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Dream Chaser illustration
A proposed change in contracting mechanism for the next round of the Commercial Crew Development (CCDev) program could create complications for companies involved in the program, like Sierra Nevada Corporation and its Dream Chaser vehicle (above). (credit: SNC)

Could commercial crew become less commercial?


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Since the Obama Administration announced its change in direction in NASA’s human spaceflight plans exactly 18 months ago—February 1, 2010—debates have raged in the halls of Congress and within the overall space community about many elements of that policy change. There have been arguments about the necessity of a heavy-lift launch vehicle and its design, the decision to defer a return to the Moon in favor of human missions to near Earth asteroids, and the ability of commercial providers to take over the duty of transporting astronauts to and from low Earth orbit.

While that last topic has at times attracted the lion’s share of attention—and, at times, hyperbolic rhetoric—that debate has focused primarily on big-picture issues and less on the details involved with developing commercial crew transportation systems. Now, though, a move by NASA to make what might seem like a minor change regarding contracts the next phase for commercial crew development has attracted the attention, and concern, of industry, fearing that not only would the move make their lives more difficult, it could be the first step on a slippery slope towards a more conventional government program.

A shift in contracting strategies

The first and second rounds of NASA’s Commercial Crew Development (CCDev) program were handled through a contracting mechanism known as a Space Act Agreement (SAA). An SAA is a non-conventional contracting tool, known in bureaucratic lingo as “other transaction authority” that bypasses conventional contracting regulations in certain circumstances. The CCDev agreements were all initially funded ones, where NASA provides the company with funding when certain milestones are achieved, although last month NASA signed an unfunded SAA with United Launch Alliance to support that company’s work to human-rate its Atlas 5 launcher.

NASA’s proposed new approach “combines the best elements of an SAA with the features of a contract that will allow NASA to approve the tailoring of requirements and the certification of a vehicle,” Mango said.

SAAs have found favor with both companies and NASA for CCDev and, previously, the Commercial Orbital Transportation Services (COTS) program to develop commercial cargo spacecraft. For companies, SAAs have a much lower overhead than traditional contracts, be they fixed-price or cost-plus, making them easier and less expensive to manage. Likewise, the milestone-based approach of funded SAAs means that NASA only pays for results—and can discontinue agreements when companies don’t make progress, as it did with its original COTS agreement with Rocketplane Kistler. (This begs the question: if SAAs are so great, why not use them all the time? Contracts are legally required when NASA is directly procuring a good or service; an SAA can be used for COTS and CCDev because NASA is supporting technology development by funded companies but is not acquiring anything.)

With planning underway for the next round of CCDev, informally called CCDev-3, the industry’s assumption is that it would again use an SAA to fund development efforts. Formally called the “Integrated Design” phase, this part of the broader CCDev development would last two years and mature vehicle designs through critical design review (CDR). A fourth and final CCDev phase, called Development, Test, Evaluation, and Certification (DTEC), would cover the construction of those vehicles and their initial test flights.

At a commercial crew program forum held at the Kennedy Space Center (KSC) on July 20, Ed Mango and Brent Jett, the manager and deputy manger, respectively, of NASA’s Commercial Crew Program, confirmed that initially the plan for CCDev-3 was to use SAAs again. “As the team dug a little bit further into the Space Act Agreement, we did find several key limitations,” Jett said. The biggest one, he said, is that NASA cannot mandate requirements under an SAA, including for crew safety, but only provide them as a reference for industry. “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,” he said. “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.”

The agreements used under COTS were able to mandate safety requirements, but Jett explained that it exploited a loophole in the regulations that applied to ensuring the safety of a NASA facility—the ISS—was protected under such an agreement. NASA could do the same for CCDev, but only for operations at the ISS. “We would not be able to levy any requirements concerning ascent, entry” or any other portions of the flight not directly dealing with approaching and docking with the ISS, Jett said. That’s not an issue for a cargo-carrying spacecraft, but it is for a crewed vehicle.

“You can’t take a traditional approach and expect anything but the traditional results, which has been broken budgets and not fielding any flight hardware,” warned Gold.

Instead, NASA is looking at a hybrid approach that incorporates some elements of an SAA while also complying with the Federal Acquisition Regulations (FAR) that govern more conventional contracts. Such a “non-traditional contract”, Mango explained, would keep the milestone-based payments of an SAA and also exempt companies from the cost accounting standards typically used in a FAR-based contract. This approach “combines the best elements of an SAA with the features of a contract that will allow NASA to approve the tailoring of requirements and the certification of a vehicle,” Mango said. “We believe that we are much closer to an SAA in our approach than we are to a traditional contract.”

Industry opposition

That plan—yet to be formally approved—generated immediate and strong opposition from industry representatives at the KSC forum. “Instead of taking an American flag to the station, we should have taken the FAR to the station and left it up there,” said Mike Gold of Bigelow Aerospace, referring to an American flag flown on the first shuttle mission that was left behind by the last shuttle crew, to be retrieved by the first commercial crew vehicle to visit the station. “You can’t take a traditional approach and expect anything but the traditional results, which has been broken budgets and not fielding any flight hardware.”

The biggest concern among companies at the forum and, later, a session of the NewSpace 2011 conference last week at NASA Ames Research Center, was that moving to a FAR-based contract would introduce a major burden on companies to comply with all its regulations, especially for companies that have sought to avoid it in the past.

