The NASA Inspector General’s Office issued a report today titled, “NASA’s Challenges Certifying and Acquiring Commercial Crew Transportation Services,” looking at what obstacles lie ahead as NASA pursues its CCDev program. The challenges include:
- modifying NASA’s existing safety and human-rating requirements for commercially developed systems
- selecting an acquisition strategy for commercial crew transportation services
- establishing the appropriate insight/oversight model for commercial partner vehicle development.
- relying on an emerging industry and uncertain market conditions to achieve cost savings
- managing the relationship among commercial partners, the FAA, and NASA.
I’ve reproduced the audit’s results and management action sections below. You can download the full report here.
NASA’s Challenges Certifying and Acquiring Commercial Crew Transportation Services
NASA is making sustained progress toward acquiring commercial crew transportation services. For example, in 2009 the Agency initiated the Commercial Crew Development (CCDev) effort to focus on developing systems and concepts that will help establish an industry capable of transporting astronauts to low Earth orbit and the Space Station. The following year, NASA awarded $50 million in funded Space Act Agreements to encourage the development of system concepts and capabilities that could enable commercial crew transportation services.5 In April 2011, the Agency announced a second round of CCDev awards (CCDev 2) totaling $269.3 million to accelerate the availability of U.S. commercial crew transportation capabilities.
Modifying NASA’s Existing Safety and Human-Rating Requirements for Commercially Developed Systems. On December 8, 2010, NASA issued a consolidated set of health and medical, engineering, and safety and mission assurance requirements that commercial partners will have to meet to obtain certification to transport astronauts to low Earth orbit titled, “Commercial Crew Transportation System Certification Requirements for NASA Low Earth Orbit Missions” (Certification Requirements). However, NASA has not finalized the processes Agency officials will use to verify that commercial partners have met these requirements and subsequently certify that a commercial partner’s vehicle can safely transport NASA personnel. In May 2011, the Agency released for industry review and comment six draft documents (the 1100-series) that supplement the Certification Requirements relating to missions to the Space Station. These documents provide additional information to commercial partners regarding roles and responsibilities, technical management processes supporting certification, crew transportation system and Space Station services requirements, and the application of technical and operations standards. 6
Despite the absence of finalized requirements from NASA, the private sector is already designing and developing systems and vehicles to meet NASA’s crew transportation needs and interested companies have provided input on NASA’s commercial crew transportation requirements. Specifically, industry representatives have suggested that NASA (1) modify existing requirements to the greatest extent possible and ensure they are achievable so that industry fully understands what is expected; (2) coordinate with the Federal Aviation Administration (FAA) – which has regulatory oversight of U.S. companies providing commercial space transportation services – to ensure NASA requirements and FAA regulations are compatible; and (3) allow for flexibility so that changes in vehicle or system design are attainable within reasonable costs.7
Additionally, in response to the CCDev 2 announcement for proposals, NASA received multiple questions from industry representatives seeking clarification on the requirements published to date, the timing of release of additional requirements, and NASA’s expectations for fulfilling the requirements. One industry representative questioned a draft requirement that commercial partner vehicles be able to provide a 95 percent abort effectiveness capability – a requirement NASA itself has never met.8 NASA officials said they hope to strike a balance that will enable innovation and flexibility yet prescribe the minimum number of requirements deemed essential to ensure the safety of NASA’s astronauts.
Selecting an Acquisition Strategy for Commercial Crew Transportation Services. NASA is still developing its acquisition strategy and has not settled on the specific mechanisms it will use for procuring commercial crew transportation services. The Commercial Crew Program Planning Office (Commercial Crew Office) plans to present its proposed acquisition strategy to Congress by late summer 2011. Mindful of national policy to limit the use of high-risk contracting vehicles such as noncompetitive and cost-reimbursement contracts, among the options NASA may consider is an acquisition strategy that relies on funded Space Act Agreements, competitive procurements, in particular fixed-price contracts, or a combination of both.9
Each of these possible approaches poses financial and programmatic challenges to NASA’s efforts to procure crew transportation services. For example, the use of funded Space Act Agreements limits Government control compared to traditional procurement contracts based on the Federal Acquisition Regulation. Moreover, according to Agency policy, NASA may only enter into funded Space Act Agreements when its objective cannot be accomplished through a contract, grant, or cooperative agreement. Further, if the expected deliverables meet NASA’s transportation needs, a procurement contract is required.
Consistent with these principles, the primary purpose of CCDev is to stimulate the private sector and aid in the development of commercial human spaceflight capabilities that NASA could use to transport astronauts to low Earth orbit and the Space Station. As one potential customer of this private sector market, NASA expects the CCDev Space Act Agreements to result in commercial capabilities that consider the Agency’s Certification Requirements. However, the Agency is not dictating specific system concepts or elements or mandating compliance with its requirements. Rather, CCDev participants are free to determine the system requirements and concepts they believe will best serve their target markets. Since crew transportation for NASA is the most viable segment of the human spaceflight market in the short term, it is in the companies’ best interest to ensure compliance with NASA requirements if they hope to obtain NASA’s business. Nevertheless, the lack of mandatory compliance with NASA’s requirements presents some risk that differences between partner designs and Agency requirements could occur.
