Kistler’s (RpK) threat to sue NASA for terminating the company’s Commercial Orbital Transportation Services (COTS) agreement is a turn for the worse in what already has been a sorry episode in the agency’s efforts to leverage the talents of America’s entrepreneurial sector.

Whether or not RpK

has grounds for a lawsuit is for lawyers to decide, but its actions resemble those of a company with little to lose and less to offer. Apparently this is what NASA gets for giving RpK

and its long-stalled K-1 rocket development project numerous

chances to meet the milestones laid out in the

COTS agreement it signed back in August 2006. For months NASA extended deadline after deadline, forgiving

RpK’s repeated failures to fulfill its obligations.

Under that agreement, NASA was to provide $207 million to help RpK

demonstrate a commercial logistics service to the international space station based on its reusable K-1 vehicle. The deal from the start was contingent upon the company’s ability to raise $500 million in private financing to complete the K-1’s development and to meet technical milestones along the way.

Even before the COTS competition began, RpK


burned through more than

$500 million in investor cash over the course of more than a decade as it tried to complete the K-1. And even though much of the K-1 hardware

already has been built, the company still needed several hundred-million more dollars to

get its vehicle to the launch pad.

The K-1

initially was intended to


low Earth orbiting telecommunications satellites, but the collapse of the telecommunications market in the late 1990s depleted its customer base and potential investors.

Nevertheless, NASA picked

the company for a COTS agreement after judging

that the advanced state of the company’s design outweighed concerns about its ability to raise money.

rewarded NASA by missing its initial $40 million fundraising milestone by a month

. When the company ran into trouble meeting a $120 million milestone

due in February

, it asked for, and received

, another reprieve; this time it promised it would have all the K-1 financing in hand by the new May deadline.


again came up empty and as a consequence missed an August design review. In September, NASA notified the company

of its intent to terminate the agreement.

response was to threaten NASA with a lawsuit unless the agency either reversed course or paid the company $10 million for partially completed milestones

– never mind that RpK

already received $32 million in COTS money for completing a systems requirement review and raising the $40 million


claim that NASA undercut its business case by signing a space station logistics contract with Russia is flimsy: the COTS agreement was for demonstrations only – there was never any guarantee of future business. In any event, the Russian contract covers only a portion of the space station’s cargo transportation requirements and expires in 2011 when the exemption Congress granted NASA from provisions of the Iran-Syria Nonproliferation

Act runs out.

When NASA went through with the termination and initiated a new COTS competition for the $175 million that became available as a result,

pushed back on two fronts. The company repeated its threat to sue but offered to hold off pending a face-to-face meeting with Richard Gilbrech

, NASA associate administrator for exploration systems, who signed the termination letter.

also moved to block the new round of COTS awards via a protest to the U.S. Government Accountability Office

challenging NASA’s plan to use a non-traditional contracting vehicle known as a Space Act Agreement. Of course,

own COTS deal was a Space Act Agreement; the company now says that based on the experience it feels that a standard contract is more appropriate.

NASA, to its credit, is pressing ahead with the competition despite RpK’s

maneuvering. But in this experience lies a lesson: The COTS source selection board, composed of NASA and outside experts, should not make any awards if the bidders fail to come up with proposals that are

both technically and financially credible.

Otherwise, the $175 million now available will go to waste, which is never a good thing but would be especially galling at a time when so many of NASA’s other activities are underfunded.

is certainly within its rights – not to mention well-established American tradition – to pursue legal action against its would-be benefactor. But by all appearances, NASA lived up to its side of the bargain. In fact the space agency bent over backwards to give

every chance to make good on its end, and still the company did not.

goal now seems to be to bleed NASA for another $10 million, as opposed to resurrecting the K-1, the required investment for which dwarfs the sum it is seeking.

The COTS program was created in response to the emergence of the entrepreneurial space industry, whose independence from the government and willingness to take risks carries the potential for innovations and cost savings beyond the reach of traditional aerospace contractors. It is unfortunate and ironic that RpK

, one of this industry’s pioneers, has resorted to obstructing NASA’s effort to take advantage because of its own inability to deliver.