TPIS Releases White Paper in Support of SLS Review

Tea Party in Space White Paper
Space Launch System Procurement Could Violate CICA

September 2011

Subject: De Facto Sole Sourcing of Space Launch System Would Violate Law

Summary: A violation of 41 U.S.C. 253 (the Competition in Contracting Act of 1984) will occur if NASA moves ahead with a decision to avoid full and open competition by implementing “de facto sole source awards” on the Space Launch System, which will cost anywhere from $111 to $322 billion in taxpayer funds, and potentially much more.

1. Background – NASA’s current SLS contracting plan

In the NASA Authorization of 2010 (PL 111-267), NASA was directed to develop a heavy lift launch vehicle called the Space Launch System (SLS). The Law required the SLS to have an initial payload capability of 70 metric tons, and then grow to 130 metric tons, be human-rated, and have an initial operating capability by 2016. At the time of the law’s enactment, Congress’ estimates for the development costs of SLS were $11 Billion. An August 5th, 2011 article from the Orlando Sentinel reported that NASA expected the total development cost of the SLS plus the Orion Multipurpose Crew Vehicle to surpass $38 Billion, and first crewed flight would not occur until after 20203. Most recently, on September 7th, 2011 the Wall Street Journal reported that an internal NASA estimate for SLS will cost in excess of $62 Billion4. NASA administrator Charlie Bolden confirmed the launch date, when he explained that first crewed flights would not occur until “the early 2020s”5. A recent Independent Cost Assessment of the SLS by Booz Allen Hamilton program determined that the program suffers from “many instances of unjustified cost reductions in the Program estimates”6

This was expanded upon by another news report that detailed how the first manned flight would not occur until after 2020, and the development of SLS would continue until 20327. This report further detailed how the current plan would modify hardware elements used for on the Space Shuttle and the now-terminated Constellation program, and would not allow for competitive procurements for large portions of the new vehicle. These include modifying elements of the Ares I first stage to be used as twin booster rockets, using some elements of the Space Shuttle External Tank as a core stage structure, with modified Shuttle Main engines mounted underneath the Tank, and significantly modifying the Ares I upper stage. Administrator Bolden alluded to this in another hearing, stating that NASA was “look[ing] at mapping the scope of existing contracts to what it is we want to do for an evolvable heavy-lift launch vehicle.”8 This would result in NASA forgoing competition for large parts, or all, of the SLS vehicle, and merely modifying a number of existing contracts9.

2. A De Facto Sole Source Award Can Violate the CICA Act

Taxpayer interests are best met when government contracts are competed openly, rather than being sole-sourced to a single company chosen without competition. Competition ensures that taxpayers get the best value and prevents government agencies from making decisions without considering the full range of potential supplier options.

A “de facto sole source award,” also known as a “de facto no-bid award,” occurs when a government agency, in order to avoid holding an open competition for a new task, simply modifies an existing contract belonging to a government contractor to allow that contractor to perform the new task. The GAO has previously overturned many such attempts by government agencies as a violation of the 1984 Competition in Contracting Act (CICA). The Comptroller General of the United States has stated that, “a contract modification that goes beyond the scope of a contract is tantamount to a sole source award.10

The GAO has stated, “Under the Competition in Contracting Act, 41 U.S.C. § 253(c)(1), a sole-source award may be made only when there is a single responsible source that can satisfy the government’s needs.”11

Therefore, if a contract modification exceeds the scope of the original contract, making the modification a “de facto sole source award,” and yet there is more than a single source that can satisfy the government’s needs, the contract modification is a violation of the Competition in Contracting Act.

3. A Previous Example of GAO Overturning a De Facto Sole Source Award

The GAO has previously sustained protests (i.e. agreed with a private company “protesting” a contract award) in which a government agency was determined to have attempted to make a “de facto sole source award.” A useful example is the case of “Stoehner Security Services, Inc., B-248077.3, 92-2 CPD 285.” The protest was sustained because “the Department of Health and Human Services’ (HUD’s) modification of a contract for Guard I security services to procure Guard II security services was an improper de facto sole source contract. The protester alleged that the modification was beyond the scope of the original contract because it resulted in a more than 107 percent increase to the original contract’s scope of work and price, and in a change to the matter of the contract from Guard I to Guard II services. HUD argued that the modification was proper because the original contract provides that properties and services could be added by written modification. The GAO sustained the protest, finding that the modification was beyond the scope of the original contact because it added a significant amount of Guard II security services at a site not under the contract for a new price negotiated after award.”12 This example demonstrates that a government agency cannot attempt to avoid a competition by modifying existing contracts out of their original scope.

