Excerpted from remarks by NASA Administrator Mike Griffin at a breakfast in Washington June 21 sponsored by the Space Transportation Association.

The idea of putting more emphasis on commercial space comes from the observation that if we pull the stick back and climb up to the 50,000-foot level, we have a $10 trillion plus economy — the greatest that the world has ever seen. We produce every year $2 trillion more in goods and services than we can consume ourselves. The ability of this economy, and the principles on which it is structured to generate wealth, is an amazement to the entire world.

The grounding principle of U.S. economic growth has been competition. I’ve spent considerable time out in Silicon Valley [in California] and I would say if you want to see the most competitive end of the spectrum that’s the place to go.

That type of competition is largely lacking from today’s aerospace business. It’s out there but it is not the industrial base which uses up most of the Department of Defense space dollars or the NASA space dollars. So for me as administrator, the problem is how do we engage that engine of competition more productively, so that it can work on behalf of space business?

For all of my admiration for entrepreneurs, people who take risks, start businesses … nine out of 10 of them fail and go on to start another business and fail again. One out of 10 succeed, build the business up and sell it out to a larger business or take it public and then become part of the American industrial landscape.

For all of my admiration of that community — and I was part of it; I was one of the failures — I think that we are all aware that there is a cacophony of voices out there of what we will call for a moment the nontraditional space community raising their hands and saying “I can do it, I can do it. If the government (read: Air Force and NASA) would just put some money out that was dedicated for us, we could perform.

Based on actual product delivered, I have to consider that mostly noise with not much signal, because real competitive businesses develop their own business plans and find their own money. They acquire a team, produce a product and try to see if it will sell. They don’t come to the government saying, “Set aside some money for us and trust us. Watch us perform.”

If I gamble money in that direction and product is not delivered, then public money has been spent on something that did not come true — money that could have been spent on a higher odds proposition. I have to account for why I did that.

The NASA administrator, the director of the NRO, the secretary of the Air Force have goals and objectives that have to be met and the meeting of those goals and objectives can’t be treated as a lottery, where we’ll just spread the money around and let a thousand flowers bloom. At the same time, as stewards of public money we have to recognize that a way needs to be found to engage this engine of competition that made the rest of America great, and that has largely been lacking from the aerospace industry.

It is a real dilemma. How do we engage competition, positioning ourselves to take advantage of the successes and accept the failures which inevitably occur in that environment while at the same time meeting the goals and objectives that we have as managers?

What I’ve come to after considerable thinking and with some discussion and modifications to come, is that the best way NASA can do that is to utilize the market that is offered by the international space station’s (ISS) requirements to supply crew and cargo as the years unfold. For the next few years we are going to be completing the assembly of the space station and supplying cargo to it using the space shuttle. That’s consistent with the president’s policy direction so next year that’s what we’re going to be doing.

In the post-shuttle world, after 2010, we will have available a Crew Exploration Vehicle (CEV) that will be the follow on to the shuttle for getting people into space, and the CEV will have the requirement to be able to carry astronauts to the Moon and later to Mars. But it will also have the requirement to carry astronauts to and from the space station and in our architecture planning we’re making certain that unmanned versions of that system can also carry cargo to the station.

There must be a government-derived capability to service the space station, even after the shuttle is retired. But that does not imply that is the way we would most prefer to have cargo and crew logistics requirements for the station satisfied. I would like to be able to buy those services from industry.

I believe we can lower the amount of money that we have to pay for such services. There is a line in our budget called ISS crew and cargo services, and we plan to use that to get started on this process.

Expect to see a departure from the more traditional request for proposals leading to a prime contractor. You might expect to see a broad agency announcement. You might expect to see other transactions agreements, as NASA can do, as opposed to classic contracting.

Expect to see the government looking to make a deal in a commercial sense. Rather than issuing a prime contract focused on process and on very detailed specifications, look for a deal-making arrangement where we tell you what it is that we want. Look for the world of commercial communication satellites to be the model for procurement rather than, say, the CEV procurement.

What are some characteristics of a deal that we might be willing to make? Well despite the wishes or entreaties of those who might want me to dump $400 million or $500 million on their enterprise, and to stand back and wait to see if the results come in, that’s not going to happen because if you’re familiar with true commercial space arrangements, both sides have to have skin in the game.

If I’m a provider of communication satellite capability to a firm that really only wants to make money, there’s kind of a tension, a very healthy tension that operates. The satellite owner has to pick a satellite provider. It doesn’t have the money to go out and pick two or three.

So there’s a tension between buyer and seller. The buyer has to provide milestone money, progress payment money, depending on him meeting and achieving of certain milestones in the development of the bird, but the seller never really makes money until the final product is delivered and working well.

I want performance rather than process. In the communications satellite world, I’m interested in numbers of transponders, output of those transponders, projected lifetime of those transponders on orbit, pointing control of the satellite so that it, you know, the antenna goes in the right direction, numbers of spot beams, a variety of things like that, power levels, all of which can be categorized in performance terms.

It’s not up to me as the procurer of that service to determine how the engineers working for you, the provider, provide that service. I do insist that you meet certain standards capable of qualifying for insurance, because if I’m a procurer, I want to buy insurance on the spacecraft and the launch as part of the overall business package.

When we build ships and airplanes there are standards to which such objects have to be designed and built or they cannot be insured. The same thing is true in the true commercial space arena and I would look for us to supply a core of such standards.

For example: human rating requirements, if you’re going to provide commercial crew delivery to us, human rating requirements must be respected. They don’t have to be respected to every I dotted and T crossed and we’re interested in push back on what is value added and what is not value added, but it’s more that the bulk of that must be accepted.

Look for us to conduct such a procurement as a competitive procurement. And look for us to pick a leader with whom we will get started and also fund a couple of followers at the study level in case the leader falls off the track because the leader is only going to continue to get his money if progress continues to be met. We will set up verifiable milestones agreed upon in the deal, the way any commercial deal would be done; and when the terms and conditions will be met, the money will be provided.

Look for us to conduct our contracting on a fixed-price basis. This is the way people buy things out in the world.

Look to be required to provide a commitment to sell at a specified price if I provide a commitment to buy a specified number. Those are the kinds of commercial terms that we will insist on. There won’t be balloon payments at the end and there won’t be get-well arrangements if you screw up.

On the other hand, there will be fairly substantial rewards for people who can deliver.

Why is it that we call this type of procurement in the space business non-traditional? We in the government acquisition business in general, are the non-traditional procurers.

So I think my feet are fairly firmly grounded in reality, but I’m also grounded in the idea that we need to change some of the definition of reality and I think if we think about it, the traditional providers are the ones we really want to engage as we go forward. So over the next few months look for these kinds of trends from us. I’m going to try and meet many challenges and I expect to do it with all of your help.

See Related Question-and-Answer Session