Garrett Reisman, the former astronaut who is managing SpaceX’s CCDev-2 work, said at NewSpace 2011 that his company wanted to stick to the fixed-price milestone-based approach used in CCDev and COTS. A FAR-based approach would require SpaceX to hire “a whole bunch more accountants” to deal with the overhead imposed by the FAR, he said. “In addition, it’s a big corporate culture change,” he said, noting that SpaceX engineers don’t fill out timecards. “It’s all an overhead burden we don’t currently have.”

Mark Sirangelo, head of the space systems division of Sierra Nevada Corporation, another company with a CCDev-2 award, said at NewSpace 2011 that he didn’t absolutely reject NASA’s approach request. “From our company’s perspective, we don’t really have a concern, one way or another,” he said. However, the hybrid approach NASA is proposing could have some sticking points, he said, such as how to account in a FAR-based contract for the co-investment companies are supposed to make in their systems, as well as how to deal with the cost and schedule impacts of any changes imposed by NASA. “It’s not that these are things that can’t be overcome, but it’s an unusual set of circumstances, and I think that’s why many people are looking at one more round of Space Act Agreements leading to a FAR contract.”

The comments, though, represent not just worries about the agency’s planned contracting approach, but also deeper concerns about the future direction of the commercial crew program. Some have worried that, over time, NASA would turn the effort into a more conventional NASA program, through contract rules, safety requirements, or other procedures that could drive up costs and make it more difficult for these vehicles to cost-effectively serve markets beyond ferrying NASA astronauts to and from the ISS.

“There’s a group of people out there who strongly feel that Space Act Agreements is the only way to do it,” Jett said. “There’s another group of people out there—not in this room, but within the government, within NASA—who strongly feel that to ensure crew safety, a cost-plus contract is the only way to do it.”

“What we mostly want to do is get the decisions that need to be made to be made as soon as possible,” Sirangelo said in an interview last month, prior to the commercial crew forum at KSC. “The thing that we are all concerned about are changes in requirements that come after we’ve designed the vehicle.” Without a cost-plus contract, accommodating such changes late in the process could be very expensive for the companies. “It becomes important that that debate and discussion happens as soon as possible, and get some solid footing so we all know what we’re designing towards.”

At NewSpace 2011, Jett acknowledged that there’s no agreement even within NASA on how CCDev should be structured. “There’s a group of people out there who strongly feel that Space Act Agreements is the only way to do it, the only way a program can be successful,” he said. “There’s another group of people out there—not in this room, but within the government, within NASA—who strongly feel that to ensure crew safety, a cost-plus contract is the only way to do it. So it’s almost like the debate in Washington over the debt ceiling.”

Fighting the bigger fight

Members of industry made it clear at the KSC forum and NewSpace 2011 conference they would not accept NASA’s proposed approach for the next CCDev round without at least more explanation from the agency on why an SAA was not acceptable. Speaking at the KSC forum, Brett Alexander, former president of the Commercial Spaceflight Federation, said NASA should provide more documentation to support its conclusion that an SAA would not work for CCDev, given that past analyses, by both NASA’s Inspector General and the Government Accountability Office, have concluded that SAAs are suitable for this. “[NASA's Office of the] General Counsel has not divulged what its legal reasoning is,” he said, “and I think they need to do that—not a couple charts, not things that you brief, but a legal brief that says, ‘here’s why,’ so that we can have that discussion.”

NASA is accepting feedback on its plans through this week but, at the same time, has also started the process of doing the next CCDev round under the FAR, issuing a “Sources Sought Synopsis”, required under the FAR as the first step in the next phase of the CCDev program if they proceed under their proposed contract strategy. “I don’t want people to think that we’re locked in to this idea of a contract,” Mango said at the KSC forum, but “we need to work in parallel so that we can continue to move forward.”

Asked about the potential shift in contracting approach during a Q&A session after her NewSpace 2011 speech last Thursday, NASA deputy administrator Lori Garver urged industry to stay involved in the discussions. “Don’t give up on us, don’t let us off the hook. We work for you,” she said. Regarding industry feedback, she said that “we are taking that into consideration.”

“The bigger issue [than contracting mechanisms] is making sure we have the proper funding for this program and making sure all of us make our milestones and go forward,” Sirangelo said.

However, both NASA and industry worry that the debate over the right contracting instrument could be moot if there’s no money available for contracts or funded SAAs. “What we really need is money and support from Congress and the executive branch,” Jett said at NewSpace 2011. Support from the executive branch is there, but Congress, given what been proposed so far for fiscal year 2012, is lagging. He noted the CCDev budget in an appropriations bill passed last month by the House Appropriations Committee is about one tenth the combined budget of the Space Launch System (SLS) and Multi-Purpose Crew Vehicle (MPCV): $312 million for CCDev versus just over $3 billion for SLS and MPCV.

“I can tell you that if that number holds for the next year, it’s going to be very challenging for us to maintain multiple partners, to maintain the type of progress we’ve made, and meet a goal to fly folks in the mid part of the decade,” Jett said. “At some point we’re going to have to spend more than a couple hundred million dollars a year.”

Company officials agreed with that concern. “The bigger issue [than contracting mechanisms] is making sure we have the proper funding for this program and making sure all of us make our milestones and go forward,” Sirangelo said.

“These are the things that keep me up at night,” Reisman said. “Worrying about how we can possibly succeed with the budgets cut way down.”


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