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.
On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.
The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.
The audiobook is also available at all these vendors, and is also free with a 30-day trial membership to Audible.
"Not simply about one mission, [Genesis] is also the history of America's quest for the moon... Zimmerman has done a masterful job of tying disparate events together into a solid account of one of America's greatest human triumphs."--San Antonio Express-News
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.
On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.
The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.
The audiobook is also available at all these vendors, and is also free with a 30-day trial membership to Audible.
"Not simply about one mission, [Genesis] is also the history of America's quest for the moon... Zimmerman has done a masterful job of tying disparate events together into a solid account of one of America's greatest human triumphs."--San Antonio Express-News
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.