An independent report published Thursday contained troubling findings about the money spent by the agency on propulsion for the Space Launch System rocket. Moreover, the report by NASA Inspector General Paul Martin warns that if these costs are not controlled, it could jeopardize plans to return to the Moon.

Bluntly, Martin wrote that if the agency does not rein in spending, "NASA and its contracts will continue to exceed planned cost and schedule, resulting in a reduced availability of funds, delayed launches, and the erosion of the public’s trust in the agency’s ability to responsibly spend taxpayer money and meet mission goals and objectives—including returning humans safely to the Moon."

The 50-page report analyzed contracts that NASA has given to Aerojet Rocketdyne, for RS-25 main engines, and to Northrop Grumman, for solid-rocket boosters. The engines and boosters power the first stage of the Space Launch System rocket, which made a successful debut flight in November 2022. The rocket will launch astronauts for the Artemis missions to the Moon.

A lot of money

The report found that efforts to refurbish RS-25 engines, manufacture new ones, and produce solid rocket boosters for the initial Artemis missions have resulted in about $6 billion in cost increases and more than six years in schedule delays compared to NASA's original projections.

To put this into perspective, Martin is talking about the cost increases, not the total cost of the engines and boosters. This means that overruns for the propulsion system of the SLS rocket alone are costing the space agency about as much as it will spend on developing two reusable lunar landers—SpaceX's Starship and Blue Origin's Blue Moon.

The principal difference is the contracting method, and Martin uses—albeit in bureaucratic terms—harsh language for NASA's choice of cost-plus contracting. Cost-plus contracts are intended to be used in experimental and cutting-edge technology programs, such as the construction of the James Webb Space Telescope. But in this case, Aerojet was modifying engines that had flown multiple times on the space shuttle program; and Northrop was modifying boosters that were similarly used many times.

"The agency’s reliance on cost-plus awards increases its financial risk," Martin wrote. "In our judgment, NASA has used cost-plus contracting structures for its SLS booster and engine contracts to a greater extent than warranted. Although the SLS is a new vehicle, its heritage boosters and RS-25 engines are well-established."

Cost-plus contracts pay the recipient the total amount of their costs plus a fee. This is in contrast to the fixed-price contracts NASA has given SpaceX and Blue Origin for landers, the design of which is much more experimental and cutting-edge in nature than repurposing space shuttle hardware.

The new report also takes issue with the fees awarded as part of the propulsion contracts. For example, even though Aerojet delivered only five of 16 of the refurbished RS-25 rocket engines by the end of its contract, it was rated "very good" by the space agency for this subpar work.

Costly engines

There are other head-scratching issues raised by the report. For example, the current cost of manufacturing a new RS-25 main engine—which will be used for the Artemis V mission and onward—is about $100 million. NASA and Aerojet are trying to achieve a 30 percent cost savings by the end of this decade, bringing the cost down to $70.5 million.

However, in projecting these savings, Martin notes that NASA neglected to include some costs: "When calculating the total cost of the new RS-25 engines, NASA and Aerojet are only including material, engineering support, and touch labor (hands-on labor effort), while project management and overhead costs are excluded." Who knows, maybe Aerojet's managers will work for free for a few years.

Compared to the private sector, even getting the cost of an RS-25 engine down to $70.5 million is a preposterously high price. Blue Origin manufactures engines of comparable power and size, the BE-4, for less than $20 million. And SpaceX is seeking to push the similarly powerful Raptor rocket engine costs even lower, to less than $1 million per engine.

Based on all of the new data in his latest report, Martin said his office has had to revise its estimate of the total cost of a Space System Launch, inclusive of ground systems and the Orion spacecraft. It is now $4.2 billion.