A report released Thursday by NASA’s inspector general paints a damning picture of the space agency’s relationship with Boeing, one of its top contractors, saying NASA “overpaid” Boeing by hundreds of millions of dollars in what the report deemed “unnecessary” payments for a “firm-fixed-price” contract.
NASA agreed to pay the company an additional $287.2 million as part of Boeing’s multibillion-dollar contract to develop a spacecraft capable of flying astronauts to the International Space Station to help it speed up the company’s launch schedule. But the payment could have been easily avoided “through simple changes to the flight manifest,” NASA’s inspector general wrote in the report.
In making the payments, NASA officials also didn’t take into account that Boeing had acquired several seats on a Russian spacecraft that it was planning to sell to NASA, something that would have helped fill the perceived gap in flights. Five days after NASA awarded Boeing the additional $287 million, Boeing proposed selling NASA up to five seats on the Russian Soyuz for $373.5 million, according to the IG’s report.
NASA also didn’t ask SpaceX, the other company under contract by NASA to fly its astronauts to the space station, whether it could speed up the development of its spacecraft and help fill the gap.
Both Boeing and SpaceX have suffered serious technical problems in what’s known as NASA’s “commercial crew program” that have delayed the first flights with human crews by two years.
Boeing, the IG said, found a way to capitalize on that delay. NASA “essentially paid Boeing higher prices to address a schedule slippage caused by Boeing’s 13-month delay” in completing a key design milestone. But the IG said that the “additional compensation was unnecessary” given that the risk of a gap between flights was “minimal.”
It also said NASA officials felt they needed to meet Boeing’s demands for additional compensation because “they believed that due to financial considerations, Boeing could not continue as a commercial crew provider unless the contractor received the higher prices.”
In a letter to the IG, the agency said it “strongly disagrees with the OIG’s characterization that NASA ‘overpaid’ for Boeing [flights] or that the final agreed-to prices were ‘unnecessary,’ ‘not justified,’ ‘unreasonable’ or ‘higher’ than some hypothetical lower amount.”
The agency said that “there is no evidence to support the conclusion that Boeing would have agreed to lower prices.” And it said the prices were reviewed and approved by numerous NASA officials and resulted in a 29-page justification memo. A NASA spokesman declined to release the letter, saying it was proprietary. He also noted that the IG “did not recommend recovery of any of the questioned costs.”
In a statement, Boeing defended the additional payments, saying it is “taking significantly more upfront financial risk and is already helping NASA with critical decisions key to optimizing future [space station] operations. Doing so under the structure of the original contract would have increased cost and schedule uncertainty and would have limited NASA’s flexibility in mission planning.”
In 2014, NASA awarded contracts — $4.2 billion to Boeing; $2.6 billion to SpaceX — as part of an effort to restore NASA’s human spaceflight program and bring launches back to U.S. soil for the first time since the space shuttle was retired in 2011.
Without a way to fly its astronauts to space, NASA has had to pay Russia as much as about $84 million a seat for rides to the space station. But the IG report questioned the rationale for the Boeing contract, finding that the first flights on Boeing’s Starliner capsule would cost $90 million a seat, slightly more than what Russia charges. Rides on SpaceX’s Dragon capsule would cost about $55 million per seat, the IG found.
The report was more bad news for Boeing, which has been engulfed in scandal since the crashes of two of its 737 Max jets killed 346 people. Dennis Muilenburg, its chief executive, was stripped of his title as chairman, and the months-long grounding of the passenger jets cost the company $5.6 billion in revenue in the second quarter. Criticism has been withering on Capitol Hill.
Thursday’s IG report came a day after another report highlighted the struggles of another of Boeing’s big projects for NASA — the development of the Space Launch System rocket, which has yet to fly but NASA is hoping to use to fly astronauts to the moon. According to that report, the SLS rocket, the Orion crew capsule that would fly on top of it, and related ground systems has so far cost the agency $34 billion, a number that is projected to grow to $50 billion by 2024.
The report comes just days after Boeing conducted a test of the Starliner’s abort system, which would ferry the crew to safety in the case of an emergency. Boeing and NASA deemed the test a success despite the fact that one of the three main parachutes failed to deploy.
Boeing officials said that two were sufficient to land the spacecraft softly and safely, and it quickly identified the cause of the failure: a pin attached to a smaller parachute that was to pull out the larger main chute was not secured properly, a human error. The pin was underneath a protective sheath and out of sight.
In the future, Boeing officials pledged to test that the link was secure by tugging on it.
SpaceX has also had problems with its spacecraft. In April, the vehicle was destroyed during a test of its abort engines. But the company this week completed the same test and it appeared to go well.
SpaceX also has had serious problems with its parachutes. The same month that its Dragon capsule exploded on the test stand, the company conducted a drop test in which three parachutes failed to deploy, “resulting the loss of the test sled,” the IG found.
Since then the company said it has completed 14 tests of a new parachute design.
During a speech at NASA’s Ames Research Center on Thursday afternoon, Vice President Pence sounded an upbeat note, saying the agency would be launching “American astronauts on American rockets from American soil” by spring.