Commercial Launch Vehicles: NASA Taking Measures to Manage Delays and Risks
Published: 2011-05-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since the National Aeronautics and Space Administration (NASA) created the strategy for the Commercial Orbital Transportation Services (COTS) project in 2005, the space landscape has changed significantly--the Space Shuttle program is retiring and the Ares I will not be available--increasing the importance of the timely development of COTS vehicles. The lack of alternatives for supplying the International Space Station and launching science missions have all contributed to an increased need for the COTS vehicles. The two COTS project partners, Orbital and SpaceX, have made progress in the development of their respective vehicles; however, both providers are behind schedule. As a result, the project recently received an additional $300 million to augment development efforts with risk reduction milestones. This testimony focuses on: (1) COTS development activities, including the recent funding increase; (2) the extent to which any COTS demonstration delays have affected commercial resupply services (CRS) missions and NASA's plans for meeting the space station's cargo resupply needs; and (3) lessons learned from NASA's acquisition approach for COTS. To prepare this statement, GAO used its prior relevant work and conducted additional audit work, such as analyzing each partner's agreement with NASA and interviewing NASA officials. New data in this statement was discussed with agency and company officials who provided technical comments, which we included as appropriate.
section_title: What GAO Found
paragraphs: SpaceX and Orbital continue to make progress completing milestones under their COTS agreements with NASA, but both partners are working under aggressive schedules and have experienced delays in completing demonstration missions. SpaceX successfully flew its first demonstration mission in December 2010, but the mission was 18 months late and the company's second and third demonstration missions have been delayed by almost 2 years due to design, development, and production challenges with the Dragon spacecraft and Falcon 9 launch vehicle. Orbital faced technical challenges developing the Taurus II launch vehicle and the Cygnus spacecraft and in constructing launch facilities, leading to multiple delays in completing program milestones, including its demonstration mission. NASA has amended its agreements with the partners to include a number of new milestones, such as additional ground and flight tests, to reduce remaining developmental and schedule risks; most of the new milestones completed thus far were finished on time, but many milestones remain. Based on the current launch dates for SpaceX's and Orbital's upcoming COTS demonstration missions, it is likely that neither will launch its initial CRS mission on time, but NASA has taken steps to mitigate the short-term impact to the space station. The launch windows for SpaceX's first and second CRS flights are scheduled to occur either before or during its upcoming COTS demonstration flights and will need to be rescheduled. Orbital's first CRS flight will also likely shift due to a Taurus II test flight. NASA officials said that the agency will have to renegotiate the number of flights needed from each partner and re-baseline the launch windows for future CRS missions once COTS demonstration flights are completed. NASA has taken steps to mitigate the short-term impact of CRS delays through prepositioning of cargo, some of which will be delivered on the last space shuttle flight. Despite these efforts, NASA officials said they would still need one flight in 2012 from SpaceX's and Orbital's vehicles to meet science-related cargo needs. In considering the use of a Space Act agreement for COTS, NASA identified several advantages. These advantages include sharing costs with agreement partners and promoting innovation in the private sector. A disadvantage, however, is that NASA is limited in its ability to influence agreement partners in their approach. At the time the agreements were awarded, NASA was willing to accept the risks of using a Space Act agreement given the goals of the project and alternative vehicles that were available to deliver goods to the space station. As the project has progressed, however, and these alternatives are no longer viable or available, NASA has become less willing to accept the risk involved and has taken steps aimed at risk mitigation. Given a critical need, the risk is present that the government will be required to make additional investments to meet mission needs. The amount of investment can be lessened by ensuring that accurate knowledge about requirements, cost, schedule, and risks is achieved early on.
section_title: What GAO Recommends
paragraphs: GAO has made recommendations to NASA and NASA is taking steps to help ensure that these fundamentals are present in its major development efforts to increase the likelihood of success.

