NASA’s Management of the Space Launch System Stages Contract
(Source: NASA Inspector General; issued Oct 10, 2018)
Human exploration of Mars has been a long-term goal of the United States for the past five decades. To achieve this goal, NASA is once again pursuing space travel beyond low Earth orbit, and key to this effort is development of the Space Launch System (SLS)—a two-stage, heavy-lift rocket that will launch the Orion Multi-Purpose Crew Vehicle (Orion) into space. This effort represents the largest development of space flight capabilities NASA has attempted since the first Space Shuttle was produced more than 37 years ago.

NASA contracted with The Boeing Company (Boeing) in 2012 to build two SLS Core Stages—that is, the first stage of the rocket consisting of the fuel tanks and supporting infrastructure—and later an Exploration Upper Stage (EUS), a new and more powerful second stage designed to increase the SLS’s upmass capability.

Originally, the first uncrewed mission of the combined SLS/Orion system known as Exploration Mission-1 (EM-1) had a launch readiness date of December 2017, while the first crewed mission of the system known as Exploration Mission-2 (EM-2) was projected to launch in mid-2021.

However, due to continued production delays with the SLS Core Stage and upcoming critical testing and integration activities, current NASA schedules indicate launch dates of mid-2020 and mid-2022, respectively.

With $5.3 billion expended as of August 2018 out of $6.2 billion allocated for the Boeing Stages contract, NASA expects Boeing to reach the contract’s value by early 2019—nearly 3 years before the contract is supposed to end—without final delivery of a single Core Stage or EUS.

As a result, the SLS Program will require a major increase in funding and renegotiation of the Boeing Stages contract to meet current launch readiness dates for the two Core Stages and EUS.

In this first in a series of audits examining NASA’s management of the SLS Program, we reviewed the extent to which Boeing is meeting cost, schedule, and performance goals for development of the SLS Core Stages and EUS and the Agency’s compliance with acquisition regulations, policies, and procedures supporting the SLS Program.

To complete this audit, we reviewed SLS Program budget and planning documentation, analyzed Boeing contract performance evaluation reports, conducted onsite surveys, and interviewed NASA and Boeing officials.

At its current rate, we project Boeing will expend at least $8.9 billion through 2021—double the amount initially planned—while delivery of the first Core Stage has slipped 2 ½ years from June 2017 to December 2019 and may slip further. Between June 2014 and August 2018, Boeing spent over $600 million more than planned on developing Core Stages 1 and 2, and NASA officials have confirmed that in FY 2018 alone Boeing expended $226 million more than planned.

Cost increases and schedule delays of Core Stage development can be traced largely to management, technical, and infrastructure issues driven by Boeing’s poor performance. For example, Boeing officials have consistently underestimated the scope of the work to be performed and thus the size and skills of the workforce required. In addition, development of command and control hardware and software necessary for Core Stage testing is 2 years behind schedule, while equipment-related mishaps and an extreme weather event contributed to cost and schedule delays.

Individually, each of these issues may have caused only minor cost and schedule problems, but taken as a whole they have resulted in a 2 ½-year slip to the SLS Core Stage delivery schedule and approximately $4 billion in cost increases for development of the first two Core Stages.

Furthermore, Boeing’s cost and schedule challenges are likely to worsen given that the SLS has yet to undergo its “Green Run Test”—a major milestone that integrates and tests the Core Stage components.

What We Found

Based on Boeing’s current expenditure rate, NASA will need to increase the contract value by approximately $800 million to complete the first Core Stage for delivery to the Kennedy Space Center in December 2019. If the EM-1 launch takes place in June 2020, more than $400 million—for a total of $1.2 billion—would need to be added to the contract. This amount would only ensure delivery of Core Stage 1 and would not include the billions more required to complete work on Core Stage 2 and the EUS.

Consequently, in light of the Project’s development delays, we have concluded NASA will be unable to meet its EM-1 launch window currently scheduled between December 2019 and June 2020.

We found that several poor contract management practices by NASA contributed to the SLS Program’s cost and schedule overruns.

First, contrary to current federal guidance, NASA lacks visibility into the Boeing Stages contract costs because all three of the company’s key activities—development of Core Stages 1 and 2 and the EUS—are co-mingled into the same contract line item number, making it difficult for the Agency to track expenditures. As a result, NASA is unable to determine the cost of a single Core Stage, which will affect the Agency’s ability to determine pricing for future Core Stages.

Second, we found flaws in NASA’s evaluation of Boeing’s performance, resulting in NASA inflating the contractor’s scores and leading to overly generous award fees. Specifically, in the six evaluation periods since 2012 in which NASA provided ratings, Agency officials deemed Boeing’s performance “excellent” in three and “very good” in three other periods, resulting in payment of $323 million or 90 percent of the available award and incentive fees. Considering the SLS Program’s cost overages and schedule delays, we question nearly $64 million of the award fees already provided to Boeing.

Third, contracting officers approved contract modifications and issued task orders to several contracts without proper authority, exposing NASA to $321.7 million in unauthorized commitments, most of which will require follow-up contract ratification. Finally, as NASA and Boeing struggle with completing the first two SLS Core Stages, the Agency’s plans are on hold for acquiring additional Core Stages. Given that NASA officials estimate needing 52 months of lead time from issuing a contract to delivery, the earliest a third Core Stage can be produced is 2023, jeopardizing planned launch dates for future missions that require the rocket, including EM-2 and potentially a science mission to Europa, one of Jupiter’s moons, in 2022.

