NASA changes have cost Northrop Grumman $36 million on its Lunar Gateway module
Northrop Grumman yesterday revealed that unexpected requirement changes to the specifications of its HALO module for NASA’s Lunar Gateway space station has raised its cost for this fixed price contract by $36 million.
In the company’s fiscal second quarter financial results released July 27, the company announced an unfavorable estimate-at-completion adjustment of $36 million for its work on the Habitation and Logistics Outpost (HALO) module, one of the first elements of the Gateway. The company blamed the charge on “evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges” that caused cost growth on the program.
…“We think that is best applied for commercial items or production programs with stable requirements and mature designs,” [the company’s CEO] said of fixed-price contracts. “As it’s turning out on the HALO program, the requirements are not as stable as we or the government anticipated, and we’re working with them to address that change management as we go forward.”
The HALO module was an upgrade of the company’s Cygnus cargo freighter, with its original fixed-price contract for $935 million.
On a fixed-price contract, NASA is not supposed to change its specifications. The company gets somewhat general requirements from NASA, and then builds the product to its own specifications. It appears that either NASA managers don’t seem to understand this and are causing the company problems, or the company itself had not anticipated some design and construction issues before bidding and are struggling to address them now. In the latter case Northrop Grumman managers might have themselves not understood the nature of fixed-price contracts, and had assumed NASA would simply pick up any increase in the project’s budget, as it does in cost-plus contracts. It apparently is not, and thus this old big space company is now suddenly forced to face reality.
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Northrop Grumman yesterday revealed that unexpected requirement changes to the specifications of its HALO module for NASA’s Lunar Gateway space station has raised its cost for this fixed price contract by $36 million.
In the company’s fiscal second quarter financial results released July 27, the company announced an unfavorable estimate-at-completion adjustment of $36 million for its work on the Habitation and Logistics Outpost (HALO) module, one of the first elements of the Gateway. The company blamed the charge on “evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges” that caused cost growth on the program.
…“We think that is best applied for commercial items or production programs with stable requirements and mature designs,” [the company’s CEO] said of fixed-price contracts. “As it’s turning out on the HALO program, the requirements are not as stable as we or the government anticipated, and we’re working with them to address that change management as we go forward.”
The HALO module was an upgrade of the company’s Cygnus cargo freighter, with its original fixed-price contract for $935 million.
On a fixed-price contract, NASA is not supposed to change its specifications. The company gets somewhat general requirements from NASA, and then builds the product to its own specifications. It appears that either NASA managers don’t seem to understand this and are causing the company problems, or the company itself had not anticipated some design and construction issues before bidding and are struggling to address them now. In the latter case Northrop Grumman managers might have themselves not understood the nature of fixed-price contracts, and had assumed NASA would simply pick up any increase in the project’s budget, as it does in cost-plus contracts. It apparently is not, and thus this old big space company is now suddenly forced to face reality.
Readers!
My annual February birthday fund-raising drive for Behind the Black is now over. Thank you to everyone who donated or subscribed. While not a record-setter, the donations were more than sufficient and slightly above average.
As I have said many times before, I can’t express what it means to me to get such support, especially as no one is required to pay anything to read my work. Thank you all again!
For those readers who like my work here at Behind the Black and haven't contributed so far, please consider donating or subscribing. My analysis of space, politics, and culture, taken from the perspective of an historian, is almost always on the money and ahead of the game. For example, in 2020 I correctly predicted that the COVID panic was unnecessary, that the virus was apparently simply a variation of the flu, that masks were not simply pointless but if worn incorrectly were a health threat, that the lockdowns were a disaster and did nothing to stop the spread of COVID. Every one of those 2020 conclusions has turned out right.
Your help allows me to do this kind of intelligent analysis. I take no advertising or sponsors, so my reporting isn't influenced by donations by established space or drug companies. Instead, I rely entirely on donations and subscriptions from my readers, which gives me the freedom to write what I think, unencumbered by outside influences.
You can support me either by giving a one-time contribution or a regular subscription. There are four ways of doing so:
1. Zelle: This is the only internet method that charges no fees. All you have to do is use the Zelle link at your internet bank and give my name and email address (zimmerman at nasw dot org). What you donate is what I get.
2. Patreon: Go to my website there and pick one of five monthly subscription amounts, or by making a one-time donation.
3. A Paypal Donation or subscription:
4. Donate by check, payable to Robert Zimmerman and mailed to
Behind The Black
c/o Robert Zimmerman
P.O.Box 1262
Cortaro, AZ 85652
You can also support me by buying one of my books, as noted in the boxes interspersed throughout the webpage or shown in the menu above.
I see the courts figuring out who pays in suit vs counter suit