NASA has picked a joint venture between Bethesda-based Lockheed Martin Corp. and Rockwell International Corp. to negotiate a contract worth more than $2 billion a year to take over the operation of the space shuttle program.
Officials at NASA and both companies said the move is designed to save taxpayers several hundred million dollars annually. They said there would be no reduction in the safety of space flights while the move could eliminate up to 7,500 jobs.
"We are not going to compromise safety to make a profit," said Kent M. Black, a former executive vice president of Rockwell who was named chief executive of the joint venture, which will be called United Space Alliance.
USA, as industry officials refer to the new company, is a 50-50 partnership between two of the nation's largest aerospace companies.
USA was picked over several other companies, including Seattle-based Boeing Co. and McDonnell Douglas Corp. of Long Beach, Calif., in a noncompetitive process to negotiate an agreement to be responsible for the shuttle operation for a period of at least five years.
"This is clearly the appropriate path to take," NASA Administrator Daniel S. Goldin said in a prepared statment.
He said that Lockheed Martin and Rockwell are "two experienced companies that clearly understand how to operate the shuttle safely."
Combined, the two companies hold 69 percent of the value of all contracts related to preparing the shuttle for launch and the flight of the space ship.
Lockheed Martin and Rockwell perform about 80 percent of the duties related to the shuttle's operations.
J. Wayne Littles, a top NASA executive in the space flight office, said the selection of another company would have required the retraining of thousands of workers.
This would have been an additional cost and would have come at a time when NASA's shuttle budget is shrinking.
Mr. Black said there would be less disruption to the program and less chance of a mistake that could lead to an accident if the same people continued the work.
At least one member of Congress looked upon the arrangement with a suspicious eye.
Rep. Robert S. Walker, the Pennsylvania Republican who chairs the House Science Committee, has requested that NASA brief lawmakers about awarding a contract without competitive bidding.
Before an agreement is reached, Mr. Goldin said, USA will need to show that it can maintain safety, meet the flight manifest and achieve savings.
The move comes at a time when NASA's budget is declining and the space agency is looking for ways to keep other programs, including the space station, moving forward.
Mr. Littles noted that the shuttle budget is $3.2 billion for fiscal year 1996 and is scheduled to fall to $2.9 billion by 2000.
Adjusted for inflation, he said, the real buying power would be about $2.5 billion.
USA is looking at eliminating about 7,500 jobs. Mr. Black said there would be a reduction of about 1,500 civil service positions and 6,000 contract personnel in coming years. He said some of the reduction would be through attrition, but there would also be layoffs.
"It will be a slow evolutionary process," he said, "There will not be big cuts all of a sudden."
Currently, there are more than 20,000 persons involved in the shuttle program, said James Adamson, a former astronaut and a Lockheed Martin executive who was named chief operating officer of USA.
NASA said it expects to have an agreement with USA by September. It could come sooner, said Mr. Black.
He said that the elimination of competitive bidding should speed the process.
"We could start as early as next May," he said, if the company gets a preliminary contract that would not have all the details worked out.
Mr. Black said the new company is proceeding on the assumption that it will manage the shuttle program for at least five years. He said the talks with NASA include options that could extend the agreement.
An agreement with USA may lead to privatization of the shuttle program.
Under such an arrangement, USA or some other private company would actually own the shuttle fleet and sell launch services to the government and other commercial customers.
"We are clearly interested in evaluating that," Mr. Black said of the possibility of buying the shuttle from the government.
"But Wayne [Littles] said, 'It would take five years before [NASA] could consider that.' I agree with that."
Offering some hint into what the joint venture could contribute to its parents, Mr. Black said the business base would eventually be between $2 billion and $2.5 billion a year, and the normal profit margin on contracts ranges between 8 and 12 percent.
The agreement seemed well received on Wall Street. Lockheed Martin shares closed at $70, up $1.625. Rockwell closed at 46.625, up 62.5 cents.