[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




                 NASA'S COMMERCIAL CARGO PROVIDERS: ARE
                 THEY READY TO SUPPLY THE SPACE STATION
                        IN THE POST-SHUTTLE ERA?

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON SPACE AND AERONAUTICS

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                         THURSDAY, MAY 26, 2011

                               __________

                           Serial No. 112-20

                               __________

 Printed for the use of the Committee on Science, Space, and Technology







       Available via the World Wide Web: http://science.house.gov

                                _____

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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         DAVID WU, Oregon
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri               GABRIELLE GIFFORDS, Arizona
RANDY NEUGEBAUER, Texas              DONNA F. EDWARDS, Maryland
MICHAEL T. McCAUL, Texas             MARCIA L. FUDGE, Ohio
PAUL C. BROUN, Georgia               BEN R. LUJAN, New Mexico
SANDY ADAMS, Florida                 PAUL D. TONKO, New York
BENJAMIN QUAYLE, Arizona             JERRY McNERNEY, California
CHARLES J. ``CHUCK'' FLEISCHMANN,    JOHN P. SARBANES, Maryland
    Tennessee                        TERRI A. SEWELL, Alabama
E. SCOTT RIGELL, Virginia            FREDERICA S. WILSON, Florida
STEVEN M. PALAZZO, Mississippi       HANSEN CLARKE, Michigan
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

                 Subcommittee on Space and Aeronautics

               HON. STEVEN M. PALAZZO, Mississippi, Chair
F. JAMES SENSENBRENNER JR.,          GABRIELLE GIFFORDS, Arizona
    Wisconsin                        MARCIA L. FUDGE, Ohio
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
DANA ROHRABACHER, California         TERRI A. SEWELL, Alabama
FRANK D. LUCAS, Oklahoma             DAVID WU, Oregon
W. TODD AKIN, Missouri               DONNA F. EDWARDS, Maryland
MICHAEL T. McCAUL, Texas             FREDERICA S. WILSON, Florida
SANDY ADAMS, Florida                     
E. SCOTT RIGELL, Virginia                
MO BROOKS, Alabama                       
RALPH M. HALL, Texas                 EDDIE BERNICE JOHNSON, Texas













                            C O N T E N T S

                         Thursday, May 26, 2011

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Steven M. Palazzo, Chair, 
  Subcommittee on Space and Aeronautics, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........    15
    Written Statement............................................    16

Statement by Representative Ralph M. Hall, Chair, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    16
    Written Statement............................................    18

Statement by Representative Jerry F. Costello, Member, 
  Subcommittee on Space and Aeronautics, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........    18
    Written Statement............................................    19


                               Witnesses

Mr. William H. Gerstenmaier, Associate Administrator, Space 
  Operations Mission Directorate, National Aeronautics and Space 
  Administration
    Oral Statement...............................................    21
    Written Statement............................................    23

Ms. Cristina Chaplain, Director, Acquisition and Sourcing 
  Management, U.S. Government Accountability Office
    Oral Statement...............................................    30
    Written Statement............................................    32

Mr. Frank Culbertson, Jr., Senior Vice President and Deputy 
  General Manager, Advanced Programs Group, Orbital Sciences 
  Corporation
    Oral Statement...............................................    55
    Written Statement............................................    57

Ms. Gwynne Shotwell, President, Space Exploration Technologies
    Oral Statement...............................................    64
    Written Statement............................................    65

  ...............................................................      

             Appendix I: Answers to Post-Hearing Questions

Mr. William H. Gerstenmaier, Associate Administrator, Space 
  Operations Mission Directorate, National Aeronautics and Space 
  Administration.................................................    96

Ms. Cristina Chaplain, Director, Acquisition and Sourcing 
  Management, U.S. Government Accountability Office..............   102

Mr. Frank Culbertson, Jr., Senior Vice President and Deputy 
  General Manager, Advanced Programs Group, Orbital Sciences 
  Corporation....................................................   105

Ms. Gwynne Shotwell, President, Space Exploration Technologies...   107


  ...............................................................      

            Appendix II: Additional Material for the Record

Written Statement Submitted for the Record by Representative Pete 
  Olsen..........................................................   112

Additional Material Submitted for the Record by Mr. William H. 
  Gerstenmaier, Associate Administrator, Space Operations Mission 
  Directorate, National Aeronautics and Space Administration.....   113
.................................................................      

 
 NASA'S COMMERCIAL CARGO PROVIDERS: ARE THEY READY TO SUPPLY THE SPACE 
                    STATION IN THE POST-SHUTTLE ERA?

                              ----------                              


                         THURSDAY, MAY 26, 2011

                  House of Representatives,
             Subcommittee on Space and Aeronautics,
               Committee on Science, Space, and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Steve 
Palazzo [Chairman of the Subcommittee] presiding.



    Chairman Palazzo. The Subcommittee on Space and Aeronautics 
will come to order. Good morning. Welcome to today's hearing 
entitled, ``NASA's Commercial Cargo Providers: Are They Ready 
To Supply the Space Station in the Post-Shuttle Era?'' In front 
of you are packets containing the written testimony, 
biographies, and truth in testimony disclosures for today's 
witness panel. I ask unanimous consent that the gentleman, Mr. 
Olson, from Texas and Mr. Flores from Texas be allowed to sit 
in at the dais with the Committee and participate in the 
hearing.
    Hearing no objections, so ordered.
    I now recognize myself for five minutes for an opening 
statement.
    I would like to welcome everyone to today's subcommittee 
hearing examining NASA's commercial cargo programs. I also want 
to thank our witnesses for taking time out of their busy 
schedules to testify before us today. We have a lot of ground 
to cover, and I know Members want plenty of time to ask 
questions, so I will keep my remarks short.
    I think we are all well aware that NASA is preparing to 
launch the final Space Shuttle mission to the International 
Space Station. The cargo bay of Atlantis will be filled with 
supplies and spare parts bound for the International Space 
Station, enough to provide up to a year's margin of safety. The 
flight was added in part because NASA and the commercial 
partners are behind schedule and have not yet demonstrated the 
capability to access the ISS. Without the Shuttle, and until 
commercial cargo flights begin flying, NASA must rely on the 
capabilities of the international partners.
    NASA's international partners should be commended for doing 
a fine job, but they simply do not have enough cargo-carrying 
capacity by themselves to insure that sufficient equipment is 
on board the Station to support a research team of six 
astronauts.
    NASA wrote the book on back-up systems, and thankfully with 
STS-135 the Space Shuttle can be called upon one last time to 
provide the much-needed cargo capability. But in the post-
Shuttle era will NASA's commercial cargo providers be able to 
do that job?
    Thus far we have very little by which to make an informed 
judgment. Only one of the two cargo resupply contractors has 
actually orbited a prototype vehicle, and that was only an 
orbital demonstration that was not intended to reach the Space 
Station orbit. Congress has generally been supportive of NASA's 
commercial cargo efforts, but too often requests for 
information have been met with a veil of secrecy and claims of 
company proprietary information.
    I want to remind NASA and the commercial partners that you 
are spending taxpayer money and lots of it. So you will not be 
exempt from oversight and financial scrutiny.
    I also want to remind everyone in this room that today we 
are talking about cargo and not capabilities to take astronauts 
into space or to the ISS. Whether or not commercially-
developed, non-NASA launch systems can safely carry astronauts 
to orbit in an economical way is a question that will require 
some number of years before we have an answer and will be the 
topic of future hearings.
    Today let us focus our attention on NASA's programs to 
commercially deliver cargo to the Space Station. NASA's 
commercial cargo programs have been in development for several 
years and have experienced delays. NASA has obligated over 
$1.25 billion and is poised to spend more than $4 billion over 
the next few years.
    Yet, in spite of optimistic projections and even a 
successful SpaceX Falcon 9 launch and Dragon capsule recovery, 
NASA's commercial cargo partners have yet to demonstrate the 
ability to safely deliver cargo to the ISS.
    I am hopeful that we will see some progress soon, and I 
look forward to hearing your testimony.
    [The prepared statement of Mr. Palazzo follows:]
    Prepared Statement of The Honorable Steven M. Palazzo, Chairman 
                 Subcommittee on Space and Aeronautics
    I would like to welcome everyone to today's subcommittee hearing 
examining NASA's Commercial Cargo programs. I also want to thank our 
witnesses for taking time out of their busy schedules to testify before 
us today. We have a lot of ground to cover and I know Members want 
plenty of time to ask questions so I will keep my remarks short.
    I think we are all well aware that NASA is preparing to launch the 
final Space Shuttle mission to the International Space Station. The 
cargo bay of Atlantis will be filled with supplies and spare parts 
bound for the International Space Station; enough to provide up to a 
year's margin of safety. The flight was added in part, because NASA and 
the commercial partners are behind schedule and have not yet 
demonstrated a capability to access the ISS. Without the shuttle, and 
until commercial cargo flights begin flying, NASA must rely on the 
capabilities of the international partners.
    NASA's international partners should be commended for doing a fine 
job, but they simply do not have enough cargo carrying capacity by 
themselves to ensure that sufficient equipment is onboard the station 
to support a research team of six astronauts. NASA wrote the book on 
backup systems, and thankfully with STS-135, the space shuttle can be 
called upon one last time to provide the much needed cargo capability. 
But in the post-shuttle era will NASA's commercial cargo providers be 
able to do the job? Thus far, we have very little by which to make an 
informed judgment. Only one of the two cargo resupply contractors has 
actually orbited a prototype vehicle, and that was only an orbital 
demonstration that was not intended to reach the space station orbit.
    Congress has generally been supportive of NASA's commercial cargo 
efforts, but too often requests for information have been met with a 
veil of secrecy and claims of company proprietary information. I want 
to remind NASA and the commercial partners that you are spending 
taxpayer money, and lots of it. So you will not be exempt from 
oversight and financial scrutiny.
    I also want to remind everyone in this room that today we are 
talking about cargo, and not capabilities to take astronauts into space 
or to the ISS. Whether or not commercially developed, non-NASA launch 
systems can safely carry astronauts to orbit in an economical way is a 
question that will require some number of years before we have an 
answer, and will be the topic of a future hearing.
    Today let's focus our attention on NASA's programs to commercially 
deliver cargo to the space station. NASA's commercial cargo programs 
have been in development for several years and
    have experienced delays. NASA has spent over $1.25 Billion and is 
poised to spend more than $4 billion over the next few years. Yet, in 
spite of optimistic projections, and even a successful SpaceX Falcon 9 
launch and Dragon capsule recovery, NASA's commercial cargo partners 
have yet to demonstrate the ability to safely deliver cargo to the ISS.
    I am hopeful that we will see some progress soon, and I look 
forward to hearing your testimony.

    Chairman Palazzo. I would now like to yield my remaining 
time to Science Committee Chairman Ralph Hall for a few brief 
comments.
    Mr. Hall. Thank you, Mr. Chairman, for yielding some time.
    NASA's commercial cargo program was initiated as we all 
know in 2006, five years ago, with the Commercial Orbital 
Transportation Systems Program. It was, and is, a technically-
challenging program to initiate two commercial launch systems, 
even for the seemingly-routine delivery of cargo to the 
International Space Station, but the procurement strategy also 
broke with NASA tradition by allowing the agency to use its 
Space Act Agreement authority to fund these developments of 
these two systems.
    Two years later NASA signed contracts valued at 3.5 billion 
with the same two COTS-funded companies for cargo supply 
services, even though neither of these companies had flown any 
demonstration flights.
    So what started as a reasonable step-by-step approach to 
develop and prove capabilities first, followed by competitive 
acquisition simply didn't happen. NASA simply ran out of time 
and is now gambling the future of Space Station on the success 
of two very new launch systems.
    We, NASA, Congress, and our Space Station partners expect 
these companies to perform. It is my sincere hope and desire 
that they perform and meet their contract goals. There is no 
plan B if they encounter severe technical or schedule 
challenges, and I want them to succeed. I simply regret that 
there continues to be so much uncertainty about our Nation's 
ability to reliably get cargo to the Station with the final 
Shuttle flight now less than two months away.
    It is unfortunate the decisions of the Administration have 
created so many questions and turmoil in the outlook for space. 
Thousands were handed unbelievable anxiety about their future, 
about their jobs, and about our Space Station.
    I just want to review just very briefly an article that has 
been furnished to all of us up here. It simply points out that 
the last Space Shuttle mission is scheduled for July the 8th, 
just around the corner. After that how is NASA going to supply, 
maintain, and utilize the multi-billion dollar International 
Space Station?
    NASA plans to rely on new commercial launch service 
providers to supplement the international partners. NASA has 
spent $500 million since 2005, on the Commercial Orbital 
Transportation Services Program intended to demonstrate 
commercial cargo delivery capabilities to the International 
Space Station from two commercial partners; Space Exploration 
Technologies and Orbital Science Corporation.
    Despite initial assurances that NASA would not expend any 
money to buy services until these systems were fully 
demonstrated, NASA has spent over $466 million towards the 
purpose of cargo delivery services even though no, I emphasize 
no, demonstration flights to the ISS have been performed.
    Furthermore, last year NASA requested an additional $312 
million augmentation, a 62 percent increase, to reduce risk and 
improve the schedule. To date NASA has obligated at least $1.25 
billion on the commercial cargo effort without accomplishing a 
single demonstration to the ISS.
    Questions for the Congress include when will these systems 
be ready, how much additional work, time, and money will be 
required, and I join with Mr. Palazzo in welcoming our guests 
here. You have had and will have disappointments. Just don't 
over promise us as we work together and hopefully succeed 
together.
    Let us remember those that blazed the way to the moon and 
back, the John Glenns, the Neil Armstrongs, the Buzz Aldrins, 
the Gene Cernans, the Mike Collins, the General Tom Staffords, 
and all those others who perished in missions that once thought 
routine. We owe them so much. Let us not let them down.
    I yield back my time.
    [The prepared statement of Mr. Hall follows:]
           Prepared Statement of The Honorable Ralph M. Hall
    Thank you, Mr. Palazzo, for yielding me some time to inject a 
couple of quick comments.
    NASA's commercial cargo program was initiated in 2006, five years 
ago, with the Commercial Orbital Transportation Systems (COTS) program. 
It was--and is--a technically challenging program to stand-up two 
commercial launch systems, even for the seemingly routine delivery of 
cargo to the ISS. But the procurement strategy also broke with NASA 
tradition by allowing the agency to use its Space Act Agreement 
authority to fund the development of these systems. Two years later, 
NASA signed contracts valued at $3.5 billion with the same two COTS-
funded companies for cargo resupply services, even though neither of 
these companies had flown any demonstration flights.
    So what started as a reasonable step-by-step approach to develop 
and prove capabilities first, followed by a competitive acquisition, 
did not happen. NASA simply ran out of time and is now gambling the 
future of Space Station on the success of two very new launch systems.
    We--NASA, Congress, our space station partners--expect these 
companies to perform. It is my sincere hope and desire that they 
perform and meet their contract goals. There is no plan B if they 
encounter severe technical or schedule challenges, and I want them to 
succeed. I simply regret that there continues to be so much uncertainty 
about our nation's ability to reliably get cargo to station with the 
final shuttle flight now less than two months away. It is unfortunate 
that the decisions of this Administration have created so many 
questions and turmoil in our outlook for space.
    I join with Mr. Palazzo in welcoming our witnesses this morning, 
and I look forward to your testimony.

    Chairman Palazzo. Thank you, Chairman Hall.
    The chair now recognizes Mr. Costello for an opening 
statement.
    Mr. Costello. Mr. Chairman, thank you, and Mr. Chairman, 
thank you for calling this hearing today.
    First I want to congratulate Associate Administrator Bill 
Gerstenmaier, who is here with us this morning and his entire 
NASA team for the successful launch of STS-134, Space Shuttle 
Endeavor's final mission. We were all heartened that 
Congresswoman Giffords was present at the launch, and our 
thoughts are with the astronauts and their families for their 
safe return home.
    In 2006, NASA envisioned a commercial cargo program that 
took into account the financial and programmatic risk to the 
United States government, allowing private companies to service 
the ISS. The initial plan 1) allowed NASA to partner with a 
commercial provider to develop and demonstrate a safe cargo 
mission to the ISS before signing a long-term resupply 
contract, and 2) provided a contingency plan to use 
Constellation vehicles and rockets if commercial providers 
could not meet their goals.
    In the last five years the landscape of human spaceflight 
has changed. In 2008, NASA signed long-term resupply contracts 
with SpaceX and Orbital before either company had safely 
completed a cargo mission, and in 2010, NASA cancelled the 
Constellation Program and shifted its focus to deep space 
exploration. Under this new plan, commercial providers will be 
fully responsible for the critical task of servicing the ISS 
when the Space Shuttle retires this year.
    Orbital and SpaceX have made significant strides in 
achieving the goals laid out by NASA for providing commercial 
cargo services under their initial agreements, but to date, as 
the Chairman has noted and the Chairman of the full Committee 
has also noted, neither company has successfully completed a 
mission to and from the ISS.
    However, both companies are under contract with NASA to 
begin flying cargo missions in 2012. After the final Space 
Shuttle launch brings supplies to the station this summer, NASA 
has no back-up plan if Orbital and SpaceX are not ready to 
launch in 2012. Without a robust and reliable commercial cargo 
service, NASA will not realize its plans to fully utilize the 
ISS as a research and development facility.
    As chair of this Subcommittee, Congresswoman Giffords 
expressed these concerns about commercial providers. She 
strongly believed that commercial companies should be given the 
time to demonstrate that they could safely provide cargo 
services and felt NASA could not put the ISS or deep space 
exploration at risk by not providing a back-up plan if they 
fail.
    I hope to hear today how NASA, Congress, and the commercial 
providers can work together to identify any remaining risks to 
reliable and timely commercial cargo operations, develop 
realistic expectations for the program, and ensure NASA has 
contingency options if commercial services are unavailable. We 
must ensure NASA has sustainable commercial cargo services for 
the life of the ISS without exposing the U.S. government to too 
much financial and programmatic risks.
    Mr. Chairman, I welcome our panel of witnesses this 
morning, and I look forward to hearing their testimony.
    [The prepared statement of Mr. Costello follows:]
          Prepared Statement of Representative Jerry Costello
    Mr. Chairman, thank you for holding today's hearing to receive 
testimony on the readiness of commercial cargo providers to service the 
International Space Station (ISS) after the Space Shuttle retires this 
year.
    First, I want to congratulate Bill Gerstenmaier and the entire NASA 
team for the successful launch of STS-134, Space Shuttle Endeavour's 
final mission. We were all heartened that Congresswoman Gabrielle 
Giffords was present at the launch, and our thoughts are with the 
astronauts and their families for their safe return home.
    In 2006, NASA envisioned a commercial cargo program that took into 
account the financial and programmatic risk to the U.S. government 
allowing the private companies to service the ISS. The initial plan 1) 
allowed NASA to partner with a commercial provider to develop and 
demonstrate a safe cargo mission to the ISS before signing a long-term 
resupply contract and 2) provided a contingency plan to use 
Constellation vehicles and rockets if commercial providers could not 
meet their goals.
    In the last five years, the landscape of human spaceflight has 
changed. In 2008, NASA signed long-term resupply contracts with SpaceX 
and Orbital before either company had safely completed a commercial 
cargo mission, and in 2010 NASA canceled the Constellation program and 
shifted its focus to deep space exploration. Under this new plan, 
commercial providers will be fully responsible for the critical task of 
servicing the ISS when the Space Shuttle retires this year.
    Orbital and SpaceX have made significant strides in achieving the 
goals laid out by NASA for providing commercial cargo services under 
their initial agreements, but to date neither company has successfully 
completed a mission to and from the ISS. However, both companies are 
under contract with NASA to begin flying cargo missions in 2012.
    After the final Space Shuttle launch will bring supplies to the 
station this summer, NASA has no back-up plan if Orbital and SpaceX are 
not ready to launch in 2012. Without a robust and reliable commercial 
cargo service, NASA will not realize its plans to fully utilize the ISS 
as a research and development facility.
    As Chair of this Subcommittee, Congresswoman Giffords expressed 
these concerns about commercial providers. She strongly believed 
commercial companies should be given the time to demonstrate they could 
safely provide cargo services but felt NASA could not put the ISS or 
deep space exploration at risk by not providing a back-up plan if they 
fail.
    I hope to hear today how NASA, Congress, and commercial providers 
can work together to identify any remaining risks to reliable and 
timely commercial cargo operations, develop realistic expectations for 
the program, and ensure NASA has executable contingency options if 
commercial services are unavailable. We must ensure NASA has 
sustainable commercial cargo services for the life of the ISS without 
exposing the U.S. government to too much financial and programmatic 
risk.
    I welcome our panel of witnesses and look forward to their 
testimony. I yield back the balance of my time.

    Chairman Palazzo. Thank you, Mr. Costello. If there are 
Members who wish to submit additional opening statements, your 
statements will be added to the record at this point.
    At this time I would like to introduce our witness panel. 
Our first witness will be Mr. Bill Gerstenmaier, Associate 
Administrator for Space Operations at NASA. Mr. Gerstenmaier 
began his career at NASA in 1977, and has worked on a number of 
projects and programs including Shuttle, Space Station Freedom, 
and the ISS.
    Our second witness is Ms. Cristina Chaplain, Director of 
Acquisition and Sourcing Management at the U.S. Government 
Accountability Office. She has responsibility for GAO 
assessments of military space acquisitions, NASA, and the 
Missile Defense Agency. She has been with the GAO for 20 years.
    Our third witness is Mr. Frank Culbertson, Senior Vice 
President and General Manager of Orbital's Advanced Programs 
Group. Mr. Culbertson is a graduate of the U.S. Naval Academy. 
He was a naval aviator and served for 18 years as a NASA 
astronaut, spending 144 days in space as Shuttle commander, 
pilot, and station crew member.
    And for our final witness introduction I recognize Mr. 
Flores for two minutes.
    Mr. Flores. Thank you, Mr. Chairman. I appreciate the 
courtesy of each of you allowing me to introduce Gwynne 
Shotwell, the President of Space Exploration Technologies. I 
also appreciate the Committee holding this important hearing on 
NASA's Commercial Cargo Providers.
    As you are aware, this option will soon be the only 
domestic American capability to transport cargo to the 
International Space Station. All Americans know that Texas has 
had a long and prominent role to play in spaceflight, and I am 
proud that the City of McGregor in McClennan County is playing 
a key role in this next phase of our space program.
    I am pleased to introduce Gwynne Shotwell, whose company, 
SpaceX, is bringing exciting new engineering and technical jobs 
to McGregor. Since 2003, SpaceX has invested more than $50 
million in its McGregor facility to develop state-of-the-art--
to develop a state-of-the-art rocket development facility which 
sits on more than 600 acres of land and employs more than 120 
Texans.
    Mr. Chairman, I have had the opportunity to visit SpaceX 
McGregor test site and meet with its employees, and I can tell 
you it is an impressive place. There is a lot of energy and 
excitement and to me it exemplifies the spirit of American 
ingenuity and innovation. Not only was I able to see the Dragon 
spacecraft, which successfully twice orbited the earth in 
December of last year, but I was also able to see the great 
engineers and technicians at work test firing one of SpaceX's 
Merlin rocket engines.
    My constituents all across our district have told me how 
proud they are to have such an innovative and exciting company 
in the community, and I am proud of what they are doing to 
develop a safe and affordable domestic alternative to offset a 
pending sole reliance on Russian spacecraft to deliver cargo 
and ultimately crew into space. McGregor is a busy place today 
and getting more industrious and busy by the minute. Every 
SpaceX Merlin engine that powers the Falcon 9 rocket and every 
Draco thruster that controls its Dragon spacecraft is first 
tested on the ground in McGregor before launch.
    SpaceX is now averaging about one test firing per day. This 
frequency will only grow and increase as SpaceX expands to 
support dozens of upcoming launches for its government and 
commercial customers. And now that NASA is working with SpaceX 
under its commercial crew development program, development of 
SpaceX's innovative new integrated launch aboard system for the 
Dragon spacecraft will be McGregor.
    Again, Mr. Chairman, thank you for allowing me the time to 
introduce Gwynne and SpaceX. Speaking from my experience in the 
private sector, I support the principle that American private 
industry leads the world in fostering innovation. It is 
important that we in Congress do all that we can to make sure 
that we highlight companies such as SpaceX. They robustly 
exhibit the commitment to American innovation, and they are 
doing it by creating jobs here in America instead of overseas.
    And I wholeheartedly believe that NASA, working with 
companies like SpaceX, the United States can and will maintain 
its lead in space exploration. Thank you.
    Chairman Palazzo. Thank you, Mr. Flores.
    As our witnesses should know, spoken testimony is limited 
to five minutes each, after which the Members of the Committee 
will have five minutes each to ask questions.
    I now recognize our first witness, Mr. William 
Gerstenmaier, Associate Administrator of the Space Operations 
Mission Directorate at NASA.

