WASHINGTON — NASA intends to hold a competition for $175 million in unspent funds should the U.S. space agency terminate Rocketplane Kistler’s Commercial Orbital Transportation Services (COTS) agreement.

A NASA official said the competition, if held, would be open to all comers, including Rocketplane Kistler (RpK).

NASA formally notified RpK Sept. 7 that it is 30 days away from having its COTS agreement terminated for failure to live up to the terms of its original agreement with the agency. The Oklahoma City-based firm was one of two companies NASA selected in August 2006 to split $500 million in public funds to help build and demonstrate competing launch systems capable of delivering cargo to the international space station. The other company was El Segundo, Calif.-based Space Exploration Technologies Corp. NASA made the COTS money contingent on meeting periodic technical and financial milestones.

RpK has struggled since the beginning of the COTS program to raise the money it needs to complete development of the K-1 reusable rocket and conduct a series of confidence-building flight demonstrations. In May, RpK missed a deadline for showing NASA that it had secured all $500 million in private financing the company has said it needs for the project.

NASA at the time said it was willing to give RpK more time to secure the private financing. The company since has missed at least one self-imposed deadline for raising the money.

NASA spokeswoman Melissa Mathews said the U.S. space agency formally notified RpK Sept. 7 “that the company has failed to perform under its Space Act Agreement” and is in jeopardy of having its COTS agreement terminated. The notice was given in the form of a letter signed by Scott Horowitz, NASA associate administrator for exploration systems.

Horowitz noted in his letter that Rocketplane Kistler had missed two milestones: Milestone 4, which is completion of the company’s financing; and Milestone 5, completion of a critical design review of the company’s proposal for a Pressurized Cargo Module.

“It is my understanding that failure to complete [Milestone 5] was due to an inability to obtain sufficient financing to perform the work,” Horowitz wrote in the Sept. 7 letter to RpK President Randy Brinkley. He went on to note that RpK was only able to finish a preliminary design review and that all of the company’s technical work had been suspended.

“After review and consideration of RpK’s performance to date and its proposed plans for completing Milestone 4, we have determined that additional efforts are not in the best interests of NASA,” Horowitz wrote in his Sept. 7 letter to Brinkley.

Mathews said the COTS agreement requires NASA to provide such notice at least 30 days in advance of terminating the agreement for “failure to perform,” such as missing agreed-upon milestones. “NASA has not terminated its relationship with RpK and has not finalized a decision whether to do so,” she said.

Brinkley did not respond by press time to a request for comment.

If NASA does pull the plug on RpK’s agreement, the agency intends to conduct a competition to select a new company to receive financial assistance with its proposed space station resupply solution.

“If we terminate the agreement with Rocketplane Kistler, we plan to conduct a competition for funded Space Act agreements similar to the COTS competition last year. RpK would be eligible to compete,” Mathews said.

Several firms already have told NASA they would be interested in competing for COTS funding, while Space Exploration Technologies has appealed to the agency to give it RpK’s unspent money in order to accelerate development of a crewed capability.

Among the firms interested in a new COTS competition are five companies that signed unfunded Space Act Agreements with NASA this year, which entitles the agency to keep them abreast of changing COTS requirements. These companies are Woodland Hills, Calif.-based Constellation Services International; Chicago-based PlanetSpace; Poway, Calif.-based SpaceDev; Houston-based Spacehab; and Reston, Va.-based Transformation Space Corp.