The day before Atlantis touched down at Kennedy Space Center to end the shuttle program’s 30-year run, a pair of NASA officials — one a veteran shuttle engineer, the other an astronaut — briefed industry on the procurement approach the agency intends to use to foster development of at least two U.S. alternatives to Russia’s Soyuz system for delivering astronaut crews to the international space station.

Maybe it was Florida’s muggy weather, but some industry representatives were left hot and bothered by the Commercial Crew Program’s proposal to abandon funded Space Act Agreements in favor of conventional government contracts subject to the Federal Acquisition Regulation (FAR), a Byzantine set of rules written to ensure tax dollars are spent honestly if not efficiently.

Everyone agrees that FAR compliance drives up costs and discourages small and midsize companies from doing business with the government. FAR imposes a patchwork of public policy mandates — including so-called Buy American provisions, small business set-asides, preference for rural subcontractors, and competitive selection of each and every vendor — that often have little to do with cost-effective delivery of quality goods and services.

But generally speaking, when federal agencies buy goods and services, they have to use FAR contracts.

Space Act Agreements, which date back to NASA’s 1958 charter, were conceived as a way to nurture capabilities aligned with broad agency objectives rather than fulfill specific requirements. As such, they would not ordinarily be used to procure must-have capabilities like crew access to the international space station.

That said, Space Act Agreements are inherently more flexible than conventional procurement contracts. They give NASA broad latitude to commit money, facilities and personnel in pursuit of common objectives with an industry partner that often brings its own resources to the table. Given that NASA now finds itself facing a prolonged period without independent access to the space station, Space Act Agreements are seen by many as the fastest and most efficient way to close the gap.

By design, Space Act Agreements keep government oversight — or micromanagement, depending on one’s point of view — to a minimum and maximize the procurement dollars that go toward engineers and technicians rather than lawyers and accountants. Furthermore, they are not subject to bid protests that can stop a procurement contract in its tracks.

Space Act Agreements awarded under NASA’s Commercial Orbital Transportation Services (COTS) program since 2006 helped foster, for relatively little money, development by Space Exploration Technologies Corp. (SpaceX) of a new medium-lift rocket along with the first privately built capsule to orbit and then return to Earth intact. Orbital Sciences Corp., meanwhile, has used COTS money to develop its own cargo-delivery system that’s slated to debut early next year.

SpaceX and Orbital each put considerable skin in the game and both have been rewarded with a combined $3 billion in space station resupply contracts. Those awards were made under the minimally restrictive FAR Part 12 rules in accordance with a law that requires NASA to treat launch services procurements as commercial transactions.

NASA’s Commercial Crew Development program has awarded some $320 million in Space Act Agreements since 2010 to foster capabilities being developed by SpaceX, Boeing, Sierra Nevada and others. Companies will soon be invited to bid for a portion of the $850 million a year NASA has notionally budgeted through mid-decade for a  development phase yielding at least two construction-ready designs for space station crew taxis that would be expected to enter service before the end of 2016.

Prospective providers would like NASA to keep using Space Act Agreements to fund this upcoming phase. After all, time is of the essence, funding is limited, and the companies insist their vehicles will serve markets beyond NASA. As but one beneficiary of this new capability, NASA should not have a veto over system requirements, the argument goes.

NASA managers also would like to keep using Space Act Agreements. In fact, their going-in assumption on the Commercial Crew Program was they could take the COTS approach: fund vehicle development and demonstration in the form of milestone payments and switch to FAR-governed commercial services contracts for operational crew transport missions.

But NASA’s procurement attorneys convinced them that the Space Act Agreement framework imposes unacceptable limits on the agency’s ability to levy safety requirements on crew-carrying spacecraft and launchers and ensure compliance.

As NASA’s Office of Inspector General pointed out in June, NASA cannot establish and enforce commercial crew requirements under Space Act Agreements; it can only present them to companies as a reference or guideline. That, in effect, means NASA would have to wait until crew taxi systems are fully developed and offered up for service to certify them as safe for carrying agency astronauts. Should the certification process uncover safety issues, NASA would face two unpalatable choices: pay to fix problems that would have cost far less to remedy had they been caught during development, or waive safety requirements.

Industry’s argument that COTS is an appropriate model for commercial crew overlooks a feature of Space Act Agreements that allows NASA  to impose  certain requirements during development when the safety of a NASA facility — in this case, the space station — is involved. The fact that COTS-funded vehicles will dock with the space station gives NASA a degree of control over requirements of systems involved in that phase of the mission. For crew transportation, safety of life is at risk during all phases of the mission, including launch, docking and re-entry. NASA managers are loath to cede control of any requirements involving crew safety and therefore are likely to view Space Act Agreements as unacceptable for developing astronaut transport systems.

Industry officials wary of the “Old NASA” — a reference to the days when agency managers wrote painfully detailed requirements for every nut, bolt and wire in a space system — see this as a truck-sized loophole that would be used to exercise oversight to the extent that the Commercial Crew Program would lose all but the pretense of being commercial. Such concerns are not unfounded; they’re shared by some NASA officials.

To its credit, NASA’s Commercial Crew Program managers are staking out the middle ground with a hybrid approach that, while classified as a FAR procurement — a nod to the agency’s certification requirements — would include much of the flexibility that makes Space Act Agreements so attractive. The strategy would feature milestone payments with a fixed government investment, maximize industry retention of intellectual property rights, and exempt industry from FAR’s most onerous cost accounting requirements. NASA says it can structure the contracts to limit the technical requirements it controls to several hundred, in contrast to the several thousand it controlled during shuttle’s development. Requests for exceptions and waivers, NASA says, will be resolved in days, not months.

It doesn’t go as far as commercial proponents would like, but industry needs to accept that there is a significant difference between docking an unmanned cargo tug to the space station and launching astronauts and returning them to Earth. Industry also must recognize that NASA is not going to invest billions of dollars to develop privately owned systems without some strings attached; surely the commercial crew hopefuls realize that without NASA’s investment and commitment as a long-term customer they would have no business case.

NASA, for its part, could help clear the air by publicly fulfilling industry’s request for a detailed explanation of the legal obstacles to using Space Act Agreements.

NASA also needs to show that it is committed to letting commercial crew ventures not just design their vehicles, but own and operate them as well. While NASA is promising not to dictate design solutions, there’s a very real danger that the engineers rolling off the shuttle and space station programs in droves will seek to manage this program to the extent that the cost advantages associated with commercial procurements are lost completely.

Getting the Commercial Crew Program to work will require good-faith efforts and compromises from both industry and NASA. It would behoove both to move beyond posturing and come to terms sooner rather than later so they can present a united front to a Congress that so far is reluctant to fund this program at a level sufficient to get at least one of industry’s designs off the drawing board and into orbit.