4. De Facto Sole Source Awards by NASA Are Not Legally Justified

Again, the GAO has stated, “Under the Competition in Contracting Act, 41 U.S.C. § 253(c)(1), a sole-source award may be made only when there is a single responsible source that can satisfy the government’s needs.” But in the case of the Space Launch System (SLS) and its major elements, it is quickly apparent that more than one contractor can satisfy the government’s needs. For example, Alliant Techsystems Inc. (ATK) holds the contract for the Ares I’s first stage (a five-segment solid rocket booster), and until recently provided the solid rocket boosters for the Space Shuttle. But it is not true that only ATK can provide such solid rocket boosters. Aerojet actually defeated Morton Thiokol (now a part of ATK) in the 1992 competition for the Advanced Solid Rocket Motor (ASRM). Last year, Aerojet wrote a letter to NASA that, as reported in Space News, stated, “Although we believe an affordable and sustainable NASA [heavy-lift vehicle] must include alternatives to the existing propulsion solutions or new propulsion development, we do intend to compete for the 5-segment solid, the J-2X, and/or expendable RS-25 propulsion solutions if they are selected…”13

Similarly, companies such as United Launch Alliance (ULA) and Space Exploration Technologies (SpaceX) are also capable of supplying either components or entire heavy-lift launch systems. ULA, for example, has proposed an “Atlas V Phase 2” development, which would use five-meter Delta IV tooling with Atlas’ hydrocarbon fuel and engines14. SpaceX has offered to develop a heavy-lift system for a $2.5 billion flat cost15. It is simply not true that only a single responsible source exists for the government’s needs. Companies such as Aerojet, ULA, and SpaceX show this not to be the case.

5. Details of the Violation

NASA is considering avoiding a full and open competition for key elements of the Space Launch System because NASA officials are being lobbied to simply modify existing Shuttle or Constellation contracts. There are several aspects of this approach which render it a violation of the Competition in Contracting Act. Some of these constitute violations in and of themselves, whereas others are exacerbating factors.

A. Lack of any form of competition: There are many different ways that NASA could compete the SLS, yet NASA is not pursuing any of these competitive paths. One form of competition would be to “compete the entire vehicle design” – i.e. any company is free to propose a vehicle design as long as it meets NASA’s top-level requirements, such as carrying a certain size payload no later than a certain date for initial services. Another form of competition would be to “compete each subsystem with all entrants allowed” – i.e. NASA would say, “NASA needs a first stage engine” and companies could propose to build different types of first stage engines. A third form of competition would be to “compete each subsystem with NASA specifying the design” – i.e. NASA would say, “NASA needs a side-booster and it has to be solid-fueled and have a certain performance” and then companies would compete to build the NASA design. But NASA is ignoring the benefits of these (and other) competitive approaches, and is instead implementing a de-facto sole source arrangement.

B. Modification of Ares I contracts: Modifying an Ares I contract to convert it to a Space Launch System contract is a clear violation of CICA. The SLS is at least three times as large as the Ares I vehicle, carries three to five times the payload, is taller and wider and heavier, is substantially more complex, and is designed to serve a different purpose. In addition, key technical characteristics from structural loads and load paths to vibration environment, flight rate, and payload are different as well. Therefore, just as the GAO overturned HHS’ decision to modify a Guard I contract into a Guard II contract (see case history above in Section 2), it should be equally concerned about NASA’s potential intention to modify one or more Ares I contracts into Space Launch System contracts.

Note also that most Ares I contracts are for development (DDT&E), not production. Production would require yet another competition, in addition to the required competition for development.

In each case, these contracts can be met by more than one supplier. Aerojet can design and build solid rocket boosters (SRBs) just like ATK, and as has been recently covered in Space News, Aerojet, SpaceX, and ULA can DDT&E liquid rocket boosters (LRBs) to meet the same functional requirements as SRBs. Multiple companies can provide launch system avionics, including Boeing, Lockheed Martin, Ball Aerospace, Honeywell, Orbital Sciences Corporation (OSC), Raytheon, BAE, SpaceX, and ULA. Upper stage engines can be provided by SpaceX, ULA, Pratt & Whitney/Rocketdyne, Aerojet, etc. And the upper stage tanks can be built by any company that builds pressurized cryogenic tanks, such as ULA, SpaceX, ATK, Lockheed Martin, or other aerospace providers.

