development efforts, and that the companies did not
come to NASA with a request for additional funding.

SpaceX has completed 4 of its new milestones on time but has
experienced minor delays in completing 3 others. SpaceX’s agreement
with NASA was amended three times between December 2010 and May
2011 to add 18 development milestones that SpaceX must complete in
order to successfully demonstrate COTS cargo capabilities. Some of the
new milestones, for example, are designed to increase NASA’s confidence
that SpaceX’s Dragon spacecraft will successfully fly approach trajectories
to the space station while others are intended to improve engine
acceptance rates and vehicle production time frames. Milestones
completed thus far include a test of the spacecraft’s navigation sensor and
thermal vacuum tests. For completing 7 of the 18 milestones, SpaceX has

Review of U.S. Human Spaceflight Plans Committee,

Seeking a Human Spaceflight

Program Worthy of a Great Nation

(Washington, D.C.: October 2009).

The COTS program manager reported that $34 million of the $300 million was for NASA

Headquarters and Johnson Space Center program support and administration as well as
technical and mission support for the remaining COTS demonstration flights and $10
million would be spent on milestone payments for Orbital’s Milestones 20 and 21 and
SpaceX’s Milestone 22.

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GAO-11-692T

received $40 million in milestone payments thus far, with $78 million yet to
be paid.

Orbital has completed 4 of its 10 new milestones on schedule and 1 of the
new milestones was delayed by about 1 month. In concurrence with
NASA’s request, Orbital agreed to add an initial flight test of the Taurus II
launch vehicle to reduce overall cargo service risk. The test flight not only
separates the risks of the first flight of Taurus II from the risks of the first
flight of the Cygnus spacecraft, but provides the opportunity to measure
the Taurus II flight environments using an instrumented Cygnus mass
simulator. The Taurus II test flight is scheduled for October 2011. Overall
technical risks associated with Cygnus development are expected to be
reduced through additional software and avionics tests. Milestones
completed thus far include early mission analyses and reviews, as well as
delivery of mission hardware. For completing the first 5 new milestones,
Orbital has received $69 million, with $49 million remaining to be paid.
Appendix I describes SpaceX’s and Orbital’s progress meeting the new
COTS development milestones in their agreements with NASA.

Based on the current launch dates for SpaceX’s and Orbital’s upcoming
COTS demonstration missions, it is likely that both commercial partners
will not launch their initial CRS missions on time, but NASA has taken
steps to mitigate the short-term impact to the space station. The launch
window for SpaceX’s first CRS flight is from April to June 2011 and from
October to December 2011 for its second CRS flight. These launch
windows are either scheduled to occur before or during SpaceX’s
upcoming COTS demonstration flights and thus will need to be
rescheduled. In the case of Orbital, NASA officials told us that the launch
window for its first CRS flight is from January to March 2012, but will
likely slip from those dates given the Taurus II test flight added to its
milestone schedule. NASA officials added that once SpaceX and Orbital
have finished completing their COTS demonstration flights, NASA will
have to renegotiate the number of flights needed from each partner and re-
baseline the launch windows for future CRS missions.

COTS Delays Will
Likely Cause
Resupply Flights to
Slip, but NASA Has
Taken Steps to
Mitigate Short-Term
Impact

International Space Station program officials told us they have taken steps
to mitigate the short-term impact of CRS flight delays through
prepositioning of cargo on the last space shuttle flights, including cargo
that is being launched on the planned contingency space shuttle flight in
early July 2011. Officials added that these flights and the planned
European Space Agency’s Automated Transfer Vehicle and Japan’s H-II
Transfer Vehicle flights in 2012 will carry enough cargo to sustain the six

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person space station crew through 2012 and to meet science-related cargo
needs through most of 2012. Despite these steps, NASA officials said they
would still need one flight each from SpaceX’s and Orbital’s vehicles in
order to meet science-related cargo needs in 2012. Beyond 2012, NASA is
highly dependent on SpaceX’s and Orbital’s vehicles in order to fully utilize
the space station. For example, we reported in April 2011 that 29 percent
of the flights planned to support space station operations through 2020
were dependent on those vehicles.

In addition, NASA officials confirmed

that the agency has no plans to purchase additional cargo flights on
Russian Progress vehicles beyond 2011 and the European Space Agency
and the Japan Aerospace Exploration Agency have no current plans to
manufacture additional vehicles beyond their existing commitments or to
accelerate production of planned vehicles. We reported previously that if
the COTS vehicles are delayed, NASA officials said they would pursue a
course of “graceful degradation” of the space station until conditions
improve. In such conditions, the space station would only conduct
minimal science experiments.

