The Laughing Wolf

Making Government Count In Space Commercialization

There are several threads that have come out in the round robins going on between myself, Rocket Forge, and Transterrestrial Musings, that come together as one: the need to make government count. The fact is, the government is in space and is not going to get out of it, even if NASA is abolished. It is also a fact that we need to make our government work for space and space commercialization, not against it. Finally, we need to do things not from the viewpoint of space and technology, but from the viewpoint of the customer and – most of all – the investor.

Now, to repeat ad nauseum, yes I did work as a contract employee for NASA and the Space Product Development (SPD) Program. Keep that in mind as we go, though my bias may not be what you expect.

The fact remains that despite its shortcomings, SPD did a great deal for space commercialization. While they could not directly fund any research, what was done was to get the broadest possible range of businesses involved to do their research in space or microgravity. This did several things, including: demonstrate hard numbers as to businesses and types of business interested in space-based research and development; allow a variety of areas to be explored by companies to determine if they would be useful or profitable to companies; provide actual dollar figures in terms of the amount of money – cash and in-kind – that industry was willing to invest in space business; and, provide hard data on the economic return of the investment in space-based R&D.

The program operates through commercial space centers located across the country. With one exception, they were located at institutions of higher learning. The idea behind this was to bring together the academic knowledge and research capabilities with the real-world knowledge and practice of industry, and then apply the synergy that comes from making use of NASA resources including access to space and microgravity.

The academic institutions benefited from the investment in the centers by industry, and through having faculty and students work on real-world applications. The benefits to the students in terms of practical education is obvious, as are the other benefits. Industry benefited by being able to make use of the academic knowledge base, research facilities, and the low-cost labor (students) for the work, as well as from the unique environment of orbital space. NASA benefited by meeting its legal requirements under the NASA Charter and the various commercial space acts. The U.S. economy benefited from the research dollars and from the money that has come from new products and companies, and U.S. education reaped much needed benefits as well.

Space commercialization benefited as well. First, the program clearly showed that there were several hundred companies of all sizes and types interested in space as an R&D tool or possible tool. The amount of cash and in-kind contribution is trackable and documents for all that industry was willing to invest millions in cash and in-kind contributions. The product economic benefit is harder to track, but can be demonstrated both in product sales (there are better than 20 products on the market that come not from spin-offs but from companies doing or preparing to do research in space and microgravity) and in the capitalization of various spin-off companies. Spinning off divisions and companies is a great sign of economic growth and vitality. All of this is now documented for the investment community.

I use the past tense even though the program still exists, because it is scheduled to die. The ivory tower types at OMB have declared its death, and the White House agrees. It seems that not only was the program a well-documented success, the horror, but that the commercial space centers were as well. This success seems to grate on certain types, both within NASA and at OMB. The former hate commercialization with a passion, while the latter lack real-world experience.

The death knell comes because the centers are not recompeted each year. This, you see, is unfair to any other potential centers. Never mind that they are subject to an outside audit on a regular basis, and that new centers are started and centers that fail to attract industry partners and investment are eliminated. The academics have spoken, and being a success is not allowed. This ignores several basic facts, the first one being “Would you invest large sums of money in an entity that might not be here in six to twelve months?” Would you commit to a long-term research program with someone who might not be there in a few months? Logic is not necessarily an important commodity in governmental planning and operations.

So, SPD is dead. Long live SPD. Yet, there is no need to waste the important foundation they have laid. It is clear that NASA is not the place for commercial development. NASA is fundamentally opposed on a philosophic and operational level to commercial operations and research. Fine, why not put the commercial emphasis where it is respected and encouraged: the Department of Commerce.

Yet, rather than just push SPD over, why not take the time to do it right. Why not do the things that are going to help commercial space development, all the things NASA was opposed to doing?

The first thing that is needed is leadership from outside the government and the usual gang from Bomart. You need someone with real-world leadership, proven success in business, who also knows space. The ideal candidate would have experience in a true space startup, as well as the needed corporate experience. Team them with a deputy director who has been involved with SPD and other activities, who knows the nuts and bolts of what has been done. The synergy here is obvious, as is the business lead.

Then give them a charter worthy of the goal. This new division would do the following:

Expand the base built by SPD at NASA. There is a good deal of research and economic data there, as well as some good models. Take that and build on it by looking into the areas that gave NASA hives, including advertising, direct sponsorship, tourism, remote tourism, new areas of research, etc.

The basic commercial space center concept worked well, but needs to be revamped a bit. No, not just to meet the idiocy of the OMB recompete requirements, but to make it even more effective. The key to the centers was the industry involvement. Get input from industry on the areas currently addressed, those areas where they have already expressed an interest, and see if there are new areas as well. Use that as the basis of a competition for 15-20 centers that will be established for a term of no less than five years, with options for additional increments for a total of up to ten years.