      STATEMENT OF MR. WILLIAM H. GERSTENMAIER, ASSOCIATE 
 ADMINISTRATOR, SPACE OPERATIONS MISSION DIRECTORATE, NATIONAL 
              AERONAUTICS AND SPACE ADMINISTRATION

    Mr. Gerstenmaier. Thank you, Chairman Palazzo and Members 
of this Subcommittee. Thank you for the opportunity to appear 
before you today to discuss the status of NASA's commercial 
cargo efforts.
    Tonight the crew onboard the Space Shuttle Endeavor will 
begin their fourth EVA or spacewalk for the mission. This will 
be a significant milestone as this will be the last spacewalk 
based solely on Shuttle crew support. So tonight if things go 
as planned the total spacewalk time associated with the Space 
Station will be 1,000 hours. So we have spent--and that is just 
building the Space Station. So we spent quite a bit of time 
building the station, assembling it, and it culminates this 
evening with the final spacewalk based from the Shuttle.
    We have been preparing for the Shuttle retirement for 
almost six years. In doing so we had to change the entire 
maintenance philosophy for the Space Station. We used to 
deliver spares to Space Station, return those spares to the 
ground, refurbish them, and launch them again. When we changed 
the cargo delivery system, we needed to change to a system 
where we essentially replaced the units on orbit and disposed 
of them in space.
    So it is--not only did we need to develop and establish a 
cargo supply system, we needed to change the basic way we bring 
cargo to and from Space Station. This retirement of the Shuttle 
Program has entailed many years of preparation and required 
efforts beyond just the cargo delivery activities that we will 
talk about today. The ISS is entering a new phase focusing on 
research and utilization. The unique capabilities of the 
Shuttle are no longer required, and I think the simpler systems 
for cargo resupply will better serve this new phase of ISS 
utilization.
    The cargo delivered by these new providers will be 
absolutely critical to the effective utilization of Space 
Station. The next phase of Space Station will focus on 
research, both fundamental and applied.
    The agency has divided its commercial cargo efforts into 
two unique activities. The Commercial Orbital Transportation 
Services and that was to demonstrate commercial cargo systems, 
and then the second activity was commercial resupply services 
to procure cargo services to and from the ISS. These are unique 
activities as one is based on Space Act as was discussed 
earlier and the other is based on a fixed price of federal 
acquisition requirements for our FAR-based services contract.
    Both COTS partners continue to make progress in developing 
their systems. NASA sees no reason to doubt either company's 
ability to achieve its desired objectives. Both partners have 
forward-leaning schedules and are facing challenges typical of 
a spaceflight development program. Both have experienced some 
milestone delays and have overcome significant technical and 
programmatic challenges in the past. This was not unexpected.
    Establishing a regular flight rate after the initial 
flights will not be easy. NASA and the ISS Program are prepared 
for these startup problems, however, NASA expects these 
providers to deliver the services as required by the contracts 
that they have signed.
    On December 8, 2010, SpaceX successfully completed its 
first COTS demonstration flight. This was a significant event 
and has been talked about earlier. Orbital is currently 
expected to complete their maiden test flight of its Taurus II 
launch vehicle from the new launch pad at Wallops Flight 
Facility this October and its demonstration flight to the ISS 
for NASA in December.
    On the commercial resupply services contract on December 
23, 2008, NASA awarded these contracts to Orbital and SpaceX 
with a delivery of cargo to ISS after retirement of the 
Shuttle. This activity was separate from the COTS activity as I 
had just mentioned. NASA anticipates both providers will have 
their systems operational in 2012.
    Again, I think both the companies are well prepared to move 
forward. We are prepared for the problems that will occur as we 
move forward. We anticipated these inevitable startup 
challenges associated with the technologically-ambitious 
endeavor. Both NASA and these providers have spent many years 
preparing for the utilization of Space Station. Now is the time 
when we will begin to see the fruits of this planning and 
development. NASA is ready for the ISS utilization, and with 
the help and dedication of these providers, ISS will be fully 
utilized and demonstrate the benefits of space-based research 
to the world.
    Chairman Palazzo and Members of the Subcommittee, I would 
like to conclude my remarks by thanking you, again, for your 
continued support for NASA and its human spaceflight program 
including our commercial cargo efforts. I will be pleased to 
answer your questions as we go through the hearing. Thank you.
    [The prepared statement of Mr. Gerstenmaier follows:]
     Prepared Statement of Mr. William H. Gerstenmaier, Associate 
     Administrator, Space Operations Mission Directorate, National 
                  Aeronautics and Space Administration
    Chairman Palazzo and Members of the Subcommittee, thank you for the 
opportunity to appear before you today to discuss the status of NASA's 
commercial cargo efforts, which the Agency has divided into two 
programs--the Commercial Orbital Transportation Services (COTS) Program 
and the Commercial Resupply Services (CRS) Program.
    Under COTS, NASA has helped fund the development of commercial 
cargo systems, and under CRS, NASA has entered into contracts to 
procure future cargo transportation services to and from the 
International Space Station (ISS). Together and along with NASA's 
initial Commercial Crew Development efforts, NASA is continuing to 
expand the opportunity for commercial access to space, thereby creating 
multiple means for NASA to access low-Earth orbit (LEO). Additionally, 
by investing in these commercial efforts, NASA is helping to facilitate 
the commercial uses of space, to help lower costs for commercial space 
services and to spark an engine for long-term U.S. job growth in the 
aerospace industry.
    My testimony today will outline the progress made by our COTS and 
CRS partners: Space Exploration Technologies (SpaceX) and Orbital 
Sciences Corporation (OSC). Both companies competed as part of separate 
competitions under COTS and CRS, and were initially selected for the 
COTS development phase in 2006 and 2008, respectively, and later for 
the CRS phase in December 2008.
    NASA is pleased with the steady progress both companies continue to 
make in their cargo development efforts. While both companies have 
experienced technical and schedule challenges to date, that is not 
uncommon with major aerospace development efforts. However, there still 
remain significant challenges to developing reliable, regular cargo 
transportation to the ISS. We need to anticipate and be prepared for 
the inevitable start-up challenges associated with a technologically 
ambitious endeavor, such as cargo delivery to the ISS.
    We anticipate that the final COTS demonstration flights will 
conclude by early 2012. The first CRS resupply flights are also planned 
take place in 2012, thereby providing a critical capability that will 
enable us to maintain the ISS following the retirement of the Space 
Shuttle, thereby providing a critical capability that will enable us to 
maintain the ISS following the retirement of the Space Shuttle.

    Commercial Orbital Transportation Services

    In 2005, NASA established the Commercial Crew and Cargo Program 
Office at Johnson Space Center. The objectives of the Program, which 
oversees the COTS projects, is to further the implementation of U.S. 
space policy with investments to stimulate the commercial space 
industry, facilitate U.S. private industry demonstration of cargo and 
crew space transportation capabilities with the goal of achieving safe, 
reliable, cost-effective access to LEO, and create a market environment 
in which commercial space transportation services are available to 
Government and private sector customers. NASA believes the eventual 
availability of safe, reliable and economical service to LEO through 
the private sector will help NASA achieve the Nation's space 
exploration goals following retirement of the Space Shuttle, thereby 
allowing NASA to focus on developing new space transportation 
capabilities to support exploration beyond LEO.
    As part of COTS, NASA entered into partnerships using funded Space 
Act Agreements (SAAs) with emerging and established space 
transportation providers to demonstrate the delivery of cargo to an on-
orbit destination. The SAAs include a schedule of performance 
milestones that each partner is expected to achieve along with a fixed 
milestone payment to be made upon successful completion of performance.
    These milestones culminate in a flight demonstration where the 
participant's vehicle will launch, rendezvous and berth with the ISS as 
the demonstration testbed, and re-enter or return safely to Earth. If a 
partner does not complete a milestone, as defined in the SAA, and to 
NASA's satisfaction, they are not paid. Should a milestone be missed, 
NASA would ascertain the cause of the failure, evaluate partner 
progress made and determine whether additional efforts are in the best 
interest of the Government. NASA does not pay for a milestone until the 
work has been completed successfully.
    It is important to understand that both NASA and the partners 
themselves act as investors during the development and demonstration of 
commercial cargo services under COTS. The partners (and their other 
private investors) are investors because they partake in the financial 
burden, and stand to reap the financial benefits of developing a proven 
commercial space transportation capability that they can sell to NASA 
and other customers. NASA's intended benefit is the future availability 
of commercial providers, to enable less expensive cargo-transportation 
costs and elimination of the operations burden for routine LEO 
transportation.
    Currently, NASA has two funded COTS partners, SpaceX and OSC. NASA 
signed funded SAAs with SpaceX in 2006 and with Orbital in 2008. Prior 
to awarding a funded SAA to OSC, NASA had an SAA with Rocketplane 
Kistler (RpK). However, RpK failed to meet certain negotiated 
milestones. In October 2007, after working with RpK for several months, 
NASA decided that it was in the best interest of the Agency to 
terminate the RpK agreement and re-compete the remaining funding. After 
the re-competition, NASA selected OSC for a funded SAA in February 
2008.
    Both SpaceX and OSC continue to make progress in developing their 
cargo transportation systems, based in part on NASA's financial and 
technical assistance, coupled with that of the industry partner's own 
financial contributions and technical expertise. NASA sees no reason to 
doubt either company's ability to achieve its desired objectives--that 
of demonstrating commercial cargo delivery to and from LEO. Both 
partners have aggressive, success-oriented schedules, and are facing 
challenges typical of a spaceflight development program. Both partners 
have experienced some milestone delays. However, these milestone delays 
are not unexpected, and have not required any additional NASA funding 
of specific milestones, since the partners are paid only fixed amounts 
for achieving milestones. Development costs beyond NASA's milestone 
payments have been borne by the companies and/or other investors.
    A detailed schedule of each partner's COTS progress is provided as 
Attachment 1.
    A review of what has occurred since SpaceX signed its COTS 
agreement with NASA in August 2006 shows that:

          To date, SpaceX has completed 25 of 40 negotiated 
        milestones for COTS work, receiving $298 million out of a 
        potential $396 million, including augmented funding.

          On December 8, 2010, SpaceX successfully completed 
        the first COTS demonstration flight, demonstrating launch of 
        the Falcon 9 booster, separation of the Dragon spacecraft and 
        completion of two orbits, orbital maneuvering and control, 
        reentry, parachute decent and spacecraft recovery after 
        splashdown in the Pacific Ocean.

          SpaceX's remaining demonstration flights for NASA are 
        scheduled for November 2011 and January 2012. NASA is reviewing 
        a SpaceX proposal to accelerate the third demonstration flight 
        test objectives, which include berthing to the ISS, during the 
        second demonstration flight. Initial safety and technical 
        assessments are expected to be completed by the end of May to 
        enable a decision on berthing with the ISS on the earlier 
        mission.

    A review of what has occurred since OSC signed its agreement with 
NASA in February 2008 shows that:

          To date, OSC has completed 21 of 31 negotiated 
        milestones for COTS work, receiving $221.5 million out of a 
        potential $288 million, including augmented funding.

          Recently, OSC began integration and testing of its 
        Cygnus Service Module and Taurus II launch vehicle.

          OSC is expected to complete its maiden test flight of 
        the Taurus II launch vehicle from the new launch pad at the 
        Wallops Flight Facility (WFF) in Virginia in October 2011, and 
        its demonstration flight for NASA in December 2011.

    Overall, NASA has invested $552 million in the COTS effort, which 
includes funding invested with the two current funded partners, as well 
as funding that was invested with Rocketplane Kistler that was 
terminated for failure to perform in 2007. By the conclusion of the 
COTS effort, NASA anticipates it will have invested $800 million in the 
COTS project--not including in-kind and infrastructure support that 
NASA has provided to the COTS partners. The $800 million includes the 
original $500 million authorized for COTS milestone payments and 
programmatic administrative costs, plus $300 million for augmented 
cargo milestone payments and associated administrative costs to help 
accelerate technical development, conduct flight tests and develop 
ground infrastructure, as authorized by the NASA Authorization Act of 
2010 and funded under the FY 2011 Full-Year Continuing Appropriations 
Act (P.L. 112-10). To be clear, this augmented funding is being used 
for additional content and risk reduction measures, and therefore 
represents additional content and new work.
    In total, NASA anticipates providing SpaceX and OSC $128 million 
each in augmented funding via modifications to their respective funded 
COTS SAAs and via the CRS contract during FY 2011, utilizing 
Exploration funds under the FY 2011 Full-Year Continuing Appropriations 
Act. To date, NASA has executed three SAA amendments (known as Quarter 
1, Quarter 2, and Quarter 3/4 augmentations) for each COTS partner with 
respect to the augmentation milestones authorized by the NASA 
Authorization Act of 2010. These amendments outline the milestones that 
each partner must successfully complete before receiving associated 
NASA funding: For SpaceX, the augmentation milestones and associated 
funding will improve the chance of mission success by adding ground and 
flight testing, accelerating development of enhanced cargo 
capabilities, or further developing the ground infrastructure needed 
for commercial cargo capabilities. More specifically, the additional 
SpaceX milestones include rendezvous and proximity operations sensor 
testing, system level spacecraft testing (thermal vacuum 
electromagnetic interference, and acoustic testing), and infrastructure 
improvements at the launch, production and test sites.
    For OSC, the augmentation milestones and associated funding will 
support a maiden test flight of the Taurus II in the October 2011 
timeframe, thereby helping to significantly reduce the risks associated 
with a new launch vehicle development. The milestones also enable 
additional software and control system testing.

    Commercial Resupply Services

    The ISS has transitioned from the construction era to an operations 
and research era, with a six-person permanent crew, three major science 
labs, and an operational lifetime through at least 2020. The ISS is the 
largest crewed spacecraft ever assembled, measuring 243 by 356 feet, 
with a habitable volume of over 30,000 cubic feet and a mass of 846,000 
pounds, and is powered by arrays which generate over 700,000 kilowatt-
hours per year. The ISS represents a unique research capability, aboard 
which the United States and its partner nations can conduct a wide 
variety of research in biology, chemistry, physics and engineering 
fields that will help us better understand how to keep astronauts 
healthy and productive on long-duration space missions. In addition to 
conducting research in support of future human missions into deep 
space, astronauts aboard the ISS will carry out experiments with 
terrestrial applications.
    While the ISS is serviced by a fleet of cargo vehicles, including 
the Russian Progress vehicle, European Automated Transfer Vehicle 
(ATV), and Japanese H-II Transfer Vehicle (HTV), NASA will be depending 
on U.S. industry to provide resupply services to and from the Station 
following the retirement of the Space Shuttle. On December 23, 2008, 
NASA awarded CRS contracts to OSC and SpaceX for the delivery of cargo 
to the ISS after the retirement of the Shuttle. The companies will 
enable operation of vehicles that can: 1) fly to the ISS orbit; 2) 
operate in close proximity to the ISS and other docked vehicles; 3) 
dock to ISS; and, 4) remain docked for extended periods of time. NASA 
anticipates that both providers will have their systems operational in 
2012.
    The CRS contracts are firm-fixed price, Indefinite Delivery 
Indefinite Quantity procurements with a period of performance through 
Dec. 30, 2015. The contract allows the contractor to make deliveries 
for one year following the end of the period of performance. This 
allows the contractors adequate time to complete missions ordered for 
CY 2015 that may move into CY 2016. The contracts are based on 
milestone payments scheduled in terms of months from launch, and the 
payment plan must meet the current requirements of the payment clause. 
For example, total milestone payments through Mission Integration 
Review shall not exceed 50 percent of the mission cost. The contracts 
allow the flexibility to add or modify mission payments in the work 
plans to accommodate specific mission tasks. Under Federal Acquisition 
Regulation (FAR) Pt. 12 commercial services contracts, payments are 
viewed as financing payments to the contractor. The government pays 
incrementally for an end item service to avoid the cost of financing 
that would be levied in the overall mission price if payment was not 
made until the end. This is a standard practice for launch services 
contract. Even though these are financing payments, the CRS contractors 
are required to demonstrate that they are making key progress toward 
providing the service and therefore the payments are typically tied to 
major reviews or manufacturing milestones.
    NASA ordered 12 CRS flights valued at $1.59 billion from SpaceX.

          SpaceX will provide pressurized and unpressurized 
        upmass and return services.

          SpaceX currently has completed 14 funding milestones 
        for the four CRS missions in process in FY 2011. In addition, 
        one more CRS mission may be turned on if progress continues. 
        Finally, two milestones in support of COTS demonstration cargo 
        have been paid.

          The schedule margin that existed when the CRS 
        contracts were initially awarded has gotten smaller over the 
        last two years. Parallel development and mission activities 
        have been challenging for a relatively small company that 
        depends heavily on in-house capabilities, yet both cargo and 
        external integration activities have begun and are proceeding. 
        This next year will demonstrate the company's ability to manage 
        multiple missions. The first SpaceX CRS flight is currently 
        scheduled for late January 2012, and the company is currently 
        slated to fly three CRS missions each fiscal year from 2012 
        through 2015. The January 2012 date is dependent on SpaceX's 
        successful completion of its COTS demo flights.

    To date, NASA has paid SpaceX $181 million for 14 CRS mission 
milestones and $4.8 million for two demonstration cargo milestones (the 
latter from the above-mentioned augmentation funding).
    NASA ordered eight CRS flights valued at $1.88 billion from OSC.

          OSC will provide pressurized upmass and disposal 
        services.

          OSC currently has completed seven additional funding 
        milestones for three CRS missions in process in FY 2011.

          OSC uses a different mission model than the in-house 
        focused work of SpaceX--one which involves using proven 
        suppliers. The distributed network of suppliers helps with the 
        multiple mission flows, and OSC has demonstrated an 
        understanding of cargo and mission integration interfaces and 
        processes.

          The company is relying on NASA assets at Stennis 
        Space Center in Mississippi (for engine testing) and Wallops 
        Flight Facility (for launch vehicle processing and 
        integration).

          The first OSC CRS flight is currently scheduled for 
        the end of the first quarter of calendar year 2012, and the 
        company is currently slated to fly two CRS missions each fiscal 
        year from 2012 through 2015.

    To date, NASA has paid OSC $273 million for 11 CRS mission 
milestones and $7.5 million for two demonstration cargo milestones (the 
latter from the above-mentioned augmentation funding).
    NASA has considerable insight into the progress that SpaceX and OSC 
are making during the demonstration missions and for the CRS milestones 
that have been given Authority to Proceed, or are in process. The 
program has weekly meetings with representatives of the companies to 
discuss schedule and technical issues. Both CRS providers are making 
progress on their missions, and this year will be key to demonstrating 
that their mission profiles are achievable. A number of challenges 
confront both CRS providers, as even successful new rockets tend to 
require adjustments following their initial launches. In addition, new 
spacecraft themselves require adjustments--both ATV and HTV required 
upgrades between their first and second missions--and they must be 
integrated with their launch vehicles. Additional challenges arise from 
the difficulties inherent in mastering automated rendezvous, proximity 
operations, and docking with a crewed spacecraft. While these tasks 
have been demonstrated many times by the Russian Progress vehicle, and 
twice each by the European ATV and Japanese HTV, the technologies and 
techniques required for their achievement are difficult, but clearly 
not impossible, to develop.
    All commercial cargo vehicles intended to dock or berth to the ISS 
must meet the same visiting vehicle standards for each of their ISS 
missions. These requirements are laid out in the ISS Visiting Vehicle 
Requirements document. These standards include requirements for 
automated rendezvous and joint proximity operations, physical and 
software interfaces, and overall safety. These requirements are 
consistent with those provided for the ATV and HTV. NASA has been 
working closely with the commercial partners through the demonstration 
phase and will continue to work with them through the CRS missions to 
ensure that each mission meets these requirements.
    There is now little to no schedule margin for significant delays in 
the CRS missions, and this is a risk for consistent cargo resupply to 
the ISS. NASA is pre-positioning maintenance and logistics items on the 
final Space Shuttle mission as a contingency to mitigate any risk to 
ISS operations due to a delay in the availability of the CRS vehicles. 
The final Shuttle mission, STS-135, is targeted for launch in early 
July. During the STS-135 mission, Atlantis will carry the Raffaello 
multipurpose logistics module to deliver critical supplies, logistics 
and spare parts for the ISS, as well as a system to investigate the 
potential for robotically refueling existing spacecraft. This will help 
reduce the risk to ISS operations and maintenance should the CRS 
vehicles not meet their current launch dates. If the contracted 
commercial cargo services are not available at the beginning of 
calendar year 2012, there would be minimal impact to ISS operations. If 
commercial cargo services are not available by the end of calendar year 
2012, there would be a reduction in utilization of the ISS. In that 
case, NASA would have to consider reducing the Station's crew size to 
three in order to conserve supplies; this would in turn result in a 
reduced ability to conduct research aboard ISS. The final Shuttle 
flight will give the ISS the flexibility to maintain a six-person crew 
into FY 2013 without any commercial cargo flights, effectively 
increasing the schedule margin by about a year.
    Another risk reduction option is the availability of the ATV and 
HTV spacecraft. NASA already relies on bartered cargo transportation 
services provided by the European Space Agency and the Japanese 
Aerospace Exploration Agency using these vehicles, and such barter 
agreements could be used to ensure a limited U.S. cargo delivery 
capacity, on the currently planned vehicles, as a stop-gap measure 
until the CRS vehicles are operationally available. NASA has also 
purchased cargo delivery services from the Russian Space Agency through 
2011, though there are no plans to extend this service beyond the end 
of this year.
    NASA has contracted for a minimum of 40 metric tons of cargo 
delivered to the ISS from 2011 through 2015 under the CRS contracts, 
and the Agency plans to continue to rely on CRS for cargo 
transportation beyond FY 2015. This will require new contract action by 
NASA. NASA is counting on its CRS suppliers to carry cargo to maintain 
the ISS. It is hoped that these capabilities, initially developed to 
serve the Station, may find other customers as well, and encourage the 
development of further space capabilities and applications and the LEO 
economy.

    Summary

    Chairman Palazzo and Members of this Subcommittee, I would 
summarize by saying again that NASA is pleased with the steady progress 
both companies continue to make in their cargo development efforts. I 
would also like to conclude my remarks by thanking you again for your 
continued support for NASA and its human spaceflight programs, 
including our commercial cargo efforts. I would be pleased to respond 
to any questions you or the other Members of the Subcommittee may have.



    Chairman Palazzo. Thank you, Mr. Gerstenmaier.
    I now recognize our second witness, Ms. Cristina Chaplain, 
Director of Acquisition and Sourcing Management for the U.S. 
Government Accountability Office.

 STATEMENT OF MS. CRISTINA CHAPLAIN, DIRECTOR, ACQUISITION AND 
   SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Chaplain. Mr. Chairman and acting Ranking Member 
Costello, thank you for asking the GAO's views for today's 
hearing. Our testimony provides more details on the current 
status of the COTS Program, reasons for delays, milestones that 
have been recently added, and our perspectives on the use of 
Space Act Agreements for COTS.
    I would like to make a few points based on our COTS work as 
well as broader work on government space acquisitions. We 
assessed the COTS Program in 2009, and found that the program 
incorporated criteria and processes that help provide insight 
into the progress of the COTS providers. We also found that 
while progress had been made in developing the COTS vehicles, 
there were development risks that could slow down the effort 
and schedules were aggressive.
    Since our report the COTS partners have experienced 
schedule delays. The delays reflect a combination of inherent 
risks associated with development efforts and some schedule 
optimism. NASA has added money to further stem delays as well 
as reduce risks. For example, by adding testing activities it 
would normally undertake in the development of its own launch 
vehicles and spacecraft.
    NASA is also taking steps to lessen the impact of the COTS 
delay on the utilization of the ISS, for example, by pre-
positioning spares. These steps seem reasonable, particularly 
because the landscape for COTS has changed considerably since 
our last report. Principally, when COTS was started, NASA 
envisioned that the Ares launch vehicle and Orion Capsule would 
be available to initially service the Space Station. Now it is 
unknown when any mass of vehicles will be available, and 
reliance on COTS has grown. In other words, the COTS Program 
has been elevated from plan B to plan A.
    While reasonable steps are being taken to address risks, 
there is still no guarantee that this approach will deliver 
results when needed. It is likely additional delays will occur, 
and additional money may be needed. At the same time, it is 
important to recognize a significant amount of progress has 
been made within a relatively short period of time and within a 
reasonable cost. Moreover, the approach offers NASA lessons in 
new ways of doing business.
    In addition, regardless of whether NASA is acquiring a 
capability or service under traditional contracts or more non-
traditional arrangements like Space Act Agreements, it is 
important that the fundamentals of good management persist. 
These include ensuring decisions are based on concrete 
quantitative and qualitative knowledge, delaying program starts 
until critical technologies are invented and understood, 
developing sound cost and schedule estimates, providing 
transparency and accountability for oversight, having the right 
incentives for partners, and having strong risk management 
plans and practices.
    Overall, we have found that these fundamentals tend not to 
be fully present in either traditional or commercial-like 
approaches. Going forward it will be important for both NASA 
and the commercial sector to also avoid hinging strategies on 
assumptions that we know negatively impacted previous efforts 
to adopt commercial-like approaches in space. These assumptions 
include such things as one, a commercial-like approach requires 
very little or no government involvement, and two, by backing 
off the government is guaranteed it will receive a product 
faster, better, and cheaper.
    In conclusion, given the critical need, the government 
bears the risk for having to make additional investments to get 
what it wants when it wants. The additional investment 
required, however, can be lessened by ensuring that accurate 
knowledge about requirements, costs, schedule, and risk is 
achieved early on and used to make decisions.
    Thank you. This concludes my statement.
    [The prepared statement of Ms. Chaplain follows:]
    
    
    
    Chairman Palazzo. Thank you, Ms. Chaplain.
    I now recognize our third witness, Mr. Frank Culbertson, 
Senior Vice President and Deputy General Manager of the 
Advanced Programs Group at the Orbital Sciences Corporation.

