Jay Gibson, former CEO of XCOR Aerospace, testifies at a Senate Armed Services Committee hearing July 18 about his nomination to become Deputy Chief Management Officer at the Department of Defense. Credit: Senate Armed Services Committee webcast

WASHINGTON — The former chief executive of XCOR Aerospace told a Senate committee July 18 that the company’s recent financial problems, which led to a layoff of all of its employees last month, could be blamed on a terminated engine development contract.

John H. “Jay” Gibson was asked about the financial problems that befell the suborbital vehicle and engine developer during a confirmation hearing for his nomination announced June 16 to become the Deputy Chief Management Officer of the Department of Defense.

Sen. Jack Reed (D-R.I.), the ranking member of the Senate Armed Services Committee, asked Gibson about the “financial difficulties” experienced by past companies he was involved with and the lessons he took from them that would give senators confidence that Gibson could “basically manage the Department of Defense.”

Gibson, who stepped down as chief executive of XCOR in late June after more than two years at the company, said the company was a subcontractor to another, unnamed company on an engine project when the company was told that contract was terminated on only 30 days’ notice.

“We were a subcontractor, and in the days of continuing resolutions we felt like we had a commitment from our prime” for funding that he said would last a year or more. “With less than 30 days notice, we were told that funding was terminated.”

Gibson didn’t name to whom XCOR was a subcontractor, but in May 2016, when the company laid off about half its workforce, it said it was suspending work on a suborbital spaceplane called Lynx to focus its resources on a liquid-oxygen, liquid-hydrogen engine program backed by United Launch Alliance. That engine was being considered by ULA as one option for a new upper stage for its Vulcan vehicle.

“The technology that we had, NASA and the Air Force were very, very high on it,” Gibson said at the hearing. “They felt like it was a long-term solution to upper-stage propulsion in a low-cost, high-reusability environment.”

That terminated contract triggered XCOR’s current problems. The company’s acting chief executive, Michael Blum, said in a July 5 statement that “adverse financial conditions” forced the company to terminate its remaining employees at the end of June, although some “critical” workers would be kept on as contractors.

XCOR management, Blum said in that statement, “is actively seeking other options that would allow it to resume full employment and activity,” but provided no additional details.

Gibson, at his confirmation hearing, said he knew going into the job more than two years ago, at the request of XCOR’s board of directors, that it would be a challenging job, calling the company “messy” and “high-risk.” He said he was warned by some of his friends when he took the job that the company “may not make it six months.”

“But, it had a tremendous opportunity in the market for very unique propulsion and launch capabilities,” he said of XCOR. “I felt like it was certainly worth the effort and I’m willing to take on a challenge.”

“I’m very proud of my management performance there. You do your best in a small business,” Gibson said. “Sometimes external factors are beyond your control.”

Jeff Foust writes about space policy, commercial space, and related topics for SpaceNews. He earned a Ph.D. in planetary sciences from the Massachusetts Institute of Technology and a bachelor’s degree with honors in geophysics and planetary science...