section_title: Letter
paragraphs: Thank you for inviting me here today to discuss the status of the National  Aeronautics and Space Administration’s (NASA) Commercial Orbital  Transportation Services (COTS) project. GAO conducted work examining  the COTS project in 2009 and reported that progress was being made, but  several risks persisted given aggressive project schedules. Since NASA  devised its strategy for the COTS project in 2005, the space landscape has  changed quite significantly, increasing the importance of the timely  development and success of COTS vehicles to NASA. Specifically, with the  impending retirement of the space shuttle in July 2011, the United States  will lack a domestic capability to send crew and cargo to the International  Space Station and face a cargo resupply shortfall between 2012 and 2020  that cannot be met by international partners’ space vehicles alone. The  Ares I project, which was originally intended to be operational in 2010 and  to fill the gap between the retirement of the Space Shuttle program and the  availability of the COTS vehicles, pushed its launch readiness date to 2015  and is now being restructured into a new program that will not be  operational until at least 2016. Further, the Delta II launch vehicle, which  has carried the majority of NASA’s science missions over the last several  years, is retiring, the impact of which is beginning to be felt by NASA’s  science projects. These changes have resulted in an increased need for  the vehicles being developed for COTS not only to address the cargo  resupply shortfall as intended, but also to support a large number of future  science missions at a reasonable cost to NASA. While COTS partners have  made progress in the development of their vehicles, they have also  experienced delays and NASA has provided additional funding to the  partners to reduce the risk that their vehicles would experience further  delays.
Against this backdrop, my testimony today will focus on: (1) the COTS  development activities, including a discussion of the need for the recent  funding augmentation; (2) the extent to which any COTS demonstration  delays have affected Commercial Resupply Services (CRS) missions to the  space station and NASA’s plans for meeting space station cargo resupply  needs; and (3) lessons learned from NASA’s acquisition approach for  COTS.
In preparing this statement, we relied on our prior report related to the  COTS project and conducted additional audit work in May 2011 to update  information from that report. Specifically, we analyzed each COTS  partner’s agreement with NASA, amendments to those agreements,  documentation from NASA and partner quarterly program management  reviews, and each partner’s CRS contract. We interviewed NASA COTS  and International Space Station program officials and company officials.  We discussed new information presented in this statement with agency  and company officials who provided technical comments that we  incorporated as appropriate. Our prior work on the COTS project, as well  as the work conducted for this statement, was performed in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
subsections: section_title: Background
paragraphs: In 2004, President George W. Bush announced his Vision for Space  Exploration that included direction for NASA to pursue commercial  opportunities for providing transportation and other services to support  the space station after 2010. When the project was established in 2005, the  approach that NASA laid out was a marked change in philosophy for how  the agency planned to service the space station—by encouraging  innovation in the private sector with the eventual goal of buying services  at a reasonable price. As a result, the agency chose to utilize its other  transaction authority under the National Aeronautics and Space Act of  1958, as opposed to a more traditional Federal Acquisition Regulation  (FAR) based contract. Generally speaking, other transaction authority  enhances the government’s ability to acquire cutting-edge science and  technology, in part through attracting companies that typically have not  pursued government contracts because of the cost and impact of  complying with government procurement requirements. These types of  agreements are not considered federal government contracts, and are  therefore generally not subject to those federal laws and regulations that  apply to federal government contracts.
NASA established the Commercial Crew and Cargo program office at  Johnson Space Center in 2005 and budgeted $500 million for fiscal years  2006 through 2010 for the development and demonstration of cargo  transport capabilities. COTS partners, Orbital Sciences Corporation  (Orbital) and Space Exploration Technologies Corporation (SpaceX), have  also made significant investments in developing these capabilities. The  COTS project was originally intended to be executed in two sequential  phases: (1) private industry development of cargo transport capabilities in  coordination with NASA and (2) procurement of commercial resupply  services to the space station once cargo transport capabilities had been  successfully demonstrated. In August 2006, NASA competitively awarded a  $278 million Space Act agreement to SpaceX to develop and demonstrate  end-to-end transportation systems, including the development of the  Falcon 9 launch vehicle and Dragon spacecraft, ground operations, and  berthing with the space station. In February 2008, NASA awarded a $170  million Space Act agreement to Orbital to develop two COTS cargo  capabilities, unpressurized and pressurized cargo delivery and disposal,  to culminate in one demonstration flight of its Taurus II launch vehicle and  Cygnus spacecraft.
