Historical Perspective of Alternative Acquisition Approaches for Launch Systems 2021 NASA Cost & Schedule Symposium April 7, 2021 Presented By: Richard Webb KAR Enterprises Outline • Alternative Acquisition Approaches – Overview – Definitions • Contract Consolidation – Shuttle – Evolved Expendable Launch Vehicle (EELV) – International Space Station (ISS) • Commercialization – Commercial Atlas Program – Commercial NASA Programs – Commercial DOD Program • Other Approaches – Insight/Oversight • Government-Owned Corporations (“G-Corps”) • Summary 2 Overview of Alternative Acquisition Approaches • “Glidepath” from Development to Production and Operations (P&O) is a continuum that has many potential paths/options • Choices of appropriate paths very dependent upon overall program goals and characteristics – Not all paths are mutually exclusive • Set of common requirements regardless of paths chosen • Lots of previous experience, potential analogs, lessons to learn – “Commercial-like Operations” • NASA – Commercial Cargo & Crew; LSP • DOD/General Dynamics: Commercial Atlas – 1st U.S. “commercial launch service”; National Security Space Launch (NSSL – EELV follow-on) – “Consolidated Contractor” • Shuttle - United Space Alliance • EELV - United Launch Alliance (pre 2012) • International Space Station – Other Approaches • Government-Owned Corporations 3 Definitions • “Commercial-Like Operations” – Single contractor responsible for providing end-to-end transportation services • Flight hardware + mission operations + launch operations + program management and support – Multiple major subcontractors typically involved; depending on level of “vertical integration” – Market services to multiple customers – Motivation: primarily profit (public companies); other strategic motivations (private companies) • “Consolidated Contractor” – May/may not be “commercial-like” operating model – Common characteristic to commercial operations: purchase from single supplier (end-to-end) – Motivation: typically recurring P&O cost reduction; driven by primary customer 4 Contract Consolidation – Shuttle (USA) • Consolidated multiple Shuttle prime contracts to single prime run by 50/50 Boeing/Lockheed LLC United Space Alliance in late 1995 – Cost plus award/incentive contract structure – Consolidation was never completed (ET, SSME, RSRM not included) • Total Shuttle program cost reductions between 1993 and 1998 approx. 30% • GAO, NASA IG, and other reports noted that reduction in Shuttle workforce/cost was result of several ongoing initiatives, not just USA contract consolidation • Difficult to differentiate savings related to each initiative • ColumBia Accident Investigation Board (CAIB) and other studies noted that By early 2000’s downsizing had “gone to far” at which point NASA “reversed the trend” 5 Contract Consolidation – EELV (ULA) • Evolved Expendable Launch Vehicle program consolidated two competing contractors (Boeing/Delta IV and Lockheed/Martin Atlas V) into single contractor (United Launch Alliance) in late 2006 – Expected commercial launch services market did not materialize (circa 1998); made continued operations of two competing launch services financially untenable • EELV structured as two contracts: Launch Services (ELS: $ per flight – fixed price) and Launch Capability (ELC: $ per year - cost plus) • Created a monopoly for ULA for DOD/National Security flights • Initial estimated savings approx. $100M to $150M per year – Savings not realized; by 2012 – “critical” Nunn-McCurdy breach notification • Eventually moved to 36 vehicle (“core”) block buy of Atlas + Delta (2013) – Reported 4.3% savings per year vs. previous contract approach • Mission success rate (Atlas + Delta) = 100% to date – 127 launches over 19 years (Atlas V + Delta IV; Delta II not included) • Award of second contract to SpaceX in 2014 ended ULA monopoly; forced ULA to begin making substantial cost reduction/consolidation initiatives 6 Contract Consolidation – International Space Station • Consolidation of 4 Work Package contracts initially awarded for Space Station Freedom consolidated to single Prime (Boeing) 1993 – McDonnell Douglas and Rocketdyne relegated to subcontractors; cancellation of 4th Work Package – Boeing subsequently acquired both McDonnell Douglas and Rocketdyne • Significant amount of change surrounding transition from Space Station Freedom to ISS makes it difficult to extract useful data or draw useful general quantifiable conclusions • Multiple schedule slips • Requirements changes and several design iterations • Flat funding profile beginning in 1990 not well suited for development program • Bringing International Partners on board • Cost-cutting measures and RIF undertaken at the same time - loss of key staff Image taken from 2006 presentation