Similarly, the potential use of fixed-price contracts for crew transportation services also presents challenges. Traditionally, cost-reimbursement rather than fixed-price contracts have been used on projects in which costs and risks are not clearly defined. While fixed-price contracts lock in the Government’s initial investment, proceeding in this manner would not eliminate cost risks. Some of NASA’s potential commercial crew partners are building spacecraft for the first time and design and development are under way without fully defined and finalized requirements. In this type of environment, there is a risk that during the period of contract performance NASA’s requirements may change so significantly that contractors can successfully argue that the Agency is changing the contract’s scope, in which case NASA could be required to pay the contractor to make necessary modifications.
Finally, NASA must consider whether to continue purchasing additional seats on the Russian Soyuz vehicle as a contingency to possible delays in obtaining commercial crew transportation. Currently, NASA has purchased seats on the Soyuz vehicle to ensure continued U.S. access to the Space Station through June 2016. Because of the long lead-time required for procuring Soyuz seats and planning a mission to the Space Station, NASA would have to make the decision to purchase additional seats in 2013, approximately 3 years before commercial systems are expected to be ready.
Establishing the Appropriate Insight/Oversight Model for Commercial Partner Vehicle Development. In selecting the timing and appropriateness of potential procurement mechanisms, NASA must balance its role as a supporter of commercial partners with its responsibility to ensure that U.S. commercially developed vehicles are safe for NASA astronauts, meet the Agency’s needs, and provide for a viable domestic alternative to the Soyuz vehicle. The Commercial Crew Office is developing the model for NASA’s insight and oversight of commercial companies.10 According to NASA policy, “insight” means acquiring knowledge and an understanding of contractors’ actions by monitoring selected metrics and milestones. Methods of achieving insight include reviewing documents, attending meetings and tests, and conducting compliance evaluations. “Oversight” combines technical insight of contractor activities with approvals that provide the contractor with formally documented authority to proceed or formal acceptance of plans, tests, or other criteria.
While commercial partners are designing their launch systems, NASA will function in an insight role, forming partnerships with companies to increase the Agency’s understanding of their system designs. During this phase of the process, NASA may consider an approach that assigns a core team to follow a specific CCDev partner throughout the life cycle of its launch system. Once the CCDev initiative has ended, NASA may award contracts or continue to use funded Space Act Agreements for commercial vehicle development, test, and evaluation. The Agency would be both stimulating a commercial crew industry and assisting the commercial partners to develop safe, reliable, and cost-effective vehicles that meet NASA’s Certification Requirements. While NASA will still need to maintain insight into the development of each vehicle, at this stage of the process the Agency may assume more of an oversight role in granting approval or direction to each partner on the path to certification. As of May 2011, NASA has not finalized the oversight model for this phase, including defining key decisions regarding what will be required of commercial partners to successfully pass each milestone. Selecting the appropriate level and mechanisms of insight and oversight is necessary to provide NASA with sufficient information to assess partners’ technical, schedule, and cost risks and certify that commercially developed vehicles are safe for NASA astronauts without unduly affecting the commercial partners’ ability to operate in a cost-effective manner.
Because NASA is not dictating specific system concepts or elements or mandating compliance with its requirements when using funded Space Act Agreements, companies may develop vehicles that deviate from Agency requirements. To mitigate this risk, NASA is considering an approach that would identify significant differences between design and requirements that may prevent a partner from obtaining NASA’s certification in the later phases of the acquisition process. However, conducting such an analysis for CCDev partners may be perceived as an unfair competitive advantage for non-CCDev companies. In fact, in response to its October 2010 CCDev 2 announcement, NASA received at least one question on the possible relationship between CCDev awards and future contracts. An industry representative inquired whether NASA anticipates overlap between CCDev 2 and any future procurement, such as commercial crew demonstration or transportation services contracts. NASA responded that there is no relationship between the two phases of acquisition. Moreover, according to the Agency’s Space Act Agreements Guide, such a relationship or perceived relationship can lead to claims of a conflict of interest. If NASA fails to address such potential conflicts or develop appropriate mitigation plans, the Agency could face a bid protest, which could cause delays and jeopardize the success of NASA’s commercial crew program.
Relying on an Emerging Industry and Uncertain Market Conditions to Achieve Cost Savings. In the NASA Authorization Act of 2010, Congress stated that commercial companies offer the potential of providing lower cost crew transportation services to support the Space Station. In fact, NASA’s acquisition strategy for procuring crew transportation services is premised on competition and a healthy commercial human spaceflight industry, which would allow NASA to solicit bids from a number of partners and make informed, competitive procurement decisions that meet individual mission requirements and provide the best value for the taxpayer. However, the commercial human spaceflight industry is in its infancy, and the market beyond NASA’s own crew transportation needs is uncertain. Many of the risks associated with achieving anticipated cost savings are largely out of NASA’s control, particularly in the area of creating non-Government demand for commercial human spaceflight services. The NASA Authorization Act of 2010 directs the Agency to work with the FAA’s Office of Commercial Space Transportation and assess the potential non-Government market for commercially developed crew and cargo transportation systems and capabilities. In April 2011, NASA and the FAA reported that over time the market for commercial crew and cargo services may emerge and provide significantly more customers, more flights, and potentially lower prices to the U.S. Government. The continuing challenge will be to determine at what point the market can sustain a number of commercial partners, allowing NASA to transition to the role of consumer and ultimately realize cost-effective commercial crew transportation.
