Because this is a new resupply ship for the space station,
NASA and its international partners had set detailed safety rules in
advance for Falcon, even though the engine failure was far from the
station. And those rules prevent SpaceX from firing its second stage
engines, Orbcomm said in a statement.
1 Comments in Response to SpaceX rocket delivers for NASA, but not for commercial satellite owner because of glitch
The engine failure was on the first stage.
The engine failed before the rocket was even in "space" . . . that is how far away from the space station it is, and guess what the first stage is already back on the ground.
This is what happens when you sign those tempting easy money government contracts . . . they own you.