Before either partner had successfully demonstrated its COTS cargo  transport capabilities, the International Space Station program office  awarded two CRS contracts in December 2008 to Orbital and SpaceX  under a separate competitive procurement from COTS. These FAR-based  contracts were for the delivery of at least 40 metric tons (approximately  88,000 pounds) to the space station between 2010 and 2015. Orbital was  awarded 8 cargo resupply missions for approximately $1.9 billion and  SpaceX was awarded 12 cargo resupply missions for approximately $1.6  billion.
In June 2009, we found that while SpaceX and Orbital had made progress  against development milestones, the companies were working under  aggressive schedules and had experienced schedule slips that delayed  upcoming demonstration launch dates by several months. In addition, we  reported that the vehicles being developed through the COTS project were  essential to NASA’s ability to fully utilize the space station after its  assembly was completed and the space shuttle was retired. Finally, we  found that NASA’s management of the COTS project generally adhered to  critical project management tools and activities.
Since our 2009 report, the two COTS project partners, Orbital and SpaceX,  have made progress in the development of their respective vehicles.  SpaceX successfully flew its first COTS demonstration mission in  December 2010 and Orbital is planning to fly its COTS demonstration  mission in December 2011. Both providers, however, are behind  schedule—SpaceX’s first COTS demonstration mission slipped 18 months  and Orbital’s first mission was initially planned for March 2011. Such  delays are not atypical of development efforts, especially efforts that are  operating under such aggressive schedules. Nonetheless, the criticality of  these vehicles to the space station’s operations, as well as NASA’s ability  to affordably execute its science missions has heightened the importance  of their timely and successful completion and lessened the level of risk  that NASA is willing to accept in this regard. As a result, the project  recently requested and received an additional $300 million to augment the  partner development efforts with, according to NASA, risk reduction  milestones.
section_title: Demonstration Missions Have Been Delayed, but Progress Against New Milestones Could Reduce Further Technical and Schedule Risk
subsections: section_title: SpaceX: Performance Against Prior Milestones
paragraphs: SpaceX has successfully completed 18 of 22 milestones to date, but has  experienced lengthy delays in completing key milestones since we last  reported on the company’s progress in June 2009. SpaceX’s agreement  with NASA established 22 development milestones that SpaceX must  complete in order to successfully demonstrate COTS cargo capabilities.  SpaceX’s first demonstration mission readiness review was completed 15  months behind schedule and its successful first demonstration mission  was flown in December 2010, 18 months late. The company’s second and  third demonstration missions have been delayed by almost 2 years to  November 2011 and January 2012, respectively. Several factors  contributed to the delay in SpaceX’s first demonstration mission readiness  review and demonstration mission. These factors include, among others,  delays associated with (1) launching the maiden Falcon 9 (non-COTS  mission), such as Falcon 9 software and database development; (2)  suppliers; (3) design instability and production; (4) Dragon spacecraft  testing and software development; and (5) obtaining flight safety system  approval. For example, SpaceX encountered welding issues during  production of the Dragon propellant tanks and also had to redesign the  Dragon’s battery.
In preparing for its second COTS demonstration flight, SpaceX has  experienced additional design, development, and production delays. For  example, several propulsion-related components needed to be redesigned,  the Dragon spacecraft’s navigation sensor experienced development  testing delays, and delays were experienced with launch vehicle tank  production. For example, SpaceX’s decision to incorporate design changes  to meet future CRS mission requirements has delayed the company’s  second demonstration mission. Integration challenges on the maiden  Falcon 9 launch and the first COTS demonstration mission have also kept  SpaceX engineers from moving on to the second COTS demonstration  mission.
