In addition to the Falcon 9 launch vehicle, SpaceX is developing a cargo capsule that could eventually carry seven astronauts.
NASA is retiring the space shuttle and has been looking for replacements in the aftermath of two shuttle disasters, most recently in 2003 when Columbia broke up during reentry, killing all seven astronauts on board.
The contract "represents a new way of doing business for NASA," said Bob Russo, vice president of Launchspace Inc., a rocket industry research and consulting firm. "If successful, it is almost a certainty that NASA will expand its support for using such services in space station activities."
But it is also a major risk for the space agency, said John Pike, a space policy analyst for GlobalSecurity.org.
NASA is not only relying on two small rocket companies to keep supplies flowing to the space station; it's also hoping the companies can develop the rocket and the cargo vehicle in months -- not the years it has typically taken for other NASA programs.
"The task is significantly bigger than anything either company has ever done," Pike said.
"All of these things strike me as significant challenges for even the biggest aerospace companies."
If SpaceX can't launch the rockets in time, the space station could be in jeopardy, Russo said. NASA doesn't plan to have a permanent replacement for the space shuttle until the next decade. And if SpaceX or Orbital is late, the U.S. will have to rely on Russian space vehicles.
"This is undoubtedly a major boost to SpaceX's credibility and bottom line," Russo said. He added that relations with the Russians were strained, which could lead to discontinued supply missions to the space station. "SpaceX's role could be crucial to the station's survival."
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peter.pae@latimes.com