 STATEMENT OF MR. FRANK CULBERTSON, JR., SENIOR VICE PRESIDENT 
 AND DEPUTY GENERAL MANAGER, ADVANCED PROGRAMS GROUP, ORBITAL 
                      SCIENCES CORPORATION

    Mr. Culbertson. Good morning Chairman Palazzo, Ranking 
Member Costello and Chairman Hall and Members of the 
Subcommittee. It is an honor to be a participant with this 
distinguished panel as we address commercial cargo delivery to 
low earth orbit and the status of the Orbital Sciences 
Corporation development of that capability to help maximize the 
return on investment from the International Space Station.
    Before I go further, though, I would like to note the 
absence of our stalwart space supporter, Representative 
Gabrielle Giffords, whose presence in this discussion is sorely 
missed. I certainly join all of you in continuing to hope and 
pray for her speedy recovery and for her return soon to provide 
us with her candor and ardor.
    I also want to recognize the success to date of the crew of 
Endeavor and combined with the ISS crew under Mark Kelly's 
leadership, as well as the entire Shuttle team around the 
country for their commitment in excellence. This country owes 
that team a lot. Mark, by the way, was the pilot on Endeavor on 
my most recent return home from the ISS. So we go way back.
    It is especially fitting that we are meeting one day after 
the 50th anniversary of President Kennedy's speech boldly 
committing our Nation to landing on the moon. However, it is 
not entirely clear to me what our Nation's, or the world's, 
next audacious goal in space will be, but I know for sure that 
the next great achievement will not be possible without maximum 
safe, efficient, and continuous use of the ISS as a waypoint on 
that journey. Just as Mercury, Gemini, X-1, and X-15 paved the 
way for Apollo and Shuttle, the ISS, through effective use of 
both commercial and government transportation systems, will 
pave the way for human exploration of the rest of the solar 
system.
    Its potential as a national research laboratory, a 
development center, and an engineering test bed must be fully 
realized in order to take the higher-risk steps necessary to 
send crews beyond low-earth orbit for extended periods of time.
    Mr. Chairman, you have asked us to cover a lot of ground in 
a short time today, so I have submitted a very thorough written 
testimony which covers our program status fully, as well as 
addresses the specific questions we were asked. I have also as 
requested provided you with a one-page summary of the points I 
will address briefly in the time allotted.
    Our launch vehicle and launch facilities are on track for 
our first launch, as was mentioned, in October of this year. 
Our Cygnus Spacecraft is scheduled for its demonstration flight 
to the ISS with birthing in December of this year. You will be 
able to see both of those launches from here by the way, a real 
treat for Washington, I think.
    Our cargo services will begin in earnest in March, 2012, 
with deliveries approximately every six months after that. So 
even though it is a challenging schedule and there are risks to 
it, we feel very strongly that by the end of 2012, we will have 
flown four flights.
    Orbital was awarded a $170 million COTS Space Act Agreement 
in February of 2008, in a second-chance competition after one 
of the first two awardees was dropped by NASA. That is a very 
important fact. We received significantly less funding and a 
later start than the predecessors.
    Some other pertinent facts that I think are important. The 
Taurus II development decision and corporate funding preceded 
the COTS award. This was being done on Orbital money. 
Spacecraft development began to move forward aggressively after 
NASA's commitment to invest in our program in February of 2008.
    This is a compressed development schedule compared to 
traditional government programs. It has challenges, but it is 
using commercial development and production practices with NASA 
insight. We provide complete transparency to the NASA team. 
However, 60 percent of the investment in this is from Orbital.
    Human rating requirements are met through NASA oversight in 
specific reviews of the--our ability to meet those 
requirements. Our COTS development is fixed funding under a 
Space Act Agreement, the base Space Act plus the augmentation. 
Our CRS contract is firm fixed price, and there is a difference 
under a FAR-based services contract. This contract was awarded 
approximately 10 months after we were awarded COTS in December 
of 2008.
    We do use earned value management tools to control cost and 
schedule, and currently our internal budgeted costs of work on 
the Taurus II Program is 95 percent complete.
    To briefly review, some of our major accomplishments to 
date, the decision to use Wallops Flight Facility was made in a 
very carefully and methodical fashion. It created over 300 new 
jobs just in the construction alone. The Commonwealth of 
Virginia and the MARS, Mid-Atlantic Regional Space Port, 
provided financial backing at the start and are the space port 
developers.
    NASA has completed a horizontal integration facility. The 
payload processing facility and the launch pad and liquid 
fueling facility are 90 percent complete with certifications of 
acceptance to begin in July and static test firing in 
September. Our three teams are working very closely together. 
The first two tank sets of our Taurus II have arrived at 
Wallops. Checkout is continuing. We have tested three of our 
Aerojet AJ26 engines, and engine four will be tested next week.
    Our Cygnus Spacecraft is proceeding quickly and rapidly 
through our integration and test per our ISO certified 
processes and will go through a complete standard orbital 
environmental testing this summer. The first of four cargo 
modules--the first four cargo modules are complete or in work.
    Very briefly, I wish to respond to the three questions 
provided by the Subcommittee. The first is: what risk reduction 
milestones were funded by the COTS Augmentation? We have eight 
milestones addressing the test flight that has been mentioned. 
They support integration readiness and launch, and then we have 
two milestones that support additional simulators to help NASA 
better understand our control systems.
    the second question is: What launch failure contingency 
planning do we have in place? Mr. Chairman, I can assure you 
that Orbital is placing maximum emphasis on identifying and 
controlling risks, as well as insuring that testing and 
analysis are in place to minimize the chance of failure. This 
includes taking the position that safety and mission success 
will never be a lower priority than schedule, which will 
occasionally result in delays as you have seen. We use every 
available company resource, every bit of engineering expertise, 
everyone's operational experience, as well as the advice and 
insight of both NASA and our team of outside experts to 
maintain the correct perspective and priorities.
    If we do have a failure, the response will depend on what 
that failure is and what the root cause is. However, we will 
always have three to five vehicles and launch vehicles in 
process at any one time so the stand down should be minimal if 
we are able to quickly resolve the problem.
    Our biggest challenges, technical is the launch site 
development, the cost and schedule, and then meeting the safety 
review panel requirements which turn out to be a very positive 
experience. On the business side, design and development effort 
under a fixed price model is very challenging. Setting prices 
for services long before development is complete or the NASA 
mission requirements are well defined is something that is not 
usually done.
    But these are challenges that we accept for the good of the 
Nation and certainly are worth the risk when you take the long 
view on human spaceflight. We established a new model for 
industry and government relationships. We have more flexibility 
in design and provide a tremendous value for the government 
over the life of the contract.
    In conclusion, we hope that these responses will help to 
serve the needs of the Subcommittee as you work with NASA to 
help ensure that more use of the private sector and support of 
critical space program objectives is successful. We at Orbital 
are proud that NASA has selected us to participate in COTS and 
CRS. This partnership has energized our company and our 
dedicated employees as well as our superb teammates to be fully 
committed to executing this mission in support of human 
spaceflight and exploration as safely and efficiently as 
possible.
    The enthusiasm and innovativeness I see around our team are 
truly contagious. Thank you, again, for this opportunity. I 
look forward to your questions, and I apologize for running 
over. I had to use very small font on that thing as you can 
see.
    [The prepared statement of Mr. Culbertson follows:]
    Prepared Statement of Mr. Frank L. Culbertson, Jr., Senior Vice 
President and Deputy General Manager, Advanced Programs Group, Orbital 
                          Sciences Corporation
    Good morning Chairman Palazzo, Ranking Member Costello and members 
of the subcommittee. I appreciate the opportunity to participate in 
this hearing regarding the status of our commercial cargo delivery 
capabilities to low earth orbit. Our job on this program is to help 
maximize our nation's return on investment in the remarkable orbiting 
facility known as the International Space Station.
    It is especially fitting that this hearing is being held one day 
after the 50th anniversary of President Kennedy's speech to Congress 
boldly committing our nation to landing a man on the moon. It's not 
entirely clear to me, however, exactly what our nation's--or the 
world's--next audacious goal will be in space, but I know for sure that 
the next big achievement will not be possible without maximum safe, 
efficient, and continuous use of the International Space Station as a 
waypoint on that journey. Just as Mercury, Gemini, X-1, and X-15 paved 
the way for Apollo and Shuttle, the ISS, with the help of both 
commercial and government transportation systems, will pave the way for 
human exploration of the rest of the Solar System. Its potential as a 
National Research Laboratory, development center, and engineering test 
bed must be fully realized in order to take the higher risk steps 
necessary to send crews beyond low-earth orbit for extended periods of 
time, as well as to justify the extensive investment by the US and all 
of our partners in this complex and highly capable facility.
    Orbital Sciences Corporation is proud to have been selected by NASA 
in 2008 to be one of the participants in NASA's Commercial Orbital 
Transportation Services (COTS) and related Commercial Resupply Services 
(CRS) programs. This partnership between NASA and private industry has 
energized our company- which next year will mark 30 years of building 
and operating some of our nation's most advanced and innovative launch 
vehicle, spacecraft and satellite systems-to develop dependable means 
of launching cargo and supplies to the ISS, and disposing of unneeded 
waste, following the retirement of the Space Shuttle. When I left the 
astronaut corps, I had spent over 20 years of my NASA career, plus my 
Navy service, working diligently to ensure safety of flight and mission 
success. When I joined Orbital, I immediately recognized a company team 
that had a similar focus, and a record of tremendous innovation with 
such vehicles as the Pegasus air launched rocket and the Minotaur 
launch vehicle. Our work force is skilled, extremely dedicated to the 
mission at hand, and individually accountable for meeting our 
performance and safety requirements. I've had the privilege of working 
with superb organizations in the Navy and at NASA, and I now consider 
it a privilege to be a part of an Orbital team that can stand toe-to-
toe with any in the government.
    Even prior to Orbital's partnership with NASA in the COTS program, 
we were developing, with our own funding, a new medium-class space 
launch vehicle, the Taurus II. Taurus II is a two-stage vehicle-with an 
optional third stage-that will provide low-Earth orbit launch 
capabilities for payloads weighing over 5,000 kg and access to 
geosynchronous orbit for smaller spacecraft. This vehicle will provide 
responsive, low-cost, and reliable access to space not only for CRS 
missions, but also for national security payloads, NASA science 
payloads, and certain commercial satellites as well. The Cygnus 
advanced maneuvering spacecraft is capable of carrying up to 2700 kg of 
cargo to the ISS, and possesses a multi-use potential as well. It can 
be used as a maneuvering and hosting spacecraft for a variety of 
government and private sector customers.
    One unique aspect of our involvement in COTS/CRS is that we will 
initially launch the Taurus II and Cygnus cargo delivery spacecraft 
from NASA's Flight Facility at Wallops Island, Virginia. While Kennedy 
Space Center provides outstanding launch service to a wide variety of 
users, and remains a potential future site for Taurus II operations, 
Orbital, NASA, and the Commonwealth of Virginia have committed 
significant financial and technical resources to enable the United 
States to have a second major east coast launch facility, providing 
resiliency and flexibility to our nation's space launch capabilities. 
An added item of interest about Wallops is that members of Congress 
(and others) can actually view Taurus II launches at this space port 
from the Capitol Building, so we hope through these launch activities 
to generate renewed interest in space flight locally and throughout the 
six-state Mid-Atlantic region.
    COTS/CRS provides a new model for U.S. government/private-sector 
collaboration to develop and operate dual-use space systems. In this 
collaboration, Orbital has contributed about 60 percent of the 
development costs for launch vehicle, cargo delivery and disposal 
systems, and much of the ground-support infrastructure, up front. This 
high level of investment from a private company recognizes the 
potential benefits of having a consistent customer in NASA for cargo 
delivery and disposal in support of the ISS's logistics needs in the 
near future, and also requires us to work hard to develop new markets 
for a variety of other users.
    The Orbital COTS Program will literally get off the ground with a 
test of the Taurus II launch system in early fall. Our current target 
date for the Taurus II test launch from launch pad 0A at the Mid-
Atlantic Regional Space Port (MARS) on Wallops Island is mid-October. 
Our Orbital/MARS/NASA team of over 400 scientists, engineers and 
technicians, including our teammates from around the industry, is 
working with great dedication toward this major milestone. Yet as we 
look forward to the first launch of Taurus II, we are well aware that 
there are significant risks to the schedule, as there are in any major 
aerospace development program. Orbital and our government partners are 
developing a rocket, a spacecraft, and a launch and control 
infrastructure simultaneously. This is a significant undertaking, which 
for the most part has gone extremely well. The Taurus II vehicle 
planned for the Test Launch is currently undergoing tests at the newly 
opened Horizontal Integration Facility, or HIF, at Wallops Island. The 
MARS-developed launch pad and liquid fueling facility are completing 
construction, and will begin certification testing in early July.
    Like most of the aerospace industry, Orbital uses Earned Value 
Management Systems to track our progress on schedule and cost 
performance. I can tell you today that based on our internal budgeted 
costs of work scheduled we are 95 percent complete with Taurus II 
development and have completed successfully the first 41 months of the 
46 month Taurus II schedule. There is also great progress to report at 
Wallops, where the HIF and Payload Processing Facility are essentially 
ready to support launches. Development of the launch pad and related 
support facilities is 90 percent complete.
    With respect to development of the Cygnus Advanced Maneuvering 
Spacecraft, the first flight unit is on track for a December 2011 
launch that will demonstrate our capabilities of providing cargo to the 
ISS. We developed Cygnus on an aggressive 45 month schedule, and are on 
track to finish the final six months on time.
    The Cygnus Service Module for the Demonstration mission is being 
assembled at our Dulles, VA, facility, and has begun our normal ISO-
certified Integration and Test process, which will be followed by 
thorough environmental testing of the fully assembled spacecraft, tests 
which we require prior to launch for all of our spacecraft.
    The service module for our first CRS mission is in the 
manufacturing flow as well, following closely behind the Demonstration 
mission hardware, and hardware for the second CRS mission is arriving 
at the plant. The hardware acceptance review for our Pressurized Cargo 
Module (PCM) is occurring this week with our industrial partner, Thales 
Alenia, with the PCM and its support equipment being essentially 
complete and ready for shipment to the US. Last December we completed a 
very successful cargo loading demonstration of the PCM to be used for 
the first CRS mission, and just this month we conducted a very 
successful crew equipment interface test with the astronauts and 
representatives from NASA's mission operations directorate in the 
actual PCM slated for the COTS Demonstration mission.
    The COTS Demonstration mission in December will mark the first use 
of a dedicated Mission Control Center for Cygnus flight operations. 
Mission Control Center Dulles, a state of the art facility at Orbital's 
headquarters five miles north of Dulles airport, was dedicated last 
November, with the participation of NASA Administrator Charles Bolden, 
and our operators will work hand in hand with ISS Mission Control at 
NASA's Johnson Space Center, and other ISS partner nation control 
centers, to manage the critical rendezvous and berthing of the Cygnus 
at the ISS. The COTS demonstration mission will be a culmination of all 
the hard work that has gone into the design, development, and the 
safety reviews for operations in proximity with the ISS, as well as the 
many hours of joint testing we are conducting with NASA. Orbital has 
worked closely with NASA to move further into the ISS Human Spaceflight 
mode of operation, successfully completing the first two phases of 
NASA's Safety Review Panel, and are well on the path to completing the 
requirements of the third and final Safety Review Panel, a prerequisite 
for approaching the Space Station.
    Success on the December COTS demonstration mission will then lead 
directly to CRS, the actual contract covering the repetitive delivery 
of cargo to the ISS, with two Orbital CRS missions slated every year 
from 2012 to 2015. Again, this is a very ambitious schedule, and we 
will know with greater certainty the exact dates to target for cargo 
delivery once we have the experience of our first test launch and 
demonstration flight.
    To address our current schedule status versus the original program 
plan, there are two significant factors that prevented us from 
achieving the original target dates for the COTS demonstration: First, 
the change from an unpressurized cargo module to a pressurized cargo 
module, executed at Orbital expense in response to a desire from NASA 
to duplicate the requirements of the CRS contract on the Demonstration 
mission; and secondly, the unexpected challenges encountered in the 
development of a minimally equipped Pad 0A into the Mid-Atlantic 
Regional Spaceport's Medium Class Launch Facility at Wallops Island. 
These challenges have been addressed, and while all activities are not 
yet complete, the threats to the remaining schedule are small compared 
to what we have encountered in the past two years.
    That in summary is our progress to date. Our Orbital-NASA 
partnership for the development of a cargo delivery capability to ISS 
is on track, moving ahead steadily, and, in fact, nearing completion.
    The subcommittee has also asked Orbital to respond to three 
specific questions, which I'm pleased to do. First, you asked about the 
justification and rationale for each of the risk-reduction milestones 
funded by the COTS Augmentation that was supported by Congress in the 
FY 2010 NASA Authorization Bill.
    Some history may be useful in this regard. The original NASA COTS 
competition for $500M resulted in NASA selecting Space X and Kistler 
Aerospace for the program in August 2006, with Space X receiving the 
majority of the funding, and Kistler a lesser amount of the $500M. 
After NASA decided to terminate its funded space act agreement with 
Kistler, the remaining $170 million was re-competed and awarded to 
Orbital in February 2008. In determining how best to utilize the 
reduced funding available for COTS, Orbital was placed in the position 
of bidding a single demonstration mission along with the development of 
the Cygnus spacecraft.
    Both the Orbital and NASA COTS program offices recognized the 
elevated risk in the plan for launching the first Cygnus maneuvering 
spacecraft on the first Taurus II launch vehicle flight. Due to the 
limited funding remaining in the program, however, this was viewed as a 
necessity. There is acceptance in the industry that first flight 
missions of new launch vehicles historically have elevated risk 
associated with them, largely due to the complexity inherent in launch 
vehicles, the necessarily small margins of safety in vehicle designs to 
meet performance-to-orbit goals, and the fact that critical elements of 
the launch vehicle can never be fully tested in exact flight-like 
conditions through ground testing.
    When the possibility of additional funding for risk reduction was 
presented, Orbital and NASA mutually agreed that a Test Flight of the 
Taurus II launch vehicle prior to the COTS demonstration mission was 
the best use of risk reduction funding. This approach added significant 
content and value to the program as well as an additional meaningful 
test of the system. The concept for the Test Flight is to launch a 
Taurus II vehicle with an instrumented Payload Simulator that mimics 
the mass properties and other key characteristics of the Cygnus 
spacecraft. This Test Flight would verify the operation of the launch 
vehicle and also return valuable launch-environment data from the 
Payload Simulator. After completing the test flight, the COTS 
Demonstration mission can be properly focused on the operation of the 
Cygnus spacecraft and its rendezvous and proximity operations with the 
ISS.
    Therefore, in the context of the above discussion of risk at the 
programmatic level for the COTS program, Orbital and NASA worked 
together to develop the 10 COTS Augmentation Milestones that authorized 
the Test Flight as a top priority, and then added other Cygnus-related 
risk reduction elements to the program that were deemed beneficial to 
reducing risk on the spacecraft. Milestones 25 and 26 require the 
development and installation of additional ground simulators of the 
Cygnus system to facilitate joint testing and verification between NASA 
and Orbital prior to acceptance for flight. Milestones 22-24 and 27-31 
are associated with deliveries of key components of the test flight and 
completion of critical readiness reviews. The criteria for success are 
clearly described for each of the milestones in an amendment to the 
SAA.
    To further discuss the addition of the test flight and the risk 
that Orbital assumed in adding content to the program, a typical launch 
service procurement spans 24 months. This span is necessary to 
authorize subcontracts for long lead suppliers such that all hardware 
elements can be delivered to the launch site with sufficient time to 
integrate and test the launch vehicle prior to flight. In the case of 
Taurus II, the 2nd stage solid rocket motor is the longest lead item 
requiring 18-21 months lead time. The liquid first stage tanks require 
18 months lead time. The plan to incorporate the Test Flight into the 
program is to utilize the first hardware set previously assigned to the 
COTS-Demo mission for the Test Flight, and then to re-assign the second 
hardware set previously assigned to Orb-1 CRS mission to COTS-Demo, and 
so on. In this way, the earliest opportunity for the Test Flight can be 
accommodated while minimizing the impact to the COTS-Demo launch date.
    To protect for the possibility for the Test Flight, Orbital 
proceeded at risk in summer 2010 to order a replacement Stage 2 motor 
assembly from ATK along with other long lead purchases of ordnance and 
separation joints. This hardware was necessary to backfill the hardware 
queue to ensure later flights could still be executed on time given the 
insertion of the Test Flight into the manifest as the first flight of 
Taurus II. These long lead purchases were made prior to receiving any 
COTS Augmentation funds and prior to being sure that the COTS 
Augmentation funds would ultimately be added to the program due to the 
extended debate on the budget and continuing resolution in Congress. 
This decision to proceed at risk was based on Orbital's desire to 
protect for the earliest opportunity for a Test Flight given the 
uncertain FY11 budget situation for NASA that existed last fall. Two 
incremental amendments to the COTS Space Act Agreement occurred prior 
to negotiation of the full suite of milestones authorizing the Test 
Flight mission.
    Your second question was about Orbital's plan to recover in the 
event of a launch failure or loss of a COTS demonstration flight or a 
CRS missions. I assure you that Orbital is placing maximum emphasis on 
identifying and addressing risks, as well as ensuring that testing and 
analysis are in place to minimize the chance of failure. Based on my 
experience in this high-risk, high-reward business, the most 
significant thing an organization can do is to inculcate in its members 
from top to bottom the strong belief that we will do everything 
possible to successfully complete our mission, and that each person who 
has a job to do on the project will be held to the highest level of 
accountability for their work. This includes taking the approach that 
safety and mission success will never be a lower priority than 
schedule, which will occasionally result in delays. And that we are 
doing, including using every company resource, engineering expertise, 
and operational experience available, as well as the advice and insight 
of both NASA and our own outside experts. Yet, if we do suffer a 
setback, as occasionally happens in this business, what we will do to 
recover, and our schedule for recovery will very much depend upon the 
circumstances of the setback, what is learned from a careful review of 
the available data to determine root cause, and what corrective actions 
are necessary to be taken. An additional factor to consider is that 
since we will have three or four Cygnus spacecraft and four or five 
Taurus II vehicles in production at any one time, we will be able to 
quickly move to the next mission and provide the needed cargo, 
providing we are able to identify and correct the cause quickly. This 
makes a lengthy stand-down in operations unlikely. Having participated 
in accident investigations in both NASA and the Navy, I know that it is 
impossible to tell exactly what course will be followed in recovering 
from an accident, but having the correct program discipline, data 
retention, and attention to detail prior to an incident will facilitate 
that recovery. We have instilled those values in our team, which should 
also minimize the chance of it occurring.
    Finally, you have asked Orbital to discuss the biggest challenges 
confronting us in the development and demonstration of our launch and 
cargo systems. I will address some of the technical challenges for the 
launch vehicle first:
    The development of a new launch vehicle system is a very complex 
and expensive task. If the development is done from scratch, meaning 
that every subsystem and component and software item is brand new, it 
is an extremely difficult task to complete on schedule and on budget.
    In the case of Taurus II and Cygnus, Orbital is able to take 
advantage of many heritage flight-proven design features. These 
include:
    a. Launch vehicle avionics--Using heritage common hardware for 
flight control and sequencing, navigation, flight termination, 
tracking, and telemetry subsystems. These common subsystems are used on 
Minotaur, Pegasus, Taurus XL, and Ground-Based Midcourse Defense 
Orbital Boost Vehicle.
    b. Launch vehicle software--Using Object-Oriented code base common 
across Orbital rocket programs.
    c. Stage 1 tanks structure--Using 3.9m diameter core based directly 
on the Zenit Ukranian launch vehicle design, using same pressurization 
components as Zenit.
    d. Stage 1 Propulsion--Using existing AJ26 LOX/RP engines with 
large stock in inventory at Aerojet.
    e. Stage 2 Propulsion--Using Castor 30 motor assembly built by ATK 
based on Castor 120 heritage design.
    f. Cygnus Service Module--Star Bus and Leo Star heritage design for 
propulsion, command and data handling systems, and software
    g. Pressurized Cargo Module--Thales Alenia heritage for the 
development of pressurized modules for NASA and ESA, to include several 
ISS pressurized modules.
    However, there are other critical program areas where Taurus II was 
not able to utilize heritage designs and new developments were 
required:
    a. Launch Pad With Liquid Fueling Facility--Despite performing 
extensive searches early in the program, there was no launch pad 
available on a US federal range that could accommodate the Taurus II 
vehicle without significant modification. A new launch pad was 
therefore required, and a trade study between Florida/Cape Canaveral 
Air Force Station and Virginia/NASA Wallops Flight Facility was 
conducted. Wallops was ultimately selected and Pad 0A was razed and 
completely rebuilt to accommodate a medium class liquid rocket.
    b. Stage 1 Propulsion Test Facility--Despite performing a search 
through the National Rocket Propulsion Test Alliance (NRPTA), no 
existing stage test facility was available that could accommodate the 
Taurus II vehicle Stage 1 Static Fire Test without significant upgrade/
modification or modernization. It was decided to utilize Launch Pad 0A 
as the stage test facility and pad systems were designed and built at 
increased cost to accommodate the increased loads on the pad induced by 
the Stage 1 Static Test firing.
    c. Stage 1 Engine Propulsion Test Facility--After performing a 
search through the NRPTA for a test stand to use for single engine 
testing for the AJ26 engine, two were identified as primary 
candidates--one at the Air Force Research Laboratory/Edwards AFB, and 
one at the NASA Stennis Space Center. However, both stands required 
significant funding to bring to a test ready condition. The Stennis E-1 
stand was chosen but had to be significantly modified from horizontal 
test configuration to vertical test configuration along with other 
areas of modification.
    The above three areas of the program that required significant 
development resources to be applied constituted the biggest challenges 
to the development of the Taurus II launch vehicle. The fixed price 
nature of the COTS program funding meant that cost and schedule 
overruns experienced during the development of the three facilities 
listed above were largely the responsibility of Orbital to resolve.
    Some may see the challenge of estimating costs for the fixed price 
Cargo Resupply Contract so soon after our late award of the recompeted 
COTS SAA, and before development costs or risks were completely 
understood as a significant risk, and in many ways it is. This issue is 
somewhat offset by the fact that a contract was indeed awarded, and 
provided we execute the contract well, this will somewhat justify both 
the risk and expense of the development effort. It is true, however, 
that the CRS contract is a financial risk to Orbital, requiring the 
submittal of fixed delivery mission prices so far in advance of the 
actual mission execution, with the period of performance spanning a 
five year period, and before critical development risks were completely 
identified or addressed.
    In summary, the biggest challenge to the company is that a complex 
program with three major new elements is being developed in essentially 
a fixed price environment through Space Act Agreements, which provide 
no company protection for cost overruns or changes in government 
requirements. And the subsequent business is also fixed price and 
totally dependent on the success of the work under the SAA. These are 
challenges that Orbital accepts as good for the nation in the long run, 
and worth the risk from a long-term business viewpoint. It is important 
to take a long view on this job. The ISS must be successfully 
resupplied, possibly for decades. It's true that the technical 
challenges are also large, but these will be resolved over time by the 
professionals working the program.
    We hope these responses will help serve the needs of the 
subcommittee as you work with NASA to help ensure that our nation's new 
path forward to utilize the private sector in support of critical space 
program objectives is successful. Our company and our team recognize 
that we have an important role in the ISS mission, and we will take all 
of the steps necessary with our NASA partner to ensure that our flights 
are safe and missions successful. Thank you again for the opportunity 
to testify before this important hearing.
  Biography for Mr. Frank Culbertson, Jr., Senior Vice President and 
   Deputy General Manager, Advanced Programs Group, Orbital Sciences 
                              Corporation
    Frank Culbertson is Senior Vice President and Deputy 
General Manager of Orbital's Advanced Programs Group. In this 
capacity, Mr. Culbertson's responsibilities include the 
execution and performance of all Orbital programs related to 
human space flight including the Commercial Orbital 
Transportation System and Commercial Resupply Services Programs 
as well as the Launch Abort System Program for the Orion 
spacecraft. Prior to this position at Orbital, Mr. Culbertson 
was a Senior Vice President at SAIC, following an eighteen-year 
career as a NASA Astronaut.
    He has flown three space missions and logged over 144 days 
in space as shuttle commander, pilot, and station crewmember. 
His last mission launched on the Shuttle Endeavour and lasted 
for 129 days, from August 10 until December 17, 2001. During 
that mission, he lived and worked aboard the International 
Space Station for 125 days and was in command of the Station 
for 117 days. Mr. Culbertson also held several key management 
positions within the NASA Shuttle and ISS programs and was 
Program Manager of the Shuttle-Mir Program.
    Mr. Culbertson is a 1971 graduate of the US Naval Academy 
at Annapolis. He was a naval aviator, a fighter pilot, and a 
test pilot, and he retired from the Navy as a Captain in 1997. 
Mr. Culbertson has received numerous honors, including the 
Legion of Merit, the Navy Flying Cross, the Defense Superior 
Service Medal, the NAA/FAI Gagarin Gold Medal, and the NASA 
Distinguished Service Medal.
    Chairman Palazzo. Well, you went over your time budget 
here, but we don't want you to go over your time budget on the 
COTS or CRS.
    Mr. Culbertson. We are working it.
    Chairman Palazzo. All right. I now recognize our final 
witness, Ms. Gwynne Shotwell, President of Space Exploration 
Technologies.

