NASA’s decision last week means the next phase of development of vehicles like Boeing’s CST-100 (above) will be supported through Space Act Agreements, as in the prior two rounds, and not contracts. (credit: Boeing)

An about face for commercial crew

by Jeff Foust
Monday, December 19, 2011

This summer, much of the entrepreneurial NewSpace community was up in arms about a planned change in NASA’s commercial crew development program. The agency announced plans to shift from Space Act Agreements (SAAs) to contracts based on Federal Acquisition Regulations (FAR), which many feared would burden the industry with contracting overhead and otherwise limit their flexibility (see “Could commercial crew become less commercial?”, The Space Review, August 1, 2011). By this fall, though, concerns had shifted to another issue: the level of funding the commercial crew program would receive. While the administration had requested $850 million for the effort, House and Senate appropriations bills only offered $312 and $500 million, respectively, eventually settling on $406 million in the final appropriations bill signed into law last month. NASA officials had warned that the lower amount would delay the program by at least a year.

In something of a silver lining for industry, though, the second problem has solved the first. In a sudden, if not entirely unexpected, change of direction, NASA announced Thursday that is was changing its procurement plans for the next phase of the commercial crew program. The FAR-based contract for the Integrated Design Phase—the request for proposals (RFP) for which was due to be released today—will be scrapped, and replaced instead with another round of SAAs to be awarded in 2012. The goal of the SAAs will be the same as for the previously planned contracts: to mature the designs of proposed commercial crew transportation systems to the critical design review (CDR) level, the point after which actual construction of those systems could begin.

In a hastily-arranged teleconference with reporters Thursday morning, Bill Gerstenmaier, the NASA associate administrator in charge of the agency’s Human Exploration and Operations Mission Directorate, blamed a “dynamic budget environment” on the decision to shift from a FAR-based contract back to SAAs. Both the limited amount of funding in fiscal year 2012 and the uncertainty about future funding made it difficult to the agency to award contracts that would span 21 months for the Integrated Design Phase.

“In a dynamic budget environment, it makes it tough for us to deal with that budget fluctuation” when using fixed-price contracts, Gerstenmaier said. “If we don’t get the funds that we anticipated, it makes it tough for us to negotiate the contract and inefficiency in renegotiating that contract.” Going back to SAAs, he said, “allows us to make significant progress during this period and continue on the way to eventually getting that commercial crew capability for the ISS.”

NASA’s original rationale for going to a FAR-based contract for the next commercial crew round had to do with making sure companies met the agency’s requirements in areas such as crew safety. NASA can encourage, but not mandate, companies meet specific requirements under a Space Act Agreement, but can require them to do so under a contract. “Even if industry chose to design to those requirements, NASA is not allowed to tie any of the milestones in an SAA to compliance with those requirements,” Brent Jett, the deputy manager of the Commercial Crew Program, explained at a forum in July announcing the agency’s planned shift. “That means NASA cannot accept the verification of those requirements and certify the system the way we need to for commercial crew under a Space Act Agreement.”

Gerstenmaier said last week that there is a risk that NASA won’t be able to ensure companies meet the agency’s requirements under the SAA approach, but that those risks can be managed. He noted that NASA has published its requirements, so companies know what to design to, and that eventually there will be a contract to provide crew transportation services that will require providers to meet those requirements. “There is a risk there that we won’t get exactly what we had anticipated, but I think it’s mitigated by these two things,” he said.

NASA’s new plan calls for requesting proposals for SAAs in the first quarter of next year, with plans to fund at least two awards in this next phase. More details are expected Tuesday morning, when the Commercial Crew Program holds a forum on the shift back to SAAs.

