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NASA OIG Audit of Commercial Resupply Services to the International Space Station

Status Report From: NASA Office of Inspector General
Posted: Thursday, April 26, 2018

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Full report

WHY WE PERFORMED THIS AUDIT

Since the Space Shuttle's final flight in 2011, NASA has embarked on a new approach to transport supplies, equipment, and science research to and from the International Space Station (ISS or Station) using private companies. Through its first round of Commercial Resupply Services contracts (CRS-1), NASA awarded a total of 31 missions to Orbital ATK and Space Exploration Technologies Corporation (SpaceX) worth $5.9 billion, or an average cost of $191.3 million per mission.1 As a follow-on to CRS-1, NASA awarded a second round of cargo resupply contracts known as CRS-2 to Orbital ATK, SpaceX, and the Sierra Nevada Corporation (Sierra Nevada) with a maximum total value of $14 billion – more than double the value of the CRS-1 contracts. As of December 2017, NASA has awarded $2.6 billion in task orders for eight CRS-2 missions and related integration costs.

Cargo missions are key to the successful utilization of the ISS and continued reliance on commercial operators to provide this vital service could play a major role in NASA's future plans as it searches for cheaper and more efficient methods to explore space. Costing more than 30 percent of the ISS Program's annual budget, NASA officials view the commercial resupply contracts as successful and cost effective. In this audit, we examined the CRS contracts for resupplying the Station through 2024 with a special emphasis on the CRS-2 contracts. Specifically, we examined (1) the extent to which CRS-2 contracts provide best value to NASA, (2) CRS-2 costs, and (3) technical and schedule risks to CRS-2 contractors. In meeting these objectives, we reviewed applicable Federal laws, regulations, and guidelines; evaluated NASA's CRS contracts; interviewed officials from NASA and the commercial companies; analyzed spending on CRS; and reviewed relevant documentation.

WHAT WE FOUND

During the CRS-2 solicitation and award process, NASA followed Federal procurement rules and applied lessons learned from the CRS-1 contract to provide the ISS Program with better cargo capabilities, more transport flexibility, added insurance coverage for NASA payloads, and clearer Government insight into subcontractor activities. We found that NASA could obtain additional savings by competing future cargo resupply missions after meeting the minimum of six flights guaranteed for each contractor. However, despite a requirement to compete task orders among all contractors, NASA approved sole-source awards for all 31 CRS-1 missions and the 8 CRS-2 missions awarded as of December 2017. With the addition of a third contractor under CRS-2, we believe NASA has more flexibility to compete task orders or possibly open the contract to new entrants through its On-Ramp clause that allows NASA to recompete contracts with new contractors for any missions beyond the guaranteed six. In addition, we believe NASA could realize substantial savings if Sierra Nevada uses a less expensive launch vehicle than the Atlas V currently planned for the company's first two missions.

Initial 2016 projections showed the CRS-2 contract was approximately $400 million more expensive than CRS-1 while delivering roughly 6,000 kilograms less upmass capability (i.e., delivery of supplies and equipment to the Station). The higher costs for CRS-2 are primarily driven by increased prices from SpaceX, the impact of selecting three contractors, and the $700 million in integration costs awarded to date. Of those integration costs, we question as premature $4.4 million paid to Sierra Nevada to begin certifying its second Dream Chaser configuration. We believe ISS Program officials should have delayed these payments until after the first Dream Chaser configuration is successfully demonstrated. In light of the CRS-2 contract's overall higher costs, the ISS Program is considering changing the cadence for upcoming CRS-2 flights to potentially save $300 million by taking advantage of pricing discounts without decreasing the number of missions. By the end of 2017, NASA had ordered 8 CRS-2 missions that followed this strategy; however, it is unclear whether the Agency will continue this pattern for the remaining 13 CRS-2 missions.

Although less risky than the CRS-1 missions, all three contractors face technical and schedule risks as they prepare for their CRS-2 missions. Development and launch of the Dream Chaser spacecraft poses the greatest technical and schedule risk to NASA due to its lack of flight history and Sierra Nevada's plan to not conduct a demonstration flight. Additionally, Sierra Nevada intends to only build one Dream Chaser and this raises concerns about potential schedule delays if an anomaly or failure occurs. For SpaceX, certification of the company's unproven cargo version of its Dragon 2 spacecraft for CRS-2 missions carries risk while the company works to resolve ongoing concerns related to software traceability and systems engineering processes. And finally, while Orbital ATK's planned use of a slightly modified Cygnus spacecraft for CRS-2 missions reduces risk, the company plans to rely on the relatively new Antares 230 configuration that could be affected by congressional bans on Russian engines.

WHAT WE RECOMMENDED

To obtain the best value for its cargo resupply missions and mitigate technical risks, we recommended the Associate Administrator for Human Exploration and Operations Mission Directorate ensure the ISS Program: (1) incorporates, to the extent practicable, the ISS Program Planning and Control Office's proposed mission cadences into the Planning, Programming, Budgeting, and Execution process for fiscal year 2020 to take advantage of contractor discounts for multiple missions through 2024; (2) ensures appropriate pacing of expenditures for integration costs to avoid paying for configurations too far in advance of when they may be used; (3) clarifies whether Sierra Nevada will deliver a second Dream Chaser spacecraft for CRS-2 missions and, if not, incorporates the risk of having only a single vehicle into the ISS Program risk management database; (4) ensures that the Agency negotiates monetary discounts, as required by the CRS contracts, in the event contractors use an alternate launch vehicle or a previously flown vehicle; and (5) decides by January 2020 whether to compete task orders beyond the minimum guarantee of six for each contractor through the existing contract or through the On-Ramp clause.

We provided a draft of this report to NASA management who concurred with our recommendations and described planned corrective actions. We consider the proposed actions responsive for four of the five recommendations and will close them upon their completion and verification. With regard to Recommendation 3, the Agency did not directly answer the question whether Sierra Nevada will deliver a second Dream Chaser spacecraft for CRS-2 missions. Therefore, we consider this recommendation unresolved pending further discussion with the Agency.

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