SpaceX officials cited the completion of Dragon development efforts,   NASA’s safety verification process associated with berthing with the space  station, and transitioning into efficient production of the Falcon 9 and  Dragon to support space station resupply missions as key drivers of  technical and schedule risk going forward. For completing 18 of the 22  milestones, SpaceX has received $258 million in milestone payments thus  far, with $20 million yet to be paid. Appendix I describes SpaceX’s  progress meeting the COTS development milestones in its agreement with  NASA.
section_title: Orbital: Performance Against Prior Milestones
paragraphs: Orbital has successfully completed 15 of 19 COTS milestones to date—8  more than when we initially reported on the program in June 2009.  Programmatic changes and developmental difficulties, however, have led  to multiple delays of several months’ duration and further delays are  projected for completing the remaining milestones. For example,  according to Orbital officials, the demonstration mission of Orbital’s  Taurus II launch vehicle and Cygnus spacecraft has been delayed primarily  due to an increase in design effort to develop a pressurized cargo carrier in  place of the original Cygnus unpressurized cargo design. After NASA  awarded Orbital a CRS contract for eight pressurized cargo missions,  NASA and Orbital amended their COTS demonstration agreement to  replace the unpressurized cargo demonstration mission with a pressurized  cargo demonstration. This delayed existing milestones, and the schedule  was revised to shift the COTS demonstration mission from December 2010  to March 2011. Since that time, the schedule for some of Orbital’s  milestones has been revised again and the demonstration mission is now  planned for December 2011.
COTS program and Orbital officials also noted technical challenges as  reasons for milestone delays. For example, Orbital officials said there are  several critical Taurus II engine and stage one system tests that need to be  completed by the end of the summer, but that the risk inherent in these  tests is mitigated through an incremental approach to testing. Specifically,  single engine testing has been successfully completed, and testing will be  extended this summer to the full stage one (i.e., two-engine) testing. COTS  program and Orbital officials also noted delays in Cygnus avionics  manufacturing, primarily driven by design modifications aimed at  increasing the safety and robustness of the system. According to these  officials, integration and assembly of the first Cygnus spacecraft has begun  and is now in the initial electrical testing phase.
Additionally, the completion of the company’s launch facilities at the Mid- Atlantic Regional Space Port in Wallops Island, Virginia, remains the key  component of program risk. NASA COTS program and Orbital officials cite  completion of the Wallops Island launch facilities as the critical factor for  meeting the COTS demonstration mission schedule. Orbital officials said  additional resources have been allocated to development of the launch  complex to mitigate further slips, and an around-the-clock schedule will be  initiated later this summer to expedite the completion of verification  testing of the liquid fueling facility, which is the primary risk factor in  completing the launch facility.
For completing 15 of the 19 milestones, Orbital has received $157.5  million, with $12.5 million remaining to be paid. Appendix I depicts  Orbital’s progress in meeting the COTS development milestones in its  agreement with NASA.
section_title: Risk Reduction Milestones Recently Added to COTS Agreements
paragraphs: In addition to the prior milestones negotiated under the COTS project,  NASA has amended its agreements with SpaceX and Orbital to include a  number of additional milestones aimed at reducing remaining  developmental and schedule risks. COTS officials told us that some  milestones reflect basic risk reduction measures, such as thermal vacuum  testing, that NASA would normally require on launch vehicle or spacecraft  development. A series of amendments were negotiated from December  2010 to May 2011 after Congress authorized $300 million for commercial  cargo efforts in fiscal year 2011. These amendments add milestones to (1)  augment ground and flight testing, (2) accelerate development of  enhanced cargo capabilities, or (3) further develop the ground  infrastructure needed for commercial cargo capabilities. These milestones  were added incrementally due to NASA operating under continuing  resolutions through the first half of fiscal year 2011.
In May 2009, the President established a Review of U.S. Human Space  Flight Plans Committee composed of space industry experts, former  astronauts, government officials, and academics. In its report, the  committee stated that it was concerned that the space station, and  particularly its utilization, may be at risk after Shuttle retirement as NASA  would be reliant on a combination of new international vehicles and as- yet-unproven U.S. commercial vehicles for cargo transport. The committee  concluded that it might be prudent to strengthen the incentives to the  commercial providers to meet the schedule milestones. NASA officials  stated that if funding were available, negotiating additional, risk reduction  milestones would improve the chance of mission success, referring  specifically to the companies’ COTS demonstration missions. Of the $300  million, $236 million, divided equally between SpaceX and Orbital, will be  paid upon completion of the additional milestones. Additionally, NASA  officials stated the International Space Station program office will pay  SpaceX and Orbital $10 million each to fund early cargo delivery to the  space station on the companies’ final COTS demonstration missions. The  COTS program manager stated that SpaceX and Orbital recognize their  responsibility under the COTS agreements for any cost overruns  associated with their development efforts, and that the companies did not  come to NASA with a request for additional funding.
