DOJ settles with company that faked tests which caused two Taurus launch failures


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The Justice Department has reached a settlement with the company that had faked test results which caused faulty components to be installed on Orbital ATK’s Taurus rocket, eventually causing two consecutive launch failures.

SPI agreed to plead guilty to one count of mail fraud while SEI entered into a deferred prosecution agreement. SPI will pay $34.1 million in combined restitution to NASA, the Missile Defense Agency (MDA) and commercial customers, and forfeit $1.8 million in “ill-gotten gains.” The company will also pay an additional $6 million to NASA and $5 million to MDA as part of a separate civil settlement.

The companies acknowledged that SPI altered test results for nearly two decades, starting in the mid-1990s, such that aluminum extrusions that had failed mechanical properties testing instead appeared to have passed. Dennis Balius, a testing lab supervisor at SPI who led the effort to falsify test results for a number of years, pled guilty on separate charges in 2017 and was sentenced to three years in prison.

Those aluminum components were sold to a number of companies, including those who had contracts with NASA and MDA. The Justice Department statement noted that the components were used in frangible joints in launch vehicles and missiles. Such joints are used in vehicle separation systems.

“NASA maintains that SPI’s manufacturing processes lacked sufficient controls and produced extrusions unable to pass mechanical properties testing,” the Justice Department stated. “NASA further maintains that it identified SPI’s out-of-specification extrusions as the cause of two failed rocket launches, which resulted in the loss of important scientific missions.” SPI disputed those claims, although NASA has barred the company from contracting.

The worst part of this story is that it likely ended up destroying Orbital ATK, an innocent party to this fraud. Though the company lives on now as a division within Northrop Grumman, it never quite recovered from the two Taurus launch failures in 2009 and 2011. Customers went elsewhere, and the company’s launch business dried up. The only customer Orbital ATK was able to muster afterward was NASA, and the number of launches this provided was not enough, causing company’s eventual absorption by Northrop Grumman.

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8 comments

  • CALVIN G DODGE

    I think Elon’s insistence on vertical integration doesn’t seem so silly, now.

  • Calvin Dodge: Uh, SpaceX does horizontal integration of its payloads. The manner of integration also has little to do with this story. Your comment confuses me.

  • Matt in AZ

    Robert, I believe vertical integration Calvin was referring to describes SpaceX’s internal sourcing of components as opposed to the outsourcing model most other companies rely on.

  • Matt in AZ: Of course. Now Calvin’s comment makes sense.

  • Diane Wilson

    See also the strut failure that destroyed CRS-7. That was also an outsourced part that failed to meet contractual specs. Musk certainly has no reason to trust anything to outsourcing. Outsourcing used to be the investors’ panacea for creating wealth, but it has been a slow and painful learning process for business to fight back.

    Don’t outsource pieces that have to work together. Don’t outsource your core business. Don’t outsource anything that you can’t afford to have fail.

  • Gary

    Components aren’t tested by the purchaser to see if they really are up to specs? With multi-million dollar projects in the balance, it only makes sense to check. “Trust no one” (the X-Files) isn’t just a fictional admonition. It doesn’t have to be every part, every time — just enough to make suppliers nervous and cautious.

  • Art

    Sounds to me like ATK got too used to a sole-source mentality. After all, when Challenger was lost, who else beside Rockwell could build a new one? Carelessness crept in.

  • Edward

    Art wrote: “Sounds to me like ATK got too used to a sole-source mentality.

    I had a similar experience. I used to buy some of my spaceflight fasteners from a company that was caught cheating. They claimed that inspector 11 had tested batches of fasteners to verify that they were as strong as they were supposed to be, but there was no inspector 11, and there had been no tests of the batches he was supposed to have inspected.

    Fortunately, none of the fasteners that came from that company failed on anything that I made, but if some had failed in flight then the company I had worked for may also have suffered a reduced reputation.

    Gary asked: “Components aren’t tested by the purchaser to see if they really are up to specs? With multi-million dollar projects in the balance, it only makes sense to check.

    Some components are, some are not. For example, electronic components (e.g. flight computers, inertial motion units, power distribution units, etc.) are checked as soon as they arrive from the vendor to make sure they were not damaged during shipment. Other items, such as screws, are not tested. All flight items come with certification paperwork to reassure everyone (e.g. satellite manufacturer and his customer) that the items were manufactured and tested before delivery to assure compliance with the specifications and requirements. At some point we have to trust these certifications of compliance, because testing every screw and washer is prohibitively expensive.

    Outsourcing items that you can’t afford to have fail is often necessary, because no company, especially not new companies, can afford to develop all the electronics (for example) that are necessary to fly in space. SpaceX almost certainly does not make its own screws, either.

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