Orion Contract Change Trades Higher Development Cost for Near-Term Savings

WASHINGTON — NASA expects to save $225 million on the Orion Crew Exploration Vehicle over the next five years by postponing production of the spacecraft to 2013, according to U.S. space agency officials.

The near-term savings are the net result of several changes NASA made to Lockheed Martin’s Orion prime contract. Those changes, announced April 20, included adding two flight tests of Orion’s launch abort system, postponing development of a pressurized cargo-carrying version of the spaceship, and extending the design phase of the program two years.

When NASA awarded Lockheed Martin Space Systems a $3.9 billion prime contract for Orion in August 2006, the Denver-based company was aiming for having Orion ready to enter production in 2011. Shortly after award, however, NASA announced that the soonest it could afford to have Orion and its Ares 1 launcher flying would be 2014.

Scott Horowitz, NASA associate administrator for exploration systems, told reporters during an April 20 teleconference announcing the $385 million contract modification that the primary driver behind the changes was the need to “sync up” Orion’s delivery schedule with that of Ares 1, which is expected to take longer than Orion to develop.

While the two-year extension and additional testing will increase the cost of Orion’s design phase to $4.3 billion, NASA officials expect the potential value of Lockheed Martin’s contract through 2016 to remain at around $8 billion once shorter production and sustaining engineering phases are renegotiated.

“Now, obviously, that can change over time, but our projection at this point is that we expect the total contract value to remain about the same,” Skip Hatfield, the Orion project manager at NASA’s Johnson Space Center in Houston told reporters during the teleconference.

NASA also expects to reap near-term savings on Orion as a result of the contract modification.

“Even though the [total cost of the design phase] is higher, the cost per year is lower until we get out into the 2011 time frame,” Horowitz said.

Under Lockheed Martin’s original contract, spending on what was then a five-year design phase was expected to peak in 2009 at just over $1 billion that year before dropping off as the overlapping production phase of the program ramped up.

According to NASA’s new projections, Lockheed Martin will be paid less per year for design activities through 2009. Lockheed stands to receive roughly $900 million that year for Orion design and about the same again in 2010 before dropping to about $600 million in 2011. While that is $200 million more than NASA would have spent in 2011 under the original contract on Orion design and development, NASA officials said the difference is offset by reduced spending on production-oriented activities in that timeframe.

Horowitz said that stretching out Orion’s design phase to make it align better with Ares’ development schedule accounted for the bulk of the $385 million contract modification — about $331 million, to be precise. NASA also saved an undisclosed amount by directing the Lockheed Martin team to hold off on developing a pressurized cargo-carrying version of Orion.

Hatfield said NASA decided to wait and see if the Commercial Orbital Transportation Systems (COTS) program produces any viable re supply alternatives before pushing ahead with a cargo version of Orion.

“What we have done in this contract modification, because we have the COTS program that has come along, is eliminated the delivery of that vehicle, although we are still doing the design effort on that at this time in order to maintain that capability in the long term,” Hatfield said.

The balance of the $385 million contract modification — or about $54 million — is attributable to the additional launch abort system tests NASA directed Lockheed Martin to add to the program. Under the new plan, the Lockheed Martin team will conduct the first of two planned pad abort tests this September. An early altitude abort test, involving a prototype of Orion’s safety system launched atop a surplus missile booster, has been added to the schedule for mid 2008. All told, NASA now plans to conduct two pad aborts and three altitude aborts, Hatfield said.

“Lockheed chose a little bit more aggressive approach than we wanted to take on. So this is really our way of putting a little bit more conservative approach to the flight test program back in,” Hatfield said.