Outsourcing looks more like monopoly at NASA

NASA has two big centers for manned space flights. Shuttles are launched at Kennedy
Space Center, and when the shuttle clears the tower at Pad 39, control shifts to the
Lyndon B. Johnson Space Center in Houston.

In the past, a dozen or more contractors and far more subcontractors contributed to the
shuttle effort. But in November 1995, NASA administrator Daniel S. Goldin signed a
sole-source justification that will end competition for space shuttle operations and
probably will end competition for support of the manned space program forever.

Mr. Goldin's actions brought all the shuttle contracts within the control of a single
contract awarded noncompetitively. The big ($6.2 billion) winner is the United Space
Alliance, a brand-new joint venture uniting Lockheed Martin Corp. (especially the units
that once were part of Loral Corp.) with Rockwell International Corp. Of course, Boeing
Co. is completing its acquisition of Rockwell.

Three years ago, NASA had major individually competed and awarded contracts with all
five of the Alliance companies, but now one giant Alliance provides lots of NASA services.
Incidentally, NASA has awarded the prime space station hardware contract to Boeing, but
Lockheed Martin as a sub has so much of the fabrication work on the station it may
actually make as much as Boeing.

And Lockheed Martin has the contract to build the space delivery vehicle that will
succeed the Space Shuttle. So Lockheed Martin gets to build them and fly them.

Unfortunately, the consolidation hasn't ended there. The United Space Alliance has
taken full advantage of its sole-source prime contractor status to make changes in the
ranks of its subcontractors and potential competitors.

For example, two major subcontractors at the Johnson Space Center recently were
terminated and their more than 1,000 jobs were incorporated into the Alliance. In fact,
the two companies collectively had spent almost decades serving NASA before they were
thrown out and their work forces taken.

One possible result or goal of the process may be to ensure there is no future
competition for any important NASA contract at either space center. If you take away a
company's work force without competition, how does it compete for future work? It has no
resumes and no facilities. It has managers but no troops.

Ironically, one of the newly terminated subcontractors received the prestigious Low
Award, given to NASA's top contractor, in 1995, so performance cannot be the issue.
Neither is cutting costs, since the subcontractors say they agreed to meet difficult cost
reduction targets but were canned anyway.

So why did the Alliance fire long-loyal NASA subcontractors? Mr. Goldin recently
stated, ""If anyone has a concern, we'll stop the [sole-source] process and
evaluate whether we ought to move on.''

Perhaps Congress, the NASA inspector general and the press should ask. But if Congress
does not ask in the very near future, it will be too late and the manned space program
will belong to a single corporate entity, even if the single entity is multi- or even

Such a major change in contracting philosophy causes lots of ripples in the contracting
pond. NASA may not have thought through the effects. For example, if a NASA employee
logically could seek work at only one private-sector entity after leaving the government,
does NASA really think its center directors and managers can be tough on that single
entity without wondering if they are making themselves unemployable?

Some government employees will plunge ahead regardless, but some may not. In the past,
NASA maintained a whole group of contractors, so top employees who had to get tough with
one contractor in the government's interest wouldn't have believed they were cutting
themselves off from virtually all future employment in the private sector.

As this NASA episode demonstrates, the unraveling of the fundamental policy embodied in
the 1984 Competition in Contracting Act is proceeding at breakneck speed in certain

NASA always has led other agencies in outsourcing and use of contractors. Outsourcing
can be good or outsourcing can be bad. But this case demonstrates that sole-source
""outsourcing'' may lead to inappropriate consolidation of all contracting at an
agency for the benefit of one or a few gargantuan players.

This may work for the biggest companies, but whether it works for the rest of the
contracting community is not clear. Competitive outsourcing will make the most robust
teams and the broadest participation.

Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell &
Ryan. He has long experience in federal information technology issues.

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