Space

Congress Threatens To Anchor Private Spaceflight With Extra Costs

A rent-seeking senator doesn't want competition to shake up NASA jobs.

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With first SpaceX and now Orbital Sciences cargo deliveries to the International Space Station, it's been an exciting decade so far for commercial spaceflight, which has shown the way to dramatic reductions in cost over the traditional NASA approach. With the roll out a couple weeks ago of SpaceX's new crewed version of its Dragon capsule, we seem well on track to replacing the costly Russian Soyuz flights (currently our only means of getting Americans to orbit) with much cheaper ones on American vehicles. This is particularly important, given Russia's recent threats to cut off our access to the station in the wake of the tensions over Ukraine.

But Congress, in its perversity and rent seeking, seems determined to keep us dependent on them.

First, six weeks ago, the House passed a NASA authorization bill declaring that when it comes to the commercial crew program that is partially funding the new American systems, "safety is the highest priority." This is a very nice-sounding declaration until you think about it for a nanosecond or two and realize how absurd it is. To restate it, ending our dependence on Russia for space access is a lower priority than ensuring that we don't risk the precious life of an astronaut in opening a harsh frontier. What they are implicitly saying is that, despite the expenditure of billions of dollars on it, what we are doing in space is so trivial and unimportant that it's not worth the chance that we might injure or kill a professional risk taker in doing it.

Why are they doing this? While no doubt some are well meaning if misguided in the sentiment, it provides a benefit for defenders of the status quo. One reason that SpaceX has been able to perform at a much lower cost than traditional NASA programs is that, rather than operating via the standard Federal Acquisition Regulations (FAR), its contracts with NASA have been through what are called "Space Act Agreements" (SAA), which allow cost sharing and much more flexibility in how it accomplishes its goals. However, a couple years ago, NASA said that while SAAs were acceptable for cargo delivery, they had to do a traditional FAR to ensure crew safety, and this language buttresses that desire, though it increases costs. For example, here is the Air Force procurement process, simply described. It has been said by Air Force types that it takes a minimum of two years to procure a paper clip. NASA's is similar.

Despite the greatly reduced costs of the cargo program under SAAs, for years the space committees in Congress have been pressuring NASA to switch to FAR and to down select from the current three commercial crew contractors (SpaceX, Boeing, and Sierra Nevada) to a single one, to "reduce cost," often using traditional socialistic arguments about the "inefficiency" of competition (from Democrats and Republicans alike). They have consistently underfunded the program in order to redirect funds to the Space Launch System (SLS), a giant rocket with no defined mission, that will cost many billions each time it (rarely) flies, but maintains jobs in the states and districts of the committee members in the House and Senate alike. There is no doubt that fear on the part of SLS supporters that a successful commercial crew program will result in public questioning of the value of SLS, hence the urge to delay the commercial program and increase its costs.

Which brings us to the latest shenanigans.

There are generally two types of government contracts under the FAR: fixed-price and cost-plus-fixed-fee. The latter, in which the contractor is reimbursed for reported costs, plus a percentage of profit, is the traditional type of contract for NASA human spaceflight activities. It eliminates risk for the contractor on a program where the technology or requirements may be uncertain or subject to change, but it obviously has incentives to pad the bill, and it adds onerous accounting requirements and associated costs. This is why NASA human spaceflight has traditionally been so expensive. The successful SAAs, on the other hand, had been fixed-price payments for successful program milestones. This meant that if the milestone cost more than the price, the contractor ate the difference, but if it cost less, then the contractor made a profit – and the government had no way of knowing how much – but the price certainty and lack of need to track costs per government specs greatly reduced the taxpayer outlay. While NASA had structured the next phase of the program under the FAR, it had maintained this key cost-saving feature of an SAA. The bidders (who will be selected later this summer) were asked for fixed-price, rather than cost-plus contracts.

Sen. Richard Shelby (R-Ala.) is the ranking member of the appropriations subcommittee that oversees NASA's budget (if, as many expect, the Republicans retake the Senate this fall, he will probably become chairman). Late last week, he added seemingly innocuous but actually toxic language to the appropriations bill that funds, among many other things, NASA. With his amendment, the bill that came out of committee said that the commercial crew contractors would provide "certified cost and pricing data." That is, even though the contracts are fixed price, the contractors will have to provide all the information that they would have to if they were cost-plus. This will have at at least two damaging effects on the contractors:

Cost-plus contract-type "Certified Cost And Pricing Data" requires excruciatingly detailed accounting of a company's development process. Cost-plus contracting thus enables excruciatingly detailed customer control of that process, for customers so inclined. NASA's traditional space-launch development faction is very much so inclined. The unfortunate fact is that this increases costs dramatically, even before the contractor starts being summoned to endless meetings over the precise thickness of gold-plating to be applied to the newly-added NASA-mandated kitchen sink. The final result is baroquely complex designs, endless project delays, and costs ten times or more those of commercial-sector equivalent projects. (This is a large part of why Shuttle was so expensive, and of why every single one of NASA's internal efforts to replace Shuttle over the years has failed.)