NASA’s intended use of the COTS Space Act agreements was to stimulate
the space industry rather than acquiring goods and services for its direct
use. Traditional FAR contracts are to be used when NASA is procuring
something for the government’s direct benefit.

NASA policy provides that

funded Space Act agreements can only be used if no other instrument,
such as a traditional FAR contract, can be used.

Therefore, Space Act

agreements and FAR-based contracts are to be used for different
purposes. In considering the use of funded Space Act agreements for
COTS, NASA identified several advantages. For example:

Even With Identified
Advantages, NASA
Has Taken Measures
to Address Risks to
COTS Strategy

•

The government can share costs with the agreement partner with fixed
government investment.

•

Payment to partner is made only after successful completion of
performance-based milestones.

GAO,

International Space Station (ISS) – Ongoing Assessments for Life Extension

Appear to be Supported

GAO-11-519R

(Washington, D.C.: Apr. 11, 2011).

GAO,

International Space Station: Significant Challenges May Limit Onboard

Research,

GAO-10-9

(Washington, D.C.: Nov. 25, 2009).

31 U.S.C. § 6303.

NASA Policy Directive 1050.1I, Authority to Enter into Space Act Agreements (Dec. 23,

2008).

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GAO-11-692T

•

The government can terminate the agreement if the partner is not
reasonably meeting milestones.

•

Limited government requirements allow optimization of systems to
meet company’s commercial business needs.

These types of agreements can also have disadvantages, however. For
example, Space Act agreements may have more limited options for
oversight as compared to other science mission and human spaceflight
development efforts that are accomplished under more traditional FAR
contracts. NASA identified other disadvantages of using a Space Act
agreement. For example:

•

The government has limited ability to influence agreement partners in
their approach.

•

The government lacks additional management tools (beyond
performance payments at milestones) to incentivize partners to meet
technical and schedule performance.

Given the intended goals of the project and the availability of alternative
vehicles to deliver goods to the space station when the COTS agreements
were signed, NASA was willing to accept the risks associated with the
disadvantages of using a Space Act agreement.

As the project has

progressed, however, and these alternatives are no longer viable or
available, NASA has become less willing to accept the risks involved. As a
result, the agency took steps aimed at risk mitigation, primarily through
additional funding.

I would like to point out that neither Space Act agreements nor more
traditional FAR contracts guarantee positive outcomes. Further, many of
the advantages and disadvantages identified by NASA for using a Space
Act agreement can also be present when using FAR-based contracts,
depending on how the instrument is managed or written. For example,
both a FAR contract and a Space Act agreement can provide for cost
sharing and the government also has the ability to terminate a FAR
contract or a Space Act agreement if it is dissatisfied with performance.

NASA goals were to: (1) implement Space Exploration policy with investments to

stimulate the commercial space industry; (2) facilitate U.S. private industry demonstrations
of cargo and crew space transportation capabilities with the goal of achieving safe, reliable,
cost-effective access to low-Earth orbit; and (3) create a market environment where
commercial services are available to the government and private sector customers.

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The ineffective management of the instrument can be an important
contributor to poor outcomes. For example, although a Space Act
agreement may lack management tools to incentivize partners, we have
reported in the past that award fees, which are intended to incentivize
performance on FAR-based contracts, are not always applied in an
effective manner or even tied to outcomes.

Additionally, the oversight

that NASA conducts under a FAR-based contract has not always been used
effectively to ensure that projects meet cost and schedule baselines.

Even with the advantages and disadvantages that can be present in various
instruments, given a critical need, the government bears the risk for having
to make additional investments to get what it wants, when it wants it. The
additional investment required, however, can be lessened by ensuring that
accurate knowledge about requirements, cost, schedule, and risks is
achieved early on. We have reported for years that disciplined processes
are key to ensuring that what is being proposed can actually be
accomplished within the constraints that bind the project, whether they
are cost, schedule, technical, or any other number of constraints.

have made recommendations to NASA and NASA is taking steps to
address these recommendations to help ensure that these fundamentals
are present in its major development efforts to increase the likelihood of
success.

Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions you may have at this time.

GAO,

NASA Procurement: Use of Award Fees for Achieving Program Outcomes Should

Be Improved

GAO-07-58

(Washington, D.C.: Jan. 17, 2007).

