NASA Official Praises Cost-Plus Contracts

Somewhat weirdly, NASA official Jim Free appeared before a meeting of the Aeronautics and Space Engineering Board and Space Studies Board in Washington, DC last week and praised cost-plus contracts, saying the fixed cost contracts that bought NASA the SpaceX Crew Dragon and the Starship variant called the Human Landing System do the agency "no good."  To be completely even-handed, while the successes of the Crew and Cargo Dragons are without question, neither Starship, its HLS variant or the Boeing Starliner have successfully flown and all were contracted as fixed price contracts.

Free specifically went after SpaceX, saying their delays in getting the HLS flying are probably going to push the 2025 Artemis III mission out.  Before the HLS variant can fly, SpaceX has to do much more than just reach orbit.  They're on contract to develop fueling on orbit and the Starship goals are completely dependent on that milestone.  

"That’s a lot of launches to get those missions done," Free said. "They have a significant number of launches to go, and that, of course, gives me concern about the December of 2025 date" for Artemis III. "With the difficulties that SpaceX has had, I think that’s really concerning,” Free added. "You can think about that slipping probably into ’26."

Seriously?  Back last November, I noted that I've seen a prediction by a guy who has been scary accurate in his predictions saying that Artemis III won't launch until '27 instead of '25. Eric Berger at Ars Technica has better sources than I do and says, a more realistic date "for Artemis III is probably 2028-ish."  

Oddly, Free also questioned the value of the contract mechanism that NASA used to hire SpaceX and its Starship lander. "The fact is, if they’re not flying on the time they’ve said, it does us no good to have a firm, fixed-price contract other than we’re not paying more," he said. 

What Free isn't acknowledging in any way is that the entire Artemis and SLS programs were written as cost-plus contracts and they reached orbit for the first time five years late and billions over budget.  There isn't one aspect of the Artemis/SLS program that was on time, let alone early, nor has any aspect been under budget.  There's no correlation between being cost-plus and getting the hardware done on time.  If anything, it goes better with fixed price contracts. 

For example, I've beaten this dead horse many times. 

These are six of the 18 RS-25 or Space Shuttle Main Engines (SSME) NASA has for Artemis. Keep in mind one of sarcastic lines about the SLS is that it doesn't stand for Space Launch System, it stands for the Shuttles' Leftover Shit.  Designed for reuse on the Shuttles, these leftovers will be used once and discarded in the deep Atlantic. 

I've been reading and reporting about cost overruns on these 1970s-vintage engines for years now.  In May of 2020, I found out that the first stage engines would cost $146 million per engine, so nearly $600 million ($584 m) for just the four engines of the booster core.  Engines that will litter the floor of the Atlantic after one use.  I've said many times, the RS-25 engines are rated at 512,000 pounds of thrust and that's not a level that nobody else can provide.  Both Blue Origin's BE-4 engines and SpaceX's Raptor 2 (and the newer Raptor 3) are in the same class.  Blue Origin sells the BE-4 for less than $20 million.  The Raptor's design price point is under $1 million (I read $500,000 once). 

Note that SLS couldn't just decide to switch to either BE-4 or Raptors; those are methane/lox engines while the vehicle itself is based on liquid hydrogen and oxygen so the entire vehicle would have to be redesigned.  

As a veteran of the defense and space industry purchasing paradigm, I've been around cost-plus and fixed cost contracts.  The only place where I think cost-plus makes sense is when you're developing technology nobody has ever done before.  That's more like Starship than SLS.  No company has ever attacked the scale problem that SpaceX has attacked with Starship.  For example, NASA reportedly wants to land just ~180 kilograms (~400 lb) of cargo with the first crewed HLS.  That's less than 2/10 of a metric ton.  Starship is probably going to be capable of landing dozens of tons of cargo in addition to several astronauts.  

In contrast, SLS isn't as powerful as the Saturn V, leading to the Gateway, the NRHO, and the indirect flight path to the moon.  They had RS-25 engines in storage they could just use.  The Solid Rocket Boosters on SLS are direct descendants of the Shuttle program's SRBs - they have an extra segment to deliver a little (20%?) more power.  They made the core diameter of the SLS the same diameter as the Shuttle program's version.  It's a large amount of design reuse, and a fixed cost contract makes more sense to me.  

Berger questioned one of Jim Free's colleagues at NASA and got a good quote:

"I can't give him a pass on the fixed-price comment," one of these officials said of Free. "On cost-plus contracts, the hardware is always late, and you pay more. On fixed-price contracts, it's only late. So yeah, his comment was technically accurate but totally tone-deaf. What really makes me worried is that I think it shows where the heart of the agency is."

My view is that cost-plus contracts do a couple of things that make them fit in NASA's and every agency's purchasing paradigm.  First, they funnel money to lots of congressional districts which is good for attracting votes.  Second, that money in turn can get funneled back to those congress critters (or senators - let's be complete).  It's like when politicians funnel money to unions and the unions funnel portions back to the politicians.

Last words to Eric Berger at Ars Technica.  Good article if you're into this stuff.

NASA's approach toward commercial contracts really only gained momentum during the administration of Jim Bridenstine, who championed the idea of the space agency being one of many customers, and buying services rather than committing to long-term cost-plus contracts. But he left in early 2021, before Free's arrival. Now, Free is saying that fixed-price contracts may not have much value for NASA.

Is the old guard about to exact its revenge on new space?