     STATEMENT OF MS. GWYNNE SHOTWELL, PRESIDENT OF SPACE 
                    EXPLORATION TECHNOLOGIES

    Ms. Shotwell. Chairman Hall, Chairman Palazzo, and Ranking 
Member Costello and Members of the Subcommittee, thank you for 
the opportunity to appear before you today and thank you, 
Congressman Flores, I am honored by your introduction and 
appreciate the support for the work that we do in the fine town 
of McGregor, Texas.
    SpaceX is an all-American company that was founded in 2002. 
Our singular goal was to provide safe, reliable, and cost-
effective access to space for cargo and eventually crew. In 
just nine years the company has grown to over 1,300 men and 
women who embody the best American ideals of intelligence, hard 
work, ingenuity, and excellence.
    In an era of increased outsourcing and off shoring, 
especially in critical manufacturing technologies, SpaceX 
maintains an all-American workforce. Every day at SpaceX there 
are hundreds, nearly a thousand engineers and technicians 
bending metal, wiring circuits, testing engines, and pushing 
the boundaries of aerospace engineering and manufacturing.
    With the Space Shuttle's imminent retirement I am pleased 
to testify that in partnership with NASA SpaceX is on track to 
support the ISS with cargo. Under the support and guidance of 
NASA's innovative, cost-effective commercial Orbital 
Transportation Services Agreement, otherwise known as COTS, we 
have developed and successfully flown a launch vehicle that for 
the first time since the 1990s has brought launch dominance 
back to the United States. We are winning launches from French, 
from the Russians, and from the Chinese.
    In addition to this grand achievement and also under the 
guidance and support of NASA, we have developed, launched, 
operated on orbit, and reentered the Dragon Capsule. Notably, 
after the Shuttle retirement in just a few weeks Dragon will be 
the only capability of carrying cargo back from the 
International Space Station.
    On December 8, 2010--it was a great day--SpaceX became the 
first commercial company ever in the history to launch, 
reenter, and recover a spacecraft from earth's orbit. From 
SpaceX Cape Canaveral launch site Falcon 9 lofted the Dragon 
spacecraft to where it orbited the earth twice before splashing 
down in the Pacific Ocean. The mission was truly an American 
success story. Until late last year only six nations have 
accomplished what we did, never a private company. These 
achievements are nothing short of extraordinary, and I am 
pleased to be able to share this success with you here today as 
well as our NASA partner.
    Including last year's mission SpaceX has completed 25 
milestones under the COTS Agreement. Since 2006, NASA has paid 
us $298 million under the COTS Agreement. SpaceX has matched 
dollar for dollar NASA's investment to date. It is critically 
important to understand that we only get paid when we complete 
milestones according to the success criteria laid out in our 
Space Act Agreement. We do not get paid merely for expending 
effort. We have to achieve something.
    If we overrun on an effort that we agreed to execute, we 
must make up for that difference either through investment or 
capital that comes from our operating expenses. The financial 
facts are important to digest here. The Falcon 9 launch vehicle 
and Dragon spacecraft were each developed from a blank sheet to 
first flight in 4-1/2 years for approximately $300 million 
each.
    SpaceX's next Falcon 9 Dragon flight is on schedule to 
occur later this year. If all goes as planned, Dragon will 
berth with the International Space Station, deliver cargo, and 
return cargo to earth. The final parameters of this flight are 
under discussion with NASA.
    At NASA's request SpaceX has been conducting additional 
tests, cargo enhancement studies and demonstration, and 
demonstrations on the spacecraft. These additions to our COTS 
Agreement are known as the augmentation milestones. They were 
designed to reduce overall risks, both technical and 
programmatic. Once COTS is complete SpaceX will begin regular 
cargo delivery to the International Space Station under our 
Commercial Resupply Services or CRS contract.
    Consequently, SpaceX is preparing for an increase in the 
number of Falcon 9 and Dragon flights per year by expanding our 
production capabilities, doubling our structural and production 
test facilities in Texas, and streamlining our production 
operations at both the Cape and Hawthorne, California. We are 
working diligently to ensure that we successfully meet the 
needs of our government and commercial customers.
    I would like to show a video that shows some of the 
capabilities that we have at our factory, our test site, and 
our launch site. It is a quick, one-minute video.
    [Video]
    I am slightly over, but Mr. Chairman, thank you for 
inviting SpaceX to participate in today's hearing, and I do 
look forward to continue my cheerleading and answering your 
questions.
    [The prepared statement of Ms. Shotwell follows:]
Prepared Statement of Ms. Gwynne Shotwell, President, Space Exploration 
                              Technologies
    Mr. Chairman, Congressman Costello and the Members of the Space 
Subcommittee,
    On behalf of Space Exploration Technologies (SpaceX) and our more 
than 1,300 employees across the United States, I thank you for the 
opportunity to participate in today's hearing.
    With the imminent retirement of the Space Shuttle and the United 
States' forthcoming reliance on Russia to carry astronauts to the 
International Space Station (ISS), the readiness of commercial 
providers to support the ISS is a timely and critical topic. I am 
pleased to testify that, in partnership with NASA, SpaceX is on track 
to support the ISS, for cargo and eventually crew carriage.
    To date, under the auspices of NASA's innovative and cost-effective 
Commercial Orbital Transportation Services (COTS) program, the SpaceX 
Falcon 9 launch vehicle and Dragon capsule have flown successfully and 
SpaceX has become the first-ever private commercial entity to 
successfully launch, orbit, reenter and recover a spacecraft. These 
achievements are unprecedented in terms of their scope, pace, and low 
level of expenditure. Let me repeat for emphasis here--what SpaceX 
achieved last year with the support and guidance from our NASA partner 
is nothing less than extraordinary. Indeed, in the history of space 
development efforts, we believe that the United States Government has 
never before received so much output and value relative to dollars 
spent. The COTS program serves as a model for public-private 
partnerships, focused on results-oriented, cost-effective, rapid 
prototyping, design and development.
    All praise for COTS aside, there remains work to be done and 
challenges to overcome as the Nation looks to domestic commercial 
providers like SpaceX to support the ISS. I will begin my testimony by 
providing the Subcommittee with a brief overview of SpaceX and our 
operations. Next, I will address key achievements realized to date, 
then focus on remaining challenges in development, testing and 
demonstration. Finally, I will discuss where SpaceX stands with respect 
to the remaining COTS milestones with a focus on our upcoming mission 
to the ISS, technical and operational risk reduction efforts and 
contingency planning as we transition from COTS to our Commercial 
Resupply Services (CRS) missions.



SpaceX: Innovation Yielding Highly Reliable, Affordable Launch Services

    Founded in 2002 by Elon Musk with the singular goal of providing 
highly reliable, cost-effective access to space to eventually 
facilitate carrying crew, SpaceX is headquartered in Hawthorne, 
California. The Company has developed a state-of-the art propulsion and 
structural testing facility in Texas and maintains offices in 
Huntsville, AL, Chantilly, VA, Washington, D.C., and shortly, Houston, 
TX. SpaceX has established launch sites at Cape Canaveral Florida, 
Vandenberg Air Force Base California, and the Kwajalein Atoll in the 
Marshall Islands.
    Recently ranked as one of the world's fifty most innovative 
companies by MIT's Technology Review, SpaceX is governed by the 
philosophy that simplicity of design, reliability and affordability go 
hand-in-hand. We hard-wire that philosophy into our Falcon rockets and 
Dragon spacecraft by focusing on simple, proven designs, keeping a 
tight control over quality and ensuring a tight feedback loop between 
the design and manufacturing teams. To be clear, safety and reliability 
are paramount for any commercial company; and cost-reduction without 
safety and reliability is meaningless.
    Our workforce, which has grown rapidly from two employees in 2002 
to more than 1,300 employees today, embodies the best American ideals 
of hard work, ingenuity and excellence. Our particular emphasis on 
developing U.S. engineering and manufacturing capabilities has yielded 
SpaceX (and, by extension, the Nation) deep domestic, in-house 
expertise in propulsion, structures, avionics, safety, quality 
assurance, mission operations, launch, mission management and systems 
integration.
    SpaceX's operational vehicles currently include the Falcon 1 and 
Falcon 9 launch vehicles and the Dragon spacecraft. Critically, 
SpaceX's Falcon 9/Dragon system offers an affordable, American-made, 
end-to-end transportation solution for carrying cargo and potentially 
crew to the ISS. With respect to development efforts, the Falcon Heavy 
launch vehicle development (which is not to be confused with NASA's 
heavy-lift development efforts) is underway, with an expected launch in 
2013, and SpaceX is a recent recipient of a CCDev2 award focused on the 
development of an integrated launch abort system for the Dragon 
spacecraft.
    SpaceX has executed at an unprecedented pace of development and 
success for an aerospace company, with nearly 40 Falcon 9 missions on 
manifest, approximately $3 billion in contracts and a customer base 
that spans the government, commercial and international markets in just 
nine years. As a result, SpaceX has been profitable every year since 
2007, despite dramatic employee growth and major infrastructure and 
operations investments. Our ability to successfully compete in the 
domestic and international commercial market demonstrates the long-term 
viability of our business model and allows us to keep our costs to the 
U.S. taxpayer low.
    To ensure that SpaceX is not dependent upon a single source for any 
key technology, we have developed the capability to manufacture the 
majority of our launch vehicle and spacecraft in-house. This provides 
us with control over quality, schedule and cost, for all key elements 
from component manufacturing through launch operations. It also allows 
SpaceX designers to work directly with manufacturing personnel located 
just steps away, which streamlines the development process.
    Total SpaceX expenditures from 2002 through 2010 were less than 
$800 million, inclusive of all Falcon 1, Falcon 9 and Dragon 
development costs. That $800 million includes the cost of building 
launch sites at Vandenberg, Cape Canaveral and Kwajalein, as well as 
the SpaceX corporate manufacturing facility. The total also includes 
the cost of five flights of Falcon 1, two flights of Falcon 9 and one 
launch and reentry of Dragon. It is fair to say that this level of 
output versus expenditure is unprecedented in the aerospace community.
    Indeed, NASA recently conducted a predicted cost estimate of the 
Falcon 9 launch vehicle using the NASA-Air Force Cost Model (NAFCOM), 
its primary cost estimating tool. It was determined that had the Falcon 
9 been developed under a traditional NASA approach, the cost would have 
been approximately $4 billion. The analysis also showed development of 
the Falcon 9 would have been approximately $1.7 billion based on the 
traditional commercial models and assumed factors. However, NASA 
independently verified SpaceX's total development costs of both the 
Falcon 1 and Falcon 9 at approximately $390 million in the aggregate 
($300 million for Falcon 9; $90 million for Falcon 1).

COTS: Key Achievements to Date

    The COTS program was the first of its kind for NASA: a ?pay for 
performance? partnership between the government and private business to 
rapidly design and prototype critical technologies. NASA structured the 
COTS program as a collaborative partnership with the commercial space 
industry, sharing the risks, costs and rewards of developing new space 
transportation capabilities. Under the program, NASA provides seed 
money for the development of private spaceflight capabilities, but 
issues payment only after a company meets technical and financial 
performance milestones. The participating COTS contractors, likewise, 
invest in the program and put their own financial ``skin in the game.''
    To date, SpaceX has completed 25 milestones under its COTS 
Agreement for efforts associated with the development, manufacture and 
testing demonstration of the Falcon 9 rocket and Dragon spacecraft for 
cargo carriage to the ISS. (The milestones completed under SpaceX's 
2006 COTS Space Act Agreement, prior to amendment for augmentation 
milestones, are listed in Appendix A, attached.) Critically, SpaceX is 
well on its way to completing the integration process with the ISS. To 
date, NASA's Commercial Cargo program has contributed $298 million 
towards this end. And, in doing so, the United States also has helped 
facilitate the development of the first internationally competitive 
launch vehicle in more than a decade and the first-ever operational, 
private, orbiting and reentry capsule. In terms of ``bang for the 
buck,'' the United States Government has made a savvy investment.
    At present, SpaceX has performed two successful Falcon 9 flights. 
Each flight carried a Dragon spacecraft--the first mission carried an 
inert, non-separating Dragon, and the second carried an operational 
Dragon. The second Falcon 9 launch was the first official launch under 
the COTS program. It bears noting that the Falcon 9 launch vehicle 
features nine SpaceX Merlin engines in the first stage, which allows 
the Merlin engine to rapidly attain heritage by means of each flight.
    The Merlin is the first new all-American hydrocarbon engine for an 
orbital booster to be flown in forty years and Falcon 9 is the first 
U.S. launch vehicle with engine-out capability after liftoff since 
Saturn V.
    On December 8, 2010, SpaceX became the first commercial company in 
history to launch, reenter, and successfully recover a spacecraft from 
Earth orbit. SpaceX's COTS demonstration mission blasted off at 10:43 
AM EST from Launch Complex 40 at Cape Canaveral. Falcon 9 lofted the 
Dragon to orbit where it twice circled the Earth at speeds greater than 
7,600 meters per second (17,000 miles per hour). Dragon reentered the 
Earth's atmosphere and splashed down just after 2:00 PM EST in the 
Pacific Ocean. The mission was nothing short of a complete success.
    Until late last year, launching, orbiting, reentering and 
recovering a spacecraft was a feat previously performed by only six 
nations or government agencies: the United States, Russia, China, 
Japan, India, and the European Space Agency. NASA's expert advice and 
mentorship throughout the development process helped SpaceX build upon 
50 years of U.S. space achievements to reach this goal.
    Once again, the financial facts are import to digest here: the 
Falcon 9 launch vehicle was developed from a blank sheet to first 
launch in four-and-a-half years for approximately $300 million. The 
Falcon 9 is an EELV-class vehicle that generates roughly one million 
pounds of thrust (four times the maximum thrust of a Boeing 747) and 
carries more payload to orbit than a Delta IV Medium. Likewise, the 
Dragon spacecraft was developed from a blank sheet to the first 
demonstration flight in just over four years for about $300 million. 
The Dragon is a free-flying, reusable spacecraft capable of delivering 
pressurized and unpressurized cargo to the ISS and safely returning 
cargo to Earth.

COTS Augmentation Milestones

    At NASA's request, prior to Dragon's successful orbital flight, 
SpaceX began conducting additional tests on the launch vehicle and 
spacecraft and performed additional Dragon component system capability 
demonstrations. Those tests and demonstrations contribute to the 
eighteen new COTS milestones, known internally as `augmentation 
milestones,' that have presently been added to our COTS Agreement. The 
uncertainty in Fiscal Year 2011 funding profiles led NASA to divide 
COTS funding among multiple amendments to its COTS agreements.
    The COTS augmentation milestones exceed the tests and 
demonstrations originally agreed to by SpaceX and NASA for COTS when 
the parties first signed their Space Act Agreement. Specifically, 
certain milestones augment pre-planned ground and flight testing, and 
others accelerate the development of enhanced cargo capabilities with 
the remaining focusing on infrastructure improvements. The additional 
milestones further develop the ground infrastructure needed for cargo 
carriage operations and help improve the launch and recovery 
operations, test site and production facility infrastructure. In short, 
COTS augmentation milestones are meant to further reduce risk and 
enhance the execution of the cargo demonstration and operational 
missions to be performed under the COTS and CRS programs. The COTS 
augmentation milestones that have been completed to date total $40 
million. NASA recently added eleven augmentation milestones as an 
additional amendment to the COTS agreement. Those tests, reviews, 
demonstrations and infrastructure enhancements are planned to be 
completed prior to the next COTS mission. (The augmentation milestones 
and associated rationale for each are listed in Appendix B, attached.)

Fulfilling the COTS Objectives: Next Steps and Remaining Challenges

    SpaceX's next flight of Falcon 9 with the Dragon spacecraft is 
scheduled to occur later this year. The final parameters of that flight 
are under discussion with NASA; however, SpaceX's goal is to have that 
COTS flight culminate in Dragon delivering cargo to the ISS and 
returning cargo safely to Earth. The mission will require SpaceX to 
accomplish all of the criteria for Demonstration Flight 2 prior to 
beginning the Demonstration Flight 3 criteria, which include berthing 
with the ISS. In effect, SpaceX will have fully achieved the 
development and demonstration goals of the COTS program and be prepared 
to undertake its CRS missions. Importantly, if SpaceX does not meet the 
mission success criteria for Demonstration Flight 2, then we would be 
prepared to fly once more under the COTS agreement if necessary. Here, 
it bears noting as a point of comparison that the European ATV and 
Japanese HTV conducted ISS operations on their maiden voyages. 
Orbital's current plan likewise calls for berthing on their first 
flight to the ISS.
    A number of modifications have been made to Dragon to ensure a 
successful next flight and ISS berthing. To reduce the risk involved 
with Dragon approaching the ISS, redundancy has been added to the 
safety-critical systems. As an example, the initial mission flew one 
flight computer and one inertial measurement unit (IMU), while the ISS-
missions fly multiple flight computers and IMU's to meet the ISS 
required fault tolerance.
    To facilitate safe ISS berthing, the Dragon will be flying a 
proximity operations suite, including space-to-space communication 
systems and proximity navigation sensors. These are complex systems 
that present challenges. Additionally, Dragon will be flying a grapple 
fixture and a Passive Common Berthing Mechanism (PCBM), which are the 
physical attachment mechanisms for the ISS. As the next mission will be 
longer in duration than the first, a new power generation system, 
including solar arrays and new batteries, are in development. Star 
trackers and an active thermal control system have been added to 
sustain Dragon on orbit.

Ensuring Safe, Highly Reliable Access to Space

    Given the purpose for our founding, SpaceX is first and foremost 
devoted to safety and reliability. By the nature of the business, 
commercial spaceflight providers cannot afford to take unnecessary 
risks that would endanger cargo or crew. As is true with respect to 
commercial aviation, businesses will fail unless safety and reliability 
come first, regardless of price. The need for a laser-like focus on 
safety and reliability becomes even more acute when commercial space 
companies have their own financial skin in the game, offer services on 
a firm, fixed price basis, and only get paid in full if they perform.
    Per the Subcommittee's inquiry, SpaceX has plans in place to 
investigate, understand and take action, if necessary, for any anomaly 
that occurs during a mission. SpaceX has worked with the FAA, NASA, Air 
Force and National Transportation Safety Board in this respect. The 
time required to complete the process would, of course, depend on the 
actual nature of the situation being addressed.
    SpaceX has demonstrated the capability to react rapidly in the 
event of test or flight anomalies. As an example, during the Falcon 1 
flight 3, which was a demonstration mission of our smaller launch 
vehicle in mid-2008, a failure occurred in flight. SpaceX arrived at 
the root cause of the failure within a day, quickly implemented the 
fix, and less than seven weeks later, successfully launched Falcon 1 
flight 4.
    In the case of a COTS or CRS mission, SpaceX maintains an active 
Falcon 9 and Dragon production line. The subsequent Falcon 9 and Dragon 
spacecraft are always in production and able to be readied for launch 
quickly after making any modifications that might be indicated by an 
anomaly. Notably, due to our unique capabilities whereby we design, 
develop, build and test the majority of our hardware, we can achieve 
far faster turnaround on anomaly and failure investigations more 
quickly than anyone else in the industry. Instead of getting bogged 
down with an army of lawyers and subcontractors after a failure, our 
engineering and test team can rapidly determine root cause and 
resolution.

Commercial Resupply Services

    In 2008, SpaceX competed for and was awarded a Commercial Resupply 
Services (CRS) contract to deliver cargo to the ISS. Over the term of 
the CRS contract, SpaceX will deliver pressurized and unpressurized 
cargo to the ISS, including plants and animals, as well as return cargo 
to Earth. The $1.6 billion contract represents a minimum of 12 flights 
with an option to order additional missions.
    It bears noting that the average price of a full-up NASA Dragon 
cargo mission to the International Space Station is $133 million 
including inflation, or roughly $115 million in today's dollars. That 
price includes the costs of the Falcon 9 launch, the Dragon spacecraft, 
all operations, maintenance and overhead and all of the work required 
to integrate with the ISS. Under SpaceX's firm, fixed price contract 
with NASA, if there are cost overruns, SpaceX will cover the 
difference, not the taxpayers.
    SpaceX is preparing for an increase in the number of Falcon 9 and 
Dragon flights per year by expanding our production capabilities. 
Currently, SpaceX's near-term production capacity supports five to six 
Falcon 9 vehicles per year. The expansion plans will increase 
production capacity to produce ten to twelve Falcon 9 launch vehicles 
by 2013, and then twenty by 2015. This is roughly a 50% increase 
annually. In preparation for increased production, SpaceX has more than 
doubled the footprint of its structural and propulsion test facility in 
Texas. We have also reorganized the production teams into a more 
efficient, streamlined organization. SpaceX is working diligently to 
ensure that we successfully service our government and commercial 
customers.