SpaceX has completed 4 of its new milestones on time but has  experienced minor delays in completing 3 others. SpaceX’s agreement  with NASA was amended three times between December 2010 and May  2011 to add 18 development milestones that SpaceX must complete in  order to successfully demonstrate COTS cargo capabilities. Some of the  new milestones, for example, are designed to increase NASA’s confidence  that SpaceX’s Dragon spacecraft will successfully fly approach trajectories  to the space station while others are intended to improve engine  acceptance rates and vehicle production time frames. Milestones  completed thus far include a test of the spacecraft’s navigation sensor and  thermal vacuum tests. For completing 7 of the 18 milestones, SpaceX has  received $40 million in milestone payments thus far, with $78 million yet to  be paid.
Orbital has completed 4 of its 10 new milestones on schedule and 1 of the  new milestones was delayed by about 1 month. In concurrence with  NASA’s request, Orbital agreed to add an initial flight test of the Taurus II  launch vehicle to reduce overall cargo service risk. The test flight not only  separates the risks of the first flight of Taurus II from the risks of the first  flight of the Cygnus spacecraft, but provides the opportunity to measure  the Taurus II flight environments using an instrumented Cygnus mass  simulator. The Taurus II test flight is scheduled for October 2011. Overall  technical risks associated with Cygnus development are expected to be  reduced through additional software and avionics tests. Milestones  completed thus far include early mission analyses and reviews, as well as  delivery of mission hardware. For completing the first 5 new milestones,  Orbital has received $69 million, with $49 million remaining to be paid.  Appendix I describes SpaceX’s and Orbital’s progress meeting the new  COTS development milestones in their agreements with NASA.
section_title: COTS Delays Will Likely Cause Resupply Flights to Slip, but NASA Has Taken Steps to Mitigate Short-Term Impact
paragraphs: Based on the current launch dates for SpaceX’s and Orbital’s upcoming  COTS demonstration missions, it is likely that both commercial partners  will not launch their initial CRS missions on time, but NASA has taken  steps to mitigate the short-term impact to the space station. The launch  window for SpaceX’s first CRS flight is from April to June 2011 and from  October to December 2011 for its second CRS flight. These launch  windows are either scheduled to occur before or during SpaceX’s  upcoming COTS demonstration flights and thus will need to be  rescheduled. In the case of Orbital, NASA officials told us that the launch  window for its first CRS flight is from January to March 2012, but will  likely slip from those dates given the Taurus II test flight added to its  milestone schedule. NASA officials added that once SpaceX and Orbital  have finished completing their COTS demonstration flights, NASA will  have to renegotiate the number of flights needed from each partner and re- baseline the launch windows for future CRS missions.
International Space Station program officials told us they have taken steps  to mitigate the short-term impact of CRS flight delays through  prepositioning of cargo on the last space shuttle flights, including cargo  that is being launched on the planned contingency space shuttle flight in  early July 2011. Officials added that these flights and the planned  European Space Agency’s Automated Transfer Vehicle and Japan’s H-II  Transfer Vehicle flights in 2012 will carry enough cargo to sustain the six  person space station crew through 2012 and to meet science-related cargo  needs through most of 2012. Despite these steps, NASA officials said they  would still need one flight each from SpaceX’s and Orbital’s vehicles in  order to meet science-related cargo needs in 2012. Beyond 2012, NASA is  highly dependent on SpaceX’s and Orbital’s vehicles in order to fully utilize  the space station. For example, we reported in April 2011 that 29 percent  of the flights planned to support space station operations through 2020  were dependent on those vehicles. In addition, NASA officials confirmed  that the agency has no plans to purchase additional cargo flights on  Russian Progress vehicles beyond 2011 and the European Space Agency  and the Japan Aerospace Exploration Agency have no current plans to  manufacture additional vehicles beyond their existing commitments or to  accelerate production of planned vehicles. We reported previously that if  the COTS vehicles are delayed, NASA officials said they would pursue a  course of “graceful degradation” of the space station until conditions  improve. In such conditions, the space station would only conduct  minimal science experiments.
