Our auditors found that long-standing issues related to NASA’s management of #SLS contracts for the RS-25 Engines and Boosters—the two components that will power the mega rocket to space—have contributed to $6 billion in increased costs and delays of 6 years.
WHAT WE FOUNDNASA continues to experience significant scope growth, cost increases, and schedule delays on its booster and RS-25 engine contracts, resulting in approximately $6 billion in cost increases and over 6 years in schedule delays above NASA’s original projections. These increases are caused by long-standing, interrelated issues such as assumptions that the use of heritage technologies from the Space Shuttle and Constellation Programs were expected to result in significant cost and schedule savings compared to developing new systems for the SLS. However, the complexity of developing, updating, and integrating new systems along with heritage components proved to be much greater than anticipated, resulting in the completion of only 5 of 16 engines under the Adaptation contract and added scope and cost increases to the Boosters contract. While NASA requirements and best practices emphasize that technology development and design work should be completed before the start of production activities, the Agency is concurrently developing and producing both its engines and boosters, increasing the risk of additional cost and schedule increases.Additionally, Marshall Space Flight Center procurement officials who oversee all four contracts are challenged by inadequate staff, their lack of experience, and limited opportunities to review contract documentation. Specifically, inadequate procurement management led us to question $24.5 million in payments to Northrop Grumman to resolve a disputed request for equitable adjustment (REA) of award fee payments. Marshall procurement officials also encountered significant issues with the award of BPOC, the follow-on booster contract, which started as an undefinitized letter contract in which terms, specifications, and price were not agreed upon before performance began. We found NASA took 499 days to definitize the letter contract, which is far outside the 180-day federal guidance. At definitization, BPOC also lacked scope details, omitted key contract clauses, underwent a limited legal review, and is at risk of making duplicate payments for overlapping work performed under BPOC and the upcoming Exploration Production and Operations Contract. We also questioned an additional $5.6 million payment NASA made to Northrop Grumman related to the Agency’s improper liquidation of funds.Further, NASA used cost-plus contracts at times where we believe fixed-price contracts should have been considered to potentially reduce costs, including the addition of 18 new production engines under the RS-25 Restart and Production contract and acquisition of Artemis IV booster long-lead materials under the BPOC letter contract. In addition, contractors did not receive accurate performance ratings in accordance with federal requirements, such as the “very good” rating awarded to Aerojet Rocketdyne on the end-item Adaptation contract despite only finishing 5 of 16 engines. As a result, we question $19.8 million in award fees it received for the 11 unfinished engines which were subsequently moved to the RS-25 Restart and Production contract and may now be eligible to receive additional award fees.Faced with continuing cost and schedule increases, NASA is undertaking efforts to make the SLS more affordable. Under the RS-25 Restart and Production contract, NASA and Aerojet Rocketdyne are projecting manufacturing cost savings of 30 percent per engine starting with production of the seventh of 24 new engines. However, those savings do not capture overhead and other costs, which we currently estimate at $2.3 billion. Moreover, NASA currently cannot track per-engine costs to assess whether they are meeting these projected saving targets.WHAT WE RECOMMENDEDTo increase transparency, accountability, and oversight of the SLS booster and engine contracts and NASA’s affordability efforts, and ensure duplicative award fees are not earned, we recommended NASA senior leadership: (1) assess whether the 18 new RS-25 production engines under the RS-25 Restart and Production contract can be adjusted to fixed price; (2) identify procurement needs and resources available to address staff shortages at Marshall; (3) ensure Marshall officials comply with best practices for establishing and maintaining internal controls related to REAs, fiscal law, and appropriate internal and external engagement; (4) ensure appropriate separation of program and procurement actions and compliance with federal requirements for use of letter contracts, proper definitization, overpayments, and duplicative payments of award fees for modified scope and contracts; (5) update RS-25 production per engine cost estimates to include investments in production restart; (6) review and update BPOC’s scope of work and technical requirements needed to complete the respective periods of performance; (7) review BPOC’s definitization to ensure proper liquidation of funds paid under the letter contract; and ( develop a separate non-fee bearing contract line item for completion of the 11 unfinished heritage RS-25 adaptation engines.We provided a draft of this report to NASA management, who concurred with Recommendations 1, 2, 3, 6, and 7, and partially concurred with Recommendations 4, 5, and 8. We consider management’s comments responsive to all eight recommendations, and therefore the recommendations are resolved and will be closed upon completion and verification of the proposed corrective actions. Despite concurring and partially concurring with all eight recommendations, the Associate Administrator for Exploration Systems Development Mission Directorate’s and Assistant Administrator for Procurement’s response to the draft of this report stated that the directorate and program do not concur with the facts as presented in the body of the report. We take issue with this summary characterization and are disappointed that the Agency’s formal response failed to specify the facts with which it disagrees. Consistent with professional standards, we carefully considered management’s technical comments to our draft and, when sufficiently supported, incorporated that information in the final report.