Recapturing Commercial Launch Services Market Share

    For the first time in more than three decades, an America company 
has begun to recapture international market-share in the commercial 
satellite launch sector--a sector in which the U.S. has seen steady 
erosion relative to Chinese, Russian and French competitors. SpaceX has 
begun successfully competing for and winning commercial satellite 
launch contracts. Whereas in 1980, 100 percent of commercial launches 
took place from within the United States; today, it is less than 12 
percent.




    Bringing back commercial launches to the United States is just one 
example of the benefits of NASA's targeted investment in SpaceX. By 
leveraging private funding with federal investment, controlling our 
costs and developing a diverse customer base, we are able to offer 
competitive pricing to our commercial and government customers. 
Likewise, safe, reliable and affordable transportation of cargo and 
astronauts to low Earth orbit by an American company will keep jobs in 
the United States, eliminate reliance on Russia to support the ISS, and 
save U.S. taxpayers significant money that instead can be invested in 
what NASA does best, pursuing the next frontier.
    Mr. Chairman, thank you for your support and for the opportunity to 
participate in today's hearing. I would be pleased to respond to any 
questions you or the other Members of the Subcommittee may have.



    Chairman Palazzo. Thank you, Ms. Shotwell. I thank the 
panel for their testimony and remind the Members that Committee 
rules limit questioning to five minutes. The chair will at this 
point open the round of questions. The chair recognizes himself 
for five minutes.
    As was originally presented to Congress for an investment 
of $500 million, the COTS Program would allow NASA to enter 
into Space Act Agreements, excuse me, with two potential launch 
service companies to enable them to develop the capability of 
delivering cargo to the International Space Station, provided 
they could meet all milestones and were competitively selected 
for the follow-on delivery contract.
    Congress was supportive and provided the money beginning in 
fiscal year 2005, but as Chairman Hall noted, what began as a 
reasonable step-by-step approach to develop and improve 
capabilities first to be followed by a competitive acquisition 
did not happen. NASA simply ran out of time and is now gambling 
the future of Space Station and the success of two very new 
launch systems--on two very new launch systems. Excuse me.
    The original cost estimates to be borne by the Federal 
Government for COTS have escalated dramatically. What started 
as a demonstration program for $500 million has not been 
completed, and yet to date NASA has spent or obligated over 
$1.25 billion under COTS, COTS Augmentation and Cargo Resupply 
Services Contract.
    So my first question to Mr. Gerstenmaier, why did NASA 
originally sell COTS to Congress as a $500 million effort only 
to later seek additional sums by asserting that further risk 
reduction efforts were necessary?
    Mr. Gerstenmaier. Again, as originally envisioned we went 
into the COTS Program with the idea that we would do the 
development activity for the $500 million that you recognized, 
and then later as time progressed and we now are in the 
situation where we no longer have the Constellation Program as 
a backup, it became important to us that the delivery service 
to keep Space Station viable and to provide a reasonable backup 
capability we needed to look at a way that we could augment 
that additional funding with some additional milestones to 
lower the overall risk and help us ensure that we deliver cargo 
to station.
    And it is kind of a fine point but is that augmentation 
absolutely required, or is it just prudent management, and I 
think where we are in this situation with the requirement to 
deliver this cargo in a timely manner to Space Station we 
needed to invest in activities that lowered the overall risk. 
You could say they are not absolutely required. The thermal 
vacuum test that we have added. You could learn that in space, 
but if that didn't work in space, you would be questioning why 
you didn't do that testing on the ground ahead of time to help 
you pull back in schedule.
    So when we looked at it overall, we developed these 
activities, these $300 million of other activities we thought 
would help lower the risk to help us ensure that we keep Space 
Station viable. So the reason for the change was we recognized 
the criticality of the situation we were in, and we needed an 
adequate backup plan to be prepared for the oncoming cargo 
delivery of the cargo to Station.
    Chairman Palazzo. And so you initiated that decision in 
2008, even before the announcement of the cancellation of the 
Constellation Program?
    Mr. Gerstenmaier. Yes, and again, I think it is driven by 
the overall requirement. We knew the criticality of this, we 
saw the Shuttle Program coming to an end, we knew our spares 
and our supplies, and we thought it was prudent at this point 
to add some additional margin, some additional risk mitigation 
to the program by recommending that we added these augmentation 
milestones.
    Chairman Palazzo. So NASA basically underestimated the cost 
of meeting the COTS Program as originally laid out to Congress.
    Mr. Gerstenmaier. And I would say that the environment when 
we initiated the COTS Program was one environment, and then 
later as we went through time that environment and the 
criticality of the cargo delivery became more important to us, 
and as prudent managers we saw that, and we recommended an 
augmentation approach, which we provided to you to go ahead and 
help us augment to provide some additional assurance that we 
could provide the cargo when it was needed.
    Chairman Palazzo. When does NASA realistically expect the 
commercial partners will have these systems ready to fly CRS 
flights?
    Mr. Gerstenmaier. We expect the COTS demonstrations to be 
late this year, and we expect the actual services to occur next 
year in 2012.
    Chairman Palazzo. Does NASA anticipate asking for 
additional money to buy down further risks before these systems 
become operational?
    Mr. Gerstenmaier. No.
    Chairman Palazzo. Mrs. Shotwell, Mr. Culbertson, how much 
confidence do you have in your company's ability to meet the 
latest schedule using available COTS and augmentation funds?
    Mr. Culbertson. Go ahead.
    Ms. Shotwell. We are only months away from the completion 
of the development of the Dragon spacecraft that will berth 
with the International Space Station. Once development is 
complete schedules are much easier to predict. It is a 
production environment, not a development environment. So we 
are very confident.
    Mr. Culbertson. We are in a similar position. We are in 
production on the first two of the Cygnus spacecraft that will 
deliver cargo already. The demo spacecraft is going through I&T 
on the Taurus II side, and once we complete the test flight, we 
will have increased confidence in the launch vehicle itself and 
should be able to move rapidly through the missions as we are 
scheduled.
    The remaining challenges that we have are relatively small 
compared to the ones that have been behind us that have 
affected our schedule. So we don't see a lot of risk to the 
upcoming schedule.
    Chairman Palazzo. Thank you. I have consumed my time.
    I now recognize the Ranking Member, Mr. Costello.
    Mr. Costello. Thank you, Mr. Chairman.
    To follow up on the Chairman's last question, Ms. Shotwell, 
you are confident, I mean, under the contract you are doing a 
final demonstration launch the last quarter of this year and 
then you have four that you will be doing next year. Is that 
correct? So a total of five in a one-year period.
    Ms. Shotwell. That is correct.
    Mr. Costello. And you are confident that--are you building 
the necessary components fast enough to meet these missions and 
the schedule over the next three years of the contract?
    Ms. Shotwell. We have produced six first stages for Falcon 
9 and we are in the fourth--second stage for Falcon 9, and I 
believe we are in production on the fourth Dragon spacecraft. 
So we do understand the timeframes associated with building 
these capabilities. As I said earlier, it is much easier to 
predict how long it takes to build something rather than 
develop something.
    Mr. Costello. Mr. Culbertson.
    Mr. Culbertson. Yes, sir. We, as I said, we are in 
production on the follow on to the demo missions. We have a 
great deal of confidence that we will be able to continue that, 
and so I believe we will be able to deliver, as I said, the 
four launches that we intend to do by the end of 2012, 
including the two demonstration flights and the two CRS 
missions.
    Mr. Costello. Associate Administrator Gerstenmaier, let me 
ask you, has NASA independently verified, I mean, not only your 
opinion but have you independently verified what they have just 
testified to? Do you believe that they are building the 
necessary components not only to meet the short term but the 
three-year contract schedule for instance that SpaceX has with 
NASA?
    Mr. Gerstenmaier. We have insight, and they have produced 
the hardware that they have described, and they have plans and 
schedules to go deliver to the schedules that they just 
described. But then as kind of a prudent buyer, we have made 
sure that there is margin in our systems, and we can accept 
some delays in processes that occur or start-up problems occur 
or we discover something in flight that doesn't work right, we 
have overall margin that will not affect the operation of Space 
Station.
    So we understand their schedules, they are very reasonable, 
they are good schedules the way we see them, but then we have 
gone above and beyond to protect on the Space Station side to 
make sure that we are not absolutely 100 percent dependent upon 
those schedules that they have to be on there at exactly those 
times. We have some margin in the overall system that will 
allow us to continue to effectively utilize Space Station.
    Mr. Costello. Ms. Chaplain, would you like to comment?
    Ms. Chaplain. Just in our general experience things happen 
even at the last minute and in the late stages of development, 
and it is well that they could happen here. If we are 
conducting vacuum tests, they typically reveal problems, and we 
don't know how difficult they would be to fix in late stages. 
So I would agree with what Mr. Gerstenmaier was saying. There 
is still the risk that there will be delays. It is typical with 
a lot of spacecraft development.
    Mr. Costello. Just--I think it would be helpful for the 
Members of the Subcommittee, Associate Administrator 
Gerstenmaier, if you would explain to us NASA's oversight in 
the interaction that you have, that NASA employees have with 
both companies here. On a day-to-day basis do you have 
employees from NASA in the facilities, both SpaceX and Orbital?
    Mr. Gerstenmaier. Yeah. We have minimum insight into their 
activities. I think we have one employee basically at both 
contractors that kind of just oversee what is happening in a 
general sense. They are not involved in any of the processing, 
any of the details. They are more of a facilitator, 
understanding schedules, passing data back and forth.
    We do numerous technical interchanges and meetings with the 
teams. They are in the process of going through some safety 
review functions for the Space Station. They have been involved 
in the activities to approach Space Station. We spend a lot of 
time in meetings understanding technical requirements, working 
back and forth in that sense.
    Mr. Costello. So you have one employee that physically is 
there, assigned on a day-to-day basis?
    Mr. Gerstenmaier. Yes.
    Mr. Costello. Switching to another issue, let me ask you, 
Russia has expressed publicly some unease about commercial 
providers docking at the International Space Station, and these 
reports come just months before SpaceX plans to dock at the ISS 
during its final demonstration flight.
    Can you explain the concerns of Russia to the Subcommittee 
and how NASA intends to address their unease?
    Mr. Gerstenmaier. Their concerns are fairly typical that we 
have seen as a vehicle comes to station. We have pretty 
stringent visiting vehicle requirements of what it takes to 
approach Space Station, and we need to make sure that the 
vehicle not only gets there safely but if it has to abort or 
stop the motion coming in, that it won't do any damage to Space 
Station. You know, we need to make sure that there is not a 
collision potentially. We have very stringent requirements. We 
are in the process of reviewing the way the individual 
spacecraft meet those requirements. We are doing that activity 
right now. We are working through some technical problems that 
we need to understand, and we are working with SpaceX and with 
Orbital on both of those.
    When we complete those safety reviews probably in the June 
timeframe, we will do a bunch of simulations to make sure we 
have a high probability of doing this activity. Then we will 
schedule the appropriate reviews with our international 
partners, not only the Russians but the Europeans, and we will 
go through the process of ensuring to them and showing to them 
why we think it is safe and prudent for us to allow these 
vehicles to come up and stop and be picked up by the SSRMS on 
the Space Station and ultimately berth to the station.
    So we are working through the same methodical process that 
we used to bring the Automated Transfer Vehicle to orbit. That 
is the European cargo transfer vehicle, and we did the same 
process with the Japanese transfer vehicle that delivers cargo. 
We are following exactly the same process with them. Both of 
those spacecraft on their maiden flights, in the case of the 
Japanese it was the first launch of their rocket, and it was 
the first actual berthing of their spacecraft to the ISS. So 
this isn't unprecedented territory for us. We are following the 
same processes we did with the international partners with our 
commercial providers, and once we understand to our level of 
satisfaction and we are ready for that approach to Space 
Station, we will then bring it up with the partners, and I 
think we will get acceptance from the partners at that point.
    Chairman Palazzo. The chair now recognizes the gentleman 
from Texas, Chairman Hall.
    Mr. Hall. Mr. Chairman, I thank you and thank you for your 
questions, and I subscribe to your questions and Mr. Costello's 
sincere approach to it.
    Mr. Culbertson, you and I are probably the few that 
remember some of these things because of our age but----
    Mr. Culbertson. Thanks, Mr. Chairman.
    Mr. Hall. I call you back to June 25, 1997. Mr. 
Gerstenmaier just mentioned something there that accidents do 
happen and things can happen that are unforeseen and not 
predicted, but I think you remember the day the Russian 
progress vessel collided with Space Station Mir. I call you 
back to that time, and I say that because there can be 
occasions like that.
    I think, Frank, you were the manager of the Shuttle Mir at 
that time, and Mr. Gerstenmaier was, operations manager, I 
think, but at any rate, you both remember that. You remember 
that the Space Station lost pressure, and it was a very 
dangerous situation we thought, and you thought, all of us 
thought. Luckily with your good work nothing happened, and no 
one was hurt.
    But those things make me wonder about whether the cargo 
delivery providers, whether they are commercial providers or 
one of our own international partners, bear any liability if 
they cause an accident to the Space Station.
    I am sure you have thought about that, and we go back to 
that, even we have had the Discovery, those that have just 
returned from up there that had some immediate problems we 
thought. So those things can happen.
    How are we assured that we can be compensated or made whole 
by mistakes made by those that we contract with? More than 
that. Let me ask this. How much non-NASA business are you going 
to have to have to survive? You are going to enter into 
contracts and Frank, I have every ability, belief in you that a 
person can have. I have been told that Mrs. Shotwell is very 
capable and her boss, Elon Musk, is a can-do person that has 
succeeded, been successful, and I am very hopeful that all that 
is true, but you are signing a contract. It is just a paper 
contract, and we are going to have to know that they can--that 
you can produce that that you are saying that you are going to 
produce, and you have a chance to demonstrate that, and I think 
you have a time set to do that in, and we will wait and see 
when that time comes.
    But to sustain your business model under the Cargo Resupply 
Services Contract I guess I would like to know what percent of 
the businesses have to come from customers other than NASA in 
order to meet your internal rate of return projections to where 
you can keep our contract.
    Can your companies continue to be a reliable contractor to 
NASA if a few or say no other contracts are secured from 
commercial customers?
    Mr. Culbertson. Mr. Chairman, as far as Orbital goes, right 
now we are focused on the CRS contract, and we have set our 
business model up so that we can support it from a business 
standpoint and from a rate of return. It is pretty tight in the 
beginning because of all the development, but we think that by 
the end of the--this phase of the contract we will at least not 
be under water.
    We are hoping for additional business from NASA since the 
Station will be extended and----
    Mr. Hall. And it is logical that you will have.
    Mr. Culbertson. Yeah, and it is something that we are 
thinking about now, but right now we are really focused on the 
immediate.
    As far as additional customers for cargo, that really 
depends on how other things develop both in the commercial 
world and in the government. We are prepared to address those 
markets, and our Taurus II vehicle as well as our Cygnus 
spacecraft are available for other customers for other uses. 
But right now we are not counting on that for the success of 
the program.
    Orbital has about $1.25 billion worth of annual revenue, 
and we have lots of other lines of business that the company 
continues to thrive on, and this is an area that is very 
special to us, and we hope to continue to grow. But we do it 
because we are committed to the success of the Station and not 
because we have to try to make a pile of money on it.
    Mr. Hall. Ms. Shotwell, you are here in the place of Mr. 
Musk, and we are probably going to ask him to come before us 
sometime in the future, and we wish you well, and if you have 
any comments you want to add to Mr. Culbertson's comment, I 
probably have maybe five seconds left.
    Ms. Shotwell. I speak fast. SpaceX, even given the 
tremendous amount of development activities that we have had 
over the past few years, we have been profitable since 2007, 
NASA represents less than half of the missions that we 
currently have under full contract for Falcon 9. We have 38 
missions contracted for Falcon 9, and, as I said, less than 
half of those are for NASA.
    So we can sustain a business without NASA. We like NASA's 
business. We like the activity that we are executing both under 
COTS and CRS. We are actually proud to be NASA's partner, but 
we can survive without that activity.
    Mr. Hall. And Frank, I will write you a letter to ask for a 
question on whether or not you bear any--the liability of any 
accident that is caused at the Space Station. I will write a 
letter to both of you for that, and the chairman will ask you 
to answer it. Thank you.
    I yield back what time I don't have.
    Chairman Palazzo. Thank you, Mr. Chairman.
    I now recognize the gentleman from Oregon, Mr. Wu.
    Mr. Wu. Thank you very much, Mr. Chairman.
    Mr. Gerstenmaier, I would like to start with you and ask 
for your assessment of what could cause further schedule delays 
in the COTS demonstrations and as they say in biochemistry, 
what are the rate-limiting steps which remain to be taken?
    Mr. Gerstenmaier. Again, I think it as both Gwynne and 
Frank have talked about, they have got a lot of development 
behind them and things are very good from a hardware 
standpoint. I think the next phase will be the operational 
phase, and it is the approach to Space Station and how we 
actually close the loop with the rendezvous, proximity 
operations sensors that provide the information to the 
spacecraft as it comes and docks.
    So it is those kind of activities that I think will be the 
next challenge, is how you actually take the vehicle and not 
only get it to orbit but now you bring it into close proximity 
where it can essentially stop and then be picked up by the 
Space Station arm and then berth to the station.
    So I think there is some challenges in that area. I think 
we will see some surprises in the hardware as it gets on orbit 
and operates. We try to mitigate those problems as much as we 
can on the ground and through ground testing, but I think we 
will see some potential surprises there that we will have to 
deal with to make sure that we can accommodate those and have a 
safe berthing to station.
    So the concern there is you don't want to put yourself in a 
situation like we did before with Progress where we were 
essentially pushing so hard to get to station that we cut some 
safety corners and then we had the accident and the collisions 
with Mir. So we need to make sure that we have got the right 
measures in place so we do this in a measured, straightforward 
fashion, and we have enough margin in the overall system if 
there is some little delays associated with that they can 
recover so we can still meet what we need to.
    Mr. Wu. So, Mr. Gerstenmaier, these are of an operational 
nature. How would you test for that without actually 
endangering the Space Station? I also would like the rest of 
the panel to comment on that.
    Mr. Gerstenmaier. We have a very methodical approach. We do 
an activity called a collision avoidance maneuver. So we allow 
the spacecraft to get to a distance where it cannot hit the 
Space Station, and then we ask the spacecraft to do a collision 
avoidance maneuver. It does that maneuver, we actually monitor 
the performance of that maneuver on the ground, we compare the 
performance that we observe in space with the performance that 
we predicted on the ground pre-flight, and we certify that that 
vehicle is now ready to move into a closer point to Space 
Station.
    We then allow them to move into a closer distance, we do a 
similar verification and test maneuver, we go back and validate 
that possibly even over an evening, and then we let them move 
in.
    So we have a series of steps or gates as we approach Space 
Station where we learn more and more about the capabilities of 
the vehicle, is it operating the way it was designed, and that 
lowers the overall risk as we approach. That is exactly the 
same approach we used with both of the international cargo 
carriers we took to station.
    Mr. Wu. Well, I would like the rest of the panel to comment 
on that and also the additional question of if there is a delay 
or a failure, who bears the financial risk and who has the 
reserves? Is it the private company, or is it NASA, or both?
    Ms. Shotwell. We have a very methodical approach to 
addressing this exact concern. The first part is to ensure that 
you have a fundamentally-reliable design. We do that by 
architecting to reduce failure modes, and then we also make 
sure that we have redundant hardware. Our Dragon spacecraft is 
two-fault tolerant to issues.
    So once you believe you have a good design or you have put 
in place a good design, then you do extensive testing on the 
ground. I agree with Mr. Gerstenmaier that one of the riskiest 
subsystems is this proximity operations piece. We do still have 
some activity left before we are ready to fly that, of course, 
and so we do extensive ground testing. We have done ground 
testing at Marshall. It is pretty extensive ground testing at 
the Marshall Spaceflight Center. They have a great prox-ops 
test capability there. We will be doing some additional ground 
testing in our factory as well.
    So you have a fundamentally reliable design, you do as much 
ground testing as you possibly can, you do extensive software 
work in coordination with NASA, and then you have to fly, and 
then you get into this spaceflight test program and getting 
through those gates on orbit, you do a little bit, you test it, 
you look at your data, you fly a little bit closer, you again 
review the data before you continue on.
    Mr. Wu. Who is going to bear the risk of delay or technical 
difficulties?
    Ms. Shotwell. As far as the financial risk goes, SpaceX 
bears that burden. We have signed a contract to do activities, 
and it is our responsibility to execute.
    Mr. Wu. Mr. Culbertson.
    Mr. Culbertson. As to that part it is the same for us. I 
mean, this is--there is no additional funding, so if we are 
delayed, it costs us money, so we keep schedule in mind, but as 
I said before, it doesn't reach a higher priority than mission 
success or safety.
    In terms of the safety of the Space Station, we take a 
similar approach to SpaceX. In addition, just like them, we 
have hired people with experience in this area. We use the NASA 
expertise as advisors and insight into what we are doing, and 
then in the critical approach phase there is actually NASA 
oversight through the Safety Review Panel of what we are doing. 
The simulations we go through are very realistic, they are very 
mature, and very thorough. We have the same fault tolerance, 
and our rendezvous design is such that if we have a problem at 
some point and we lose control of the spacecraft, it will just 
sail past the ISS because we don't get on the final approach 
until the last few--couple of hundred meters.
    At that point we do have to demonstrate the avoidance 
maneuver. We have to show that we can back out, that we can 
clear the Station, and that we have sufficient redundancy in 
the system to do that.
    So this is an area that we have paid a lot of attention to. 
It is the most critical phase of the flight, and we have to 
protect the Station. This is more important than delivering the 
cargo.
    Mr. Wu. Thank you very much, Mr. Chairman.
    Chairman Palazzo. I now recognize the gentleman from 
California, Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman, and 
that last description of your company's ability to complete 
that part of the mission was very impressive considering the 
fact that you personally have gone through this and so I think 
of anybody in the room, we have got some fellow that actually 
went through the procedures that we are talking about. Well, I 
say at the desk there.
    So let me ask a couple questions. Mr. Chairman, with all 
due respect to the concept of gambling on two companies, if we 
are, indeed, gambling on two companies, I think it is a good 
bet, a much better bet than gambling on patching up the 
Shuttle. We have spent a little over $1 billion now on trying 
to achieve a commercial and competitive approach. It is 
fascinating to see we have two competitors sitting right next 
to one another here today offering us their services and 
continuing to want to win this competition.
    We have spent in order to achieve this a little over $1 
billion. Let us just note one flight of the Shuttle is a little 
over $1 billion without the payload, and that is a system that 
we know does not have the reliability that we need to have in 
order to rest assured that the Space Station can be resupplied 
and that we can meet other, our other goals in space.
    So that billion dollars that has been spent rather than 
spending it on another Shuttle flight I think has been a very 
good decision.
    With that let me also note, and let me see if I can get 
this right, both SpaceX, you have received about $300 million 
in government money so far, in NASA money in the development of 
Falcon 9?
    Ms. Shotwell. We have received $298 million under the COTS 
Program for Falcon 9 and Dragon development.
    Mr. Rohrabacher. Orbital has received how much?
    Mr. Culbertson. A little bit less than that.
    Mr. Rohrabacher. Okay. So we have had--and is Orbital like 
the SpaceX match dollar for dollar?
    Mr. Culbertson. It is not really a dollar for dollar. It is 
whatever it takes to complete the program once you have spent 
the Space Act funds.
    Mr. Rohrabacher. All right.
    Mr. Culbertson. And so the onus is on the company to 
complete the project no matter what the government is funding.
    Mr. Rohrabacher. But how much have you spent so far in the 
project non-government money?
    Mr. Culbertson. Probably a little more than the government 
has.
    Mr. Rohrabacher. Okay. So what we have if we really look at 
this, the government . . .
    Mr. Culbertson. Actually quite a bit more than that when 
you count Taurus II.
    Mr. Rohrabacher. Okay. Well, America, if we are not saying 
that the Space Program belongs to the government but instead 
belongs to the people, America has received for $300 million 
each, let's say, we have received at least $600 million in 
benefit to the Space Program, unless, of course, we think the 
Space Program is a government program and is owned by the 
people who work for the government and not the people who are 
of this country who are paying for, out of their pockets for 
whatever is achieved into space.
    So I would suggest that gambling on these two new systems, 
as I say, and the price that we are talking about is--was a 
very good bet indeed. I take it that both of you, the Orbital 
and SpaceX, are operating on a fixed price contract, and you 
have--now, we know that the cost has gone up a little bit as 
has been noted as this commercial space endeavor has moved 
forward, but the costs that have gone up have been basically 
going up because new milestones were set for your companies by 
NASA. Is that correct?
    Mr. Culbertson. Additional content was added to the 
development program under the Space Act Agreement that we 
agreed to add to the program, and NASA agreed to invest in that 
partially.
    Mr. Rohrabacher. So but no, there has been no additions of 
cost to the taxpayers that was generated by something that you 
didn't foresee but were not required to do. In other words, you 
have done what you were required to do for the price that you 
agreed to do it at as compared to, I might add, the development 
of other programs for NASA that are not fixed price that seem 
to always go over and need more money, not based on meeting 
NASA milestones but just because they underestimated what their 
costs would be. Is that correct? Go right ahead.
    Mr. Culbertson. It is probably better for Bill to answer 
that.
    Mr. Rohrabacher. What do you think, Bill?
    Mr. Gerstenmaier. Again, in this case we added these 
augmentation milestones to help assure where we needed to be.
    Mr. Rohrabacher. Right.
    Mr. Gerstenmaier. They weren't absolutely required, and 
this is a better way from a cost risk to the government for us 
to go enter into these activities.
    Mr. Rohrabacher. Right, but let's just note this was not 
that this program cost more money because as we have seen in so 
many other NASA programs because the people who had contracted 
were being unrealistic about what they could achieve or what 
they were willing to put in. What we have here is, again, 
examples of when we deal with the private sector, we make 
things a private endeavor rather than just a totally government 
endeavor, it costs the American people less, we end up getting 
more for the dollars that are being put in rather than less and 
more risky.
    And, again, when we talk about the risk factor, I, when I 
look at the Shuttle, the risk compared to what we are talking 
about is overwhelming, and it always has been, and the Shuttle 
went from being--I was--I happened to be a young reporter when 
that, when the decision was made to move forward with the 
