Northrop Grumman writes off $100 million on its fixed-price Lunar Gateway contract
Northrop Grumman announced on January 25, 2024 that it has written off another $42 million on its fixed-price contract with NASA to build the main habitable module for its Lunar Gateway space station, bringing the total losses so far to $100 million.
The company blamed the latest charge primarily on “cost growth stemming from evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges.” The company offered the same explanation when it reported the charge in the second quarter.
Northrop received a $935 million fixed-price contract from NASA in July 2021 to build the module, which is based on the company’s Cygnus cargo spacecraft. HALO will provide initial living accommodations on the Gateway and includes several docking ports for visiting Orion spacecraft and lunar landers as well as additional modules provided by international partners. It will launch together with the Maxar-built Power and Propulsion Element (PPE) on a Falcon Heavy.
In a fixed price contract NASA is not suppose to issue change orders. What must be happening is that either the company or NASA are recognizing there are some issues with the initial and then revised designs, forcing Northrop Grumman to issue its own change orders, delaying development and adding costs.
That the company is having problems however is a bit baffling. First, space station module design is not new. There is a history going back decades on how to do this. Second, Northrop is basing this module design on its already launched Cygnus freighters. Though unmanned, these freighters still have to be habitable after docking with ISS. It should not be so difficult to upgrade them.
Regardless, the company has now become hostile to bidding on any future fixed price contracts, or if it does, it will bid much higher (a decision that caused it to lose in another recent bidding contest). Hopefully this decision on fixed price contracts, similar to Boeing’s own decision, will not cause NASA to abandon such contracts. Just because these big, old-space companies can’t work efficiently doesn’t mean others can’t. Fixed-price is how every business in the real world must function. For most NASA projects such a deal is realistic. If these old companies can’t function practically let new companies bid instead. This will be better for NASA and the entire American space industry.
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In 2020 when the world panicked over COVID I wrote that the 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. Only in the past year have some of our so-called experts in the health field have begun to recognize these facts.
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.
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Northrop Grumman announced on January 25, 2024 that it has written off another $42 million on its fixed-price contract with NASA to build the main habitable module for its Lunar Gateway space station, bringing the total losses so far to $100 million.
The company blamed the latest charge primarily on “cost growth stemming from evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges.” The company offered the same explanation when it reported the charge in the second quarter.
Northrop received a $935 million fixed-price contract from NASA in July 2021 to build the module, which is based on the company’s Cygnus cargo spacecraft. HALO will provide initial living accommodations on the Gateway and includes several docking ports for visiting Orion spacecraft and lunar landers as well as additional modules provided by international partners. It will launch together with the Maxar-built Power and Propulsion Element (PPE) on a Falcon Heavy.
In a fixed price contract NASA is not suppose to issue change orders. What must be happening is that either the company or NASA are recognizing there are some issues with the initial and then revised designs, forcing Northrop Grumman to issue its own change orders, delaying development and adding costs.
That the company is having problems however is a bit baffling. First, space station module design is not new. There is a history going back decades on how to do this. Second, Northrop is basing this module design on its already launched Cygnus freighters. Though unmanned, these freighters still have to be habitable after docking with ISS. It should not be so difficult to upgrade them.
Regardless, the company has now become hostile to bidding on any future fixed price contracts, or if it does, it will bid much higher (a decision that caused it to lose in another recent bidding contest). Hopefully this decision on fixed price contracts, similar to Boeing’s own decision, will not cause NASA to abandon such contracts. Just because these big, old-space companies can’t work efficiently doesn’t mean others can’t. Fixed-price is how every business in the real world must function. For most NASA projects such a deal is realistic. If these old companies can’t function practically let new companies bid instead. This will be better for NASA and the entire American space industry.
Readers!
Please consider supporting my work here at Behind the Black. Your support allows me the freedom and ability to analyze objectively the ongoing renaissance in space, as well as the cultural changes -- for good or ill -- that are happening across America. Fourteen years ago I wrote that SLS and Orion were a bad ideas, a waste of money, would be years behind schedule, and better replaced by commercial private enterprise. Only now does it appear that Washington might finally recognize this reality.
In 2020 when the world panicked over COVID I wrote that the 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. Only in the past year have some of our so-called experts in the health field have begun to recognize these facts.
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.
Robert wrote: “In a fixed price contract NASA is not suppose to issue change orders.”
This is correct. NASA became accustomed to changing its requirements all the way through its cost-plus contracts. Which is why all those cost-plus contracts seemed to always go over budget and finish late. Perhaps the agency just cannot get out of that habit.
From the article:
“…combined with macroeconomic challenges.”
Is this an indirect way of admitting that the current economy and inflation is impacting the program?
Hello Bourbon,
“Is this an indirect way of admitting that the current economy and inflation is impacting the program?”
It seems the most obvious reading of it. Everybody in the industry has had their supply chains hit by inflation – even SpaceX.