section_title: Even With Identified Advantages, NASA Has Taken Measures to Address Risks to COTS Strategy
paragraphs: NASA’s intended use of the COTS Space Act agreements was to stimulate  the space industry rather than acquiring goods and services for its direct  use. Traditional FAR contracts are to be used when NASA is procuring  something for the government’s direct benefit. NASA policy provides that  funded Space Act agreements can only be used if no other instrument,  such as a traditional FAR contract, can be used. Therefore, Space Act  agreements and FAR-based contracts are to be used for different  purposes. In considering the use of funded Space Act agreements for  COTS, NASA identified several advantages. For example:    The government can share costs with the agreement partner with fixed  government investment.
Payment to partner is made only after successful completion of  performance-based milestones.
The government can terminate the agreement if the partner is not  reasonably meeting milestones.
Limited government requirements allow optimization of systems to  meet company’s commercial business needs.
These types of agreements can also have disadvantages, however. For  example, Space Act agreements may have more limited options for  oversight as compared to other science mission and human spaceflight  development efforts that are accomplished under more traditional FAR  contracts. NASA identified other disadvantages of using a Space Act  agreement. For example:    The government has limited ability to influence agreement partners in  their approach.
The government lacks additional management tools (beyond  performance payments at milestones) to incentivize partners to meet  technical and schedule performance.
Given the intended goals of the project and the availability of alternative  vehicles to deliver goods to the space station when the COTS agreements  were signed, NASA was willing to accept the risks associated with the  disadvantages of using a Space Act agreement. As the project has  progressed, however, and these alternatives are no longer viable or  available, NASA has become less willing to accept the risks involved. As a  result, the agency took steps aimed at risk mitigation, primarily through  additional funding.
I would like to point out that neither Space Act agreements nor more  traditional FAR contracts guarantee positive outcomes. Further, many of  the advantages and disadvantages identified by NASA for using a Space  Act agreement can also be present when using FAR-based contracts,  depending on how the instrument is managed or written. For example,  both a FAR contract and a Space Act agreement can provide for cost  sharing and the government also has the ability to terminate a FAR  contract or a Space Act agreement if it is dissatisfied with performance.
The ineffective management of the instrument can be an important  contributor to poor outcomes. For example, although a Space Act  agreement may lack management tools to incentivize partners, we have  reported in the past that award fees, which are intended to incentivize  performance on FAR-based contracts, are not always applied in an  effective manner or even tied to outcomes. Additionally, the oversight  that NASA conducts under a FAR-based contract has not always been used  effectively to ensure that projects meet cost and schedule baselines.
Even with the advantages and disadvantages that can be present in various  instruments, given a critical need, the government bears the risk for having  to make additional investments to get what it wants, when it wants it. The  additional investment required, however, can be lessened by ensuring that  accurate knowledge about requirements, cost, schedule, and risks is  achieved early on. We have reported for years that disciplined processes  are key to ensuring that what is being proposed can actually be  accomplished within the constraints that bind the project, whether they  are cost, schedule, technical, or any other number of constraints. We  have made recommendations to NASA and NASA is taking steps to  address these recommendations to help ensure that these fundamentals  are present in its major development efforts to increase the likelihood of  success.
Mr. Chairman, this concludes my prepared statement. I would be happy to  respond to any questions you may have at this time.
section_title: Appendix II: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
paragraphs: For questions about this statement, please contact me at (202) 512-4841 or  chaplainc@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  testimony.
section_title: Staff Acknowledgments
paragraphs: Individuals making key contributions to this statement include Shelby S.  Oakley, Assistant Director; Jeff Hartnett; Andrew Redd; Megan Porter;  Laura Greifner; and Alyssa Weir.
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