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NASA administrator Bill Nelson told Senate appropriators May 3 that traditional cost-plus contracts were a “plague” for the agency. (credit: NASA/Bill Ingalls)

“Times are changing”: NASA looks to move beyond the traditional contract

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When NASA administrator Bill Nelson appeared before Senate appropriators May 3 to discuss the agency’s fiscal year 2023 budget proposal, most expected him to explain and defend the agency’s request for nearly $26 billion released in late March. That request included nearly $1.5 billion for the Human Landing System program, days after the agency announced its intent to hold a competition to select a second company to develop a lander alongside the existing award to SpaceX (see “A second chance at the Moon”, The Space Review, April 18, 2022).

“There is no excuse for cost overruns, but the old way of doing business was cost-plus,” Nelson said. “Because of the competition we’ve been talking about, we have been moving to fixed-price where we can under procurement law.”

“Then we would have two landers somewhere in the 2027 time frame, both having already landed,” he said. Artemis 3, using the SpaceX lander, is scheduled to launch in 2025, while the second lander could carry astronauts on the Artemis 5 mission, tentatively set for 2027. (Artemis 4 will not land on the Moon but instead deliver a module for the lunar Gateway.) After that, NASA intends to buy lunar landing services from the two companies competitively.

“I believe that that is the plan that can bring us all the value of competition, and get it done with that competitive spirit,” Nelson said, before taking a surprising turn. “You get it done cheaper, and that allows us to move away from what has been a plague on us in the past, which is a cost-plus contract.”

To have the head of NASA call cost-plus contracts, where contractors are reimbursed for their costs plus a fee, a “plague” is remarkable. NASA has, for decades, relied on such contracts for major development programs, including the Space Launch System and Orion. Nelson made clear later in the hearing he did not misspeak when he criticized cost-plus contracts.

“There is no excuse for cost overruns, but the old way of doing business was cost-plus,” Nelson said when asked by Sen. Jeanne Shaheen (D-NH), chair of the appropriations subcommittee that funds NASA, about cost and schedule overruns cited in Government Accountability Office reports. “Because of the competition we’ve been talking about, we have been moving to fixed-price where we can under procurement law.”

He brought up one example, a contract awarded to Bechtel to build a second mobile launch platform for the SLS, one designed to accommodate the larger Block 1B version of SLS. NASA awarded a cost-plus contract to the company in 2019 to build Mobile Launcher 2 for $383 million.

However, that program is facing overruns that prompted “letters of concern” to the company by NASA, the Aerospace Safety Advisory Panel noted at a meeting earlier this year. The company has declined to comment on the contract, but at the Senate hearing Nelson alleged the company “underbid” to win the contract.

“Because Bechtel underbid on a cost-plus contract in order to, what appears, to get it,” he said, “they couldn’t perform. And NASA is stuck.”

NASA has not said by how much Bechtel is overrunning on the original contract. At a briefing two days later, Jim Free, associate administrator for exploration systems development at NASA, said the agency was working with Bechtel “all the way up their management chain” about the project. “We’re working with Bechtel to get an update to their cost and schedule in the late May time frame,” he said.

Those discussions have included meeting between Nelson and Brendan Bechtel, CEO of Bechtel, but the administrator sounded pessimistic at the Senate hearing that it would result in cost savings for NASA. “There’s no way, under the contract, since it’s a cost-plus contract, that we can do anything but eat it,” he said. “And that’s not right. Times are changing.”

Starship lunar lander
The SpaceX Starship lunar lander is an example of the benefits of industry partnerships and competition, as well as not being prescriptive in requirements, say both NASA and industry. (credit: SpaceX)

NASA at a crossroads

Even before Nelson’s unprompted criticism of cost-plus contracts as a “plague” on NASA, it was clear that times were changing at the agency. The success of commercial cargo and crew transportation to the International Space Station illustrated what industry could do with fixed-price contracts, public-private partnerships, and competition. It’s led NASA to consider that approach for HLS, commercial successors to the ISS, and even spacesuits for the Artemis lunar missions.

“What does your system look like when you have no mass constraint, no volume constraint?” Matthews asked. “Our NASA community, our payload community, should really think about this new capability that’s coming online.”

That shift, and how both NASA and industry can navigate it, was at the heart of last month’s AIAA ASCENDx Texas conference, which took place a few minutes’ drive from the Johnson Space Center. An agency, and a center, long used to traditional contractor relationship was grappling with how to best work with an increasingly capable industry in this new era.

NASA “is at a crossroads,” said Bhavya Lal, associate administrator for NASA’s office of technology, policy, and strategy, in a keynote at the day-and-a-half event. “We are learning that, given the pace of innovation in the space sector and its diversity, governments may not always be the owner of the most innovative technology approach or architecture.”

She cited as examples of this HLS and the Commercial Lunar Payload Services (CLPS) program of robotic lunar lander missions, with NASA adopting commercial capabilities and technologies it might not have considered under traditional approaches. “Instead of seeing ourselves as a sole actor in space, with all other entities as followers, we need to see ourselves as a catalyst rather than as a performer,” she said of the agency. “We need to seed innovation, whether it’s in-house or outside, grow the space economy, and then leverage outcomes to meet our objectives.”

