Rocketplane Kistler President Resigns

Rocketplane Kistler, on the verge of losing NASA backing for the rocket it had hoped to use to carry supplies to the international space station, accepted the resignation of its president just days after he sent a lengthy missive to the U.S. space agency blaming it for the company's financial woes.

The Oklahoma City-based company confirmed Oct. 4 that Randy Brinkley had stepped down and been replaced by William Byrd, a member of Rocketplane's board of directors.

Byrd, 54, is the director of the Iowa Space Grant Consortium, a position he has held since leaving NASA in 1994 after more than a decade working on the space shuttle and space station programs.

Brinkley, a former president of Boeing Satellite Systems, took over Kistler Aerospace in August 2004 and led the reusable rocket company out of bankruptcy and through its acquisition by Rocketplane in early 2006 just as proposals for NASA's Commercial Orbital Transportation Services (COTS) demonstration program were coming due. Brinkley did not respond the week of Oct. 1 to multiple requests for comment.

Rocketplane Kistler (RpK) won one of the two funded COTS agreements NASA awarded in August 2007, entitling the company to receive up to $207 million in government funding for the development of its K-1 reusable rocket provided it met certain technical and financial milestones, including raising $500 million in private financing for the project.

NASA notified RpK in early September that it considered the company in breach of its COTS agreement for failure to meet a May deadline for raising the money and for not completing a promised critical design review of the K-1's pressurized cargo module on schedule. "After review and consideration of RpK's performance to date and its proposed plans for completing Milestone 4 [a second and final financing round], we have determined that additional efforts are not in the best interest of NASA," Scott Horowitz, NASA associate administrator for exploration systems wrote Sept. 7.

In late September, Brinkley sent NASA a seven-page letter blaming the agency for the company's financing woes, disputing that it was in default on the promised critical design review and raising the possibility of legal action should the agency terminate its COTS agreement.

NASA spokeswoman Melissa Mathews said Oct. 3 that the agency had not yet made a decision to terminate RpK's agreement.

However, other NASA officials not authorized to speak to reporters about the situation, said termination was imminent. NASA's Sept. 7 letter to RpK started the clock on the minimum 30-day notice the agency is required to give under the COTS agreement before pulling out. These officials said planning for a new competition for the remaining $175 million of RpK's COTS money was underway.

Mathews told Space News in mid-September that NASA planned to conduct a new COTS competition if it terminates RpK's award. "Any company, including RpK, that meets the eligibility requirements would be able to compete," she said at the time.

In his letter, a copy of which was obtained by Space News, Brinkley says NASA in recent months caused investors to question the space agency's commitment to COTS and commercial space, which in turn prevented RpK from meeting two milestones.

Brinkley says two incidents in particular spooked RpK's investors. The first, he said, was NASA's announcement this spring that it had concluded a $720 million deal with Russia to provide space station crew and cargo transportation services through 2011.

"That action significantly reduced the potential cargo volume and revenue available to COTS participants in the critical 2010-2011 timeframe," Brinkley wrote. "Senior NASA officials were widely quoted in the press at the time suggesting that NASA does not see COTS as the preferred alternative for resupply of the ISS."

NASA Administrator Mike Griffin tried at the time to reassure COTS contenders that there would still be plenty of space station re-supply business to go around when the agency ultimately puts the commercial service contracts out for bid. He repeated that message April 12 2007 during a media roundtable here at the 23rd National Space Symposium.

"Our studies have shown we can use everything we can get from Progress and Soyuz plus everything commercial companies are offering to provide for the space station and not be oversubscribed," Griffin told reporters attending the National Space Symposium in Colorado Springs in April.

Griffin also said at the time that COTS Phase 2 – the awarding of actual space station servicing contracts – would be an open competition and that interested companies would not necessarily have to demonstrate their proposed systems before submitting bids.

"I doubt that I would impose such a requirement," Griffin said. "It would go in the direction of excluding too many people. It's possible to conduct a competition and select winners before the ability to provide the service has been demonstrated. The government does it all the time."

In early August, two months after RpK had missed its financing milestone, NASA asked industry to submit information about its existing or planned launch capabilities to help the agency shape procurement strategies for space station re-supply services and satellite launch.

To RpK, the request for information NASA issued in August was a significant departure from the agency's original COTS announcement, which the company says made it sound like a successful demonstration in Phase 1 would be a prerequisite in COTS Phase 2.

"The fact is that the follow-on ISS Servicing RFI significantly deviates from the COTS announcement, and this public notification caused potential investors to question NASA's commitment to COTS and commercial space," Brinkley wrote.

Brinkley said RpK's financing plans – including $300 million in Canadian commitments – begin to unravel at that point and were dealt another blow in late July when U.S. credit markets were buffeted by the sub-prime mortgage fallout.

On Sept. 6, RpK's lead investors – Canada's McDonald Dettwiler and Associates and the Ontario Teachers Pension Plan (identified by Brinkley only as a "Canadian investment fund" pledging $200 million) – explained to NASA and RpK why they were withdrawing their financial commitments.

"The primary reason, highlighted by discussions with potential U.S. investors, was the uncertain revenue stream from ISS servicing," Brinkley wrote. "In their view, the current conditions, particularly the lack of a servicing commitment from NASA, makes any COTS participant not financeable. The lead investor emphasized their strong continuing interest and that they would reconsider their position if NASA could commit to a defined revenue stream post COTS demonstration. In the end, the conclusion of the Canadian investment fund was that, absent an ISS servicing commitment from NASA, they would not finance RpK and not any other potential COTS participant."

The following day, Sept. 7, NASA sent RpK notification that it was in default on its COTS agreements. Termination could happen as soon as the week of Oct. 8.

Companies that did not make the cut during NASA's COTS competition last year are now gearing up to submit new proposals.

Some of those contenders are unsympathetic to RpK's situation, among them: David Gump, president of Reston, Va.-based Transformational Space Corp. The company's air-launched piloted capsule was a finalist for COTS funding last year and is one of several companies keeping NASA apprised of its progress through unfunded COTS agreements awarded earlier this year.

"RpK came in with a lot of promises and a half baked business plan and the market place is weeding them out," Gump said. "It's disingenuous to now say they were shocked – shocked – they would have to compete for ISS cargo business. That was plan[ned] in the original ISS cargo announcement. Everybody who bid knew it.

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