Caveat Emptor on ‘Commercial’ Space

by




It is interesting, as always, to find myself purposefully quoted out of context to support some point unrelated to that which I was making in the original speech. In this case, the vehicle is former Congressman Robert Walker’s recent op-ed, “The Practical Benefits of Commercial Crew” [Commentary, Sept. 20, page 19], wherein certain remarks of mine in a 2005 speech are cited to support the author’s, but not my, opinions.

Here is the specific quote: “Utilizing the market offered by the international space station’s requirements for cargo and crew will spur true competition in the private sector, will result in savings that can be applied elsewhere in the program, and will promote further commercial opportunities in the aerospace sector.”

Bob and I think much alike concerning the value of the free market and on the likely future benefits of commercial space transportation for crew and cargo. These things will certainly come, quite likely in that order and with a considerable gap in time between their respective availability. To aid such a development, I believed five years ago and believe now that the U.S. government should take all reasonable policy measures toward that end.

However, these measures emphatically should not include the purchase of goods and services on so-called commercial terms, when those items do not yet exist. As noted in my 2005 speech, I did indeed buy my car and my airplane on the commercial market. These items existed prior to my purchase, and I was able to exercise the ancient advice of caveat emptor before writing the checks. As is customary, I did put down an earnest-money deposit of around 5 percent on these items. To pursue the analogy in regard to commercial space, the Commercial Orbital Transportation Services (COTS) program was intended (at least in my original formulation of the program) to be NASA’s “earnest money,” a tiny fraction of the required sum, placed on the table in advance of performance.

To continue, the conventional notion of an arms-length commercial transaction does not require the buyer to provide front-end development money. Rather, the product is developed by managers and investors who raise private capital to bring a product or service to market, after which the offerer quite rightly charges every dime the traffic will bear.

In a transaction where front-end payments are involved, as when having a custom home built to order, when the work is done, the buyer owns the house. He does not have to rent it back from the builder.

The U.S. government too uses these types of negotiated contracts (“prime contracts,” in the parlance) and is expected by taxpayers to exercise appropriate oversight and control so as to provide high confidence that what has been bought is actually delivered. Much of the recent unseemly behavior by those in the nascent commercial space industry hinges on exactly this point. What appears to be desired by this group is a very substantial upfront payment to aid the development of not-yet-existing goods and services, yet without the oversight and control normally exercised by the government in such circumstances.

The people who are asking for this deal are really just clamoring for what they view as their rightful share of the money that in the past has gone to the nation’s larger companies; i.e., the “prime contractors,” which comprise 99 percent of our defense and aerospace industrial base. Indeed, they should have that share — right after they win a government-sponsored competition to deliver a specific product subject to the normal terms and conditions for such arrangements.

Further, when I buy a product on commercial terms, I am not enjoined from having other, competing products ready for use as needed. Thus, I do not have to agree to give up my existing home as a condition for a builder to construct my new home. I do not have to put myself in a position where I have no option other than to accept the builder’s terms. Yet that is exactly what the purveyors of so-called commercial space transportation are seeking. NASA is to be required to forgo replacement of U.S. government capability to put crew in orbit, in order that “commercial” providers can offer whatever terms they choose. Everyone advocating that the U.S. government be held hostage in such a fashion should be required to accept such terms in their next “commercial” transaction. As a further condition, I want to be the seller.

Finally, Bob makes the point that NASA should be required to use the existing Atlas and Delta systems, developed and operated by industry almost entirely with Department of Defense (DoD) funding. I fail to understand how such a choice falls under the rubric of “commercial space,” as the existing DoD space launch infrastructure is no more “commercial” than is the space shuttle, and for similar reasons. But be that as it may, what seems to be almost willfully misunderstood or ignored is that several years ago, NASA did pursue this approach. However, careful study showed that to meet the same set of requirements, the DoD expendables would be substantially less safe and would cost billions of dollars more than the Ares 1 design selected by the agency. No equivalent study has reached a different conclusion.

Now, it is completely understandable that existing launch vehicle providers would wish to set aside those conclusions and, through their lobbyists, endeavor to force NASA to utilize their own products, irrespective of whether those products are the best choice to meet NASA’s requirements. What is less understandable is that anyone wearing a government badge would listen.

I remain as I was in 2005 — a committed advocate of both government and commercial space development, and of the benefits of the marketplace in support of both. But, as Justice Potter Stewart said apropos the definition of pornography, I know “commercial” when I see it. The deal we’re being offered by the more strident supporters of commercial space isn’t it.

 

Mike Griffin was NASA administrator from 2005 to 2009.