Therefore, modifying an Ares I contract to provide a similar (let alone a dissimilar) element for the SLS violates CICA. When one considers that some Ares I contracts were awarded on a sole source basis, this compounds the violation of CICA.

C. Modification of Space Shuttle contracts: Modifying a Shuttle contract to convert it to a SLS contract is also a clear violation of CICA. The SLS has nearly three to four times the payload as the Shuttle vehicle and is designed to serve a different purpose. Likewise, everything from structural loads and load paths to vibration environment, flight rate, and payload are different as well for the Shuttle. The Shuttle is meant for Low Earth Orbit operations while SLS is meant for missions that are much more energetic, aimed beyond Earth orbit.

Note also that Space Shuttle contracts are for production, not development. Since the Shuttle was an operational vehicle, the scope of work to maintain and support it is very different from that required to design, develop, and test the SLS.

Furthermore, the Space Shuttle is now retired, and continuing these contracts for a different system, and therefore a different purpose, would clearly be a de facto sole source contract extension meant to avoid having a competition, and therefore a CICA violation.

D. Contracts for integration: In order to develop the SLS, a contract must be awarded for integration and ground operations, in addition to hardware development. Full and open competition is required here also, because integrating a SLS is sufficiently different from integrating the Space Shuttle that the Space Flight Operations Contract cannot be extended. Moreover, the Ares I integration contract for Exploration Ground Launch Services (EGLS) was canceled before it could be awarded, and is therefore not available. Clearly some company would have to perform this task for SLS, and that contract must be competed.

E. Restrictive program requirements. NASA cannot set the requirements for elements in SLS in such a way that certain companies are made ineligible to compete for reasons having nothing to do with actual technical merit. In fact, it violates CICA for NASA to structure a procurement with requirements that unfairly excludes potential bidders from competing. As a matter of law as well as good public policy, procurements should be structured to maximize competition to achieve the greatest possible value for the taxpayer. Companies that want to help save taxpayer money through innovation and efficiency should not be prevented from doing so.

F. Attempts to delay competition. During summer 2011 there have been media reports that NASA may allow a competition for one element of the SLS – the side boosters – but even this limited competition would not occur now, but some years into the future.16 Any such approach would violate CICA as it would be a de facto sole source award until a new, competed booster was flying. Furthermore, NASA would have to take considerable pains to make sure that the future “competition” would in fact be fair, since the proposed initial use of solid rocket boosters could create a barrier to entry for liquid booster competitors.

6. NASA has no compelling justification for avoiding competition

NASA may argue that the goal of developing a Space Launch System is an urgent one, perhaps especially given the retirement of the Space Shuttle. Specifically, NASA may even appeal to the NASA Authorization of 2010 (PL 111-267), which sets deadlines for the first flight of SLS and many other programmatic and technical requirements. Indeed, the Authorization Act even encourages NASA to use existing Shuttle and/or Constellation hardware and contracts wherever possible to reduce the time and cost of developing an SLS. The Authorization Act does not, however, free NASA from its existing statutory requirements under the CICA and other law. Furthermore, the SLS section of the Authorization Act is replete with the exculpatory phrase “to the extent practicable.” Clearly it was not Congress’ intent to suspend the CICA’s applicability to the SLS.

NASA may also argue that there are other public policy goals, such as preservation of the existing Shuttle industrial base or promoting employment of laid-off Shuttle or Constellation workers, which justify the selection of a narrowly-specified SLS and de facto sole-source awards of key SLS elements based on their derivation from Shuttle or Constellation hardware. These may be valid goals, but they are not requirements of law, nor do they supersede the CICA.

Finally, NASA has a poor track record of completing space transportation development programs over the past few decades. It is difficult to imagine how suspending normal procurement processes and awarding sole source contracts will improve on this history. In fact, without the ongoing pressure of competition, contractors would have little incentive to control the cost overruns and schedule delays that have plagued other programs, and could result in SLS cancellation.