YIKES. "NASA continues to experience significant scope growth, cost increases, and schedule delays on its booster and RS-25 engine contracts, resulting in approximately $6 billion in cost increases and over 6 years."oig.nasa.gov/docs/IG-23-015…
NASA has spent as much on cost *increases* for SLS rocket boosters and engines as it is spending on two fully reusable lunar landers. LOL. Cost-plus contracts, baby!
Amazing. "The cost impact from these four contracts increases our projected cost of each SLS by $144 million through Artemis IV, increasing a single Artemis launch to at least $4.2 billion."
For example, NASA initially awarded the RS-25 Restart and Production contract for six new production engines under a cost-plus structure. Approximately 3 years later, the contract was modified to include an additional 18 production engines valued at $1.8 billion. Given its established design, purchase of these additional engines could have been structured under a fixed-price contract....
NASA has a lot to say. At the bottom of the report: “As a result, the directorate and the program do not concur with, not endorse, the facts as presented in the body of the report.”👀
Government Accountability Office (GAO), as was the case with the SLS program in the present audit. While both directorate and program leadership welcome the healthy debate and dispositioning of comments that accompany these engagements, they are concerned that the foregoing report offers an incomplete view of the program's decision-making regarding its boosters and engines elements and that the information in the report is presented without the context that would have rendered it more accurate. Despite several hours of follow-up meetings with the OIG team following the release of the initial draft report and submission of extensive supporting documentation by the SLS program, NASA leadership was disappointed to see that few of the clarifications offered by the Agency's subject-matter experts were incorporated herein. As a result, the directorate and the program do not concur with, nor endorse, the facts as presented in the body of the report.Nonetheless, the program does concur or partially concur with the recommendations provided by the OIG since much of the suggested work was either already completed or scheduled prior to the initiation of the audit. It is evident that the OIG and directorate and program leadership agree on several key principles: major acquisitions and contract management practices should continue to be reviewed at the highest levels of leadership to ensure the Federal Acquisitions Regulation (FAR) is faithfully employed, accountability and oversight is rigorously practiced, and maximum transparency is evident in contract execution. NASA will continue to welcome engagements with audit teams while pushing forward its priority the development, production, and testing of hardware for the next Artemis mission in a responsible manner.
A final note: The Associate Administrator for Exploration Systems Development Mission Directorate’s and Assistant Administrator for Procurement’s response to the draft of this report stated that NASA leadership “was disappointed to find that few of the clarifications offered by the Agency’s subject matter experts were incorporated herein” and thus “the directorate and the program do not concur with, nor endorse, the facts as presented in the body of the report.” We take issue with this summary characterization and are disappointed that in its formal response the Agency failed to specify the facts in the report with which it disagrees. Consistent with professional standards, we carefully considered management’s technical comments to our draft and, when sufficiently supported, incorporated that information in the final report. Further, we had multiple additional discussions with senior Agency officials at Headquarters and Marshall about the report’s findings. However, from our perspective personnel involved in these conversations did not provide evidence to fundamentally change our findings and recommendations. In addition, in conducting this audit we followed the quality control procedures required by government auditing standards, including ensuring the report received an independent verification of its findings and supporting evidence by auditors unconnected with this review.
I just don't understand the continued use of cost plus contracts for finished designs. Cost plus might make sense for the first 1 or 2 when the design is not certain and changes are needed, after that it's just a recipe for waste. And the fact that they can't track the costs per engine build is just criminal.
