Space Commercialization the Worst Way

Two developments over the summer would tend to indicate that the United States government remains basically clueless about what is necessary to encourage the commercialization of space. One development, emerging from the halls of Congress, is the Space Launch Loan Guarantee Bill being offered by Senator John Breaux (D) Louisiana. The other development is the very strange kabuki dance being performed by NASA about finding a commercial provider for the inflatable Transhab module for the International Space Station.

The Space Launch Loan Guarantee Bill is designed to encourage the development of an American private launch industry and thus lower the cost of accessing space. The bill would do this by spending five hundred million dollars to guarantee commercial loans to American companies that are working on new space launch vehicles. The task of choosing which companies would receive the loan guarantees would be given to the Secretary of Transportation.

There are two serious drawbacks to the Breaux bill. One lies in how the bill is written and the other is inherent in offering loan guarantees.

The bill is written in such a way that gives the Secretary of Transportation almost total discretion over which companies would get the loan guarantees and which would not. Virtually the only objective requirements currently mentioned in the bill, according to Space.Com, is that a company seeking a loan guarantee will have to already have raised ten million dollars from private sources and will have to actively seek a launch license from the Federal Aviation Administration.

The potential for the United States government rather than the marketplace to pick winners and losers in the race to develop low cost space launch services is obvious. The temptation for the government to favor large established aerospace companies over small start-ups might prove to be overwhelming. The bill's approach also discriminates against firms, like Beal Aerospace, which have managed to raise it's needed capital without having to access venture capital markets.

The other problem with the Breaux bill is that it obligates the American taxpayers to cover loans from companies that fail. This is the kind of service which the American government generally does not offer other businesses and therefore the fairness of doing so for space launch companies is open to question. Loan guarantees also remove the essential discipline of risk that strengthens the private sector. The American taxpayer might find itself funding questionable ventures that might otherwise have never seen the light of day.

The Breaux bill could be fixed by creating a greater set of objective criteria for eligible space launch companies and by limiting the discretion of the Secretary of Transportation to deny loan guarantees to firms that meet those criteria. But a better way to encourage an American space launch industry would be to grant tax incentives for customers of companies offering low cost launch services. That way the US government would not pick winners and losers nor will the US taxpayers be obligated to cover loans of failed companies.

The Breaux Space Launch Loan Guarantee bill is at least an honest effort to address a real problem. The same cannot be said for NASA's efforts to commercialize parts of the International Space Station, particularly the proposed Transhab module.

The current Transhab story started earlier in the summer when the United States House of Representatives voted to deny funding for NASA's attempt to replace the habitation module on the International Space Station with the inflatable Transhab. NASA proposed this substitution because the Transhab offered greater volume and improved facilities over the original habitation module. The Transhab would provide a three deck living area with dining, meeting, exercise, and health facilities and individual cabins for each ISS crewmembers.

Despite the Transhab's inherent advantages, Congress found a number of problems. First and foremost, despite NASA's assurances to the contrary, the cost of deploying the Transhab had exploded past the cost of the original habitation module. The Transhab also constituted another redesign (not mandated by Congress) with new and unproved technology. Finally many in Congress suspected that the Transhab was a test bed for a similar module for a crewed interplanetary spacecraft designed to go to Mars. Neither the Congress nor the White House has authorized a humans to Mars program beyond a handful of under funded, small-scale technology programs.

The NASA authorization bill that killed government funded for Transhab did allow one loophole. Congress would allow the addition of Transhab if NASA were to contract it's development commercially and then enter into a lease arrangement with the private firm which would build the module on it's own nickel.

NASA appears to have decided to use this loophole as a means to acquire the Transhab for ISS under some kind of commercial arrangement. But the way NASA is going about it calls into question it's seriousness toward the concept of commercialization, as most people understand it.

NASA held a Habitation Module Commercialization Conference in the last week of August, to sound out interest among the private sector for building a commercial habitation module. NASA, however, only publicly announced the conference a week before it was to take place, even though it took place two weeks before Labor Day in the middle of the vacation season. One week is unusually short notice for anyone, not to speak of busy business people, to change their plans and to attend a several day conference in Houston, Texas.

NASA also has all but said that the inflatable Transhab is the preferred concept for a commercially built habitation module. It may well be, but NASA's attitude would seem to preclude other concepts. One concept that has never been mentioned is GEODE, which was developed by a Johnson Space Center engineer, named Mark Holderman, using the space shuttle external tank. A true commercial competition would involve several different concepts, not just a few variations on the same theme.

Even worse, several things that Dan Tam, the NASA's administrator's assistant for space commercialization, said at the conference makes NASA's commitment to commercialization questionable. He said to attendees of the conference, "This won't be the traditional procurement with a set of requirements and bids." He did not elaborate upon what criteria a commercial partner would be chosen.

It's possible that the partner has already been chosen. Tam also said at the conference that NASA has already received a proposal from a commercial firm, according to Space.Com. Tam did not reveal which company had made the proposal or what it contained. The extremely short time period companies have been given to come up with a proposal was a source of complaints by many attending the conference, according to Space.Com. That short lead-time, coupled with the "secret" proposal, suggests that the fix may be in.

If true it would not be the first time NASA has performed a kabuki dance in pretense of offering everyone an even chance to pick up a major privatization contract, while all the time choosing a winner in advance. In the early 90s, NASA proposed to "privatize" operations of the space shuttle fleet and suggested that this contract would be put out to competitive bid. However, a short time later, NASA announced that a consortium between Rockwell and Lockheed (now Boeing and Lockheed Martin as a result of subsequent mergers) would be awarded the contract. No one else need apply.

If NASA were really serious about arranging for a commercially built habitation module it would do several things different. First it would allow commercial companies several months to come up with proposals. NASA would not try to prejudge what form these proposals would take, except to adhere to broadly written requirements. Then, having received these proposals, NASA would judge them against a set of objective criteria and would award the contract to the one that best meets those criteria. NASA would rigorously avoid even the appearance of the kind of crony capitalism that it has so often practiced in the past.

The problem is that NASA as an institution is inherently hostile to the private sector. Bill Wisecarver, who worked at the Johnson Space Center for about a year writing business plans for space station commercialization, is pessimistic about the situation changing any time soon. Space News quotes him as saying, "NASA has some fantastic engineers, and incredible scientific capabilities. But they don't know how to cut a deal. They make political decisions...not economic decisions. You just can't ask bureaucrats [who] are running the commercialization programs to do economic deals. You are asking them to go against their best interests. They are going to attack anything that takes away bureaucratic control."

And there lays the problem. Until NASA is changed to become a commercial friendly organization-or is replaced by one that is-space commercialization will remain more a concept than a reality.