GAO,

NASA: Assessments of Selected Large-Scale Projects

GAO-11-239SP

(Washington,

D.C.: Mar. 3, 2011).

GAO,

NASA: Assessments of Selected Large-Scale Projects

GAO-09-306SP

(Washington,

D.C.: Mar. 2, 2009); GAO,

NASA: Assessments of Selected Large-Scale Projects

GAO-10-227SP

(Washington, D.C.: Feb. 1, 2010); and

GAO-11-239SP

Page 12

GAO-11-692T

Appendix I: COTS Partners’ Progress
Completing Prior and New Milestones

Table 1: SpaceX’s Progress Completing Prior COTS Development Milestones

Milestone
number

Milestone description

Scheduled
completion
date

Completed
on time (Yes/No)

Delay if
applicable
(months)

Payment
amount
(millions)

Project Management Plan Review

Sept. 2006

$23.1

Demo 1 System Requirements Review Nov. 2006

Demo 1 Preliminary Design Review

Feb. 2007

$18.1

Financing Round 1

Mar. 2007

$10

Demo 2 System Requirements Review Mar. 2007

$31.1

Demo 1 System Critical Design Review Aug. 2007

$8.1

Demo 3 System Requirements Review Oct. 2007

$22.3

Demo 2 Preliminary Design Review

Dec. 2007

$21.1

Draco Initial Hot-Fire

Mar. 2008

Financing Round 2

Mar. 2008

$10

Demo 3 Preliminary Design Review

Jun. 2008

$22

Multi-engine Test

Sept. 2008

$22

Demo 2/Demo 3 System Critical
Design Review

Dec. 2008

$25

Financing Round 3

Mar. 2009

$10

Demo 1 Readiness Review

Mar. 2009

Communications Unit Flight Unit
Design, Accept, Delivery

May 2009

Demo 1 Mission

Jun. 2009

Demo 2 Readiness Review

Sept. 2009

(projected)

Demo 2 Mission

Nov. 2009

(projected)

Cargo Integration Demonstration

Jan. 2010

Demo 3 Readiness Review

Jan. 2010

(projected)

Demo 3 Mission

Mar. 2010

(projected)

Total:

$278 million for
the completion
of all
milestones

$258 million
paid to date

Source: NASA and SpaceX.

NASA is currently reviewing a proposed amendment that would change the completion dates for

milestones 18, 19, 21, and 22. In particular, Demo Mission 2 (milestone 19) would take place in
November 2011 and Demo Mission 3 in January 2012.

Page 13

GAO-11-692T

Table 2: Orbital’s Progress Completing Prior COTS Development Milestones

Milestone
number

Milestone description

Scheduled
completion

date

Completed
on time
(Yes/No)

Delay, if
applicable
(months)

Payment amount
(millions)

Program Plan Review

Mar. 2008

$10

Demo Mission System Requirements Review

Jun. 2008

$20

Unpressurized Cargo Module Preliminary
Design Review

Jul. 2008

$10

4 DELETED

COTS System Preliminary Design Review was
milestone 4, but it has been renumbered as
milestone 10

No longer
applicable

No longer applicable

5 COTS

Integration/Operations

Facility Review

Sept. 2008

$10

Pressurized Cargo Module Preliminary Design
Review

Oct. 2008

$10

7 DELETED

Unpressurized Cargo Module Critical Design
Review

No longer
applicable

No longer applicable

Instrumentation Program and Command List

Feb. 2009

$10

Completion of ISS Phase 1 Safety Review

Mar. 2009

$10

COTS System Preliminary Design Review

Apr. 2009

$20

11 DELETED

Unpressurized Cargo Module Fabrication
Started

No longer
applicable

No longer applicable

Pressurized Cargo Module Critical Design
Review

Jul. 2009

$10

Cygnus Avionics Test

Aug. 2009

$10

Completion of ISS Phase 2 Safety Review

Aug. 2009

$10

COTS System Critical Design Review

Sept. 2009

$10

Service Module Core Assembly Completed

Dec. 2009

$7.5

Service Module Test Readiness Review

Apr. 2010

$7.5

Service Module Initial Comprehensive
Performance Test

Jul. 2010

(projected)

Launch Vehicle Stage 1 Assembly Complete

Oct. 2010

(projected)

$2.5

Cargo Integration Demonstration

Dec. 2010

$2.5

Mission Readiness Review

Feb. 2011

(projected)

$2.5

System Demonstration Flight

Mar. 2011

(projected)

$2.5

Total:

$170 million for
completion of all
milestones $157.5
million paid to date

Source: NASA and Orbital.

