NASA IG Slams Bechtel on Mobile Launcher 2

NASA’s Office of Inspector General issued a harsh assessment of Bechtel’s performance on the contract to build a second Mobile Launcher for NASA’s Space Launch System rocket today. Mobile Launcher 2 is required for the more capable version of SLS NASA needs to execute the Artemis lunar program, but the cost has more than doubled and it will be at least 2.5 years late. The scathing report has been much anticipated since the head of NASA himself excoriated Bechtel in congressional testimony and expressed eagerness to see the OIG’s take on what went wrong.

NASA Administrator Bill Nelson left no doubt about where he placed the blame during testimony before the Senate Appropriations Commerce-Justice-Science subcommittee in early May. He accused Bechtel of underbidding the contract “and they couldn’t perform.” Because it is a cost-plus contract, where the government assumes the risk of overruns, NASA is stuck paying for it. “There’s no way under the contract, since it’s a cost-plus contract, that we can do anything but eat it. That’s not right.”

The OIG agreed on Bechtel’s poor performance, but didn’t let NASA off the hook either, noting that it resumed paying the company award fees (the “plus” part of a cost-plus contract, which is profit for the company) despite everything.

NASA awarded Bechtel a $383 million contract in 2019 to design, build, test, and commission ML-2. NASA needs ML-2 for the upgraded Block 1B version of SLS needed for the fourth flight in the Artemis sequence to support construction of the Gateway space station in lunar orbit and flights beyond that to achieve NASA’s goal of sustainable lunar exploration. Block IB can place 40 percent more mass into lunar orbit than Block I.

SLS Block I will be used for the uncrewed Artemis I test flight, the Artemis II crewed test flight, and Artemis III, the first flight to return astronauts to the lunar surface since 1972. It uses an Interim Cryogenic Propulsion Stage derived from the upper stage for the United Launch Alliance Delta IV rocket. Block IB will use a new, more capable Exploration Upper Stage that is heavier and taller than ICPS, hence the need for a different vehicle to support the integrated vehicle while it is being assembled in the Vehicle Assembly Building at Kennedy Space Center, transferred to the launch pad by the Crawler-Transporter, through launch. An even more capable SLS variant envisioned for the future, Block II, would also use ML-2.

The single “design-build” contract was a departure from the traditional “design-bid-build” approach used for ML-1 where design and construction are sequential and bid separately. The goal was to avoid communications and integration problems encountered with ML-1 and streamline the process to accelerate the schedule.

The OIG found that the new cost estimate is $960.1 million, more than 2.5 times the original cost, with delivery in October 2025 instead of March 2023, more than 2.5 years late. As of this moment, only artistic renderings of ML-2 are available because the final design is still up in the air.

“We expect further cost increases as inevitable technical challenges arise when ML-2 construction begins. Given the time NASA requires for additional testing once the structure is delivered, the earliest the ML-2 will be available for Artemis IV is November 2026,” the OIG concluded. NASA’s current plan is to launch that mission in August 2026.

That’s still better than an independent review cited in the OIG report that expects the delivery date will be December 2027, meaning Artemis IV could not launch until a year after that, the end of 2028, per the OIG.

The OIG attributed the delays and cost growth mostly to Bechtel.

The ML-2’s substantial cost increases and schedule delays can be attributed primarily to Bechtel’s poor performance on the contract, with more than 70 percent ($421.1 million) of the contract’s cost increases and over 1.5 years of delays related to its performance. For example, Bechtel underestimated the ML-2 project’s scope and complexity, experienced ML-2 weight management challenges, and experienced staffing turnover and retention issues. Additionally, Bechtel’s lack of a certified [Earned Value Management System] since inception of the ML-2 contract—a contractually required tool for measuring and assessing project performance—has limited NASA’s insight into the project’s cost and schedule issues.

NASA got its own share of criticism.

Bechtel’s performance notwithstanding, NASA’s management practices contributed to the project’s cost increases and schedule delays. NASA awarded the ML-2 contract while the Exploration Upper Stage—the primary reason NASA needed a second mobile launcher—lacked final requirements, impacting the ML-2 design. With respect to contract management, while NASA withheld award fees for a 6-month performance period in spring 2021 due to Bechtel’s poor performance, the Agency did not continue this practice despite the contractor’s continued poor performance in the subsequent award period. Therefore, we question nearly $3 million in award fees NASA awarded to Bechtel for this period.

Among the OIG’s recommendations is that NASA’s procurement office issue policy guidance to reinforce existing regulations “for stopping or withholding payments to a contractor for significant deficiences in business systems” like the Earned Value Management System.

NASA agreed with that and the OIG’s other four recommendations. The agency told the OIG it is considering converting part of the contract from cost-plus to fixed-price, though no final decision has been made.

Bechtel does not agree. Spokesperson Fred deSousa, Manager of Public Affairs for Bechtel Nuclear, Security & Environmental, issued a statement today saying the report does not provide a full picture or take account of the complexities of the job or the impacts of COVID.

Mobile Launcher 2 is a critical piece of infrastructure that must support human spaceflight, and Bechtel is committed to successfully delivering it. The project has experienced significant cost and schedule growth beyond the original good faith estimates, which did not appreciate the project complexity and necessary change resulting from parallel design evolution of all launch systems.

Unfortunately, the Inspector General’s report does not provide a complete picture of what led to the current situation, and we strongly disagree with the report’s overarching conclusions on the primary causes of the cost increases.  

The report does not appreciate the significance of the impacts of necessary design changes in support of the Artemis IV mission; nor does it address the significant and ongoing impacts of the global pandemic; and it wrongly attributes significant cost increases to poor project performance, including management of the mobile launcher weight, which is a unique engineering challenge that Bechtel and NASA engineers have resolved together. 

In partnership with NASA, we are now focused on reaching 90% design completion before construction starts to establish a high-confidence estimate of the full cost and schedule.  

We are very proud of the excellent joint team working to deliver ML2, and we remain committed to supporting NASA and the Artemis program in the safest, most efficient way possible. — Bechtel