Managing the Relationship Among Commercial Partners, the FAA, and NASA. The FAA is responsible for regulatory oversight of companies seeking to provide commercial human space transportation. To date, the FAA has issued regulations pertaining to launch and reentry activities that could affect the public safety. However, in December 2012 the FAA is authorized to begin proposing regulations concerning the safety of passengers and crew involved in commercial spaceflight. As previously discussed, NASA plans to impose its own set of requirements, standards, and processes that commercial partners must meet to obtain a certification before transporting Agency personnel. Accordingly, NASA must coordinate with the FAA to avoid an environment of conflicting requirements and multiple sets of standards for commercial companies seeking to transport Government and non-Government passengers to low Earth orbit. Toward that end, the FAA and NASA have expressed a spirit of cooperation, and both groups have agreed that the goal is FAA licensing of commercially developed vehicles used to transport NASA personnel. Additionally, the agencies are co-locating personnel at NASA Headquarters, FAA field offices, and Johnson and Kennedy Space Centers to optimize Government oversight of commercial partners through compatible requirements, standards, and processes.
Separately managing each challenge associated with certifying and acquiring commercial crew transportation services is difficult enough, but because the challenges are inherently related this creates additional complications. For example, the degree and nature of requirements levied on commercial partners will have an impact on both NASA’s chosen acquisition strategy and the insight/oversight model the Agency will use to verify that the requirements are met. Also, to mitigate risks associated with relying on a single commercial partner and to help achieve anticipated costs savings, NASA’s acquisition strategy should encourage competition between multiple commercial partners. However, the viability of the commercial human spaceflight market is uncertain beyond NASA’s mission requirements, and the costs the industry must bear – such as those associated with operating in an environment of multiple standards and requirements established by NASA and the FAA – may deter companies from entering such an uncertain market.
While we are not making specific recommendations for corrective action, we believe NASA must pay particular attention to the challenges highlighted in this report. Specifically, NASA should:
- clearly articulate to its commercial partners as soon as possible all requirements for commercially developed systems and the processes NASA will use for certifying such systems;
- maintain robust communication with the emerging commercial spaceflight industry to ensure that Agency contracting mechanisms include the appropriate balance between insight and oversight that will provide NASA with sufficient information to assess and certify commercial partners’ systems while providing companies the flexibility to innovate;
- clearly articulate how it will mitigate potential conflicts of interest that may arise as a result of any analysis that could provide an unfair competitive advantage to a NASA partner; and
- expand coordination with the FAA to avoid the potentially serious business impacts that would result if commercial companies were required to operate in an environment that included inconsistent standards for NASA certification and FAA licensing of the same vehicle.
In response to a draft of this report, the Associate Administrator for Exploration Systems Mission Directorate agreed that NASA should pay particular attention to the challenges highlighted in the report. The Associate Administrator also noted that NASA’s acquisition strategy for the Commercial Crew Program is still under consideration and subject to further change as the procurement process matures (see Appendix C for the Agency’s response).
5 Pursuant to the National Aeronautics and Space Act of 1958 and NASA policy (NASA Policy Directive 1050.1l, “Authority to Enter into Space Act Agreements,” December 23, 2008), NASA may enter into Space Act Agreements to meet mission and program objectives. The agreements, which represent a set of legally enforceable promises, are classified as reimbursable, non-reimbursable, or funded. NASA may only enter into funded Space Act Agreements with domestic agencies, persons, corporations, or educational institutions when the Agency’s objective cannot be accomplished through a contract, grant, or cooperative agreement.
6 NASA plans to issue the baseline 1100-series documents by the end of the year.
7 In August 2010, the FAA sponsored a commercial human spaceflight workshop attended by a representative from NASA’s Commercial Crew Office and industry representatives. According to the FAA, the companies were selected for participation based on their demonstrated capabilities and interest in participating in the commercial human spaceflight transportation industry.
8 Requirement 220.127.116.11 in the draft version of “International Space Station Crew Transportation and Services Requirements Document” (CCT-REQ-1130) states, “The CTS [Commercial Transportation System] shall provide an overall abort effectiveness of 0.95 . . ..”
9 A procurement contract is defined by the Federal Acquisition Regulation (48 C.F.R. § 2.101), while the Federal Grants and Cooperative Agreements Act of 1977 (Chiles Act) (31 U.S.C. § 6303) establishes the general criteria that Federal agencies must follow when deciding which legal instrument to use when entering into a funding relationship. The principal purpose of a procurement contract is to obtain property or services for the direct benefit or use of the Government.
10 NASA Policy Directive 8610.23C, “Launch Vehicle Technical Oversight Policy,” August 18, 2006.