Past time to can Free and Horne…
Recommendation 1: Assess whether the 18 new RS-25 production engines under the RS-25 Restart and Production contract can be adjusted from cost-plus to fixed-price.Management’s Response: NASA concurs with this recommendation. Before initiating the RS-25 Production Restart contract, an assessment was conducted to determine the most cost-effective contract type. Due to the high amount of development, test, and engineering design work associated with the restart of new production lines and qualification of new manufacturing processes, we assessed that cost risk would have driven the contractor to propose an unaffordable fixed-price cost to cover their identified risk; therefore, a cost-plus-incentive-fee contract was determined to be more cost effective and to provide additional insight. As currently structured, a cost-type arrangement affords the Government the opportunity to monitor cost efficiencies and risk and ultimately discontinue development if deemed unaffordable or unachievable from a technical perspective. A fixed-price contract does not equate to reduced costs; in development work, it can have the opposite effect if entered with high uncertainty in cost and/or technical requirements.
Fixed costs doesn't work because the companies would ask an exorbitant fixed price. The whole procurement method is flawed. Instead of fixed cost, NASA ended up implementing fixed cost plus incentives which is better than cost plus.
Recommendation 1: Assess whether the 18 new RS-25 production engines under the RS-25 Restart and Production contract can be adjusted from cost-plus to fixed-price.Management’s Response: NASA concurs with this recommendation. Before initiating the RS-25 Production Restart contract, an assessment was conducted to determine the most cost-effective contract type. Due to the high amount of development, test, and engineering design work associated with the restart of new production lines and qualification of new manufacturing processes, we assessed that cost risk would have driven the contractor to propose an unaffordable fixed-price cost to cover their identified risk; ...
Quote from: VSECOTSPE on 05/25/2023 08:35 pmPast time to can Free and Horne…Fixed costs doesn't work
Quote from: WindnWar on 05/25/2023 08:56 pmI just don't understand the continued use of cost plus contracts for finished designs. Cost plus might make sense for the first 1 or 2 when the design is not certain and changes are needed, after that it's just a recipe for waste. And the fact that they can't track the costs per engine build is just criminal.I smell Pork.
Quote from: yg1968 on 05/25/2023 11:07 pmQuote from: VSECOTSPE on 05/25/2023 08:35 pmPast time to can Free and Horne…Fixed costs doesn't work I did not write anything about contract cost structure. I only wrote that Free and Horne should be shown the door.
Quote from: yg1968 on 05/25/2023 11:07 pmFixed costs doesn't work because the companies would ask an exorbitant fixed price. The whole procurement method is flawed. Instead of fixed cost, NASA ended up implementing fixed cost plus incentives which is better than cost plus. Sorry, no. Two distinct efforts in play: production restart and ongoing production.Quote from: page 52 of the OIG ReportRecommendation 1: Assess whether the 18 new RS-25 production engines under the RS-25 Restart and Production contract can be adjusted from cost-plus to fixed-price.Management’s Response: NASA concurs with this recommendation. Before initiating the RS-25 Production Restart contract, an assessment was conducted to determine the most cost-effective contract type. Due to the high amount of development, test, and engineering design work associated with the restart of new production lines and qualification of new manufacturing processes, we assessed that cost risk would have driven the contractor to propose an unaffordable fixed-price cost to cover their identified risk; ...That is BS. Might apply to production restart, but not subsequent ongoing production.NASA folded for whatever reason; they need to grow some balls.
Why? Most of this pre-dates them.
Quote from: VSECOTSPE on 05/25/2023 08:35 pmPast time to can Free and Horne…Fixed costs doesn't work because the companies would ask an exorbitant fixed price.
The whole procurement method is flawed.
Instead of fixed cost, NASA ended up implementing fixed cost plus incentives which is better than cost plus.
Marshall procurement officials also encountered significant issues with the award of BPOC, the follow-on booster contract, which started as an undefinitized letter contract in which terms, specifications, and price were not agreed upon before performance began. We found NASA took 499 days to definitize the letter contract, which is far outside the 180-day federal guidance.
In addition, contractors did not receive accurate performance ratings in accordance with federal requirements, such as the “very good” rating awarded to Aerojet Rocketdyne on the end-item Adaptation contract despite only finishing 5 of 16 engines. As a result, we question $19.8 million in award fees it received for the 11 unfinished engines which were subsequently moved to the RS-25 Restart and Production contract and may now be eligible to receive additional award fees.
Past time to can Free and Jackson…
Fixed costs doesn't work because the companies would ask an exorbitant fixed price....
And while you're at it, please show Nelson the door as well. He's in large part responsible for starting the bottomless pit that is SLS.
