WASHINGTON — Northrop Grumman has taken another charge on its contract to build a module for NASA's Lunar Gateway, bringing its losses for the year on that program to $100 million.
In its 2023 fourth-quarter and full-year earnings release on January 25, the company disclosed “unfavorable EAC results of $42 million.” [estimate at completion] “amendment” to its contract to build the Gateway's Habitat and Logistics (HALO) unit. The company recorded a similar charge of $36 million in the second quarter, and said this year's total charges on the contract reached $100 million.
The company blamed the latest charges primarily on “cost growth resulting from evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges.” The company gave the same explanation when it reported these charges in the second quarter.
Northrop was awarded a $935 million firm-fixed-price contract from NASA in July 2021 to build the module, which is based on the company's Cygnus cargo spacecraft. HALO will provide primary accommodations on the Gateway and include several docking ports for visiting Orion spacecraft and lunar landers as well as additional modules provided by international partners. It will be launched with the Maxar-built power and propulsion element (PPE) on the Falcon Heavy.
In July, when Northrop announced the second-quarter charge, company executives said they believed they had mitigated the risk of design changes by doing initial work on HALO under cost-plus contracts before accepting a fixed-price contract to produce it.
“With the advent of the HALO program, the requirements are not as stable as we or the government expected, and we are working with them to address change management as we move forward,” Kathy Warden, Northrop Grumman's CEO, said on a July earnings call.
Warden only mentioned the latter charge in his recent earnings talk, which was dominated by discussion of the much larger fee the company took on its contract to produce the B-21 stealth bomber. “We have programs like HALO that definitely teach us some additional lessons and we are applying them as we move forward,” she said.
Northrop was taking a more cautious approach in bidding on fixed-price contracts in general, she said. “We took a different approach in looking at a fixed fixed price, where we either declined to make an offer if the customer chose to go to a fixed price, or we offered a price, in the case of SDA Tranche 2, that we thought was fair and reasonable and the customer decided not to further negotiate with us.”
The Space Development Agency awarded contracts to L3Harris, Lockheed Martin and Sierra Space on January 16 for the Tracking Layer Tranche 2 constellation of missile tracking satellites worth a total of about $2.5 billion. Northrop won a contract in 2022 to provide some satellites for Tracking Layer Tranche 1.
NASA had been working to launch HALO and PPE in October 2025, but the agency's Jan. 9 announcement that it would postpone the next two Artemis missions by about a year could delay the launch of the first Gateway elements separately.
“We are now working with our industry partners at Maxar and Northrop Grumman to review the timeline for when it makes sense to launch this before Artemis 4,” which is scheduled for no later than September 2028, said Amit Kshatriya, NASA's deputy associate administrator. to Mars, in a call with reporters to announce the postponement. “We think they have a great path to get there to support this mission, but we will update that timeline.”
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