Shuttle and covered some of the earlier press conferences, and 
the Shuttle was going way, way over everything, whatever 
anybody believed it would cost. And there was no reliability on 
the people who were building the Shuttle to keep those costs 
down.
    In fact, they were operating on cost plus, which gave them 
free reign. I think that now we are dealing in a very 
responsible commercial way. So I appreciate this hearing, Mr. 
Chairman, and I think we have learned a lot. Thank you very 
much.
    Chairman Palazzo. I now recognize the gentlelady from 
Maryland, Ms. Edwards.
    Ms. Edwards. Thank you, Mr. Chairman, and thank you to our 
witnesses today.
    Mr. Gerstenmaier, you commented to Committee staff that 
your decisions frequently involve consideration of different 
risks, the source of the risks, and the mitigating measures, 
and I know this hearing is focused on commercial cargo but I 
think some of the lessons that are learned for commercial crew, 
if any, are too valuable not to be highlighted right now.
    And so I wonder if you could tell us whether the risk and 
mitigating measures involved in testing the industry's ability 
to bring crew to the Space Station is likely to be similar to 
those in developing commercial cargo transportation?
    Mr. Gerstenmaier. I like to think our experience in this 
cargo activity will help inform us on how we move forward into 
the crew activity so we can take what we have learned through 
this process through cargo and dealing with the commercial 
providers in a kind of a non-traditional government manner with 
both the space act and also with the fixed price contracts, and 
we can see what works well, what doesn't work well from an 
overall product standpoint, and that can inform the approach 
that we take as we move forward into the cargo or into the crew 
activity.
    So I think we can learn the lessons of working with these 
guys from a cargo standpoint. We can understand some of the 
risks, some of the things we understand, we don't understand, 
and understand how to move forward as we move into crew with 
the proper safeguards in place for the criticality of 
transporting crew to orbit.
    Ms. Edwards. Are there factors that you would anticipate 
make it more challenging to develop commercial transportation 
of crew than cargo?
    Mr. Gerstenmaier. I think crew is more--is less fault 
tolerant from an overall standpoint. We have a very high regard 
for life and so we want to make sure that the crew is protected 
in all aspects, whereas the cargo, if it is lost, it is an 
impact to us, but it is recoverable. We can manufacture more 
hardware on the ground and fly again.
    So crew carries a higher burden for perfection in order to 
make sure that the activity is performed in the best manner 
possible. So I think we need to factor that into our thinking, 
into our logic, into our acquisition approach for those 
activities to make sure we have got those proper safeguards 
that are proportional to the criticality of the cargo that we 
are carrying.
    Ms. Edwards. And how important are the mitigating measures 
that are available under CRS such as pre-positioning by the 
STS-135 and availability of partner spacecraft and giving you 
the needed margin to ensure the continued Space Station 
viability?
    Mr. Gerstenmaier. Those are extremely important to us from 
a Space Station standpoint. Our philosophy of putting all the 
necessary cargo to keep Station viable for roughly about a year 
period on orbit is tremendously valuable to us. That allows 
some schedule slips to occur, that allows some of these flights 
to move around, and it is not an immediate impact to us. We had 
the critical items to make sure we can effectively utilize 
Space Station with minimal resupply for about a year.
    So it has been really important for us to take these 
remaining Shuttle flights to get the cargo up to Space Station. 
It has also been very important for us during this phase to 
have the ability to return cargo from Space Station so we can 
understand what failures are occurring on orbit so we can make 
repairs in the next generation of hardware that we deliver to 
Station.
    So I think we have utilized the Shuttle in the most 
effective manner for this lead-up period, and we have postured 
ourselves with the proper margin to allow us to bring these new 
providers online in a safe and reasonable timeframe.
    Ms. Edwards. And how are you going to ensure that the 
margin will be available during the industry's attempt to 
demonstrate the ability to provide commercial crew 
transportation safely and reliably?
    Mr. Gerstenmaier. Again, this overall margin sits there 
throughout that period of time. It doesn't go away 
instantaneously on one particular date. We also assumed pretty 
conservative failure rates for our components on orbit, and we 
are in a pretty good period with Space Station where there is 
not a lot of failures occurring. Typically when you launch a 
spacecraft the first period on orbit there is a lot of failures 
as new systems come online. Then you reach a period where there 
is not many failures. Then towards the end of life as 
components start aging you start seeing more failures. We are 
in that low part of the curve, but we have assumed in our 
estimates that we would be in the higher part where more 
components are failing, so we have margin in the overall 
systems design on Station.
    So I think we have a very reasonable margin to move 
forward. We need them to keep moving forward as fast as they 
reasonably can. We will encourage them to stay on the schedules 
they described to you, but we recognize that we won't push 
those schedules so far that we take risks to Space Station or 
we take risks to overall goal that we end up with a major 
failure on our hands.
    So we will balance that risk of delivering on time as much 
as we can versus the margin we have on orbit, and we will 
balance those two as we do all along in all of our activities 
in space.
    Ms. Edwards. Thank you very much. I just want to get in 
really quickly with Ms. Shotwell and Mr. Culbertson, I wonder 
if you can tell me as you talked about absorbing the potential 
for delay or for catastrophic failure, are you holding reserves 
in place of--in order to be able to, you know, to pay for those 
risks should they happen? I mean, how do we know that your 
company isn't just going to go belly up and then the taxpayers 
are left holding the bag?
    Ms. Shotwell. Under our cost agreement with NASA we meet 
quarterly with their program management and show them our 
financials and show them what we have on our books. We do have 
some reserve right now.
    Ms. Edwards. How much?
    Ms. Shotwell. In our bank account?
    Ms. Edwards. How much do you have in reserve that you are 
holding in case there is a delay or failure?
    Ms. Shotwell. Currently we have about $30 million worth of 
reserve, and that grows monthly.
    Ms. Edwards. And that is going to pay for a delay or a 
failure?
    Ms. Shotwell. Not quite yet. No.
    Ms. Edwards. Thank you.
    Ms. Shotwell. It will build up by the time we reach the 
Station.
    Ms. Edwards. Thank you.
    Chairman Palazzo. I now recognize the gentleman from 
Oklahoma, Mr. Lucas.
    Mr. Lucas. Thank you, Mr. Chairman.
    Ms. Shotwell, in your testimony you say that NASA 
independently verified SpaceX's total development costs for 
Falcon 1 and Falcon 9 at $390 million. Does that include the 
cost of development for the Dragon Capsule?
    Ms. Shotwell. No, sir. That was just for the Falcon 9 and 
the Falcon 1 Program.
    Mr. Lucas. So how much more was spent to develop the Dragon 
Capsule?
    Ms. Shotwell. As of December last year another $300 
million.
    Mr. Lucas. As of December last year. Okay. So what is the 
total development cost then for the entire Falcon and Dragon 
system?
    Ms. Shotwell. We are not quite done with the Dragon 
development. I anticipate the entire development to be----
    Mr. Lucas. I have been led to believe maybe $690 million. 
Is that a fair number?
    Ms. Shotwell. No. It will be $50 or $60 million more than 
that, sir.
    Mr. Lucas. So $700 million then.
    Ms. Shotwell. That is correct.
    Mr. Lucas. Did NASA independently verify SpaceX's total 
development cost for the entire Dragon 9 and--Falcon 9 and 
Dragon Systems?
    Ms. Shotwell. They had access to our financial data for 
that. I don't know the extent of the analysis they did on the 
data.
    Mr. Lucas. And maybe this is a question for the director as 
well as yourself then. Who exactly performed that kind of 
verification? An entity from within NASA or----
    Mr. Gerstenmaier. I will need to take that question for the 
record. I don't know the specifics of how that detailed cost 
accounting was done.
    Ms. Lucas. Well, as you can well expect just looking at 
this from the perspective of the taxpayer, we are curious about 
the money and the details and the verification.
    You told our staff, Ms. Shotwell, that SpaceX does not 
assign engineering costs to individual vehicles. Is that 
correct?
    Ms. Shotwell. Our engineers do not sign timecards. On the 
other hand, we can estimate the numbers of engineers that are 
working individual projects, but it is just estimates.
    Mr. Lucas. So I guess my question then doesn't that make it 
kind of hard for SpaceX or NASA to know what the true 
development cost is?
    Ms. Shotwell. It makes it difficult to understand the exact 
cost. On the other hand, the overall cost for the total program 
is not. It is the money that we have expended.
    Mr. Lucas. So then I would ask thinking about that and 
looking at what the real costs are involved to both yourself 
and the associate administrator, so do either one of you keep 
track of the value of the technical services received from NASA 
since you mentioned using various facilities and testing 
equipment? Has that just been a freebie so to speak, or is that 
accounted for by either entity?
    Ms. Shotwell. We pay for the facilities that we use from 
NASA, for example, the Marshall Spaceflight Center facility. We 
have leveraged the Arc Jet facility testing out of Ames, and we 
pay for that.
    Mr. Lucas. So that is all tracked, that is all verified, 
that is all of public record then?
    Mr. Gerstenmaier. Yes.
    Mr. Lucas. To you, Associate Administrator, NASA has told 
us that the average cost to deliver a kilogram of cargo to the 
International Space Station by the RS--CRS contract is $59,000 
per kilogram. I believe CRS providers are expected to deliver 
40 metric tons, 40,000 kilograms times $59,000 per kilogram. By 
my math that is about $2.36 billion, and the CRS contract total 
is $3.5 billion, totals on the contracts.
    So what is the remaining trillion--billion, sorry, we are 
into too many trillions in this town anymore, billion, $140 
million paying for?
    Mr. Gerstenmaier. The way we--the numbers we talk about in 
cargo, we talk about the 40 metric tons of cargo, 20 to each 
contractor. That is what we consider usable cargo. So for that, 
for us that is the actual cargo that is delivered to space. 
That is the thing that we can actually use, but you can't just 
deliver it. You actually have to pack it, it has to go into 
flight support equipment in the spacecraft, and there is other 
things that hold it in place or allow it to be delivered, and 
that is the difference in price.
    So we are paying for a price per rocket and then we have 
been asked to provide the price per kilogram, so then we just 
divide those out, and whether we include that other support 
equipment or not, you can get two different prices for the 
price for kilogram. And we can show you all the accounting and 
all the math and all the details behind that if you would like 
to go review that in detail.
    Mr. Lucas. I suspect we will look at all the numbers 
because it on the surface appears to be about a $1 billion 
prize here for successfully prevailing in this contract.
    With that, Mr. Chairman, I yield back the balance of my 
time.
    Chairman Palazzo. Thank you. I recognize the gentleman from 
Alabama, Mr. Brooks.
    Mr. Brooks. Thank you, Mr. Chairman.
    I am looking at what the Committee staff has prepared for 
us, and there are some things that kind of stood out, and I 
would like any of the witness's response to it, and this is on 
page five of 12 of our handouts.
    The following chart lists approximate cost to deliver one 
pound of cargo to the International Space Station under various 
programs. Development costs are not included in these 
calculations and are considered proprietary information by the 
COTS partners. We have got for the Space Shuttle $21,268 per 
pound, $21,268. We have got for the Russian Progress $18,149 
per pound, and then we have the Commercial Resupply Services, 
CRS, of $26,770 per pound.
    So if this information is accurate, CRS costs 26 percent 
more to deliver a pound to the International Space Station than 
does the Space Shuttle and 47 percent more per pound than if we 
used the Russian Progress. And then there are some further 
notes. Costs for the Russian Progress and the Commercial 
Resupply Program are NASA estimates. The CRS estimate would be 
higher at around $39,700 per pound if derived using a method 
similar to that used for the Space Shuttle.
    Now, if that ends up being the correct number, $39,700 per 
pound using the CRS Systems, well, that is 118 percent higher 
cost to American taxpayers than the Russian Progress and 
21,000--excuse me. Eighty-seven percent higher cost to American 
taxpayers than the cost of using the Space Shuttle.
    My first question is are these numbers accurate or 
inaccurate, and if they are inaccurate, where did the Committee 
staff make their mistakes, and second, just your general 
thoughts concerning this information.
    Mr. Gerstenmaier. I think I would like to go ahead and we 
can take that for the record. We need to understand exactly 
what went into those calculations and then compare them with 
what we have got for estimates. It is difficult on how you 
assume what costs are where, whether we have--we look at new 
obligation authority, we look at actual costs during the year, 
you know. How many Shuttle flights occur per year drives that 
clearly right. If we only fly one or two Shuttle flights, that 
dramatically changes that number in that table.
    Mr. Brooks. Well, this is assuming four missions per year.
    Mr. Gerstenmaier. Okay.
    Mr. Brooks. According to another one of the footnotes. 
Again, I don't know if this information is accurate or 
inaccurate, but I do find it startling that at least according 
to what the staff has handed me that the Commercial Resupply 
Service approach is so much higher for American taxpayers than 
is either the Russian Progress or the NASA Space Shuttle.
    Mr. Gerstenmaier. Again, we also have to look at how we--
those are calculated, the development costs for the Shuttle 
Program are not in those numbers. There is lots of things that 
we need to talk about specifically, so it is not as simple as 
the table implies. I would like to take the question for the 
record, and we can provide you much more detail behind those 
numbers, and we can understand better what is in the table, and 
we can do much more of a fair comparison between the two and 
show you the range of how you can look at these numbers, and it 
is not--there is not a single number as you described. There 
will be a range of numbers for each one of those columns that 
you described in the table, and we can show you those ranges 
and how they fit across all three providers.
    Mr. Brooks. Well, please, if you could have some of your 
staff get with the Committee staff and consult about this, 
would that be satisfactory?
    Mr. Gerstenmaier. We will do that.
    Mr. Brooks. Thank you.
    [The information can be found in Appendix II.]
    Ms. Shotwell. Could I respond?
    Mr. Brooks. Certainly.
    Ms. Shotwell. I appreciate that. One of the assumptions 
used to calculate at least our dollars per pound here in the 
charter was--it is an erroneous assumption. It was purely 
taking the $1.6 billion under the CRS contract and dividing 
that by 20 metric tons. The fact is that NASA has bought 12 
flights from SpaceX. We could take much more than 20 metric 
tons to orbit on those flights. We don't charge NASA extra for 
anything above the 20 metric tons as long as we are still doing 
the 12 flights.
    Depending largely on the density of the cargo that we take 
and we haven't packed the Dragon yet with actual cargo, but in 
the best case from a taxpayer perspective, if we can take the 
full Falcon 9 performance capability to the ISS, the cost per 
pound of cargo is under $10,000 a pound using our system. It is 
not $26,000 a pound.
    Mr. Brooks. Thank you, and would you please get with the 
Committee staff at some point, either you or someone else, and 
try to ascertain what the true numbers are in as much as that 
is critical I am sure to the decision making process that the 
Congress will make.
    Ms. Shotwell. Yeah. I would be happy to.
    Mr. Brooks. Thank you.
    Chairman Palazzo. I now recognize the gentlelady from 
Florida, Mrs. Adams.
    Mrs. Adams. Thank you, Mr. Chairman, and I appreciate you 
holding this hearing.
    We are working through an incredible time in the history of 
the American Space Program. I would be shocked if you would 
find anyone on this panel who didn't understand this. You know, 
yesterday was the 50th anniversary of those famous words from 
our 35th President, John F. Kennedy, who said, you know, we are 
going to go to the moon, and he inspired all of us to believe 
we could beat the Russians, and we could make it to the moon, 
and American ingenuity was limitless in the face of seemingly 
insurmountable odds.
    Mr. Chairman, in my district people are hurting. Their 
families are hurting, they are fighting tooth and nail to 
scrape together to pay their mortgage, they are looking for 
change to pay for their gas, and now here comes the layoffs, 
lots of layoffs. And I understand sometimes layoffs happen, but 
what is most troubling is this one was unnecessary. It was 
unnecessary because we didn't have to get to this point. It was 
poor planning, poor management, and a lack of vision that led 
us here. And as I see it we must continue to invest in our 
exploration capabilities, we must continue to invest in our 
cargo transport capabilities, and we must continue to invest in 
job creation.
    This all starts by NASA following the directives of 
Congress. We cannot lose sight of the fact that an 
Authorization Bill exists, and if we don't like the direction 
of the Authorization Bill, if we think that as a Nation we need 
to move in a different direction or change something in that 
Authorization Bill, then we should have that conversation 
rather than trying to start a different direction through 
budget requests.
    Ms. Shotwell and Mr. Culbertson, I hope you both fully 
understand the awesome, awesome responsibility being laid on 
your respective companies. This is not some meaningless 
investment or some contract that your country--company can just 
simply hope to fulfill. The future of our international 
commitments, the bond and the promise of the United States is 
on the line, and you signed up for the responsibility to ensure 
those promises have been met.
    History has trusted the United States of America to lead 
the way in space technology and exploration. I hope you and 
your companies understand what is being asked of you by the 
American people and the trust that the American people have put 
in you because it is not something I take lightly, and I will 
not be able to let you forget that either.
    With that said, I would like to start with Mr. 
Gerstenmaier. This country has spent over $1.25 billion on the 
commercial cargo effort to date. When is our first cargo 
mission going to supply Station?
    Mr. Gerstenmaier. The demonstration flights will be later 
this fall, and the first cargo resupply mission will be in 
2012.
    Mrs. Adams. How much more money do you expect NASA will 
request for this effort before the commercial companies will be 
able to resupply on a regular basis?
    Mr. Gerstenmaier. We will request no more funds than what 
are there. These are fixed price activities as we described 
earlier, and the cost that we have laid and we brought forward 
are the costs we expect, and so we--there will be not any more 
increase to deliver the cargo that we have purchased through 
these service contracts.
    Mrs. Adams. How many people does NASA expect to hire to 
manage our Commercial Cargo Program as the flight manifest 
starts to fill up?
    Mr. Gerstenmaier. We will not hire any NASA civil servants 
beyond what we currently have monitoring the Cargo Program as 
the flights ramp up.
    Mrs. Adams. What confidence level does NASA have in each 
contractor meeting the latest revised schedules for their first 
cargo resupply missions?
    Mr. Gerstenmaier. I think the schedules they have laid out 
are optimistic but realistic schedules. I think I would also as 
we have discussed here earlier, I would also say that I would 
be remiss if I didn't expect to see some schedule delays and 
delays in those schedules, and we will be prepared for those 
delays. They will not have financial penalties to us for those 
delays, but we have to make sure we had the right margin on 
Space Station that we don't impact the operations of Space 
Station when those inevitable delays occur.
    Mrs. Adams. Now, when asked about the article in the paper 
about possible problems with docking, SpaceX docking and doing 
the test docking, you said there were technical problems that 
needed to be understood. What type of technical problems? I 
mean, are they such problems that could delay any kind of test 
docking for a length of time, a longer length of time?
    Mr. Gerstenmaier. No. They are understandable problems that 
we have seen before. There are some hardware differences. As 
Gwynne described earlier, there is a lot of software activity 
that needs to be done. We are very closely monitoring that 
software activity to make sure that it gets done correctly.
    I don't see anything there that is an extraordinary 
problem, but they are not easy technical problems to solve. We 
will work through the contractors as we have before. We will 
apply our best folks to help where we can, and the companies 
have been doing a great job of responding and helping and 
working with us in those areas. The activities they are doing 
at Marshall to actually verify software and hardware 
functionality is a tremendous testimony that SpaceX has stood 
up, to recognizing this as an area that needed extra help. They 
went and procured some extra help from NASA in that area.
    Mrs. Adams. So you don't believe it will be delayed?
    Mr. Gerstenmaier. There will be some delays, but they will 
be manageable within the overall margin we have onboard.
    Mrs. Adams. Ms. Shotwell, I know but SpaceX has received 
$250 million of the American tax dollars so far for Region 18 
of your 22 COTS. Are you going to be ready to deliver on your 
promise to supply the Station when this country needs it?
    Ms. Shotwell. Yes, we are.
    Mrs. Adams. Thank you.
    Chairman Palazzo. All right. Thank you.
    I now recognize the gentleman from Texas, Mr. Olson.
    Mr. Olson. Well, thank you, Chairman Palazzo and Ranking 
Member Costello, for your courtesy and the opportunity to come 
back to Science and Aeronautics Subcommittee. While I am no 
longer on the Subcommittee, I still represent the heart of 
human spaceflight, the Johnson Space Center in Space City, USA. 
I am grateful to our witnesses for being here today, excuse me, 
to give us your insights and perspectives.
    The commercial industry has been part of the human 
spaceflight program since its inception. The only thing that 
has changed is the means in which we contract with the 
commercial sector for the critical services and support they 
provide to NASA with change, prudent management, and forthright 
accountability by all parties, Congress, NASA, and industry is 
imperative.
    Adherence to the goals, objectives, safety requirements, 
and budgets and milestones are critical to the agency's 
success. If we falter in any one of these areas, we risk 
failure, and in our business failure can cost lives, waste 
precious funding, result in irreversible damage to the 
industry, and in some cases result in the failure of an entire 
program.
    In this business failure is not an option. We must avoid 
failure at all costs, and in doing so it is imperative that we 
provide candid and factual updates of the program 
accomplishments and issues so they can be mitigated before 
failure. This is the essence of why we are here today, to 
assess where we are in the NASA COTS Program that began in 
2005, six years ago.
    My first question is for you, Mr. Gerstenmaier. First of 
all, I want to tell you you were missed at the Art at NASA Gala 
in Houston a couple weeks ago, and I understand the COTS 
Program is behind schedule relative to the pronouncements over 
the past year by the COTS providers. In your view where do we 
stand today relative to both program investment and schedule 
now that we are five years and $1.2 billion into the program?
    Mr. Gerstenmaier. Again, I think as we have discussed 
earlier, the development activity is a very tough time for 
these, for the contractors to do development, and we see that. 
We wanted to make sure we got the development right, and we 
didn't rush that, so we had some schedule delays in the 
development activity. I think that is appropriate and 
reasonable for where we are, and we have retired some of those 
development activities. We now entered into the operational 
phase, and we need to continue to monitor that moving forward.
    So I think I see the scheduled delays that have occurred. I 
think they are reasonable with what we have seen. I have seen 
these companies rise to the challenges that they have 
encountered during these development delays, and they both have 
done a very good job of working through those problems. I think 
there will be problems in the future. They need to address 
those in a very straightforward manner as you described, and we 
need to make sure we get to the right technical solution and 
don't shortchange things or cut things to move forward because 
it is absolutely important we get this service to Station as 
soon as we can and make sure we get it there safely.
    Mr. Olson. Yes, sir. I agree completely. We do have to 
minimize that gap, but just following up with that question, is 
it your view that the COTS providers had the capacity and 
resources in place to successfully execute this manifest, their 
manifest on this timeline?
    Mr. Gerstenmaier. I think they have the appropriate 
resources to do that, but I think we, again, need to be 
prepared that if they run into problems, we have some ability 
to absorb some delays, and we don't force them into a situation 
where they have to take undue risks.
    Mr. Olson. Appreciate that.
    Ms. Shotwell, Mr. Culbertson, would you like to comment on 
that question?
    Mr. Culbertson. Well, as far as how we are executing here, 
I want to, first of all, I want to apologize to Bill for 
tossing my customer a grenade a few minutes ago and without 
taking it back, and I will take it back right now. What we are 
doing is a combination of Space Act Agreements with, as I said, 
fixed funding and fixed price contracts under the FAR, which 
are to protect both parties from--on a contractual basis. But 
they are fixed price, and if we have to go redo a test, we 
absorb the cost of that test. If we have to figure out a 
different way to ship our first stage to Wallops, we have to 
absorb the cost of doing that. We don't transfer that cost to 
the government. This is not a cost-plus contract.
    So there is not going to be a growth in cost on the CRS to 
the government, but there may be cost to us, and so that 
affects our ability to continue on the program in the future, 
and we will have to evaluate as we go forward whether it is 
profitable and worth the risk or not. Right now it is worth the 
risk because we see it as very important to the Nation that we 
provide this cargo delivery. But we see it important to the 
industrial, the space industry that commercial companies step 
up to this responsibility and figure out a way to accomplish 
this.
    This is a precedent for what is coming in the future, I 
believe, and the amount of money that has been paid to us on 
the CRS contract has been mentioned several times as extra 
money that has been sent to the contractors. That is not the 
case. When you do business in a commercial world, you are given 
milestone payments. You are given progress payments in order to 
make sure that you can buy your long-lead items, you can pay 
your staff, you can pay your engineering development and keep 
the program moving until you reach that final goal, and we have 
20 to 30 percent at stake on every mission if we don't execute 
it. So we are not going to get paid ahead of time. We have to 
execute it, and so we are committed to making it happen, but it 
is a commercial endeavor and not a traditional government cost 
plus development, and that is a really big difference from what 
people are used to, and I think some folks in the community 
might be having trouble understanding that.
    We are very sympathetic to the impact of layoffs and what 
is going on. If I could hire all the people that are being laid 
off in the Shuttle Program, I would do it, but then I couldn't 
control my costs in order to provide you the service you need.
    Mr. Olson. Ms. Shotwell.
    Ms. Shotwell. Yes. Just to be clear, we have built enough 
hardware and we are far enough along in our development, we are 
very confident of our costs and thus our prices. We will 
execute, we will complete the COTS demonstration, and we will 
execute the CRS missions to Station for what we have proposed.
    Mr. Olson. Thank you, ma'am, and since I have crossed into 
the realm here where the clock is actually increased, I have a 
red light, I yield back the balance of my time.
    Chairman Palazzo. Thank you, Mr. Olson.
    That is it for our questions today. I do want to thank our 
witnesses for their testimony.
    Mr. Olson. Mr. Chairman, one question. I would like to ask 
unanimous consent that I enter--I have a statement to enter 
into the record about my concerns, some of my concerns 
elaborated on my concerns with the course our country is 
following. I apologize.
    [The prepared statement of Mr. Olson appears in Appendix 
II:]
    Chairman Palazzo. Without objection, so approved.
    Several things seem clear from today's testimony, namely 
that there is still tremendous challenges both companies need 
to address, and time is growing short. NASA has obligated 1.25 
billion over the last five years, and it is my firm hope that 
before the year is out we will have real proof that this 
investment has been worthwhile.
    Congress has been very supportive and has provided 
significant additional funding, but the burden of proof is now 
on NASA and its commercial partners to accomplish what they 
have signed up to do.
    I thank the witnesses for their valuable testimony and the 
members for their questions. The members of the Subcommittee 
may have additional questions for the witnesses, and we will 
ask you to respond to those in writing. The record will remain 
open for two weeks for additional comments from members.
    The witnesses are excused, and this hearing is adjourned.
    [Whereupon, at 11:41 a.m., the Subcommittee was adjourned.]
                               Appendix I

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Mr. William H. Gerstenmaier, Associate Administrator, 
        Space Operations Mission Directorate, National Aeronautics and 
        Space Administration


Questions submitted by Chairman Steven Palazzo

Q1. If a reduction of ISS crew size were implemented because of delays 
in CRS, how would the reductions be apportioned among the ISS member 
nations? Would a NASA astronaut continue to serve on board even if it 
was the U.S. who failed to maintain a reliable cargo delivery system?