These centers would then have the stability to attract industry yet meet any whining about fairness. Have them subject to the same type of external review as is current, with an eye towards eliminating any that fail to meet the requirements for number of industry partners, cash and in-kind contributions, etc. At the end of ten years, they can then start a new recompete cycle, with the industry partners and trade associations having inputs. Those that don’t make the grade at five years are eliminated, or if close, can be given one or two year extensions to see if they can make the grade. If they don’t, they go. If they do, they continue. If a new area is identified with or by industry, then a new center can be started. This ensures continuity, fairness, and much more.

Now, since these centers are no longer tied to NASA, that means they don’t have to use just NASA for launch and operations. They can make us of any launch service and should be required by charter to use commercial launch, research, and related facilities wherever possible, with the usual caveats towards new and small businesses. This means that if Scaled Composites, XCOR, or others succeed, they will have an almost guaranteed customer base with commercial research. It would also open the door for competing space facilities, both space platforms and space stations. Just think of the opportunities, and competition, there.

In addition, until such is available, NASA should be required to provide access on the same low-cost basis as is currently being provided. Fair is only fair, after all. It was the dependency on NASA that resulted in the miniscule amount of commercial research that has actually flown. To date, with just a few exceptions, the potential for space-based research and development is really not known.

What is needed is time in space so that all the elegant theories can be tested for commercial viability. Can microgravity make it easier to do some things? Will the conditions encourage certain biological processes or activities? Can certain data be gathered with higher precision in an easier manner? Stay tuned, as we find out the answers. It will only be with this time that we start to find out what can benefit and where space business can start to go in terms of research, development, and – eventually – production. Not just manufacturing, but a host of other areas as well.

Now, this is a nice start, but should only be one part of what is done. The second thing that needs to be done is to establish this new operation as the focal point for coordinating government regulation of commercial space activities. This way, industry and government can be brought together to develop some realistic guidelines and operations to the benefit of all, in a Department that is at least reasonably favorable towards business.

The best way to do this would be to establish a committee with several representatives from the new space industry (XCOR, Elon Musk, Sea Launch), at least one representative from the Bomart group, and one each from the relevant government agencies. This committee would advise and discuss with a manager from the new program, who would be charged with developing a coordinated government policy and acting as an advocate for space commerce. They would need a staff and related support.

Third, this new operation should act as a clearing house and coordination for research that can benefit commercial space activities. Energy, Defense, NASA, and other agencies do a great deal of research into materials, propulsion, control, and other activities that could benefit companies looking at going into space. Particularly those companies who have hit a snag in the development process. Why not give them an office they can turn to who can then see if anyone else has addressed a particular problem? Why not provide them with a low-cost means of leasing specialized testing facilities that would otherwise be unused or under-utilized? Make use of the research data and research facilities to benefit companies and competition.

It would have to do one SPD job, however. The new operation would have to continue to be a buffer between NASA and other government launch operations and industry. Few if any companies are going to be willing to put up with the paperwork, testing, and hurdles that go into flying with NASA. So, until real commercial comes along, that buffer will continue to be needed.

The final thing is that it needs to have a sunset clause. To prevent it from becoming a problem, rather than an asset, it needs to be set to expire in no less than 30 years with options to close down the centers sooner if the basic research needed to prove concepts is completed. This will be determined by activities such that industry is no longer funding research into if space is a potential benefit and/or when industry and is spending in excess of $500 million a year with private service companies on direct research, development, or production. Actually, this needs to be broken down a bit to cover major research areas so that they can be phased out and new areas identified as and if needed.

This is just a rough outline, but it is a fair start. Now for the budget issues, since the first question is what will it cost? Fair enough. To create this program will cost app. $50 million for the centers, including startup and competitions, with a recurring cost of at least $35 million per year thereafter. The coordination and regulation role will probably take $20 million per year, while the research coordination/assistance operation should have around $35 million per year at the start. Launch costs will be at least $50 million per year for now and general operating budgets will probably be on the order of $20 million for salaries, facilities, travel, equipment, outreach and education, and related administrative activities. This is all off the cuff, but is a good starting point for discussions. Round it a bit and call it $225 million to start.

This should not be too far off the full budget for SPD using full-cost accounting. So, it is not a major increase or decrease in the budget. It has the potential to provide a great deal more to support business development in space and a solid foundation to build upon. There are a few more bells and whistles that need to be added before it can be written up as a bill, but not a whole lot more. The basics are here.

So, what do you think?