NASA Negotiated Discounts After SpaceX Launch Failure

SpaceX Falcon 9 break up June 28, 2015
A SpaceX Falcon 9 carrying a Dragon spacecraft breaks apart during a June 28, 2015, launch. NASA subsequently negotiated discounted prices for a future missions and other "special consideration" with SpaceX, according to a new report. (Image credit: NASA TV)

WASHINGTON — NASA received discounted prices for future cargo missions and other "significant consideration" from SpaceX in the aftermath of the loss of a Dragon cargo mission to the International Space Station (ISS), according to a NASA report.

The report, issued by the NASA Office of Inspector General (OIG) June 28, the one year anniversary of the Falcon 9 launch failure that destroyed the Dragon spacecraft bound for the ISS on a mission designated SpX-7, also raised questions about how NASA handles launch failure investigations, manages risk for cargo flights and assigns cargo for those missions.

The Falcon 9 failure, about two minutes after liftoff, resulted in the loss of cargo valued at $112 million, according to NASA. That included the first of two new docking adapters designed to allow future commercial crew vehicles to dock with the ISS. The lost cargo also included supplies that reduced the reserves of food, water and oxygen for the ISS, but did not pose an immediate danger for the station's crew. [The Falcon 9 Explosion in Slow Motion (Video)]  

The report indicates that, to compensate NASA for the lost cargo, SpaceX agreed to lower its prices for several later missions. In December 2015, NASA modified SpaceX's Commercial Resupply Services (CRS) contract to add five additional missions, designated SpX-16 through 20. Those additional missions will be flown at "discounted prices," the report stated, "to help compensate for the SpX-7 failure."

In addition, the report stated, "NASA negotiated significant consideration in the form of Adapter hardware, integration services, [and] manifest flexibility" that SpaceX will provide to NASA at no cost. The report did not state the overall value of the concessions SpaceX made. NASA has paid SpaceX $1.7 billion under its CRS contract as of March 31, a total that includes milestone payments for missions not yet flown.

The OIG report praised NASA for how it has negotiated prices with SpaceX under that CRS contract. "In addition to the adjustments that followed the SpX-7 failure, we found NASA has consistently negotiated equitable adjustments throughout the life of its CRS-1 contract with SpaceX," it concluded. "NASA officials indicated, and we confirmed, that all equitable adjustments provided NASA with either additional capabilities at no increase in cost or intangible benefits of value to the ISS Program and the research community, or both."

That assessment stands in contrast with an earlier review of NASA's CRS contract with Orbital ATK, which also suffered a launch failure. A September 2015 OIG report concluded that NASA missed several opportunities before and after the October 2014 loss of a Cygnus spacecraft to seek more than $80 million in cost savings on that contract.

A SpaceX-led investigation into the SpX-7 failure concluded that the failure was caused by the failure of a strut assembly in the Falcon 9's upper stage. However, the OIG report noted that a separate investigation by NASA's Launch Services Program (LSP), prompted by its desire to understand the failure in advance of the Falcon 9 launch of the Jason-3 mission, "did not identify a single probable cause for the launch failure." That report concluded that it could be explained by not just a faulty strut but also by manufacturing damage or improper assembly.

While those concerns were resolved to permit the launch of Jason-3 in January and resumption of commercial cargo missions in April, NASA sent a letter to SpaceX in February "expressing concerns about the company's systems engineering and management practices, hardware installation and repair methods, and telemetry systems based on LSP's review of the failure," a report footnote stated.

Those conclusions paralleled the earlier Cygnus failure investigation. An Orbital-led study concluded that failure was caused by a machining defect in a first stage engine turbopump, while an independent NASA review concluded the failure could also have been caused by inadequate design robustness of the engine or foreign object debris in the engine.

While SpaceX made both technical changes to the Falcon 9 to address its failure as well as process improvements to improve reliability, the OIG report recommended streamlining the launch investigation process for CRS missions. Those changes would also address concerns that company-led investigations may not be sufficiently independent and also not look beyond the root technical cause of future accidents.

"While a complete NASA mishap investigation is not required for launch failures under the terms of the CRS-1 contract," the report concluded, citing the formal standards for investigations of NASA mission failures, "in our judgment the absence of more formal guidance for CRS investigations increases the risk that contractor corrective actions may not fully address broader contributing causes."

The report also recommended that NASA improve risk management for CRS missions, disagreeing with the agency's current approach of placing all cargo in the lowest risk classification regardless of the value of the payload. It also called on NASA to do make greater use of the unpressurized payload capacity available on Dragon missions. [SpaceX's First Two 'Droneship' Rocket Landings: Highlight Video]

NASA agreed with some but not all of OIG's recommendations in a response by Bill Gerstenmaier, the associate administrator for human exploration and operations, and Terrence Wilcutt, chief of the agency's office of safety and mission assurance.

In particular, they disagreed with a recommendation to quantify risk ratings for commercial cargo missions, arguing in that risks for individual cargo missions "are managed by the program through well-established control board processes."

They partially accepted a recommendation to clarify the scope and purpose of future launch failure investigations NASA does in parallel with company-led reports, but stopped short of embracing use of NASA mishap investigation standards for those launches. Doing so, they concluded, "would be a fundamental change to the procurement and resupply strategy laid out by NASA in 2008 and which has created an ISS commercial resupply capability and fostered U.S. commerce in low Earth orbit."

This story was provided by SpaceNews, dedicated to covering all aspects of the space industry.

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Jeff Foust
SpaceNews Senior Staff Writer

Jeff Foust is a Senior Staff Writer at SpaceNews, a space industry news magazine and website, where he writes about space policy, commercial spaceflight and other aerospace industry topics. Jeff has a Ph.D. in planetary sciences from the Massachusetts Institute of Technology and earned a bachelor's degree in geophysics and planetary science from the California Institute of Technology. You can see Jeff's latest projects by following him on Twitter.