    A1. Any impacts caused by Commercial Resupply Services (CRS) 
contract delays would need to be jointly worked with the International 
Space Station (ISS) International Partners. NASA has kept the Partners 
apprised of the progress of these vehicles. Any impacts to overall ISS 
crew complement planning will be negotiated with the Partners along 
with the other impacts to science and cargo.

Q2. Do the cargo delivery providers, whether they are commercial 
providers or one of the international partners, bear any liability if 
they cause an accident to the space station?

    A2. The Intergovernmental Agreement (IOA) for the International 
Space Station (ISS) contains a broad cross-waiver of liability clause 
to encourage participation in the exploration, exploitation and use of 
outer space through the ISS. The United States and its international 
partners waive claims against each other, and against each other's 
contractors, for damages caused during space operations, except for 
damages caused by willful misconduct. The IGA requires NASA to flow 
down this cross-waiver to its contractors. The CRS contract also 
includes this cross-waiver of liability. Neither the CRS contractor nor 
NASA is liable for damage to the other's property that occurs during 
space operations, including damage to the ISS, except for damage caused 
by willful misconduct. If the contractor damages the ISS, the mission 
is deemed a failure and the contractor forfeits the final milestone 
payment for that mission.

Q3. If a commercial cargo provider loses a mission, do they have to 
replace the cargo?

    A3. In the event of a failed mission, the contractor forfeits the 
final milestone payment (20 percent of the mission price). The 
contractor is not required to replace the cargo.

Q4. If they lose a mission do they owe NASA a replacement flight? If 
no, why not?

    A4. In the event of a failed mission, the contractor forfeits the 
final milestone payment (20 percent of the mission price). The 
contractor is not required to re-perform the flight.

Q5. NASA is investing considerable sums to stand-up two new launch 
providers. What were the factors that led NASA to take this path 
instead of using existing capabilities of the EELV program? Current 
Delta and Atlas launch systems have proven to be highly reliable, but 
they're also under-utilized. How and why did NASA come to the 
conclusion that using a clean-sheet approach with new launch systems 
was more cost-effective?

    A5. The Commercial Resupply Services (CRS) contracts were awarded 
through a full and open competition for the delivery of a minimum of 40 
metric tons of cargo from 2011 through 2015. None of the proposals that 
were received by NASA in the competition proposed the use of an Evolved 
Expendable Launch Vehicle (EELV). The successful bidders--Space 
Exploration Technologies (SpaceX) and Orbital Sciences Corporation 
(OSC)--were selected on the basis of the responsiveness of their 
proposals to the requirements of the announcement. These proposals 
involved the use of the new Falcon-9 and Taurus-2 launch vehicles.

Q6. Have NASA and FAA clearly worked out roles and responsibilities 
regarding the safe launch and reentry of cargo payloads?
Q6a. Are there any unresolved issues between the two agencies relative 
to the licensing of NASA-contracted cargo payloads to ISS?

    A6a. Launches under the CRS contract are commercial launches, not 
Government launches. The contractor is required to obtain a FAA license 
for launches and re-entries.

Q6b. Is FAA treating the resupply flights in the same manner as any 
other commercial launch?

    A6b: NASA cannot speak for the FAA with regard to how it treats 
other commercial launches. Launches under NASA's CRS contract are 
commercial launches, not Government launches. The contractor is 
required to obtain a FAA license for launches and re-entries.

Q7. It's my understanding that fixed-price contracts are generally used 
to buy commodities or other services that have relatively low risk. 
Since CRS is not a low risk venture why did NASA choose to use a fixed-
price contract for the cargo resupply services program?

    A7: The CRS acquisition was conducted under Part 12 of the Federal 
Acquisition Regulation (FAR), Acquisition of Commercial Items. The 
contract complies with the Federal Acquisition Streamlining Act (FASA), 
which requires that acquisitions of commercial services must be fixed-
price contracts. Cost-type contracts are prohibited for commercial 
services.

Q8. Why was FAR Part 12 chosen over FAR Part 15 for Cargo Resupply 
Services acquisition?

    A8. The Commercial Space Act of 1998 states that space 
transportation services are considered to be commercial items for 
acquisition purposes. NASA complied with this requirement by using Part 
12 of the FAR, Acquisition of Commercial Items, to acquire ISS cargo 
resupply services under the CRS contract.

Q9. Given the degree of risk using newly developed launch systems to 
deliver critical cargo to the ISS, do one or two demo flights equate to 
a mature system?

    A9. NASA recognizes that one or two missions do not equate to a 
mature system. The commercial cargo contractors and NASA will be 
learning new things about these cargo vehicles as they fly their test 
launches, demonstrations, and the CRS missions. Even after the Space 
Shuttle had flown for several years, NASA was learning new things about 
the operation of the vehicle. NASA recognizes that there is risk in 
these new systems that will only be reduced through continued safe and 
reliable performance. One of the reasons NASA invested in two cargo 
providers was to mitigate the normal start -up issues that may occur 
with these new cargo launch systems.

Q10. Your testimony said, ``NASA sees no reason to doubt either 
company's objectives,'' yet there have been no demonstrations flights 
to the ISS so their capabilities are unknown.
a. If the demonstration flights are unsuccessful, what is NASA's plan?

    A10a. The COTS partners are strongly incentivized to successfully 
complete their demonstration flights. The companies do not get paid for 
their milestones unless they are successful. In addition, both 
companies have over a billion dollars at stake for the services 
missions under the CRS contracts. If either company has an unsuccessful 
demonstration flight, NASA expects them to keep trying until they are 
successful. However, in the event that one of the CRS contractors 
cannot meet its obligations under CRS, then NASA could rely on the 
remaining CRS contractor to fly additional cargo flights. Both 
companies have indicated that they can increase their flight rate for 
CRS missions if required by NASA. In addition, NASA could contract for 
additional HTV, ATV, and/or Progress flights for more cargo delivery.

Q10b. Does NASA have any recourse, monetarily or otherwise, if the 
providers fail to meet NASA's requirements?

    A10b. Under the terms of the SAA, the partners are only paid for 
milestones that are successfully completed. If milestones are missed, 
NASA may unilaterally terminate the agreement if it is determined that 
sufficient progress is not being made and it is in the best interest of 
the Government. See the response to Question 10 for a non-monetary 
recourse. The CRS contracts include termination for cause provisions. 
They also contain clauses regarding recovery of interim milestone 
payments and require the contractor to forfeit the final milestone 
payment in the event of a failed mission.

Q10c. Do the CRS contracts contain any ``look back'' provisions which 
would allow NASA to recover damages if the providers fail to fulfill 
their obligations?

    A10c. In the event of a failed mission the contractor forfeits the 
final milestone payment. Once the contractor reaches the final 
milestone event, prior milestone payments for that mission are not 
recoverable.

Q11. In briefings by senior NASA officials leading up to this hearing, 
committee staff was told, ``NASA did not get the level of detail with 
Space Act Agreements that they expected.''
Q11a. What was missing and what were the weaknesses NASA found in 
dealing with a complicated development activity under a Space Act 
Agreement?

    A11a: There has been no information missing from the data provided 
to NASA. Under the COTS SAAs, the partner proposes its own milestones 
and provides NASA with the data needed to verify that the milestone was 
successfully accomplished. To date, this has been done for every 
performed milestone under the COTS SAAs. It should be noted that after 
the SAA partners chose to use the ISS as their on-orbit test bed, the 
provision of key development data related to meeting safety 
requirements for conducting proximity operations and berthings to the 
ISS was made a requirement of their SAA agreements. To date, the 
information required by NASA to determine that the SAA partners are 
meeting those safety requirements has been provided.

Q11b. What lessons were learned from this?

    A11b. NASA believes that it is important to have the option of 
using different mechanisms to work with its partners. In this case, use 
of SAAs for the COTS demonstration flights and contracts for CRS 
operational missions was appropriate. The former approach maximized 
flexibility for the COTS providers in preparing for a demonstration of 
their commercial capabilities, while the latter obtained cargo delivery 
services specifically for NASA including the insight required for an 
operational system.

Questions submitted by Acting Ranking Member Jerry Costello

Q1. What types of in-kind or non-reimbursable services allowed by Space 
Act Agreements are being provided to COTS companies? Has NASA analyzed 
and estimated the value of those in-kind services? If so, what are the 
results of the analysis and estimated values?

    A1: NASA provides limited technical assistance to the COTS partners 
from the Commercial Advisory Team (CAT). The CAT is made up of 
technical experts throughout the Agency who assist NASA and the COTS 
companies in the disposition of technical milestones. NASA has not 
estimated the value of these services, as the Agency does not track the 
time providing assistance only and specifically to the COTS partners. 
Their function supports both the COTS partners and NASA management. 
Other than the CAT, NASA has offered use of the Tracking and Data Relay 
Satellite Services (TDRSS) for space communications with the ISS and 
has provided some equipment to facilitate ISS ground testing and 
integration. The estimated value of these equipment and services has 
not been calculated.

Q2. What insight and oversight mechanisms is NASA using to ensure that 
CRS contractors are on track to meet their production goals and 
scheduled flight milestones? Are they the same mechanisms for either 
COTS or CRS?

    A2. NASA has weekly schedule meetings with the CRS providers, 
SpaceX and Orbital, and so has considerable insight into the progress 
that the contractors are making. In addition, under the contract, each 
provider delivers monthly detailed schedule updates on not only the CRS 
missions but also their demo activities. The schedules show progress on 
major vehicle hardware, software and integration activities including 
insight into their schedule slips. In addition, the ISS Program has key 
design, test, and analysis deliverables that are required from the 
providers to verify safety and interface requirements are met, and to 
perform integrated analysis and verification that ensures that the 
final vehicle can be successfully integrated with the on orbit ISS 
vehicle. The ISS Program also has insight into the conditions that 
drive these deliveries. And finally, the program performs independent 
analysis of the schedules and deliverables that SpaceX and Orbital 
provide and assesses their performance.

Q3. What is the nature of your insight into COTS contractors and what 
specific areas do you have exposure to?

    A3. NASA has significant insight into the COTS partners' technical 
and schedule status. The COTS program office has frequent and thorough 
communications with the partners ranging from daily telecons for 
technical integration issues to formal quarterly management reviews 
with the NASA program manager and company executives. NASA also has 
limited insight into company financial status to assess the company's 
financial viability and verify that both the company and NASA 
contributions are consistent with the terms of the agreements.

Q3a. Why have the COTS launch dates slipped, and how much advance 
insight did you have that the slips would occur?

    A3a. The COTS partners have experienced delays due to development 
challenges as their program transitions from design to integration and 
testing. Both partners continue to make technical progress toward their 
development and demonstration milestones. Schedule status is formally 
reported by NASA, using its own judgment regarding estimated dates at 
the quarterly management reviews.

Q3b. Will NASA's level of insight be any different under the CRS 
contracts?

    A3b. NASA's level of insight is different under the CRS contract 
than under the COTS SAAs. Under a contract, NASA has the ability to 
levy specific contractual requirements and the responsibility to verify 
them. Under the CRS contract, the contractors have to demonstrate that 
they meet specific cargo configuration requirements and environmental 
constraints (and provide the relevant data to NASA). In addition, NASA 
is performing a risk assessment on the launch system design for the 
contracted missions that are not being performed for the demonstration 
missions.

Q3c. What indicators from CRS provider activities, for which NASA 
currently has no insight into, might enhance the accuracy of projected 
mission launch dates?

    A3c. NASA receives detailed schedules from the contractors, and 
believes that it currently has sufficient, continuing insight into CRS 
provider activities to be able to make reasonable projections of 
mission launch dates. This is an important consideration, as it impacts 
the cargo complement to be flown on a given CRS mission.

Q4. If cargo delivery flights fall behind schedule, how will NASA 
prioritize what cargo is carried on those flights? What priority is 
given to utilization payloads in CRS mission manifesting and 
scheduling?

    A4. If CRS cargo delivery flights fall behind schedule, NASA will 
prioritize the cargo carried on those flights on the basis of payload 
criticality to the maintenance and operation of the International Space 
Station (ISS). Beyond meeting these requirements, NASA will first 
satisfy additional requirements associated with NASA utilization 
missions involving the Human Research Program and Technology 
Development and Demonstration projects necessary to NASA's exploration 
mission. Finally, NASA would work together with the Non-Profit 
Organization managing the National Laboratory aspects of the ISS to 
determine the priority of utilization-related cargo, including 
equipment and samples supporting research objectives by organizations 
other than NASA. The success of the CRS cargo delivery flights and use 
of the ISS as a National Laboratory have always been directly linked.

Q5. How will NASA respond if a commercial provider experiences a 
failure and indicates to NASA that the cost of recovering puts the 
financial viability of its company at risk?

    A5. NASA would assess the specific situation before determining an 
appropriate course of action. The Government may terminate the CRS 
contract if the contractor fails to perform or fails to provide, upon 
request, adequate assurances of future performance.

Q6. How do the CRS contracts deal with last minute payload additions on 
CRS flights? For instance, if NASA determines that there is a need for 
a critical life support component to be shipped up to the Station, is 
there flexibility to allow NASA to add that payload to a CRS flight at 
the last minute? Would there be a financial implication for such a late 
addition to the payload?

    A6. The CRS contract allows flexibility in the specific manifest as 
long as the cargo bag complement and overall weights of the bags remain 
within the negotiated limitations of the mission. NASA specifically 
designed the contract this way to allow late-load items and the ability 
to fly critical life support spares at the last minute.

Q7. Does NASA plan to include National Laboratory payloads on the 
scheduled 2012 commercial cargo flights? If not, why not? What will be 
the impact on that research if commercial providers are not ready to 
deliver cargo to the ISS next year? How can researchers plan for ISS 
utilization under these circumstances?

    A7. NASA does plan to include National Laboratory payloads on 2012 
CRS cargo flights. Should the CRS capabilities be delayed, delivery of 
material in support of National Laboratory research would be delayed, 
as well. While NASA and its CRS providers are working to establish a 
routine cargo delivery capability to the ISS to enable maximum use of 
the Station for research in a wide variety of science disciplines, it 
is important that researchers build a degree of flexibility into their 
schedules to accommodate possible slips in the availability of these 
new services.

Q8. What do any CRS delays mean for the number of scientific 
experiments that can utilize the ISS, the nature of science that can be 
conducted, and the duration of potential experiments on ISS?

    A8. The specific impacts of a potential delay in the availability 
of CRS capabilities would depend on the length of the delay, the 
planned duration of a given experiment, and whether such a delay 
involved resupplying an experiment already in progress aboard the ISS. 
In most cases, a delay in the operational availability of cargo 
services would mean a delay in the commencement of a particular 
experiment. NASA and its CRS providers are working to ensure that cargo 
resupply will be available in a timely manner, both to support 
scientific research and utilization and to maintain Station operations.

Questions submitted by Congresswoman Donna Edwards

Q1. As with any space mission, commercial cargo providers are at risk 
of suffering a launch failure.a. How will NASA respond if a commercial 
provider experiences a failure and indicates to NASA that the cost of 
recovering puts the financial viability of its company at risk?

    A1a. With regard to COTS, NASA's response to a commercial partner's 
failure and resultant financial uncertainty would depend on the nature 
of the failure, the financial risk posture of the company, and its plan 
for recovery after the failure. However, in general, if a company is 
unable to complete the milestones listed in the SAA, NASA may terminate 
the agreement and is under no obligation to make any further payments.
    With regard to CRS, NASA's response would be dependent on the 
particular circumstances of the failure and the company's performance. 
The Government may terminate the CRS contract if the contractor fails 
to perform or fails to provide, upon request, adequate assurances of 
future performance. One of the NASA mitigations for this risk was the 
award of two CRS contracts.

Q1b. Who is responsible for funding any technical work needed to 
address the failure to meet technical objectives?

    A1b. With regard to COTS, NASA pays for a milestone only if the 
milestone is successfully completed. The COTS partners are responsible 
for funding any work needed to address the failures of any technical 
objectives in order to retry and successfully complete the objective 
for payment in a subsequent milestone.
    With regard to CRS, the CRS contractor is responsible for ensuring 
that its launch system and spacecraft provide the required service and 
meet the technical requirements of the services contract. NASA makes 
fixed-price payments for the services, regardless of the actual costs 
the contractor incurs to ensure its system meets the requirements or to 
address failures to meet the requirements. NASA does perform insight 
activities of the contractor and pays for those activities.

Q1c. Are there any reserves being held at NASA should a major failure 
to meet COTS [or CRS] objectives occur?

    A1c. With regard to COTS, there are no reserves held in the COTS 
program for additional payments to the COTS partners since NASA is not 
financially responsible for additional costs associated with failures. 
NASA is responsible only for the investments included in the Space Act 
Agreements and those payments are only made upon successful completion 
of milestones in the Space Act Agreements.
    With regard to CRS, NASA does not hold specific reserves to address 
a major failure. Program reserves or other Agency reserves would need 
to be used if additional flights were required.

Questions submitted by Congressman David Wu

Q1. Is NASA assuming any liability risk or providing any 
indemnification for the CRS missions?

    A1. Launches and re-entries under the CRS contract are licensed by 
the FAA, and are covered by the FAA's statutory provision for 
Government payment of third-party liability claims exceeding the 
contractor's required insurance. NASA does not have authority to 
indemnify the CRS contractors, and contractually has not assumed the 
risk of third-party liability for the CRS contractors.

Q2. Do the.CRS contracts protect NASA's assurance of cargo delivery in 
the event that a commercial provider experiences a launch failure?

    A2. In the event of a failed mission, the contractor is not 
required to re-perform the mission. One of the mitigations for this 
risk was the award of two CRS contracts.

Q3. Do the COTS Space Act Agreements and CRS contracts allow for non-
NASA payloads to be flown on the same NASA mission?

    A3. With regard to CRS, the contractor is performing a service 
specifically for NASA. In the case of a shared CRS cargo flight to ISS, 
NASA and non-NASA payloads would have to meet the same requirements. 
Payloads are prohibited from interfering with each other, with the 
function of the cargo delivery vehicle, or with ISS systems and 
functions.
    With regard to COTS, the partner is conducting its own 
demonstration of its capability and may choose to fly other payloads on 
the demonstration flights. However, other payloads cannot interfere 
with ISS systems and functions.

3a. Can NASA veto such a shared mission?

    A3a. With regard to COTS, yes, NASA can disapprove any payload for 
missions to the ISS that does not meet ISS safety requirements. Under 
the CRS contract, NASA has the ability to disapprove a shared mission 
that has an impact to the CRS mission, does not meet ISS safety 
requirements, or causes NASA to perform additional work for which NASA 
has not received consideration.

3b. What precautions must NASA take if it shares the same mission and 
what is required of NASA?

    A3b. With regard to COTS, all payloads proposed to be flown to or 
near the ISS must be approved by the ISS Safety Review Panel.
    With regard to CRS, in the case of a shared CRS cargo flight to 
ISS, NASA and non-NASA payloads would have to meet the same 
requirements. Payloads are prohibited from interfering with each other, 
with the function of the cargo delivery vehicle, or with ISS systems 
and functions.

3c. Does NASA get any cost-reduction from the CRS contractors if it 
allows them to fly non-NASA commercial payloads on a CRS mission?
3d. If not, why not?

    A3c&d: NASA purchases CRS services in terms of kilograms of up 
mass, not flights; the NASA cargo upmass on a particular CRS flight 
might or might not take up the total upmass capacity of that flight. 
Therefore, NASA does not receive a cost reduction from the CRS 
providers if a given flight is able to take up some non-NASA cargo in 
addition to that upmass procured by NASA.
                   Answers to Post-Hearing Questions
Responses by Ms. Cristina Chaplain, Director, Acquisition and Sourcing 
        Management, U.S. Government Accountability Office

Questions submitted by Chairman Steven Palazzo

Q1. What were the weaknesses that were found with the government's use 
of Space Act Agreement for complicated development activities like CRS?

    A1. Space Act Agreements were not used in the procurement of 
Commercial Resupply Services(CRS). In June 2009, we reported that the 
International Space Station program office awarded, under a separately 
competed procurement from COTS, two commercial resupply services 
contracts in December 2008 to SpaceX and Orbital. In prior reports we 
have noted weaknesses on DOD development activities that were conducted 
through the use of the other transaction authority including the 
Evolved Expendable Launch Vehicle (EELV) and Future Combat Systems 
(FCS). For more information on these weaknesses in these programs, 
please see question 2 below.

Q2. In your testimony you state, ``Going forward, it will be important 
for both NASA and the commercial sector to avoid hinging strategies on 
assumptions that we know have negatively impacted previous efforts to 
adopt commerciallike approaches in space.'' Would you please elaborate 
on some of these erroneous assumptions and explain by providing 
examples from other government procurements that you think are 
applicable?

    A2. We have previously reported that DOD's EELV program was begun 
under the assumption that there would be a large national and 
international marketplace for commercial satellites and therefore, for 
launch vehicles. However, this commercialmarketplace never 
materialized. As a result, the government became the lonepurchaser, 
increasing costs above the original baseline. Additionally, because 
thisprogram was begun under an ``other transaction authority'' (DOD's 
authority similarto NASA's Space Act agreement authority), DOD has been 
unable to fullyunderstand the costs associated with the program. This 
lack of knowledge canimpact the government's ability to negotiate costs 
when awarding a contract.
    In 2003, the Army and Boeing entered into an ``other transaction'' 
agreement for the system development and demonstration phase of the FCS 
program. The Army's rationale for using such an agreement was to 
encourage innovation and to use itswide latitude in tailoring business, 
organizational, and technical relationships to achieve the program 
goals. The FCS program faced significant challenges in setting 
requirements, developing systems, financing development, and managing 
the effort. Congress raised concerns over the use of the agreement for 
the development of a program as large and risky as FCS, and the 
Secretary of the Army directed that the other transaction agreement be 
converted to a FAR-based contract.
    In addition, the X-33 and X-34 programs were developed as an effort 
to significantly reduce the cost of access to space by partnering with 
private industry to develop and demonstrate technologies needed for 
future reusable launch vehicles reaching orbit in one stage. Both 
programs experienced difficulties achieving their goals primarily 
because NASA did not develop realistic cost estimates, timely 
acquisition and risk management plans, and adequate and realistic 
performance goals. In particular, neither program fully assessed the 
costs associated with developing new, unproven technologies; provided 
for the financial reserves needed to deal with technical risks and 
accommodate normal development delays; developed plans to quantify and 
mitigate the risks to NASA; or established performance targets showing 
a clear path leading to an operational reusable launch vehicle. 
Underlying these difficulties were problems with the agreements and 
contracts that established the relationship between NASA and its 
industry partners and eventual erosion of commercial prospects for the 
development of new reusable launch vehicles. As a result, both programs 
were cancelled.