of Space Station Cost History Team 7 Commercialization – Commercial Atlas • First (known to us) U.S. Government purchase of commercial launch services - General Dynamics Space Systems (GDSS) Atlas II “Commercial Atlas” program – GD Board authorized non-recurring investment and purchase of 62 unsold Atlas II shipsets begin ca. 1985 – First commercial Atlas launch: NASA CRES 7/25/1990 “General Dynamics acquired the remaining Atlas/Centaur Program assets from NASA in exchange for performing one launch service (AC-69 CRRES). These assets included the Intellectual Property; one mostly completed vehicle, lots of parts, and the Launch Complex 36 ground support equipment at Cape Canaveral.” E. Bock, former GDSS Atlas Program Manager, www.marsretirees.org/Moments/hist2012Q2.pdf • Commercial Atlas provides insights into implementation of commercial approach – Asset ownership transfer – Use of Barter – Block buys – purchase of 62 shipsets - GD issued Firm Fixed Price subcontracts for primary system elements • MA-5 (Rocketdyne), RL-10 (Pratt Whitney), INU (Honeywell), Data Acquisition System (Gulton), Solid Motors (Thiokol); Savings approx. 30%+ – Subcontract termination liability “saved” program from early cancellation by GD due to early launch failures; sold GDSS to Martin Marietta (1993) – Anchor tenants – USG acted as “anchor tenants” for initial 62 vehicles • After GD commitment, DOD purchased blocks of 9 DSCS (USAF) and 11 UHF (Navy) satellite launches; USG ultimately accounted for 47% of 80 flights of commercial Atlas program – Investment Incentives – Future investments in follow-on systems made possible • Eventual success of commercial Atlas II program enabled Lockheed Martin investment in Atlas V EELV program, which enabled ULA, which enabled investment in Vulcan 8 Commercialization - NASA • Commercial Cargo, Commercial Crew, Launch Services – NASA procures end-to-end launch service from multiple providers • Competition • Each provider has access to multiple other transportation markets – Levels of NASA insight/oversight vary depending on specific mission • Crew: substantial insight into contractors’ crew capsule and launch vehicle designs • Cargo: substantial initial insight/integration with ISS in particular; reduced as systems certified/flown • LSP: varies depending on NASA’s classification/certification of launch system risk (Risk Category 1 through 3) and payload Mission Class (A through D) • All contracts are OTA/SAA’s for development; IDIQ Fixed Price per launch for launch services – No cost-plus contracts: no DCAA-approved cost accounting systems; limited cost insight – Contractor investment required – Each suppliers’ systems based on incremental modifications to systems already flying/flown; have application or potential application to other markets – Enables SpaceX and Blue Origin participation (no DCAA approved cost accounting system) • NASA estimates commercial approach has reduced cost for NASA and other customers (NASA IG-18-016) – Introduction of competition – Increases flight rate/amortization of fixed costs over greater number of flights for each supplier 9 Commercialization - DOD • Addition of SpaceX to EELV program (2012) forced ULA to make significant cost reductions to compete • Cost reduction initiatives reduced ULA prices by 50% between 2012 and present – Halving of ULA workforce (approx. 3,700 EP to 1,800 EP) – Consolidation/evolution of Atlas and Delta vehicles to Vulcan – Booster engine cost reduction/RD-180 replacement (BE-4 vs. AR-1) – Eliminate facilities (LC-37, SLC-6, Harlingen) • Long term supplier partnerships (Blue Origin (BE4), AR (RL10), Ruag (Fairings/Composites), L3 (Avionics (INCA)) • EELV program transitioned to National Security Space Launch program (2019) – NSSL Phase 2: IDIQ Fixed-Price Contracts – fixed price per launch – ULA awarded 60% of future launches (8/7/2020) = ~20 launches through 2027 (SpaceX awarded 40%) “Maintaining a competitive launch market, servicing both government and commercial customers, is how we encourage continued innovation on assured access to space.” • Dr. William Roper, Assistant Secretary of the Air Force for Acquisition, Technology and Logistics 10 Other Approaches – Insight/Oversight • Most insight/oversight-type studies limited to impacts of Earned Value Management requirements – The "definitive" Coopers & Lybrand study in 1994 found a cost impact of up to +18% of "value added" cost – Subsequent studies (circa 2017) say that the additional/incremental impact has shrunk to very minimal since 1994- most contractors use EVM on all projects – EXCEPT when the government “mis-applies” the requirements • Other Insight/Oversight aspects: Government Property, Customer Interactions, Data Requirements – EXAMPLE: ATK -provided historical data “benchmarks”