NASA’s inspector general criticizes Orion cost accounting

WASHINGTON — NASA’s inspector general criticized the agency for its accounting of Orion program costs in a new report, arguing it has “hindered the overall transparency” of the program amid growing costs and schedule slips.

In a July 16 report, NASA’s Office of Inspector General (OIG) raised several issues with costs of the Orion program, including the agency’s decision to exclude many costs from a formal cost estimate for the program as well as “overly generous” award fees paid to the prime contractor, Lockheed Martin, over the life of the program.

Through January of 2020, the latest financial data was available, NASA spent $16.7 billion on Orion, dating back to the Constellation program. NASA estimates spending $12.8 billion on Orion through 2030, primarily on production of future spacecraft.

While that suggests a total of Orion through 2030 of $29.5 billion, NASA’s formal estimate for life cycle costs for the program is $11.3 billion, covering development through the Artemis 2 mission. That total excludes the $6.3 billion spent on Orion during the now-defunct Constellation program and an estimated $10 billion in costs for missions beyond Artemis 2.

While life cycle cost estimates are supposed to cover the entire program, NASA granted approval for a tailored cost estimate, concluding, according to the report, that it would be difficult to estimate the overall cost “for a long-term human exploration program that is likely to last for multiple decades.” However, OIG said that approach limited the ability of those outside the agency to track development “and determine whether a replan or rebaseline of program funding and schedule expectations is required.”

“Furthermore, without a complete and comprehensive picture of Orion’s Life Cycle Cost, it is difficult for Congress and other stakeholders to have the information necessary to inform strategic decisions regarding future human exploration priorities,” the OIG report added.

Even with the limited scope of life cycle costs, there are signs of overruns. While NASA used the $11.3 billion as its formal “agency baseline commitment” for Orion, costs are now estimated to be $12.2 billion, of which $7.7 billion is for development. Those development costs have grown by nearly 14%, nearing the 15% threshold that requires formal congressional notification. OIG said additional cost growth of about $500 million is currently projected through 2023.

The report said that “performance shortcomings” by Lockheed Martin contributed to those cost overruns and some schedule slips, although those delays have been masked to some degree by greater schedule problems with the Space Launch System. OIG, citing internal NASA documents, said the Artemis 1 mission is now scheduled for launch in November 2021 and Artemis 2 in August 2023, although agency leadership has yet to confirm those dates.

Despite those challenges, the OIG report found that Lockheed still received $740.9 million in award fees dating back to 2006, or 90.2% of the total amount the company was eligible to earn. Part of that is that final scores given to the company during evaluations of its performance “were consistently higher than the composite of the individual factor scores” used in that evaluation.

NASA officials say that officials can increase those scores by considering higher-level issues beyond the scope of the company. However, OIG concluded that “deeming its work consistently ‘Excellent’ appears overly generous given the program’s longstanding cost and schedule growth.”

OIG made three recommendations to NASA: including all costs for Orion in future reports, adjusting production schedules for later Orion spacecraft and minimizing award fees if future contracts have to be modified because of contractor performance.

The agency, in a response included in the report, said it would implement all three recommendations. However, OIG noted that NASA didn’t commit to including Constellation-era Orion costs in those future reports. Doing so might not be practicable, OIG acknowledged, but “in our judgment a complete picture of Orion’s Life Cycle Costs should include all costs related to a program regardless of funding source or management control over its planned lifespan