To its credit, the SLS Program has taken positive steps to address management and procurement issues related to the Boeing Stages contract, including making key leadership changes; requesting reviews of Boeing’s management, financial, and estimating systems; adding routine, in-depth performance reviews; and changing the procurement process to improve internal controls.

However, the impact of these actions on improving Boeing’s future contract performance is uncertain.

Click here for the full audit report (50 PDF pages) on the NASA IG website.


Inspector General Attack on Nasa Super-Rocket Marred by Mistakes, Omissions
(Source: Forbes; issued Oct 12, 2018)
The National Aeronautics and Space Administration (NASA) has launched an epic quest to build the biggest rocket ever constructed, with the aim of taking astronauts deeper into space than ever before. Called the Space Launch System, it will eventually provide the means for carrying human beings to Mars.

Much of the needed technology will be adapted from equipment used on the Space Shuttle to save money. However, the core stages that will provide most of the rocket's lift had to be developed from scratch. Boeing, a contributor to my think tank, won the contract to build the stages in 2012. Recognizing the technological and managerial challenges involved, NASA has consistently rated Boeing's performance on the program as "excellent" or "very good."

Nonetheless, on October 10 NASA's Inspector General released an audit deriding Boeing's performance. It states that "cost increases and schedule delays of Core Stage development can be traced largely to management, technical, and infrastructure issues driven by Boeing's poor performance."

I have read the audit through twice and talked to Boeing executives about its findings. It appears to be a political document engineered by a holdover appointee from the Obama administration -- the same administration that tried to kill all of NASA's human exploration programs. It omits important information, misstates key facts and isn't even internally consistent in its assertions.

For instance, it seeks to blame Boeing for delays on the program, but then provides a compendium of factors contributing to the delays such as tornadoes and tooling malfunctions that cannot reasonably be attributed to mismanagement. Auditors also seem to have made almost no effort to obtain the contractor's explanation of why problems occurred; as a result, there are major inaccuracies.

If the Space Launch System is an epic quest, the Inspector General's latest assessment of its progress is an epic fail. What follows is a list of the top eight deficiencies I detect in the audit. My list is not exhaustive. But it is instructive.

First, the audit fails to provide historical context that might help explain why problems have occurred. This is only the second time in history that any country has tried to develop such a powerful rocket. The first time was the Saturn V program for Apollo missions to the Moon, half a century ago. With the demise of the Space Shuttle program, key skills were lost, infrastructure aged and the supply chain atrophied. NASA understood there were major challenges ahead, but the Inspector General is mum on their impact.

Second, the audit fails to recognize the disruptive impact of Obama-era decisions concerning NASA's human exploration program. After canceling those exploration efforts, the Obama administration first opposed and then impeded development of the Space Launch System, even though it had been directed by Congress. In 2015, the first full year of rocket development, funding for the program was cut 25%, resulting in the loss of 400 workers. The audit mentions this issue, but only to minimize its significance.

Third, the audit fails to acknowledge how a sub-optimal funding profile contributed to difficulties. Unlike major space exploration efforts of the past, there was no surge in NASA's budget during the initial years of the Space Launch System program. Because almost all of the data in the audit is derived from these early years, it provides a poor basis for projecting performance during the Trump administration. In fact, program performance has improved markedly since Trump took office.

Fourth, the audit fails to accurately calculate the current or future mix of program costs. For instance, it states that Boeing's core stages contract is over 40% of the Space Launch System cost through 2021 when in fact it is about 35%. It assumes continued outlays for items that have already been fully purchased. It ignores contractor estimates of future costs that are $2 billion below its own projections -- even though the contractor estimates are based on more recent data.

Fifth, the audit fails to mention corrective actions taken to resolve early problems in the program. Some of those actions were taken years ago, and reflected the learning that occurs in all development programs. Other actions eliminated costs no longer deemed necessary or refined managerial practices. Collectively, such corrective actions have altered the cost vector of the program, but none of that is acknowledged in the audit. It assumes past is prologue despite recent gains in performance.

Sixth, the audit fails to note the difficulties associated with rebuilding NASA's workforce and skill base. The development and fabrication of equipment for human spaceflight is extremely demanding. When investment wanes, so do the necessary skills. Boeing has had to rebuild all that, and meanwhile implement new technologies that were not available when Saturn V and the Space Shuttle were developed. No planning tool could have anticipated all the issues that might arise, but it is a one-time process that is now largely accomplished.

Seventh, the audit fails to reflect relevant information about the Space Launch System program that was readily available from the lead contractor. Contractors working on technology programs typically have a better understanding of their intricacies than anybody else. But during the five months it took the Inspector General's staff to complete this latest audit, it consulted with Boeing for a grand total of three hours. The company says there are mistakes in the audit they could easily have corrected if anyone asked.

Eighth, the audit fails to acknowledge any of the progress that has been made in the program. There have been major successes in revitalizing the human spaceflight industrial base and fabricating the first core stage stack for testing. The progress matters in an audit since it bears upon the cost curve that the program will likely follow in the future. Because none of this progress is reflected in the audit's data or narrative, it comes to much more pessimistic conclusions about future costs than current program trends warrant.

I could go on but this is a blog, not the Encyclopedia Galactica. The point here is that NASA's Inspector General has put together an almost entirely negative assessment of a program that is making steady progress and is unique in the world. The audit is backward looking not only in terms of its facts, but -- dare I say -- its biases. The Obama administration was never serious about returning to the Moon and then going on to Mars. The Trump administration has embraced those goals, and the Space Launch System is the best ticket we have for getting there.


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