In August 2006, NASA competitively awarded a  $278 million Space Act agreement to SpaceX to develop and demonstrate  end-to-end transportation systems, including the development of the  Falcon 9 launch vehicle and Dragon spacecraft, ground operations, and  berthing with the space station. Since our 2009 report, the two COTS project partners, Orbital and SpaceX,  have made progress in the development of their respective vehicles. Nonetheless, the criticality of  these vehicles to the space station’s operations, as well as NASA’s ability  to affordably execute its science missions has heightened the importance  of their timely and successful completion and lessened the level of risk  that NASA is willing to accept in this regard. As a result, the project  recently requested and received an additional $300 million to augment the  partner development efforts with, according to NASA, risk reduction  milestones. SpaceX’s first demonstration mission readiness review was completed 15  months behind schedule and its successful first demonstration mission  was flown in December 2010, 18 months late. The company’s second and  third demonstration missions have been delayed by almost 2 years to  November 2011 and January 2012, respectively. In preparing for its second COTS demonstration flight, SpaceX has  experienced additional design, development, and production delays. Risk Reduction Milestones Recently Added to COTS Agreements

In addition to the prior milestones negotiated under the COTS project,  NASA has amended its agreements with SpaceX and Orbital to include a  number of additional milestones aimed at reducing remaining  developmental and schedule risks. SpaceX has completed 4 of its new milestones on time but has  experienced minor delays in completing 3 others. The Taurus II test flight is scheduled for October 2011. Appendix I describes SpaceX’s and Orbital’s progress meeting the new  COTS development milestones in their agreements with NASA. COTS Delays Will Likely Cause Resupply Flights to Slip, but NASA Has Taken Steps to Mitigate Short-Term Impact

Based on the current launch dates for SpaceX’s and Orbital’s upcoming  COTS demonstration missions, it is likely that both commercial partners  will not launch their initial CRS missions on time, but NASA has taken  steps to mitigate the short-term impact to the space station. These launch  windows are either scheduled to occur before or during SpaceX’s  upcoming COTS demonstration flights and thus will need to be  rescheduled. In the case of Orbital, NASA officials told us that the launch  window for its first CRS flight is from January to March 2012, but will  likely slip from those dates given the Taurus II test flight added to its  milestone schedule. NASA officials added that once SpaceX and Orbital  have finished completing their COTS demonstration flights, NASA will  have to renegotiate the number of flights needed from each partner and re- baseline the launch windows for future CRS missions. International Space Station program officials told us they have taken steps  to mitigate the short-term impact of CRS flight delays through  prepositioning of cargo on the last space shuttle flights, including cargo  that is being launched on the planned contingency space shuttle flight in  early July 2011. Despite these steps, NASA officials said they  would still need one flight each from SpaceX’s and Orbital’s vehicles in  order to meet science-related cargo needs in 2012. In considering the use of funded Space Act agreements for  COTS, NASA identified several advantages. For example:    The government can share costs with the agreement partner with fixed  government investment. For example:    The government has limited ability to influence agreement partners in  their approach. Given the intended goals of the project and the availability of alternative  vehicles to deliver goods to the space station when the COTS agreements  were signed, NASA was willing to accept the risks associated with the  disadvantages of using a Space Act agreement. As the project has  progressed, however, and these alternatives are no longer viable or  available, NASA has become less willing to accept the risks involved. The  additional investment required, however, can be lessened by ensuring that  accurate knowledge about requirements, cost, schedule, and risks is  achieved early on. We  have made recommendations to NASA and NASA is taking steps to  address these recommendations to help ensure that these fundamentals  are present in its major development efforts to increase the likelihood of  success.
Why GAO Did This Study

Since the National Aeronautics and Space Administration (NASA) created the strategy for the Commercial Orbital Transportation Services (COTS) project in 2005, the space landscape has changed significantly--the Space Shuttle program is retiring and the Ares I will not be available--increasing the importance of the timely development of COTS vehicles. The lack of alternatives for supplying the International Space Station and launching science missions have all contributed to an increased need for the COTS vehicles. The two COTS project partners, Orbital and SpaceX, have made progress in the development of their respective vehicles; however, both providers are behind schedule. As a result, the project recently received an additional $300 million to augment development efforts with risk reduction milestones. This testimony focuses on: (1) COTS development activities, including the recent funding increase; (2) the extent to which any COTS demonstration delays have affected commercial resupply services (CRS) missions and NASA's plans for meeting the space station's cargo resupply needs; and (3) lessons learned from NASA's acquisition approach for COTS. To prepare this statement, GAO used its prior relevant work and conducted additional audit work, such as analyzing each partner's agreement with NASA and interviewing NASA officials. New data in this statement was discussed with agency and company officials who provided technical comments, which we included as appropriate.

What GAO Found

SpaceX and Orbital continue to make progress completing milestones under their COTS agreements with NASA, but both partners are working under aggressive schedules and have experienced delays in completing demonstration missions. SpaceX successfully flew its first demonstration mission in December 2010, but the mission was 18 months late and the company's second and third demonstration missions have been delayed by almost 2 years due to design, development, and production challenges with the Dragon spacecraft and Falcon 9 launch vehicle. Orbital faced technical challenges developing the Taurus II launch vehicle and the Cygnus spacecraft and in constructing launch facilities, leading to multiple delays in completing program milestones, including its demonstration mission. NASA has amended its agreements with the partners to include a number of new milestones, such as additional ground and flight tests, to reduce remaining developmental and schedule risks; most of the new milestones completed thus far were finished on time, but many milestones remain. Based on the current launch dates for SpaceX's and Orbital's upcoming COTS demonstration missions, it is likely that neither will launch its initial CRS mission on time, but NASA has taken steps to mitigate the short-term impact to the space station. The launch windows for SpaceX's first and second CRS flights are scheduled to occur either before or during its upcoming COTS demonstration flights and will need to be rescheduled. Orbital's first CRS flight will also likely shift due to a Taurus II test flight. NASA officials said that the agency will have to renegotiate the number of flights needed from each partner and re-baseline the launch windows for future CRS missions once COTS demonstration flights are completed. NASA has taken steps to mitigate the short-term impact of CRS delays through prepositioning of cargo, some of which will be delivered on the last space shuttle flight. Despite these efforts, NASA officials said they would still need one flight in 2012 from SpaceX's and Orbital's vehicles to meet science-related cargo needs. In considering the use of a Space Act agreement for COTS, NASA identified several advantages. These advantages include sharing costs with agreement partners and promoting innovation in the private sector. A disadvantage, however, is that NASA is limited in its ability to influence agreement partners in their approach. At the time the agreements were awarded, NASA was willing to accept the risks of using a Space Act agreement given the goals of the project and alternative vehicles that were available to deliver goods to the space station. As the project has progressed, however, and these alternatives are no longer viable or available, NASA has become less willing to accept the risk involved and has taken steps aimed at risk mitigation. Given a critical need, the risk is present that the government will be required to make additional investments to meet mission needs. The amount of investment can be lessened by ensuring that accurate knowledge about requirements, cost, schedule, and risks is achieved early on.

What GAO Recommends

GAO has made recommendations to NASA and NASA is taking steps to help ensure that these fundamentals are present in its major development efforts to increase the likelihood of success.