Cost-plus contracting profoundly affects a company's internal culture. It essentially turns productive workers into part-time accountants. Lots of hours that used to go to producing beans get spent on counting them instead. This significantly increases costs and cripples companies for normal commercial competition. Large companies tend to have separate government contracts divisions, smaller companies tend to either specialize in government cost-plus work or (if they want to maintain commercial viability) avoid it like the plague.

So why is Sen. Shelby doing this? He says it's in the name of "transparency" for the taxpayer, but he doesn't seem concerned about that from the Russians. And if he were really concerned about it, he'd be loudly waving this report from the General Accountability Office, which leads with, "The scope of the National Aeronautics and Space Administration's (NASA) preliminary cost estimates for the Space Launch System (SLS), Orion Multi-Purpose Crew Vehicle (Orion), and associated ground systems encompasses only the programs' initial capabilities and does not include the long-term, life cycle costs associated with the programs or significant prior costs. [Emphasis added]"

No, it's not about transparency. It's about protecting the home team. Sen. Shelby is the biggest supporter of the SLS on the Hill, because it is being managed by the Marshall Space Flight Center in Huntsville, with thousands of Alabama jobs at stake. Cheaper ways of doing human spaceflight are anathema to him because it puts the old ways and preferred programs at risk, and he can't control where the money goes. Beyond that, as the Space Access Society explains, it also helps one of his favored contractors, because Boeing (one of the commercial-crew competitors, which has donated $65,000 to him this cycle) is used to cost-plus accounting, and its vehicle will fly on an Atlas V, built down the road from Huntsville in Decatur, Alabama:

Combining the House Appropriations Report mandate to downselect Commercial Crew to one contractor, Sen. Shelby's mandate to go to cost-plus accounting in Commercial Crew and Commercial Cargo, and Sen. Shelby's (otherwise inexplicable) support for raising fiscal year 2015 Commercial Crew funding to $805 million, and it forms a clear picture: The new low-cost commercial vendors frozen out, and one old-line cost-plus contractor doing both Commercial Crew and Cargo out of Huntsville the old, slow, and expensive NASA-total-detail-control way.

If this language becomes law, at a minimum it will require a revised cost proposal from the contractors. But it may require an entire rebid, based on the timing, that could delay the program for another year. And every year that we delay getting our own capability to get to space on American spaceships is another year that we are overpaying the Russians for crew transportation services, and eliminating any leverage we have over them in foreign policy. It's also another year's delay in developing a vibrant competitive commercial spaceflight industry, particularly if only a single contractor remains.

If Congress was actively trying to sabotage the nation's future in space, it's hard to see what they would be doing much differently.

For more information on commercial spaceflight, click here for Rand Simberg's new book Safe Is Not an Option, which entertainingly explains why we must regulate passenger safety in the new commercial spaceflight industry with a lighter hand than many might instinctively prefer. 

NEXT: Squirrels

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  1. NASA needs to die.

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  2. Senator Shelby is a POS criminal like the rest if them. “Cost-plus contracting” is the prevalent within the DOD also. Also, their equipment acceptance policy is horrid, and it is by design that equipment is accepted with discrepancies, only to return to the yard or facility to “fix” these errors at the expense of taxpayers (extortees) as the equipment no longer is covered under warranty after it is accepted.

    Defense, space travel and anything else should and can be provided through free individuals in a free market. One can pull their funding if a company acts recklessly utilizing cost plus fee ,versus fixed price incentive and firm fixed price contracts.

  3. I hate NASA and think it’s a piece of shit.

    On the other hand, I can see a NAP argument for doing whatever it takes to keep me from having cheap access to really high rocks.

    1. I don’t think it’s a NAP argument until you actually drop one of those rocks.

      1. I think you need to read a few more of my comments…

      2. No I think a threat combined with the capability to carry out the threat would be sufficient to qualify as a NAP violation

  4. Wife and I went to the Astronaut Training Experience at the Cape; sort of hokey and Disney would have done a better job with the exhibits.
    But for propaganda, it couldn’t be beat! Four hours of ‘contact your congress critter to keep our jobs, ’cause we have neat hardware!’.

  5. Specifically referencing SpaceX’s CEO Elon Musk’s boast that he would establish a Mars colony, Tyson said on a recent video podcast, ‘It’s not possible. Space is dangerous. It’s expensive. There are unquantified risks. Combine all of those under one umbrella; you cannot establish a free market capitalization of that enterprise.’

    He also suggested that space travel is tied to other forms of significant innovation like transportation, energy, and health ? which he contrasted with people “who innovate because you want to make a buck” and are trying to figure out “the next app.”

