Commercial space and six questions for a good story – Pt. 1 of 3 (wonkish)

In 2006 NASA went down a rather new path to get cargo to the International Space Station. No one could have imagined the end was so near for the dogma of space exploration as an expensive, exclusively government affair. Suddenly, getting cargo to the ISS meant inside baseball lingo about firm fixed price contracts and backup providers in meetings where once only the lingo of delta-v or mass fraction were allowed entry. Oddly, for a successful program so different from how NASA typically did things, it seems no one has quite drawn out all the moving parts.

Journalist ask six basic questions to write a good story – “what”, “who”, “where”, “when”, “why” and “how”. Much of the talk about commercial space leans to “what” with a touch of “how”. Often “what” and “how” are fused, a firm price, a lower cost, and making something available beyond just the government customer.

The NASA view

This far, there is no lack of good reading getting bearings on commercial space. NASA has an elegant visual – how a contract changes, how a market changes for what we call commercial space. The diagram captures the essence of a lot of excellent work describing commercial space at greater length (here, here and here). What you buy is more commercial as your price gets more defined and as you become one of many customers.

A figure showing an arrow increasing bottom left to top right, where the vertical X-axis is the NASA business practice, from "cost-plus" to "firm fixed price", and the horizontal Y-axis is the customers, from "government as the only customer" to the "government as one of many customers". Credit: NASA.
Commercial space as defined by NASA. Credit: NASA.

The Whitehouse view

Whitehouse space policy from 2010 is another starting point (and still the 2020 definition) for commercial space:

The term “commercial,” for the purposes of this policy, refers to goods, services, or activities provided by private sector enterprises that bear a reasonable portion of the investment risk and responsibility for the activity, operate in accordance with typical market-based incentives for controlling cost and optimizing return on investment, and have the legal capacity to offer those goods or services to existing or potential non-governmental customers.

Some decent work even put costs and numbers to all this for the program that got everyone talking, NASA’s Commercial Orbital Transportation Services (COTS) program. Still, knowing what succeeded, having a goal not to be the only customer and having half a notion to insist on a firm fixed price contract is probably not the same as knowing how to succeed again. More so, this lab apparatus got lightening to strike, but was it just the contract type? And a little competition? How do we make sure lightening can strike twice, in the same place? And then do it again. Often.

Commercial space – but what makes it tick?

If we want to see “how” NASA approached commercial space, the first word is actually “partnerships”. Partnerships occur in the up-front (“when”) phase of a project, in design and development. “Commercial” comes later, when it’s all operational.

I was often in discussions about these distinctions at NASA – where I came to see a need for a list of ingredients, a checklist of sorts, for partnerships and commercial space. (Yes, these meetings were supposed to be about something else.) With the right details going into a program as a partnership NASA could make more of its limited budget and help its missions succeed, sooner versus if ever.

Because I think this is a very important discussion, I offer a starting point. If you want to prepare a partnership and later a commercial acquisition so it succeeds, this could be a short-list of ingredients to check off.

Ingredients of Partnerships 
Contract is a Space Act Agreement or Other Transaction Authority
Contract emphasizes “what” over traditional “how”, favoring innovation (versus discouraging it)
Partner makes significant financial commitment – “skin in the game
Partner has a compelling business case for NON-government customers
Partner implements
Government pays out funds only at “pay for performance” milestones
Government management office is small
Government management mindset as a co-investor
Government favors partners with strong NON-government business plans
Government is advised by an outside advisory group
Government commitment is clear – they will buy future services, product, data, etc.
Government invests in many early partners – competition is high  
During development, the partnership phase

Ingredients of Commercial Acquisitions
Firm fixed price contracts
Private partner retains property; the government does not own the hardware (government buys the ride, not the car)
Private partner business /pricing attracts non-government customers
Government selects at least TWO partners for ongoing services  
During operations, the commercial phase:

This naturally leads to many more questions, “why” these ingredients? And why do they work? Are they all necessary, some critical, other’s just nice to have? Are the ingredients connected? Is the list even complete? If the devil’s in the details, figuring out commercial space and what make’s it tick will require a trip to the basement.

Stay tuned for Part 2.

Also see:

NASA invited offerors to demonstrate their commitment to the public-private partnership by providing a corporate contribution; these corporate contributions not only have the effect of significantly lowering offerors’ proposed firm fixed prices, but also show how each offeror intends to leverage its corporate contribution to enable its approach for commercializing HLS capabilities.

NASA Source Selection Statement

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