Revisiting commercial space and NASA

Before “commercial space” there was “cost-plus space”. It was in this Byzantine world that whistle blower Ernie Fitzgerald said back in the 1960s “There are only two phases of a program. The first is ‘It’s too early to tell.’ The second ‘It’s too late to stop.’” While today’s trending topics in space exploration are about going commercial not cost-plus, Starships and Starlink, space tourism, billionaires and SPACs, it is worth remembering how any project can go askew. Knowing what to avoid, space exploration can finally be more about planets and less about plans.

A paper in a typewriter. The text on the paper says "There are only two phases of a program. The first is ‘It’s too early to tell.’ The second ‘It’s too late to stop.’” Below the image there is a subtext that says: Did you get the memo about the program schedule update?
Credit: Edgar Zapata, zapatatalksnasa.com

If space exploration projects were territory, a look at recent projects would show that commercial contracting has been seizing ground once exclusively reserved for cost-plus contracts. In 2018 NASA selected nine companies to get payloads to the surface of the Moon on a commercial basis. The next year NASA went with a firm-fixed-price contract for the first part of a lunar Gateway, a space station in lunar orbit. With the partner retaining ownership of the element, this was NASA again going more commercial.  Last year NASA awarded a contract to get cargo to the Moon as a commercial delivery service, the same way it contracts to get cargo to the International Space Station. Then this year NASA awarded a contract for a lunar lander for crew, the SpaceX Starship, also firm-fixed-price, with payments by milestones. Payment for milestones (read: results) is also very commercial.

Recent NASA Commercial Contracting

The idea seems simple. If you want to explore the solar system, any plan is going to have a lot of moving parts. If there were more focus on results, as with commercial contracting, there is a greater chance you avoid each part having just Fitzgerald’s two phases. Uncertainty about where you are heading, with no steering or brakes, has proven to be a bad mix. Traditional “cost-plus” space did this mix predictably often.

On the other hand, for NASA getting cargo to the ISS a commercial approach showed how to do more with less. There is still uncertainty, especially as cost risk shifted to the private sector partner. This makes for a proper and more common- sense alignment of everyone’s incentives, public and private. We sink or swim together. But the steering and brakes definitely work, as funds are paid out for progress, not activity, and NASA is freer to put on the brakes for one partner knowing another partner is at the ready. But much of this logic goes beyond just the word “commercial”. If cost-plus projects seemed at times like paying to cut grass by the hour (guess how long that might take), and commercial contracting is an improvement, might there still be pitfalls ahead akin to Fitzgerald’s two program phases?

Revisiting commercial ingredients

Budget realities are close behind the laws of physics. Plans for space exploration learn this the hard way. Space exploration plans that are fully government lead and owned have discovered that sticker shock can stop a grand plan just as much as would rocket equations that don’t add up. Commercial programs would seem a way out of this trap, costing less, fitting within the prospects of budgets that are steady, maybe even growing a little year over year, but not going up generously. In either case, even when budgets do have good times, projects that span a career have to ask if the good times will last. Again, commercial programs at more modest costs would seem better built for when budget growth is modest as well.

Yet is going “commercial” merely a fixed price contract, or payments by milestones? Probably not. And by checking off just what is more “commercial” we can start planning ahead with eyes full open. Consider these ingredients defining just what is commercial (updated and improved since last visiting this topic):

Up-front

  • Commitment / the government intent to buy when operational is clear
  • Competition / the government invests in multiple partners in early phases
  • Competition / the government invests in at least two partners in the development phase
  • Private partner makes significant private $ investment
  • Government pays / funds at progress milestones / results (favors “what” over “how” 1/2)
  • Private partner owns the system
  • Private partner commitment, strong non-government business plans
  • Small government management office
  • Government enlists standing / independent outside advisory group

When Operational

  • Competition / government buys from at least two partners when operational
  • Government buys at “firm fixed price” (favors “what” over “how” 2/2)
  • Private partner attracts non-government business on par with government business
A checklist - ingredients of what makes a contract as more or less commercial vs. NASA commercial programs.
A checklist – ingredients of what makes a contract as more or less commercial vs. NASA commercial programs.

Immediately some “X” marks draw the eye. Should NASA invest in lunar cargo capabilities up-front (the second and third ingredient for “CLPS”)? There remains much uncertainty over the funding for commercial low Earth orbit and private space stations that could be what follows the International Space Station. There is only one commercial lunar lander where it would seem successful programs (like cargo and crew to ISS) have two providers (the third ingredient for the crew lander). Does a seeming lack of government commitment to buy once operational doom any programs early on (the first ingredients for X-33 and XSP)? Or is it more likely a critical flaw leading to problems is funding just one partner up-front (common among X-33, EELV, XSP and now the crew lander)? Or are their relationships, one flaw not enough to spell defeat if all the other ingredients are checked off? These are questions still to figure out.

Fitzgerald may have sounded the alarm long ago about cost-plus programs. Experience tells me his two phases of a program – too early to tell and too late to stop – are not unique to cost-plus contracts. Complicated space exploration plans with lots of moving parts that have gone askew before are unlikely to find simple solutions when trying again. If the project phases we want are – get results and grow demand – understanding precisely why something worked before will be as important as knowing what did not.

The table above will be updated as more information becomes publicly available. Thoughts? Comments below.

Also see:

  • May 21, 1999 Wall Street Rejects VentureStar
    • About the private investment amount in the X-33 – “Teets statement before the Senate was tantamount to admission that his company’s $230 million investment in the subscale VentureStar test craft, the X-33, would not be matched by additional billions in company funds for the full size vehicle.”
  • November 29, 2018 NASA selects nine companies for commercial lunar lander program
    • “NASA is providing no development money for any of the CLPS companies, who will have to raise the funding needed for their landers from other sources.”

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