NASA Relies on Contractors as it Reins In Costs By Greg Schneider and Ariana Eunjung Cha Washington Post Staff Writers Monday, February 3, 2003; Page A17
The astronauts on the space shuttle Columbia flew for their nations and for NASA, but it was private contractors who trained them, prepared their spacecraft for flight and managed Mission Control. In fact, about 92 percent of the $3.2 billion NASA spends each year on the shuttle program goes to private contractors, according to a study last month by the Rand Corp. That is a direct consequence of the drive to cut spending that has marked the nation's space program for the past two decades, pushing NASA to privatize management of even its most high-profile efforts. Since 1996, the shuttle program has been run by a partnership of NASA's two top contractors, Boeing Co. and Lockheed Martin Corp., who usually compete against one another for such big-dollar jobs. The companies formed a joint venture in 1995, the United Space Alliance, because neither company wanted to lose its piece of the prestigious space shuttle program after NASA announced it wanted to hire outside management. Under their original $7 billion six-year contract, plus a $2.5 billion, two-year extension awarded last summer, the companies got latitude to run the program without extensive government oversight. However, 40 percent of the contract fee is tied to meeting safety and quality standards, and another 40 percent is for safely meeting schedules. A spokesman for United Space Alliance, which is based in Houston, said he was uncertain yesterday what impact Saturday's crash of the shuttle Columbia might have on the company, either financially or in terms of legal liability. The company's practices are likely to come under extensive scrutiny during the investigation into the Columbia disaster. United Space Alliance is by far the single biggest contractor on the shuttle program, accounting for about a third of all money spent on the shuttle. As a joint venture between Lockheed Martin and Boeing, United Space has no publicly traded stock of its own and no board of directors, though it does have advisers who include both outsiders and representatives from its parent companies. Its Houston headquarters, in a shiny black building with a red, white and blue lobby, oversees 4,000 on-site workers who handle astronaut training, mission planning and upkeep of the billions of lines of software code that connect the 2.5 million bits of hardware that make up the space shuttle. Another 6,000 men and women in Cape Canaveral are responsible for manufacturing and fitting parts and shuttle maintenance. United Space workers in Florida also make the heat-resistant tiles that coat the underside of the Space Shuttle. The company also has operations in Alabama, California and the District. Its top executives represent its owners: President and chief executive Russell D. Turner is a former executive from Boeing and from Boeing's Rocketdyne unit, which builds the shuttle's main engines. And chief operating officer Michael J. McCulley is a former space shuttle pilot and Lockheed Martin executive. He once served as Lockheed's launch site director at the Kennedy Space Center. The United Space Alliance also oversees the International Space Station for NASA. Profits from the company are split among itself and its parent corporations. Lockheed Martin clears about $50 million a year from the partnership, a spokesman said, a tiny portion of the company's expected $2.4 billion in overall profit for 2003. A spokesman for Boeing refused to disclose that company's financial stake in the deal. United Space Alliance also oversees the many subcontractors on the Space Shuttle program. Overall, Boeing is NASA's top contractor, and it and Lockheed do significant work on the shuttle program beyond their stakes in United Space. Boeing bought the shuttle's original builder, Rockwell, in 1996, and its Rocketdyne unit makes the shuttle's three main engines. Boeing also provides design engineering support as a subcontractor to United Space. Lockheed Martin manages all of NASA's data collection, including the telemetry and communications with the Space Shuttle, and manufactures the giant external fuel tank that appeared to shed insulation when Columbia lifted off. Lockheed set up most of NASA's mission control centers, including those in Houston and at the Cape. Of the 10,000 people who work for NASA in Houston, 7,600 are contractors. The ratio is even more slanted toward the private sector at Cape Canaveral: 14,000 people work there, with 12,600 of them contractors. Some experts and government auditors have warned for years that the push to cut costs and privatize shuttle management could be setting the stage for a disaster. NASA's shuttle program chief resigned in 1996, reportedly dissatisfied with the idea of hiring contractors to manage the program. The United Space contract is part of a government-wide trend toward performance-based contracts, in which the agency simply sets a goal and lets the contractor figure out how to achieve it rather than dictating each step along the way. Several reports by the General Accounting Office and by NASA's own inspector general have accused the agency of lax contractor oversight. One report in June said NASA now monitors such contracts through "insight" instead of oversight, meaning it occasionally sampled certain performance standards, "as opposed to traditional intense oversight methods requiring the government's review and concurrence of contractor processes and decisions," the report by NASA's inspector general said. The inspector general concluded that NASA is not doing a good job with its "insight" inspections. On an everyday basis, workers from NASA and from its contractors are virtually indistinguishable as they go about preparing shuttles for flight. "Frankly it's increasingly difficult to tell them apart," said Brett Lambert, and industry expert and consultant with DFI International. "They're all from the space community. They're such a close-knit group of people. They tend to switch badges a lot...They move from private sector to government and government to private sector -- they're really interchangeable." United Space Alliance workers would have had responsibility for fixing any damage from the foam insulation that fell off during Columbia's liftoff and hit the shuttle's left wing. The company also fitted and tested the heat-resistant tiles that the insulation apparently hit. And it was the company's staff that conducted the final inspection of the Columbia before it went into orbit on Jan. 16. Some United Space employees work on teams alongside NASA employees. But others, like the shuttle "processing" staff, which has responsibility for preparing shuttles for launches, operates largely independently with management oversight only at the highest levels. The Lockheed Martin-built external fuel tank is brought fully assembled to Cape Canaveral by barge, where United Space employees mate it onto the shuttle. Then the shuttle is rolled out to the pods for a final inspection by United Space. United Space spokeswoman Jessica Rye said the company and NASA have weekly and sometimes daily meetings during the processing of shuttles. Lambert defended the performance of contractor employees. "These guys live and breathe the value of the lives they're sending up there, every day, from the forms they fill out to the bolts they tighten... I think there's a great appreciation on the part of the contractors of the special nature of what they do," he said. Another industry expert, Marco Caceres of the Teal Group consulting firm, noted that NASA's top contractors, especially Lockheed Martin and Boeing, have a powerful interest in keeping the Space Shuttle program on track because it provides "a steady revenue stream for both companies." If the current program were phased out and the companies had to compete to build a new generation of shuttle-like crafts, the two contractors would have to spend millions on research and development, with no guarantee that either would win the job. Boeing also has been working on an "orbital space plane" that could replace the shuttle as a ferry to the International Space Station. Last November NASA awarded the company $307 million to complete development of an unmanned test version. That project might get a significant boost because of the Columbia disaster, Lambert said -- in part because it is co-sponsored by the Air Force. "The focus of activity for the next-generation systems might naturally move toward the people with the money, and right now that's the Air Force, not NASA," Lambert said. NASA flirted during the 1990s with completely privatizing the shuttle program. Lockheed Martin designed a next-generation launch vehicle that was to have operated for profit, but it got mired first in weight and then in budgetary problems and was cancelled.
