Rockwell, Lockheed to Run Shuttle Program : Aerospace: NASA contract for the joint venture will be worth $2 billion a year, one of the largest awards ever.

NASA said Wednesday that a joint venture of Rockwell International Corp. and Lockheed Martin Corp., selected to run the day-to-day operations of the space shuttle program, will receive a contract worth more than $2 billion annually, making it one of the government’s largest awards ever.

The joint venture, known as United Space Alliance (USA), will run virtually every aspect of space shuttle launches, although astronauts will continue to be civil service employees and top officials of the National Aeronautics and Space Administration will continue to manage flights once they leave the launch pad. NASA officials expect that the companies will streamline the bureaucratic shuttle operation and cut back the program’s massive work force, thereby saving several hundred million dollars annually by 2000. The contract will have little impact on jobs in Southern California.

The arrangement is the first step in a long-range plan, supported by both NASA and Congress, to privatize the shuttle fleet by turning over ownership of orbiters and other equipment to USA or another bidder.

While the shuttle has operated successfully for more than a decade, its astronomical costs have badly hurt the U.S. space program, and experts are searching for ways to operate the four existing orbiters more cheaply without compromising safety.

NASA spaceflight chief J. Wayne Littles said USA should be able to eliminate 7,500 jobs out of a current government and private contractor work force of about 24,500. Nearly all of the work is done outside California.

Littles said the current shuttle program budget was expected to drop from the current $3.2 billion to about $2.5 billion on an inflation-adjusted basis by 2000. A portion of the decline will result from reductions in the development of new hardware and a portion from improved efficiency.

The massive cutbacks will have no impact on flight safety, Littles insisted, because USA will be able to improve responsibility and accountability in the program.

Under the USA reorganization, NASA will eliminate the separate project offices for each component of the shuttle system, ranging from tanks to engines. Cutting the number of these overlapping bureaucracies “will reduce the opportunity to make mistakes,” Littles said.

Because Rockwell and Lockheed Martin separately control 69% of the existing contracts on the shuttle operation, the $2 billion is not entirely new business. Moreover, it will take a number of years to transfer all of the shuttle work to USA, said Kent M. Black, the USA chief executive who is leaving his existing job as Rockwell’s chief operating officer.

Black declined to say how much profit Rockwell and Lockheed, which each hold 50% shares of USA, are expecting from the “cost-plus” NASA contract. Typically such awards yield profits of 8% to 12% on cost, meaning USA could realize profits of about $200 million annually.

NASA took the unusual step of selecting USA without considering competing bids from McDonnell Douglas Corp. and Boeing Co., which had indicated their interest in the contract.

NASA Director Daniel S. Goldin said he based the decision on Rockwell and Lockheed’s experience in operating the shuttle, eliminating the need for a massive training program that a new contractor would require. Goldin cited NASA’s tight launch schedule for the space station, which begins next year.

Goldin submitted the decision to eliminate competitive bids to Congress, which can demand that he reinstitute competition. But a congressional source said it is unlikely that the decision will be met with any significant opposition.