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Smaller Firms Win Bid to Resupply Space Station

By Dana Hedgpeth
Washington Post Staff Writer
Wednesday, December 24, 2008

NASA yesterday gave two companies the job of resupplying the International Space Station after the space shuttle retires, picking Orbital Sciences of Dulles and SpaceX of Hawthorne, Calif., for a $3.5 billion contract.

NASA says the deal is a milestone for the agency as part of its effort to encourage companies to get more involved in space transport and it was seen as a major win for two relatively small firms that beat out the giants of the space industry: Lockheed Martin of Bethesda and Boeing of Chicago.

After the shuttle fleet retires in 2010, NASA will depend on Russian rockets to get astronauts to and from the orbiting station until a new American spacecraft can be built. Orbital and SpaceX will split unmanned cargo duties during that time.

Companies, including Lockheed Martin and Boeing, have long built spacecraft for NASA, but that has been under contract and the space agency owned the hardware. In the past year, Orbital and SpaceX were part of a roughly $500 million development program designed to encourage companies to perform the costly and risky work of building rockets to carry cargo to and from the space station, freeing NASA to focus on space exploration.

The new contract "will serve as a showcase for the types of commercial services U.S. space companies can offer NASA," David W. Thompson, Orbital's chairman and chief executive, said in a statement.

Orbital has annual sales of about $1.1 billion and employs 3,800 people across the country, including about 2,000 in the D.C. region. The bulk of its business is related to developing technologies for NASA and working on missile defense systems for the Pentagon. It also sells commercial communications satellites.

SpaceX was founded by PayPal co-founder Elon Musk, who is among the first entrepreneurs to compete in the business of flying cargo -- and eventually astronauts -- to space.

Bill Gerstenmaier, associate administrator for NASA's space operations, said in a conference call that Orbital and SpaceX won the seven-year contract because they had "good sound plans and good technical proposals." The two companies beat out a team that included PlanetSpace, a Chicago-based company that makes space-related technologies, Lockheed Martin, Boeing and ATK, a Minneapolis company that makes rocket motors.

"This contract is about trying to leverage suppliers who are willing to take on some risk themselves to develop new technologies," said Chris Donaghey, a defense technology industry analyst at SunTrust Robinson Humphrey in Atlanta. "SpaceX is the poster child for that and Orbital committed very early on to developing this rocket on their own. For NASA, this is about getting a capability they know they need, but trying to get it at a better price than they've historically been able to get from traditional suppliers."

Awarding a contract to SpaceX and Orbital is a "way of sustaining an American participation in the space station," said John Pike, a space expert at Global Security.org, a Washington think tank. "We've spent tens of billions of dollars on the space station and this is a way for us to continue to participate in it," he said.

"Otherwise the shuttle gets retired in 2010 and we have no way of getting people or toilet paper up there," Pike said. "This is significant because it is a way of taking American taxpayers' dollars to pay an American company to take American payloads to the space station so we're not entirely dependent on the kindness of the Russians to get to our space station."

As part of the deal, SpaceX and Orbital will build unmanned cargo vehicles that can carry a minimum of 20 metric tons. Eight flights, costing about $1.9 billion, will be handled by Orbital and 12 flights that will cost about $1.6 billion will be done by SpaceX, NASA officials said.

Marco Caceres, a senior analyst on the aerospace and defense industry at the Teal Group in Fairfax, said the cargo contract "kills two birds with one stone. They get the cargo service to the space station, which gives them a Band-Aid solution, and they're doing what they've always wanted to do -- provide incentives for the commercialization of space."

For Lockheed Martin, losing the NASA contract is somewhat of a blow, according to Paul Nisbet, an aerospace analyst at JSA Research.

"It is partially a surprise that Lockheed lost," he said. "NASA is sort of spreading the wealth here. They have several participants in their programs including Lockheed, Boeing and Orbital. It was just Orbital's turn this time."

Jeffery Adams, a spokesman for Lockheed Martin, referred comments on the NASA deal to PlanetSpace, which was the lead contractor for their team. Officials at Planet Space did not respond to e-mails or calls seeking comment.

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