Questions submitted by Acting Ranking Member Jerry Costello

Q1. How timely has the response been to delays in SpaceX's second COTS 
demonstration flight due to the need to redesign components for the 
propulsion system, producing the launch vehicle tank, and in testing of 
the Dragon spacecraft's navigation sensor?

    A1. As of June 2011, no new delays have been reported and SpaceX 
has completed two additional milestones as part of its risk reduction 
efforts.

Q1a. Should we expect that SpaceX will need to address other technical 
issues following the second and third COTS demonstrations, and even 
after the initial CRS flights, given that the launch vehicle is so 
early in its flight history?

    A1a. We reported last November that NASA certifies rockets based on 
payload risk classifications, which require anywhere from 3 to 14 
successful launches for the highest classification category (lowest 
risk tolerance), depending on various certification alternatives.
    Officials at the Aerospace Corporation told us that while the 
causes of a given system's failures can change over time (i.e. from the 
first three to seven flights, or even later in the design-life of the 
system), early failures are heavily weighted toward engineering design 
or process errors, especially in the first three launches. Once these 
errors are caught and ``driven out'' of a system, workmanship errors 
are the next most frequent cause of failures. After about the seventh 
launch, the frequency/severity of workmanship errors exhibits a steady 
state throughout the flight history of a system. Aerospace officials 
said this basic trend is the same for both expendable and reusable 
launch vehicles, as well as for both government and commercial systems, 
although the failure rate is much higher for the latter.
    As such, there is a reasonable expectation that SpaceX will need to 
address additional technical issues following future demonstration 
missions; however, the incidence or duration of any delays resulting 
from such issues is a matter of speculation.

Q1b. If so, has time been added to the schedule to accommodate these 
types of changes?

    A1b. This question would best be addressed by SpaceX and NASA. 
Nevertheless, as of June 2011, there have not been any apparent changes 
to the company's COTS schedule from what we testified on May 26th. It 
has been reported in the media that NASA has given tentative approval 
for SpaceX to combine its second and third demonstration missions into 
one mission to be completed near the end of 2011.

Q2. What do any CRS delays mean for the number of scientific 
experiments that can utilize the ISS, the nature of science that can be 
conducted, and the duration of potential experiments on ISS?

    A2. We reported in November 2009 that if these vehicles are 
delayed, NASA officials said they would pursue a course of "graceful 
degradation" of the space station until conditions improve. Under such 
conditions, the space station would only conduct minimal science 
experiments. International Space Station program officials told us in 
May 2011 they have taken steps to mitigate the short-term impact of CRS 
flight delays through prepositioning of cargo on the last space shuttle 
flights. Officials added that these flights and the planned European 
Space Agency's Automated Transfer Vehicle and Japan's H-II Transfer 
Vehicle flights in 2012 will carry enough cargo to meet science-related 
cargo needs through most of 2012. Despite these steps, NASA officials 
said they would still need one flight each from SpaceX's and Orbital's 
vehicles in order to meet science-related cargo needs in 2012. Beyond 
2012, NASA is highly dependent on SpaceX's and Orbital's vehicles in 
order to fully utilize the space station.

Questions submitted by Congresswoman Donna Edwards

Q1. You say in your statement that GAO's work looking at other 
government acquisitions has shown that the government is required to 
make additional investments to mitigate risks and that the amount of 
investment can be lessened by securing, early on, accurate knowledge of 
costs, schedule, and risks. You also say that NASA has limited 
influence over the approaches taken by cargo providers. What does this 
say about the appropriateness of using the NASA cargo model to acquire 
crew transportation services?

    A1. NASA has performed extensive analysis to determine if Space Act 
agreements are appropriate for remaining phases of its commercial crew 
effort and has tentatively concluded that such agreements would not be 
appropriate. Specifically, NASA's entire commercial crew certification 
process is based on partners' compliance with NASA safety requirements 
for human spaceflight, but according to NASA, such requirements cannot 
be levied in a Space Act agreement.

Q2. Mr. Culbertson stated that for Taurus II and Cygnus, Orbital was 
able to take advantage of heritage flight-proven design features 
although new developments were required for other program areas. In the 
partnership between NASA and the commercial cargo providers, who is 
credited with the invention of the capabilities according to the Space 
Act agreements?

    A2. The Space Act agreements between NASA and Space Exploration 
Technologies Corporation (SpaceX) and Orbital Sciences Corporation 
(Orbital) state that "NASA has determined that to stimulate and support 
the capability of a United States commercial provider to provide space 
and orbital transportation services to the public and the Federal 
Government, the interest of the United States would be served" by 
waiving the government's rights to inventions \1\ made \2\ by the 
partners in the performance of work under these agreements. The Space 
Act agreements include a provision that provides a means for NASA to 
waive rights to any or all inventions that may be made under the 
agreements. We contacted NASA about whether the waivers were granted, 
but have not yet received a response. Because GAO has not specifically 
analyzed issues related to intellectual property rights and the 
commercial cargo Space Act agreements, we do not know whether or not 
the partners petitioned for such a waiver or if NASA granted it. 
Ultimately, the determination of whether or not a certain invention 
falls within the parameters of these provisions will be made on a case 
by case basis.
---------------------------------------------------------------------------
    \1\ ``Invention'' is defined by both SpaceX's and Orbital's Space 
Act agreements as ``any innovation or discovery that is or may be 
patentable or otherwise protectable under title 35 of the U.S.C.'' 
Title 35 relates to patents.
    \2\  ``Made'' is defined by both SpaceX's and Orbital's Space Act 
agreements, in relation to any invention, as ``the conception or first 
actual reduction to practice of such invention.''

---------------------------------------------------------------------------
Questions submitted by Congressman David Wu

Q1. Your prepared statement notes that ``additional resources have been 
allocated to development of the launch complex in Wallops Island to 
mitigate further slips.''

Q1a. Who is supposed to be responsible for developing the launch 
complex--NASA or Orbital?

    A1a. To support its COTS demonstration mission, Orbital and the 
Mid-Atlantic Regional Spaceport are responsible for funding the 
construction of several new facilities, including a horizontal 
integration facility (to integrate the Taurus II with the Cygnus 
spacecraft); a launch pad, mount, and ramp; and separate fueling 
facilities for the Taurus II and the Cygnus spacecraft. As required by 
its Space Act agreement with NASA, Orbital completed an initial review 
in September 2008 of the launch site facilities to be developed and 
prepared a concept of operations for its launch activities. NASA 
provided Orbital with $10 million for completing this milestone.

Q1b. What is the extent of additional funding that has been provided to 
develop the launch complex and what is the source of that funding?

    A1b. We have not conducted audit work to determine the extent and 
source of the additional funding. This question would best be addressed 
by Orbital and NASA.

Q1c. In your view, is the plan and schedule to complete the launch 
complex viable?

    A1c. We previously reported that Orbital's development schedule was 
aggressive and the company continues to experience delays in developing 
its launch complex at Wallops Island. In June 2009, we reported that 
Orbital's construction schedule indicated that its launch pad, mount, 
and ramp would be completed by the end of 2009, its horizontal 
integration facility was planned for completion in May 2010, and the 
Cygnus space vehicle fueling facility was planned to be completed by 
October 2010. In May 2011, we testified that the completion of the 
company's launch facilities remained the key program risk to meeting 
its COTS demonstration mission schedule. Orbital officials told us that 
an around-the-clock schedule would be initiated later in the summer to 
expedite the completion of verification testing of the liquid fueling 
facility, which is the primary risk factor in completing the launch 
facility. Orbital officials indicated in July 2011 that its COTS 
demonstration mission would slip from December 2011 to February 2012 to 
allow for the completion and certification of its rocket propellant and 
pressurization facilities at Wallops Island.
                   Answers to Post-Hearing Questions
Responses by Mr. Frank Culbertson, Jr., Senior Vice President and 
        Deputy General Manager, Advanced Programs Group, Orbital 
        Sciences Corporation

Questions submitted by Chairman Steven Palazzo

Q1. Under the COTS agreement your company has to meet milestones in 
order to receive progress payments:

Q1a. How would you describe NASA's responsiveness to data submissions 
made by your company when seeking to prove compliance with a milestone?

    A1a. NASA has been very responsive to our data submissions. Our 
approach has been to pre-coordinate with NASA the type of data they 
expect as part of the milestone completion criteria, which has helped 
to avoid confusion when milestone completion letters are submitted. 
Further, when submissions are made, NASA has been very responsive in 
reviewing the data and responding with questions, allowing us to 
satisfy their concerns in a timely fashion and meet our milestone 
plans.

Q1b. How responsive has NASA been with requests for technical 
assistance?

    We have generally worked any requests for technical assistance 
through NASA's Commercial Cargo and Crew Program Office and in all 
cases, they have been very responsive to our requests. They have 
coordinated the support on the NASA side and the resulting support has 
been very good.

Q2. In your testimony you state, ``. . .this is a compressed 
development schedule compared to traditional government programs, it 
has challenges, but it is using commercial development and production 
practices with NASA insight.'' NASA has always used commercial 
suppliers to build and operate launch vehicles and spacecraft, so 
please explain exactly what these ``commercial development and 
production practices'' are and how they differ from any other NASA 
development and production.

    A2. While NASA has certainly purchased goods and services from 
privately owned companies throughout its history, the federal 
acquisition regulations impose restraints on NASA's purchases which are 
quite different from commercial practices. Orbital Sciences' continuing 
analysis over several decades indicates that the spacecraft we build 
for private companies cost between one-third and one-half of the cost 
of U.S. government spacecraft. That difference is largely accounted for 
by the additional oversight required by the government at all levels 
(e.g. technical, managerial and financial).

Q3. Orbital is planning its first demonstration flights in October; 
when do you expect the launch pad at Wallops Island, Virginia will be 
ready?

    A3. Orbital has relatively little influence on the readiness date 
of the launch pad that is owned by MARS. It is our understanding that 
MARS plans a dedication ceremony for the launch pad in October. The 
first demonstration flight cannot occur any sooner than three months 
after the pad becomes available.

Q4. When does Orbital plan to fly its first non-NASA commercial mission 
with the Taurus 2 launch vehicle?

    A4. Orbital continues to discuss non-NASA Taurus II flights with 
potential customers. Since no contract has been signed, it is not yet 
appropriate to announce a mission.

Question submitted by Ranking Member Jerry Costello

Q1. To what extent does Orbital purchase insurance for the launch and 
payload associated with a CRS cargo launch? What, if any, other steps 
does Orbital take to mitigate against the potential failure of a CRS 
cargo launch?

    A1. Orbital plans on procuring insurance against the final payment 
of our milestone based contract with NASA which is approximately 20% of 
the total mission cost.
    Orbital has performed satellite launches dating from 1990 and has 
developed a solid performance record over two decades of missions for 
commercial and government customers. The keys to Orbital's success 
include well documented design, verification, and operations processes 
that are certified to AS 9100/ISO 9001 industry standards. These 
documented processes allow Orbital to incorporate lessons learned from 
earlier launches into the mission cycle for the CRS cargo launches. 
Another key attribute is Orbital's use of hardware and software that is 
common across multiple programs within Orbital, meaning that teach 
rocket component benefits from an active production line and extensive 
testing performed on several different products. In addition, Orbital 
takes several active steps to mitigate against the potential failure of 
a CRS cargo launch, including:
    1) Independent Peer Review: One of Orbital's ingrained internal 
processes is an Independent Design review performed by peers within 
each engineering department but outside of the program to ensure the 
vehicle is ready to fly.
    2) Independent `Gray Beard' Review: Orbital has retained an 
Independent Readiness Review Team (IRRT) comprised of experts with long 
careers with NASA, the Air Force and industry leading technical 
organizations. The IRRT has attended each of the Taurus II design 
reviews dating to the start of development to actively apply technical 
expertise and industry lessons learned.
    3) Independent Safety and Mission Assurance Organization: Orbital 
has created an independent S&MA reporting chain that is outside of the 
program and which reports directly to the General Manager of the Launch 
Systems Group. Patterned after NASA lessons learned from the Challenger 
disaster, the S&MA group places quality inspectors and safety engineers 
in positions of active oversight on the Taurus II program while 
maintaining independence from the program.
    4) Component Qualification Program: Orbital has developed an 
internal process for verifying the design of flight hardware prior to 
flight that is based on MIL-STD-1540, which is a recognized aerospace 
industry standard. This process ensures that each hardware component is 
tested to environmental levels exceeding the flight environments to 
demonstrate design margin (called Qualification Testing). In addition, 
each flight component is tested to flight environment levels to screen 
out workmanship defects (called Acceptance Testing). The combination of 
Qualification and Acceptance Testing provides confidence that the 
rocket components will function properly during flight. Flight software 
goes through a disciplined Functional Qualification Test that similarly 
verifies that he software meets all design requirements and that it 
functions in a reliable manner.
    5) Test Like You Fly: Orbital has created the simulation tools 
necessary to rigorously test the software and hardware together in 
realistic `hardware in the loop' environments that exercise the 
integrated system throughout multiple mission sequences prior to 
flight. Off nominal logic and redundant functions are also tested as 
part of the rigorous ground test program. Statistical methods such as 
Monte Carlo analysis are utilized in simulation environments to ensure 
mission success is still achieved even while varying critical subsystem 
parameters to worst case deviations.

Questions submitted by Congresswoman Donna Edwards

Q1. Are there any reserves being held at Orbital should a major failure 
to meet COTS objectives occur? How much reserve is being held?

    A1. Orbital's contract for the Commercial Orbital Transportation 
System (COTS) and Commercial Resupply Services (CRS) with NASA is a 
fixed price contract with Orbital responsible for additional costs for 
tasks above and beyond what NASA requires us to do to fulfill our 
obligations under the contract. Orbital has an extremely healthy 
balance sheet including hundreds of millions of dollars of cash on 
hand, and thus is in no risk of not meeting its obligations.

Q2. In the partnership between NASA and Orbital, who is credited with 
the invention of the capabilities according to the Space Act 
Agreements?
    A2. Orbital owns the intellectual property associated with our 
launch vehicle, the Taurus II, which is being entirely developed by 
Orbital with its own money. The development of the Cygnus is partially 
funded by NASA-the COTS Space Act agreement signed in 2008 gives 
intellectual property rights associated with the development of Cygnus 
to Orbital.
                   Answers to Post-Hearing Questions
Responses by Ms. Gwynne Shotwell, President, Space Exploration 
        Technologies

Questions submitted by Chairman Steven Palazzo

Q1. Under the CQTS agreement, your company has to meet milestones in 
order to receive progress payments:
a. How would you describe NASA's responsiveness to data submissions 
made by your company when seeking to prove compliance with a milestone?

    A1. NASA has created an efficient and effective process for 
receiving and responding to data submissions. NASA has been prompt in 
providing comments or additional data requests with respect to 
milestone reviews, notices of successful milestone completion, and 
timely payments.

b. How responsive has NASA been with requests for technical assistance?

    To date, NASA has been highly responsive in providing SpaceX with 
technical assistance as requested in the context of COTS. Here, NASA 
and SpaceX technical teams have worked as partners towards achieving 
the objectives of the COTS agreement. Separate from the COTS Space Act 
Agreement, SpaceX also has executed Reimbursable Space Act Agreements 
(by which SpaceX pays NASA for the use of the agency's time and 
facilities) with other NASA centers. For example, SpaceX has executed 
Reimbursable SAAs with NASA AMES Research Center and the Jet Propulsion 
Lab for technical assistance and use of facilities.

Q2. When does SpaceX plan to fly its first non-NASA commercial mission 
on the Falcon 9 launch vehicle?

    A2. SpaceX has already flown a non-NASA Falcon 9 mission. The first 
Falcon 9 flight, launched successfully on June 4, 2010 under an FAA 
commercial launch license, was a nonNASA demonstration mission. At 
present, SpaceX's next flight of the Falcon 9 for a commercial customer 
is scheduled for the third quarter of 2012.

Q3. In your testimony you said, ``SpaceX, even given the tremendous 
amount of development activities that we have had over the past few 
years, we have been profitable since 2007.'' Is this based on GAAP 
reported earnings? Has SpaceX had positive free cash flow each year 
since 2007?

    A3. We consider the most important financial metric related to 
profitability to be positive cash flow. SpaceX has experienced a 
stronger ending cash balance through positive cash flow each year since 
2007.

Q4. In your testimony you said that NASA represented less than half of 
SpaceX's 38 contracted Falcon 9 missions. Who are the non-NASA 
customers, and how many missions are scheduled for each customer?

    A4. Per the attached, SpaceX's current NASA, commercial and 
international missions under contract include 33 full Falcon 9 missions 
plus 5 optional flights to total 38. Of those flights, thirty-seven 
percent are NASA resupply missions to the International Space Station 
(ISS). The list of customers and the number of missions are indicated 
on the attached manifest; please see Attachment 1--SpaceX Manifest.

Question submitted by Acting Ranking Member Jerry Costello:

Q1. Please explain to what extent SpaceX purchases insurance for the 
launch and payload associated with a CRS cargo launch. What, if any, 
other steps does SpaceX take to mitigate against the potential failure 
of a CRS cargo launch?

    A1. SpaceX will comply with all contractual and regulatory 
requirements for each launch mission it performs. In accordance with 
the terms of its CRS contract and the applicable FAA regulations, 
SpaceX will purchase insurance at least in the amount prescribed by the 
FAA to cover the potential claims of third parties for bodily injury or 
property damage arising out of any particular licensed activity. Third-
party launch liability insurance, however, does not cover any loss or 
damage to the payload on a CRS mission. The FAA's regulatory regime 
requires NASA (or any other purchaser of launch services) to bear the 
risk of loss to the payload during a licensed activity.
    Specifically, the FAA's regulatory regIme requires (and the CRS 
contract reflects) the implementation of a reciprocal waiver of claims 
for each licensed activity, under which each party waives and releases 
claims against all the other parties to the waiver and agrees to assume 
financial responsibility for property damage it sustains and for bodily 
injury or property damage sustained by its own employees, and to hold 
harmless and indemnify each other from bodily injury or property damage 
sustained by its employees, resulting from a licensed or permitted 
activity, regardless of fault.
    The risk of loss is minimized, however, as SpaceX performs 
extensive testing and analyses to ensure the success of each mission. 
In addition, NASA maintains extensive insight and approval rights under 
the CRS contract in order to allow NASA to assess the risk to the cargo 
itself and to its safe and timely delivery. Finally, NASA reserves the 
right to utilize Government-performed technical assessments of launch 
and cargo vehicles/configurations to evaluate the readiness of the 
Contractor to deliver NASA cargo to the ISS. The combined efforts of 
the SpaceX-NASA team effectively mitigate the risk of potential failure 
of a CRS cargo launch.

Questions submitted by Representative Donna Edwards:

Q1. I take from your testimony that SpaceX will be able to sell its 
designs, vehicles, and capabilities to partners other than NASA. Can 
you estimate the market value of this transfer? How much could SpaceX 
stand to gain from selling its capabilities in the private market?

    A1. As described by NASA in its initial COTS solicitation of 
January 2006, the COTS program was established to: (a) implement U.S. 
Space Exploration policy with an investment to stimulate commercial 
enterprises in space, (b) facilitate U.S. private industry 
demonstration of cargo and crew space transportation capabilities with 
the goal of achieving reliable, cost effective access to low-Earth 
orbit, and (c) create a market environment in which commercial space 
transportation services are available to Government and private sector 
customers. As the product of joint public-private funding, there is no 
``transfer'' and the work performed under COTS is meant to be 
commercialized. SpaceX, like all U.S. entities, is bound by export 
control laws and other restrictions from selling designs, vehicles or 
capabilities to non-U.S. entities, absent State Department approvals. 
SpaceX may sell services, for which some of the underlying technologies 
were developed under the COTS program, into the commercial and 
governmental space transportation markets. Demand in the private 
commercial market varies from year-to-year and market share potential 
depends on a wide range of factors; however, as noted in hearing 
testimony, whereas in 1980, 100 percent of commercial launches took 
place from within the United States; today, it is less than 12 percent. 
For the first time in more than three decades, via SpaceX, an America 
company has begun to recapture international market-share in the 
commercial satellite launch sector--a sector in which the U.S. has seen 
steady erosion relative to Chinese, Russian and French competitors over 
the three previous decades.

Q2. In the partnership between NASA and SpaceX, who is credited with 
the invention of the capabilities according to the Space Act 
Agreements?

    A2. Under the standard Invention and Patent Rights Clause included 
by NASA in Space Act Agreements under which the nongovernmental partner 
performs work of an inventive type for NASA, the partner may obtain 
title to inventions it makes under the SAA through an advance or 
individual waiver, and NASA benefits through retention of a government 
purpose license in the invention, as well as from the available 
commercial source of a needed technology. In this case of the 
partnership between NASA and SpaceX, NASA has determined that in order 
to stimulate and support the capability of a United States commercial 
provider to provide space and orbital transportation services to the 
public and the Federal Government, the interest of the United States 
would be served by waiving to SpaceX the rights to any inventions made 
by SpaceX in the performance of work under the COTS SAA. With respect 
to each SpaceX invention for which a waiver of rights is applicable, 
however, NASA reserves (a) an irrevocable, royalty-free license for the 
practice of such invention throughout the world by or on behalf of the 
United States or any foreign government in accordance with any treaty 
or agreement with the United States; and (b) march-in rights.


                              Appendix II

                              ----------                              


                   Statement Submitted for the Record




                   Statement Submitted for the Record

            Prepared Statement of Representative Pete Olson
    Since I have been a Member of Congress, I have been a strong 
advocate of NASA, its mission, and the significant importance that 
space has had around the world and to our country. NASA's programs 
profoundly impact almost all aspects of the U.S. economy and our daily 
lives through technology development and influence in national 
security, medical science, aeronautics, planetary science, research, 
education and many other areas.
    However, what is no longer clear to me and many of my colleagues is 
. . . NASA's current mission. The U.S. space industry needs a path 
forward that sets a clear direction with attainable goals and an 
appropriate balance of human space flight, exploration, technology, 
science, and aeronautics programs that can assure U.S. competitiveness 
and a strong future for our country and the industry.
    Collectively, the agency and programs have been studied and 
evaluated extensively in the past decade by Presidential Commissions, 
independent commissions, The Government Accountability Office, NASA's 
Office of the Inspector General, professional organizations and NASA, 
resulting in complete instability due to too many changes in direction, 
policy, budget and programs, to safely, affordably, and successfully 
move forward in any U.S. space endeavor. This trend must stop--NASA is 
wasting billions of tax payer dollars as a result of ineffective 
management, and imprudent decisions. The agency, a proud symbol of U.S. 
exceptionalism and regarded as one of the most technically capable, 
worthy of our national investment, has now deteriorated to an agency 
whose future and purpose is in question and programs under constant 
scrutiny.
    Right now we face a gap with an unknown end . . . a gap in U.S. 
space capability that was unnecessary, risking our future and global 
leadership in space, and creating a detrimental and irreversible impact 
to our industrial capability for years to come. The position we find 
ourselves in was entirely avoidable and must now be corrected with 
explicit direction, clearly articulated goals, and the commensurate 
funding. Performance and accountability to these goals--safety, cost, 
program milestones, and succeeding or failing--is our collective 
responsibility. The viability of NASA's future and our nation's future 
in space depends on our success, right now.
    The civil space program needed to evolve in order to move beyond 
Low Earth Orbit where our expertise and resources have been the focus 
for more than 30 years. There is challenge in this necessary evolution 
but methodical, strategic planning could have preserved the critical 
capabilities required for the next step. Instead, the Administration 
opened up a revolution in February of 2010 that has led to our 
fragmented industry. By evidence of actions on the part of NASA and the 
Administration, we are operating under two government policies--the 
NASA Authorization of 2010 enacted last October and the President's 
National Space Policy released last June. Now, as Congress has stepped 
in, in partnership with the Agency and industry to bring stability back 
into the agencies programs, we must understand where our programs are 
in accomplishing the goals and objectives of their programs. In order 
to equitably manage our precious government resources, we must hold all 
segments of the industry--The Administration, NASA, and contractors--
accountable for their actions and performance.
    There is only one policy that should be directing NASA and the 
civil space industry . . . the Authorization Act of 2010, funded 
through the Continuing Resolution. NASA must move forward, without 
hesitation, in implementing the actions detailed in the NASA 
Authorization of 2010, enacted by the President and Congress, last 
October.
    The Authorization directs NASA to continue the development of a 
commercial cargo and crew capability to support the International Space 
Station and accelerate the development of the Space Launch System (SLS) 
and Multipurpose Crew Vehicle (MPCV) that will take the U.S. beyond low 
earth orbit (LEO) order to develop capabilities to take humans to Mars. 
The Authorization is the most prudent action at this point, well 
thought out in the context of the budget environment, current 
capabilities, and industry development to assure a strong future in 
space for the U.S.
    Additional Material Submitted for the Record by Mr. William H. 
    Gerstenmaier, Associate Administrator, Space Operations Mission 
       Directorate, National Aeronautics and Space Administration



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