The principle of a cost premium is simple. Occasionally the US government needs something extraordinarily difficult, complex and unprecedented to build. In these cases, the government will pay a contractor the full value of the development costs plus a fee of often 10 percent if technical challenges are limited.
This is a useful tool to find the best contractors in the country To focus their efforts on large programs, the government considers this valuable. However, this is not a good way to encourage a company to implement a program quickly, especially as companies try to maximize their profits. The longer a contract runs, the more money it costs and the more fees it will incur.
The alternative is a fixed-price contract where the government pays a seller a fixed fee for a product. If the company delivers a product for less than that, it makes a profit. If the product costs more, the company eats the difference. In most cases, a company does not receive most of the financing until it delivers a product.
Rockets were once considered an extraordinarily difficult and complex technology – and it's still very difficult to find just the right thing. However, commercial space companies have now built powerful rockets independently of the US government. The US Air Force has recognized this and has made the transition from one-stop contracts to additional costs at competitive fixed prices for the introduction of national security arrangements.
Cost plus for production?
Nine years ago, NASA began the construction process of the Rocket Space Launch System, in which Boeing is selected as prime contractor for the vehicle phase. Although much of the booster used sophisticated technologies, including space shuttle main engines, conventional rocket propellants, and shuttle-derived side-mounted boosters, NASA awarded contract awards for the development of the rocket. The construction of the core stage and the merging of the entire rocket technology were difficult, complex and unprecedented.
It seems as if the rocket has met the critics' statements about extra-cost contracts in terms of urgency. The rocket is already three years late for its first launch and is unlikely to fly before mid or late 2021. However, the SLS manufacturers say the rocket is now in production, since Boeing is almost done with the first core phase, and work on a second vehicle is starting. "SLS is the only rocket powerful enough to send Orion, astronauts, and supplies to the Moon on a single mission, and no other rocket in today's production can carry as much cargo into space as the Space Launch System rocket." John Honeycutt of NASA's SLS program manager said this week.
NASA announced Wednesday that it is negotiating an agreement with Boeing to buy up to 10 SLS core phases, but the production and operating costs of a single SLS launch are certainly well over $ 1 billion. The mechanism of the contract is not mentioned.
Kathryn Hambleton, a spokeswoman for the agency, told Ars that the terms of the agreement "NASA expects the contract to be a mix of cost-plus-incentive fee and cost-plus surcharge, possibly at one fixed price, "she said. "Cost incentives are planned to cut costs during early production to allow the lowest possible unit prices for subsequent fixed-price issues."
If it seems strange that a government contractor would receive an expense contract for the production of a rocket, which he almost had A decade to learn how to build, what has gone into production and what is based on heritage technology – that's because it is. However, in their negotiations with NASA, companies such as Boeing (and Lockheed Martin, who recently signed a similar contract for the spacecraft Orion) know that they have strong political supporters.
In the case of the SLS rocket, the Alabama delegation, which includes a senator who effectively writes the agency's budget, has made it clear that financing the SLS rocket is his priority. Although NASA did not necessarily intend to grant Boeing a contract for SLS missiles for the next 15 years, it may have had no choice.
What is even more remarkable about NASA's Artemis Moon program is that the most complex technological component of the program is not the missiles, as the agency's leaders have repeatedly stated. Rather, it is the human land system that brings astronauts from lunar orbit to surface and back. Nevertheless, the Artemis program does not have strong backing in Congress. Firms competing for the construction of the Lunar Module are therefore applying for fixed-price contracts.