Much of the conference looked at how those new approaches were working on specific efforts, including CLPS, HLS, and commercial space stations. Part of it was discussing how JSC in particular was adapting its approaches to better partner with industry.

“I think the entire leadership team at the center recognizes that the way we do business has to change, and fundamental to that is how we communicate with other stakeholders,” said Monte Goforth, assistant director of the engineering directorate at JSC.

He and other JSC officials on one panel discussed ways they were trying to better communicate with industry, including educating civil servants on when they can talk with industry during a procurement cycle. “If we can’t have a meaningful conversation, we’re never going to build the trusted relationships we need,” said Sam Gunderson, partnership development lead at JSC.

One theme from conference discussions was the desire by industry for NASA not to be prescriptive in setting technical requirements. “One of the things that we’ve seen, especially after a decade of Dragon development that we’ve been able to work on successfully, is that when NASA specifies their capabilities in a really pure sense, rather than being very prescriptive about what the design solution looks like,” said Aarti Matthews, Starship HLS program manager at SpaceX, “it’s really critical to allowing industry to come on board.”

Starship is perhaps the best example of that, looking nothing like a traditional lunar lander or concepts proposed by other HLS competitors, but offering significantly greater capabilities at a lower price. That should encourage others to rethink how they’ll take advantage of that capability, she argued.

“Starship can land 100 tons on the lunar surface. It’s really hard to think about what that means in a tangible way,” she said. “What does your system look like when you have no mass constraint, no volume constraint? Our NASA community, our payload community, should really think about this new capability that’s coming online.”

But agency officials acknowledged that it can be hard to embrace those new ways of working with industry. “It’s really hard for NASA to let go,” said Lara Kearney, manager of the extravehicular activity and human surface mobility program office at JSC, responsible for efforts such as developing new Artemis spacesuits and lunar rovers.

“We like to be in the middle of everything. We like to think we have all of the answers a lot of the time,” she continued. “We have to help retrain our folks, retrain our culture.”

Kearney cited the example of trying to strike that balance in the ongoing procurement of spacesuits NASA astronauts will wear on Artemis missions. NASA offered its expertise to competitors in the forum of documents outlining years of work and hundreds of millions of dollars of past NASA funding on spacesuit development.

“Let’s not write off the government quite yet,” Lal said. “The government plays a major role in developing innovations.”

“This whole service idea is kind of new, but we’re seeing it work. I know in my program we are definitely taking that to heart and trying to move forward with that type of mentality,” she said. “I don’t know, honestly, that we’re going to ever go back to what I would call a heritage way of contracting at this point.”

Some worry that shifting more to commercial mechanisms, and shifting work from the agency to companies, could lead to an erosion of expertise within the agency. “NASA is going towards a direction where it’s a customer, which is awesome, but after a while you lose the skill to know for sure what is going on,” said Kirk Shireman, a former NASA ISS program manager who is now vice president of Lockheed Martin’s lunar exploration campaign.

“How do you maintain that skill?” he asked. “That’s a tough problem, I think, for NASA.”

NASA, to be clear, is not shifting entirely to commercial partnerships over traditional government-led contracting approaches. “Let’s not write off the government quite yet,” Lal said. “The government plays a major role in developing innovations.”

One example, she said, is where there is risk of “market failure,” such as when technology development takes too long or is too high-risk. “Commercial entities tend to underestimate the complexity of technology development and sometimes exaggerate the market size and revenue potential,” she said, citing the brief rise and faster fall of asteroid mining companies several years ago. “In situ resource utilization will almost certainly be required for any sustainable human presence of humanity in space. However, the trillionaires aren’t coming for a while.”

Another role for government leadership is for “system-wide thinking,” such as planning for the Artemis Base Camp, NASA’s vision for a sustainable lunar presence. That includes roles for international cooperation and competitiveness. “NASA absolutely needs to play this visioning role, developing the overarching vision for what we do on and around the Moon, so commercial entities and our international partners can see their place and jumpstart their own activities,” Lal said.

Much of the discussion at AIAA ASCENDx Texas focused on NASA human spaceflight and exploration programs, and it remains to be seen how it will, or can, be applied, to other agency efforts. Lal cited the James Webb Space Telescope as an example of innovation that was led, and could only be done by, the government, and while that mission has been successful so far as it near the start of science operations, it also was far behind schedule and over budget.

NASA officials have, in some recent presentations, argued that they have learned the lessons of JWST and are making progress in cost and schedule performance on science missions by doing more analysis up front to obtain better estimates. Twenty-nine science missions started after establishing those procedures have cumulatively underrun their budgets by 2.3%. (When JWST is added, the portfolio is 3.7% over budget, to give a sense of the magnitude of its overrun.) Yet, increasing costs for two flagship missions in development, Mars Sample Return and Europa Clipper, prompted NASA in its fiscal year 2023 budget request to push back work on NEO Surveyor, a space telescope to track near Earth asteroids, despite broad support for that mission and its endorsement weeks later in the planetary science decadal survey.

Lal said both government and industry have roles in the future of space exploration, with different capabilities and resources. “We need to work together to change the paradigm of space,” she said. “Well-designed public-private partnerships combine the strengths of the government and the private sector.”

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