On Monday, NASA announced that it had awarded a new $4.6 billion "production" contract to Lockheed Martin for six additional Orion spacecraft, which will be used for Artemis missions to the Moon, mostly during the 2020s.

“This contract secures Orion production through the next decade, demonstrating NASA’s commitment to establishing a sustainable presence at the Moon to bring back new knowledge and prepare for sending astronauts to Mars,” said NASA Administrator Jim Bridenstine in a news release.

The contract is good politics for Bridenstine, a former member of Congress. After his decision last month to base the lunar lander program at Marshall Space Flight Center in Alabama, Congressional representatives from Texas pushed back. They complained that Johnson Space Center, in Houston, should manage the lander program.

With this decision, Bridenstine has signaled his desire for a long-term program to manage the construction of Orion vehicles at the Houston center. The decision appeared to mollify Bridenstine's critics, including Senator Ted Cruz (R-Texas). “I am pleased that Administrator Bridenstine has heeded my calls and is taking significant steps to ensure that Johnson continues to grow with the exciting future of manned exploration that lies ahead," Cruz said. "More needs to be done, and I look forward to production ramping up in the weeks and months to come and to more opportunities with NASA.”

Parochial politics aside, perhaps the more pertinent question is whether NASA got a good deal with this contract. As The Planetary Society's Casey Dreier noted, under this agreement, NASA will pay $900 million for the first three Orion capsules under this order and $633 million for the final three. For comparison, NASA's marginal cost for the Apollo Command and Service Module, in inflation-adjusted dollars, was $463 million.

Cost-plus

NASA's prices are also not firm under this deal. Instead of negotiating a fixed-price contract for these Orion capsules, these first six spacecraft will be acquired by cost-plus-incentive-fee contracts, the agency said. Under cost-plus deals, a contractor receives reimbursement plus a fee regardless of whether it delivers the vehicles on time or late, and on budget or over budget.

In 2016, NASA had signaled that as it moved into the production phase of Orion, it intended to use fixed-price contracting—which usually saves money and incentivizes a contractor to deliver a product in a timely manner. When it issued a "Request for Information" to the aerospace industry in September, 2016 for Orion production, NASA said, "It is contemplated that this effort will utilize, to the greatest extent possible, firm-fixed price contracting."

It's not clear what has changed since then. In its news release, NASA cited Orion as a "complex, high-tech system" that justified the use of cost-plus contracting. However, Lockheed and NASA have been working on the design and development of Orion for 15 years, and the agency has invested $18 billion in present-day dollars into the vehicle. If not a transition from cost-plus contracts now, then when?

By contrast, NASA has signaled that the lunar lander for its Artemis program will be funded through fixed-price contracts—even though these vehicles will arguably be more complex than Orion and lack its 15-year design and development runway.