7. Conclusion

NASA’s plans for procuring the Space Launch System are of critical importance to the American taxpayer not only because SLS will cost tens of billions to develop, but its impact will be felt for decades. Contractors selected for this program will be “locked in” for a generation – having sole-source access not only to billions of dollars in development capital, but additional billions in operations and unit production spending. SLS will be at the center of NASA’s human exploration program for several decades, and SLS decisions will have implications for taxpayers for at least as long. It is therefore vital that NASA conduct a fair and open competition – and “get it right” – rather than rushing ahead on a sole source basis. NASA simply cannot determine “best value” for the taxpayer without going through its legal duty to conduct a full and open competition.
Ultimately, GAO will rule on any protests arising from NASA’s apparent SLS procurement strategy. However, the paramount goal of achieving the greatest possible space advancements for the least taxpayer dollars militates for preemptive action to avoid this legal imbroglio. GAO has the authority to step in beforehand and make clear to NASA leadership, that the avoidance of competition is legally and therefore programmatically perilous.

Footnotes

1 Senator Nelson, chairman of the Senate Space Subcommittee, was quoted in 2010 as stating that the cost of the Space Launch System would be approximately $11.5 billion.
2 ESD Integration Budget Availability Scenarios, August 19 2011, http://nasawatch.com/archives/2011/09/nasas-internal.html
3 Orlando Sentinel: Mark Matthews. August 5 2011. “New NASA moon rocket could cost 38 billion.” http://articles.orlandosentinel.com/2011-08-05/news/os-nasa-next-moonshot-20110805_1_constellation-moon-program-nasa-supporters-internal-nasa-documents
4 http://online.wsj.com/article/SB10001424053111903648204576555010831469864.html
5 July 12 2011 “A Review of NASA’s Space Launch System”, Hearing before House Science, Space & Technology Committee.
6 Independent Cost Assessment of the Space Launch System, Multi-Purpose Crew Vehicle and 21st Century Ground Systems Program, Booz Allen Hamilton, August 19th, 2011
7 Chris Bergin: July 27 2011. “Preliminary plan shows evolved SLS vehicle is 21 years away.” http://www.nasaspaceflight.com/2011/07/preliminary-nasa-evolved-sls-vehicle-21-years-away/
8 April 11 2011 NASA hearing by Senate CJS Appropriations Subcommittee.
9 It should be noted that some of these existing Constellation-era contracts were in fact awarded on a sole source basis to begin with.
10 See the following GAO document: http://archive.gao.gov/legald426p3/158002.pdf
11 See the following GAO document: http://redbook.gao.gov/11/fl0053363.php
12 GAO example from: http://www.buchananingersoll.com/media/pnc/2/media.1532.pdf
13 Space News, January 14, 2011. Amy Svitak. “Aerojet Guns for Lead Roles on New Heavy Lift Rocket.” www.spacenews.com/launch/110114-aerojet-guns-lead-rocket.html
14 Jonathan Barr and Bernard Kutter, “Phase 2 EELV – An Old Configuration Option with New Relevance to Future Heavy Lift Cargo”, AIAA, retrieved from www.ulalaunch.com .
15 Aviation Week, December 2, 2010. Guy Norris. “NASA Studies Scaled-Up Falcon, Merlin.”
16 Space News, “NASA’s Heavy Lift Launcher Would First Fly with Solid Rocket Boosters.” Dan Leone, 17 June 2011. www.spacenews.com/civil/110617-heavy-lift-first-fly-sbrs.html

  • warshawski

    Good letter the only thing I would add is that SpaceX is developing the Falcon Heavy with 53 ton paylod with no government funding and has started developemnt of Merlin 2 engine that would power heavy Lift rocket. SpaceX have developed 2 new rockets in the last 5 years for less than 800 million so have a demonstarble good track record.

  • Paul451

    Warshawski,
    Just to be pedantic, “no government funding” is a bit misleading since SpaceX has received COTS and CCDev funding for Falcon9, with the promise of more. That subsidises FH development. (The amounts are trivial compared to anything spent so far on Constellation and MPCV/SLS, but then SpaceX builds entire systems for the rounding-off error of Constellation/SLS.)

    What I find frustrating about SLS is not that each component is sole-sourced, but that the design has been fixed. Why isn’t the whole rocket up for bid? NASA didn’t ask for SLS, it was Congressional pork. The best way to indicate their distaste for this pork would be to offer the whole vehicle for bid.

    RFP 1: Launch vehicle. Man-rated. Minimum 70 ton to LEO. Minimum 8m diameter payload fairing. First launch on or before 2016. Prices for 10, 20 and 50 launches by 2030.
    RPF 2: Launch vehicle. Cargo only. Minimum 130 ton to LEO. Minimum 10m diameter payload fairing. First launch on or before 2020. Prices for 10, 20 and 50 launches by 2030.