WASHINGTON — A report released Thursday by NASA’s inspector general paints a damning picture of the space agency’s relationship with Boeing, one of its top contractors, saying NASA “overpaid” Boeing by hundreds of million of dollars in what the report deemed “unnecessary” payments for a “firm-fixed priced” contract.
NASA agreed to pay the company an additional $287.2 million as part of Boeing’s multibillion-dollar contract to develop a spacecraft capable of flying astronauts to the International Space Station to help it speed up the company’s launch schedule. But the payment could have been easily avoided “through simple changes to the flight manifest,” NASA’s inspector general wrote in the report.
In making the payments, NASA officials also didn’t factor in that Boeing had acquired several seats on a Russian spacecraft that it was planning to sell to NASA, something that would have helped fill the perceived gap in flights. Five days after NASA awarded Boeing the additional $287 million, Boeing proposed selling NASA up to five seats on the Russian Soyuz for $373.5 million, according to the inspector general’s report.
NASA also didn’t reach out to SpaceX, the other company under contract by NASA to fly its astronauts to the space station, to see whether it could speed up the development of its spacecraft and help fill the gap.
Both Boeing and SpaceX have suffered serious technical problems in what’s known as NASA’s “commercial crew program” that have delayed the first flights with human crews by two years.
Boeing, the inspector general said, found a way to capitalize on that delay. NASA “essentially paid Boeing higher prices to address a schedule slippage caused by Boeing’s 13-month delay” in completing a key design milestone. But the inspector general said the “additional compensation was unnecessary” given that the risk of a gap between flights was “minimal.”
It also said NASA officials felt they needed to meet Boeing’s demands for additional compensation because “they believed that due to financial considerations, Boeing could not continue as a commercial crew provider unless the contractor received the higher prices.”
NASA didn’t respond to a request for comment. But in a letter to the inspector general, the agency said it “strongly disagrees with the OIG’s characterization that NASA ‘overpaid’ for Boeing (flights) or that the final agreed-to prices were ‘unnecessary,’ ‘not justified,’ ‘unreasonable’ or ‘higher’ than some hypothetical lower amount.”
The agency said “there is no evidence to support the conclusion that Boeing would have agreed to lower prices.” And it said the prices were reviewed and approved by numerous NASA officials and resulted in a 29-page justification memo.
In a statement, Boeing defended the additional payments, saying it is “taking significantly more up-front financial risk and is already helping NASA with critical decisions key to optimizing future [space station] operations. Doing so under the structure of the original contract would have increased cost and schedule uncertainty and would have limited NASA’s flexibility in mission planning.”
In 2014, NASA awarded contracts – $4.2 billion to Boeing, $2.6 billion to SpaceX – as part of an effort to restore NASA’s human spaceflight program and bring launches back to U.S. soil for the first time since the space shuttle was retired in 2011.
Without a way to fly its astronauts to space, NASA has had to pay Russia as much as $84 million a seat for rides to the space station. The inspector general report questioned the rationale for the Boeing contract, finding that the first flights on Boeing’s Starliner capsule would cost $90 million a seat, slightly more than what Russia charges. Rides on SpaceX’s Dragon capsule would cost about $55 million per seat, the inspector general found.
The report was more bad news for Boeing, which has been engulfed in scandal since the crashes of two of its 737 Max jets killed 346 people. Dennis Muilenburg, its chief executive, was stripped of his title as chairman, and the months-long grounding of the passenger jets cost the company $5.6 billion hit in revenue in the second quarter.
