Jul 08 2014

Bloomberg Letter to the Editor

Letter to the Editor in response to “SpaceX Versus Senator Shelby’s Rocket to Nowhere”

June 27, 2014

On June 23, 2014, Bloomberg View printed an op-ed entitled “SpaceX Versus Senator Shelby's Rocket to Nowhere,” which I believe provides an inaccurate depiction of the facts. While the issues are numerous, I would like to take the opportunity to clarify some of the more glaring misrepresentations in the article. Namely, the article improperly describes Commercial Crew contracts and mischaracterizes language included in the Fiscal Year 2015 Commerce, Justice, Science (CJS) Appropriations bill. 

The piece states that language included in the CJS bill would create more paperwork and red-tape by requiring Commercial Crew contract competitors to submit certified cost and pricing data.  Moreover, the author suggests that this data is typically only required under a cost-plus contract.  The fact is, however, that providing certified cost and pricing data is a requirement for all federal contracts, including firm-fixed-price contracts. Today, there are three large-scale NASA projects under firm-fixed-price contracts and all of them include the requirement for certified cost and pricing data.  These projects include the GRACE Follow-On mission, the ICESat-2 mission, and the recently concluded LADEE mission. Yet, NASA has waived this condition for the Commercial Crew program.

In addition, the author is under the misimpression that the requirement included in the CJS bill covers the totality of the contract.  In fact, the language only applies to contract changes that exceed $700,000.  If, what the article contends is true – “contractors who complete work on such projects under-budget keep the difference; those who don’t, swallow the losses” – then the aforementioned requirement should not be an issue because it would never be applicable.  Furthermore, the requirement would only prove problematic for those companies that are unable to comply.

All too often Congress and the American people have been lured into a false sense of security by “firm-fixed-price contracts” only to find out later that there are millions of dollars in additional costs.  Contrary to the author’s arguments, these costs are borne by taxpayers – not by contractors.  The recently concluded LADEE mission is a prime example of a firm-fixed-price contract that ultimately cost taxpayers $18.6 million more than was expected.  Additionally, the GAO has identified ICESat-2, also a firm-fixed-price contract, as a NASA program projected to exceed the agency baseline cost commitment by at least 15 percent, or $84 million. 

Given NASA’s history with firm-fixed-price contracts, I sought to re-insert accountability measures that NASA purposefully excluded from the Commercial Crew contract.  I strongly believe that accountability and transparency are essential components of any government program.  They are necessary to ensure that the government is getting what it has paid for and, more importantly, to ensure that taxpayers are protected if contractors do not deliver the product promised at the price contracted.  Contracts that assume a ruse of exactness and transparency do not protect the interests of taxpayers – they protect contractors.

My interest is in defending the American people and their hard-earned tax dollars.  Requiring ALL contractors to comply with the rules is the best way to do that.

Senator Shelby (R-Ala.) is the Vice Chairman of the Senate Appropriations Committee and its Subcommittee on Commerce, Justice, Science, and Related Agencies.