NASA OIG Says Projected SLS Price Financial savings are Illusory

NASA’s plan to award a single contract to provide an upgraded model of the House Launch System (SLS) is unlikely to radically cut back the price of producing the astronomically costly Moon rocket, in response to a new report from the house company’s Workplace of Inspector Normal, which additionally advisable NASA look at utilizing business options.

“Our evaluation reveals a single SLS Block 1B will price at the very least $2.5 billion to provide—not together with Programs Engineering and Integration prices—and NASA’s aspirational purpose to realize a price financial savings of fifty p.c is extremely unrealistic,” the report stated.

House Launch System Capability

SLS Block 1B is an upgraded model of the SLS Block 1 rocket that will probably be used on the primary three Artemis missions to the lunar floor. The upgraded rocket will be capable of ship ten extra tons of payload into Earth orbit and to the Moon than Block 1 can.

NASA’s plan to chop prices entails awarding a sole-sourced contract known as the Exploration Manufacturing and Operations Contract (EPOC) to Deep House Transport, LLC (DST)—a newly shaped three way partnership of The Boeing Firm and Northrop Grumman Programs Company. The contract would cowl manufacturing, techniques integration, and the launch of 5 to 10 SLS flights beginning with Artemis V in 2029.

“Earlier than getting into into EPOC, NASA intends to make use of a 3-year Pre-EPOC contract to guage DST’s readiness to imagine the brand new contract’s duties,” the report stated. “Our audit projections estimate a single SLS rocket produced below EPOC will price $2.5 billion, a determine NASA hopes to scale back by 50 p.c by way of workforce reductions, manufacturing and contracting efficiencies, and increasing the SLS’s person base. Given the large prices of the Artemis marketing campaign, failure to realize substantial financial savings will considerably hinder the sustainability of NASA’s deep house human exploration efforts.”

The OIG report discovered that NASA’s plans to scale back the price of SLS have been inadequate, particularly calling out two makes an attempt Boeing made to take action as insignificant. These included decreasing the dimensions of its workforce and bettering manufacturing processes by way of an “Aerojet Rocketdyne’s RS-25 Restart and Manufacturing Contract” as being insignificant.

“In consequence, a single SLS will price greater than $2 billion by way of the primary 10 SLS rockets produced below EPOC,” the report stated.

“That stated, shifting SLS manufacturing from separate cost-reimbursable contracts to a mixed business companies method could probably cut back SLS manufacturing prices in the long run if a fixed-price contract is used to codify a diminished value. Nonetheless, the Company has but to find out the extent to which fixed-price contracts will probably be used with DST,” the doc added.

SLS Block 1B Contracts (as of Could 2023)

The report made seven particular suggestions to NASA to scale back the price of SLS:

(1) Set up achievable cost-saving metrics, starting with Artemis IV SLS components and manufacturing contracts;
(2) transition the core stage and Exploration Higher Stage contracts to mounted value with a per-mission value to codify precise prices;
(3) if conserving contracts as cost-plus-award-fee, improve the proportion of price as an element when conducting contractor evaluations for award charge functions;
(4) conduct an in depth overview of all contractor-submitted paperwork to make sure the federal government’s rights to knowledge and processes are usually not unnecessarily transferred to the contractor;
(5) embody contract flexibility on future SLS acquisitions that can permit NASA to pivot to different business options;
(6) add compensation to the DST contract akin to incentive charges for when the contractor achieves particular price saving objectives for every Artemis SLS rocket below EPOC; and
(7) guarantee Authorities Obligatory Inspection Factors and authorities oversight groups stay all through the EPOC transition interval.

“We offered a draft of this report back to NASA administration who concurred or partially concurred with the suggestions and described deliberate actions to handle them. We take into account administration’s feedback responsive; due to this fact, the suggestions are resolved and will probably be closed upon completion and verification of the proposed corrective actions,” the report stated.

The report additionally advisable that NASA look at the usage of business options that it stated can be coming on-line within the close to future.

“Though the SLS is the one launch car at the moment obtainable that meets Artemis mission wants, within the subsequent 3 to five years different human-rated business options which are lighter, cheaper, and reusable could grow to be obtainable. Due to this fact, NASA could wish to take into account whether or not different business choices needs to be part of its mid- to long-term plans to assist its bold house exploration objectives,” the report stated.

The report’s “Leads to Temporary” part is reproduced under:

NASA’s Transition of the House Launch System to a Business Companies Contract
NASA Workplace of Inspector Normal
October 12, 2023
IG-24-001 (A-23-08-00-HED)
Full Report (PDF)

Leads to Temporary

Why We Carried out This Audit

The Artemis marketing campaign seeks to return people to the Moon’s floor in 2025 earlier than sending crewed missions to Mars within the 2030s. Key to this effort is growth of the House Launch System (SLS)—a two-stage, heavy-lift rocket that launches the Orion Multi-Goal Crew Automobile into house. In December 2022, Artemis I accomplished its 25-day uncrewed take a look at mission after launch delays of almost 4 years and billions of {dollars} in price will increase. NASA’s whole Artemis marketing campaign prices are projected to achieve $93 billion from fiscal 12 months 2012 by way of 2025, with SLS Program prices representing 26 p.c ($23.8 billion) of that whole. NASA’s growth of house flight techniques for Artemis IV contains the Gateway outpost, a Human Touchdown System, and a extra highly effective variant of the SLS rocket—often called the Block 1B—that can make the Artemis marketing campaign extra difficult and costly.

