Final Report – IG-13-016 – NASA’s Management of Commercial Orbital Transportation Services and ISS Commercial Resupply Contracts

NASA Inspector General Paul K. Martin today released a report examining NASA’s management of its commercial cargo program which uses private companies to deliver supplies to the International Space Station (ISS or Station). In anticipation of the Space Shuttle’s retirement, Congress directed NASA to foster the private commercial space flight industry as a means of developing commercial cargo transportation capabilities to the ISS. In the absence of a U.S. cargo capability, NASA would need to rely on its international partners to provide essential supplies to ISS crews and access to research conducted on the Station.

To encourage commercial companies to build spaceflight systems that could carry cargo to the ISS, NASA used a combination of Space Act Agreements and fixed-price contracts. Under the Space Act Agreements, NASA provided funding to two private companies – Space Exploration Technologies Corporation (SpaceX) and Orbital Sciences Corporation (Orbital) – to further the companies’ development of their spaceflight cargo capabilities.

On a separate track, in 2008 NASA entered into a $1.6 billion fixed-price contract with SpaceX for 12 resupply missions to the ISS and a $1.9 billion contract with Orbital for 8 missions. In March 2013, SpaceX completed its second Station resupply mission while Orbital is scheduled to undertake its first resupply mission near the end of 2013 after it completes a September demonstration flight to the ISS. In light of the commercial cargo program’s importance to the ongoing viability of the Station, the OIG examined NASA’s management of the program.

The OIG review found that despite an almost 3-year delay in development, SpaceX completed its demonstration flights and two resupply missions to the ISS. Although each experienced some anomalies, none was serious enough to substantially impact the missions.

Similar to SpaceX, Orbital has experienced delays in its development program and these delays in turn caused substantial delays to the planned flight schedule for the company’s resupply missions to the Station. However, until recently NASA did not adjust its payment schedule to Orbital in light of these delays.

In fact, the OIG found that despite the delayed launch schedule, NASA is on track to pay Orbital up to 70 percent of the funds associated with the company’s first six ISS resupply missions – well in advance of lead times needed in light of the current launch schedule. Specifically, although Orbital has yet to complete a successful demonstration flight to the ISS, NASA has paid Orbital a total of $910 million through fiscal year 2012 toward both the company’s Space Act developmental efforts and for resupply missions under its fixed-priced contract

As a general matter, procuring rocket systems prior to a successful system demonstration flight substantially increases financial risk if major technical problems are encountered during final testing and demonstration. NASA officials said they concurrently funded development of SpaceX’s and Orbital’s spaceflight capabilities development and their resupply missions out of a need to ensure a redundant cargo capacity and to meet the ISS resupply schedule. Given the critical need for ISS resupply capabilities, the OIG does not question NASA’s decision to concurrently fund spacecraft systems for up to three cargo missions. However, the OIG review questioned whether NASA had accepted too much financial risk by funding construction of six Orbital spacecraft systems before the company has flown a successful demonstration flight to the Station.

In order to reduce financial risks to the Agency, the OIG recommended that NASA ensure that contracts with the commercial cargo providers are updated to reflect the lead times required to meet any revised launch dates. Specifically, if launch dates slip further NASA should adjust the contracts to ensure that its payments to the companies reflect this revised schedule. NASA concurred with the OIG’s recommendation.

To read the OIG full report, please visit our website at http://oig.nasa.gov/audits/reports/FY13/IG-13-016.pdf .