While the specific decision to go back to SAAs may have taken some by surprise, the agency’s decision to restructure the procurement was not unexpected. The program was in something of a gray area since the passage of the 2012 appropriations bill: NASA officials had previously suggested they would cancel the RFP if they received the House’s proposed funding but keep it if they got the Senate’s level; they got instead an amount exactly halfway between the two versions (see “The ongoing certainty of budget uncertainty”, The Space Review, November 21, 2011). At a Space Transportation Association luncheon two weeks ago, NASA administrator Charles Bolden would only say that the agency was looking at the best way to structure the program. “We’re going to continue to look at the commercial crew program to find out the most effective and efficient way we can bring it into being,” he said when asked about any potential changes in the program given the reduced funding. “We’re going to continue to work on that.”

On the same day that NASA announced the shift back to SAAs, the Government Accountability Office (GAO) issued its own report about the program, recommending a change in NASA’s plans prior to last week to use a FAR-based contract for the Integrated Design Phase. Noting that the funding levels are about half of what was originally projected, “NASA’s ability to execute its approach as currently planned is unlikely,” the report concluded.

While Gerstermaier said that NASA did not consult with industry before making its decision, many in the commercial crew field welcomed the decision to return to SAAs for the next phase. “This is a surprising victory for common sense within NASA in getting the most benefit for the country out of a limited Commercial Crew budget,” said the Space Access Society in a statement issued Thursday. The organization had fought earlier this year to keep using SAAs, claiming a shift to FAR-based contracts “was likely to fatally increase” costs and timelines for the program. NASA’s decision, the society said, “will be a major step toward producing viable US commercial crew transport capabilities in the coming years.”

The Commercial Spaceflight Federation, the industry trade group that has also previously advocated for retaining SAAs, also supported NASA’s decision. “Space Act Agreements are a proven way to get rapid, cost-effective results and will help ensure that the Commercial Crew Program is a success,” the organization’s new executive director, Alex Saltman, said in a statement. “This decision maximizes NASA’s bang-for-the-buck and brings America one big step closer to replacing the Space Shuttle with safe, reliable, and affordable commercial transportation to low-Earth orbit.”

Not everyone was pleased with the decision, though. Key members of Congress raised concerns about the shift, citing increased risks to NASA because of the lesser degree of oversight that an SAA offers. “Therefore, it is vitally important that NASA and its industry partners work cooperatively to ensure the highest level of crew safety, even in the absence of safety requirements,” said Rep. Ralph Hall (R-TX), chairman of the House Science, Space, and Technology Committee, in a statement. The committee’s ranking member, Rep. Eddie Bernice Johnson (D-TX), had similar concerns. “I am concerned that NASA’s plan does not appear to contain sufficient margins and other risk reduction measures to give Congress confidence that it has a high probability of successfully meeting the objective of providing safe and cost-effective commercial crew transportation to and from the International Space Station by 2016 or even 2017,” she said.

Hall suggested that, given limited funding, NASA should accelerate the program by abandoning its desire to support at least two companies. “We need to be able fully utilize our Space Station until the end of this decade, and we also need to end our reliance on other countries to ferry our astronauts,” he said. “In order to reduce risk and cost, and to minimize further schedule slips, it would be my hope that two commercial companies would team together to jointly develop a cost-effective and safe launch system.”

While Hall said in his statement that his committee would examine this decision in more detail in early 2012, Gerstenmaier said NASA did consult with Congress before announcing its plans. “They kind of understand our position and they understand the logic behind why we made this shift,” he said.

Although industry won this procurement battle, getting NASA to use Space Act Agreements again, at some point NASA will shift to more conventional contracts. Asked Thursday if this decision took NASA as far as it could go before it had to use contracts, Gerstenmaier agreed, with a caveat. “This is probably as far as we want to go with Space Acts, but I’m hesitant to say that with certainty.”

Jeff Foust (jeff@thespacereview.com) is the editor and publisher of The Space Review. He also operates the Spacetoday.net web site and the Space Politics and NewSpace Journal weblogs. Views and opinions expressed in this article are those of the author alone, and do not represent the official positions of any organization or company, including the Futron Corporation, the author’s employer.

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