Page 14

GAO-11-692T

Note: When Orbital amended its agreement with NASA in March 2009, it deleted milestones 7 and
11, and moved milestone 4 to become milestone 10. These changes are indicated in this revised
schedule.

Milestones 17, 18, 20, and 21 were amended in March 2011 to reflect updated milestone

descriptions and completion dates. In particular, the System Demonstration Flight (milestone 21) is
now planned for December 2011.

Page 15

GAO-11-692T

Table 3: SpaceX’s Progress Completing New COTS Development Milestones

Milestone
number

Milestone description

Scheduled
completion
date

Completed on
time (Yes/No)

Delay if
applicable
(months)

Payment amount
(millions)

Modal Test Plan and Setup

Nov. 2010

Modal Test

Dec. 2010

Light Detection and Ranging (LIDAR)
Test (open loop)

Dec. 2010

Solar Array Deployment and
Component Thermal Vacuum Tests

Dec. 2010

Light Detection and Ranging (LIDAR)
Test Plan (closed loop)

Mar. 2011

< 1

Thermal Vacuum System Test Plan
and Procurement

Mar. 2011

< 1

Overall Infrastructure Plan and Long
Lead Procurement

Mar. 2011

< 2

$10

Thermal Vacuum System Tests

Jul. 2011

$20

Test Site Infrastructure Implementation Jun. 2011

Dragon Trunk Acoustic Test

Jun. 2011

$10

Light Detection and Ranging (LIDAR)
Test (closed loop)

Aug. 2011

Design Review of Enhanced Powered
Cargo Accommodations

Aug. 2011

Design Review of Pressurized Cargo
Volume Increase

Aug. 2011

Full Dragon Electromagnetic
Interference/Capability Test and
Second Flight-Like Hardware in the
Loop Simulator

Jul. 2011

$10

Dragon Cargo Racks and Hatch
Simulator

Aug. 2011

Ground Demonstration of Enhanced
Powered Cargo

Sept. 2011

Launch Site Infrastructure
Implementation

Sept. 2011

40 Production

Infrastructure

Implementation

Sept. 2011

Total:

$118 million for the
completion of all
milestones

$40 million paid to
date

Source: NASA and SpaceX.

Page 16

GAO-11-692T

The fifth amendment to SpaceX’s agreement with NASA included Milestone 23 with a due date of

November 2010. Because NASA did not sign this amendment until December 2010 and SpaceX
completed the milestone that same month, NASA views this milestone as having been completed on
time.

SpaceX successfully completed Milestone 27 on April 18, 2011.

SpaceX successfully completed Milestone 28 on April 28, 2011.

SpaceX successfully completed Milestone 29 on May 10, 2011.

Page 17

GAO-11-692T

Table 4: Orbital’s Progress Completing New COTS Development Milestones

Milestone
number

Milestone description

Scheduled
completion
date

Completed on
time (Yes/No)

Delay, if
applicable
(months)

Payment
amount
(millions)

Mission Concept Review for Taurus II
Maiden Test Flight

Dec. 2010

$20

Taurus II Maiden Flight Preliminary
Mission Analysis

Feb. 2011

$10

Cygnus Mass Simulator Design Review

Mar. 2011

$10

Installation of Additional Processor in the
Loop Simulators

Apr. 2011

< 1

PROX Flight Equivalent Unit Test Unit

May 2011

Taurus II Maiden Flight Stage 1 Core
delivered to Wallops Flight Facility (WFF)

Apr. 2011

$24

Taurus II Maiden Flight Upper Stage
delivered to WFF

Jun. 2011

$20

Taurus II Maiden Flight Cygnus Mass
Simulator at WFF in preparation for
integration with Taurus II Maiden Flight
Launch Vehicle

Jun. 2011

$10

Taurus II Maiden Flight Launch Vehicle
Stage 1 Assembly Complete

Jul. 2011

$10

Taurus II Maiden Flight

Oct. 2011

Total:

$118 million for
the completion
of all milestones

$69 million paid
to date

Source: NASA and Orbital

Orbital successfully completed Milestone 25 on May 20, 2011.

Page 18

GAO-11-692T

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