In an effort to extend the affordability of Artemis, NASA is making ready to award a sole-sourced companies contract, often called the Exploration Manufacturing and Operations Contract (EPOC), to Deep House Transport, LLC (DST)—a newly shaped three way partnership of The Boeing Firm and Northrop Grumman Programs Company—for the manufacturing, techniques integration, and launch of at the very least 5 and as much as 10 SLS flights starting with Artemis V scheduled for 2029. Boeing and Northrop Grumman at the moment provide the SLS core and higher phases and boosters, respectively, that energy the SLS. Earlier than getting into into EPOC, NASA intends to make use of a 3-year Pre-EPOC contract to guage DST’s readiness to imagine the brand new contract’s duties. Our audit projections estimate a single SLS rocket produced below EPOC will price $2.5 billion, a determine NASA hopes to scale back by 50 p.c by way of workforce reductions, manufacturing and contracting efficiencies, and increasing the SLS’s person base. Given the large prices of the Artemis marketing campaign, failure to realize substantial financial savings will considerably hinder the sustainability of NASA’s deep house human exploration efforts.

This report is one other in a collection of audits analyzing NASA’s growth of house flight techniques for its Artemis IV and future missions. On this audit, we assessed the extent to which EPOC is positioned to realize the Artemis marketing campaign’s efficiency and affordability objectives. To finish this work, we interviewed officers with NASA, Boeing, The Aerospace Company, and the Protection Contract Administration Company (DCMA), in addition to surveyed SLS Program and procurement officers. We additionally visited the Michoud Meeting Facility and reviewed contract information and different documentation associated to SLS Program acquisitions, solicitations, prices, contract modifications, contractors, and manufacturing high quality management.

What We Discovered

After reassessing NASA’s deliberate technique to shift SLS manufacturing, techniques integration, and launch companies to DST below a companies fairly than the present sole-source contract construction, the Exploration Programs Improvement Mission Directorate added 3 years to the timeline for transitioning these tasks and consolidating present SLS-related contracts below DST. Throughout this 3-year analysis and readiness interval, NASA will proceed to handle the person SLS contracts till DST is able to absolutely assume that function. We imagine this Pre-EPOC transition contract is a constructive step as it is going to embody an perception/oversight staff to watch and consider DST’s potential to handle the total scope of SLS manufacturing and integration. For instance, the transition interval offers Boeing extra time to enhance its high quality management efforts for core and higher stage manufacturing at NASA’s Michoud Meeting Facility, a priority raised by DCMA since 2019.

Our evaluation reveals a single SLS Block 1B will price at the very least $2.5 billion to provide—not together with Programs Engineering and Integration prices—and NASA’s aspirational purpose to realize a price financial savings of fifty p.c is extremely unrealistic. Particularly, our overview decided that price saving initiatives in a number of SLS manufacturing contracts akin to decreasing workforce inside Boeing’s Phases contract and gaining manufacturing efficiencies with Aerojet Rocketdyne’s RS-25 Restart and Manufacturing Contract weren’t vital and, consequently, a single SLS will price greater than $2 billion by way of the primary 10 SLS rockets produced below EPOC.

That stated, shifting SLS manufacturing from separate cost-reimbursable contracts to a mixed business companies method could probably cut back SLS manufacturing prices in the long run if a fixed-price contract is used to codify a diminished value. Nonetheless, the Company has but to find out the extent to which fixed-price contracts will probably be used with DST. Contemplating the $4.3 billion price improve the Company incurred with cost-reimbursable contracts used to construct the house flight techniques for the primary Artemis mission, persevering with to make use of the sort of contract below EPOC calls into query the suitability, affordability, and effectiveness of NASA’s contracting method to SLS manufacturing. Furthermore, a contractor’s potential to handle prices has usually accounted for under 25 p.c of its analysis below the SLS’s present cost-reimbursable contracts, so the SLS Program’s vital previous price overruns have had little affect on the award charges NASA offered to Boeing and Northop Grumman.

Furthermore, NASA’s potential to scale back SLS prices and negotiate a fixed-price contract with DST will probably be impeded by a scarcity of competitors for heavy-lift launch companies, a attribute that traditionally has helped drive down prices. Additional, NASA has permitted present SLS contractors to include restricted rights knowledge into the design of the core stage and Exploration Higher Stage, successfully blocking different contractors from competing to construct the SLS system. That stated, inclusion of a number of Federal Acquisition Regulation provisions in EPOC akin to incentive charges could help NASA in contract negotiations, mitigate the affect to schedule and value overruns, and guarantee remaining knowledge rights are retained to the fullest extent doable by the federal government. Lastly, whereas DST intends to scale back prices by growing economies of scale by constructing extra SLSs, its efforts to search out clients outdoors of NASA have been unsuccessful so far. Though the SLS is the one launch car at the moment obtainable that meets Artemis mission wants, within the subsequent 3 to five years different human-rated business options which are lighter, cheaper, and reusable could grow to be obtainable. Due to this fact, NASA could wish to take into account whether or not different business choices needs to be part of its mid- to long-term plans to assist its bold house exploration objectives.

What We Advisable

To enhance the sustainability of the SLS system because the EPOC technique is finalized, we advisable the Affiliate Administrator for Exploration Programs Improvement Mission Directorate