Shuttle contractors again facing scrutiny

Matthew Fordahl

Tuesday, Feb. 4, 2003 | 9:57 a.m.

SAN JOSE, Calif. -- As NASA investigates the Columbia space shuttle disaster, the spotlight once again is on the long list of private contractors who maintain the shuttle fleet in an era of tight budgets and industry consolidation.

Though it's too early to determine causes or point fingers, past disasters with both manned and unmanned spacecraft ultimately have been blamed on cost-cutting measures, lax oversight and miscommunication between the nation's space agency and its dozens of contractors.

Since the end of the Cold War, the closely tied defense and space industries have seen major consolidation as companies vie for fewer contracts and win the work by bidding low.

At the same time, NASA has increasingly relied on private contractors as it trimmed costs, shifting work that was previously handled by federal employees -- including much of the shuttle and unmanned space programs -- to private companies.

"I don't think it's been a great improvement," said Robert Park, a University of Maryland expert on the space program.

In 1996 NASA handed over day-to-day operation of the shuttle fleet to United Space Alliance, which then consisted of Rockwell International and Lockheed Martin Corp. Boeing Co. took over Rockwell's role that year.

Currently $9 of every $10 the space agency spends goes to its contractors.

United Space Alliance's six-year contract, from 1996 to 2002, was valued at $9 billion. Last year it was extended for another two years for $2.9 billion. The alliance was the space agency's largest contractor in 2001, with procurements totaling $1.7 billion. It currently has more than 120 subcontractors.

In the past, spacecraft problems have been largely blamed on underfunding, which ultimately trickles down from decisions made by the White House and Congress.

But consolidation does not necessarily mean safety has been compromised, said Marco Caceres, an analyst at the Teal Group consulting firm.

"It does imply saving money and finding more efficient ways of doing something," he said. "It doesn't mean you're compromising safety. It could mean you're enhancing safety."

With tight budgets, agency and company managers have been reluctant to make costly decisions.

That was the case in the explosion of the space shuttle Challenger in 1986.

In that incident, Morton Thiokol workers warned NASA and their employer about the danger of launching the shuttle Challenger in cold weather. Brittle O-rings on one of the Thiokol-built boosters leaked hot gas, causing the explosion that killed all seven astronauts.

The disaster led to a redesign of the boosters, as well as countless safety reforms.

Early speculation on the cause of Saturday's Columbia accident, which also killed all seven aboard, is focusing on a piece of foam insulation that fell off the external fuel tank during launch, striking a section of the fragile thermal tiles on the orbiter's left wing.

The external fuel tank was built by Lockheed Martin Corp. at its Michoud Assembly Center in Louisiana. A Lockheed subsidiary also handled the design, installation and maintenance of the shuttle fleets' thermal tiles.

Lockheed earlier came under fire after NASA lost two unmanned Mars spacecraft in 1999.

First the $125 million Mars Climate Orbiter burned up in the Martian atmosphere after Lockheed engineers failed to convert critical navigation data into metric numbers.

Two months later a software glitch that was not caught by NASA or Lockheed caused the $165 million Mars Polar Lander to shut off its engines prematurely during landing. The spacecraft is believed to have crashed into the Red Planet.

In both cases, review boards found oversight and funding to be lacking.

In 2001 a NASA audit criticized the space agency's oversight of the United Space Alliance's shuttle safety operations. An alliance spokesman did not immediately return calls seeking comment on the audit and whether any changes were made as a result.

Megan Mariman, a Lockheed spokeswoman, said the company was cooperating with NASA in the investigation but referred specific questions to the alliance. Boeing spokesman Dan Beck said it was premature to be talking about the future of United Space Alliance.

Space shuttles have flown dozens of missions safely and successfully since the alliance became the prime contractor. In 2001 an Alliance employee was cited for averting a disaster when he spotted hairline cracks in the fuel lines of the shuttle Atlantis.

Still, major shuttle contractors aren't expected to take a major financial hit as a result of the Columbia disaster, said Robert Friedman, senior aerospace defense analyst for Standard & Poor's Equity Group.

NASA-related sales account only for 4 percent and 3 percent of total sales for Boeing and Lockheed Martin, respectively.

But smaller subcontractors, such as Alliant Techsystems, which now owns Thiokol, will likely see fallout in both revenues and from investors, he said.

"I wouldn't base my long-term growth prospects on NASA business, that's for sure," Friedman said.

In trading on the New York Stock Exchange on Monday, Alliant shares fell $6.34, or 11.7 percent, to close at $48.02. Boeing shares dropped 48 cents, or 1.5 percent, to $31.11. Lockheed stock fell $1.50, or 2.9 percent, to $49.55.