    I didn’t know that guy was such a piece of shit.

    1. ^Tyson = NASA fanboy Neil Degrasse Tyson

    2. Yeah, I’m starting to think less and less of him.

      1. I think Dr. Tyson should heed the words of Thomas Sowell and stick to his area of expertise (astro-physics), and stop talking about other sciences, economics, and politics.

    3. You mean like that guy who made a better rocket than NASA could at a fraction of the cost then turned around and made the only close to viable electric car and gave away all the patents to it?

    4. I found the article you referenced…

      http://www.examiner.com/articl…..e-frontier

      The quote is pretty shitty, but the rest of the article has him solidly against how NASA built the Shuttle, and leads me to believe NDT would not be on the side of Shelby’s boondoggling bill-diddling.

    5. It’s bullshit, anyway. Most of the new space entrepreneurs want to make money, and they want a robust human presence throughout the solar system.

      What really needs to happen is for SpaceX and similar companies to get manned spacecraft running, then ferry people up for private purposes. Once the market is established, then it will be hard to stop it.

  6. I think SpaceX can handle this but if it becomes a problem they should decamp so some central american nation, maybe the ZEDE in Honduras in a couple years. Closer to the equator = easier launch.

  7. Here’s an idea: how about SpaceX concentrates on serving commercial customers, and lets NASA go to hell in the proverbial hand basket?

    -jcr

  8. Chile would be best

    mostly free market, near the equator, has really high mountains, and is on the ocean for easy shipping

    1. Chile is on the wrong side. You want to launch over the ocean whenever possible, so you won’t hit anybody if it crashes. But you also want to launch towards the East, so you can add the Earth’s rotation to your launch velocity. Going West is the absolute worst.

      This is part of the reason NASA chose Florida and the ESA chose French Guiana.

  9. Read this about an hour ago. Stewed on it a bit, and came back here to post this:

    “Goddamnit.”

    1. That about sums it up.

      1. Except if you’re an atheist. :0P

  10. I would have thought reason would be free of the “Pol X got $Y from ZCorp” meme.

    The opensecrets.org link, itself, says:

    This table lists the top donors to this candidate in 2009-2014. The organizations themselves did not donate, rather the money came from the organizations’ PACs, their individual members or employees or owners, and those individuals’ immediate families. Organization totals include subsidiaries and affiliates.

    The individuals donate, not the companies.

    Sheeesh!

    Kevin R

  11. Sen. Richard Shelby is such a scam. What he is asking is equivalent to requiring a taxi company to make a consumer aware what parts the taxi is made out of and where the parts come from. WHO CARES?!?! All you care is that it:

    A) Meats safety/certifications and etc
    B) The final price

    Transparency matters when your paying for every single thing like in cost-plus. When you are paying a fixed price all your doing is wasting tax payers money by forcing prices up to comply with useless regulations that serve no purpose.

    Shelby is trying to promote his useless SLS rent seeking project which usefulness is questionable. For one, with the initial configurations of the SLS, the Space X Falcon Heavy pretty much matches it and at 1/4th the cost per launch. And once the Falcon Heavy is run in reusable mode, costs will drop 10X more. In comparison, SLS throws out multiple expensive 40 million dollar engines into the trash can every launch.

  12. Some people (like me), believe that space exploration and eventual colonization is essential for the long-term survival of the human race, and that more funds should be spent on it.
    Some people believe that we have enough problems here on Earth, and that by diverting scarce Government resources to space, we squander scarce resources.
    Of course, if space exploration was left to private industry, then those who support it could use their own money to finance it, hopefully realizing a profit, while those who believe that their money should be spent closer to home could support their favorite charity to fund the lifestyles of executives who pretend to combat hunger in Africa.
    But that’s freedom, and we can’t have that. ALL decisions regarding the amount of funds we spend on space, and exactly how they are spent, must be made by Government.
    You know the reason why we aren’t darting around the Asteroid Field as predicted in 1950’s pop sci-fi? Because for the past 50 years space exploration has been controlled by the federal government instead of private industry.
    Where’s your flying car? Where’s your vacation condo on the moon? They were eaten by Big Government.
    Yet one more way that Big Government has helped to ensure that this is not the life I ordered.

  13. And I forgot to mention the laws forbidding private companies from launching into orbit. I think they have been mostly rescinded by now, but for at least 40 years it was illegal to launch a private craft into space. How much time that has cost the attempt to colonize space we will never know, but surely it was not inconsequential. During the same time when private America was developing revolutionary technology in fields such as material engineering, computers, and communications, only government sponsored launches were allowed. Hell, a large portion of our own communications satellites were launched overseas to avoid the bullshit jealous NASA officials successfully lobbied Congress to pass in order to protect their monopoly on space.
    I was born one month after Neil Armstrong walked on the moon; I was raised on sci-fi promising a colonized solar system within a hundred years; and if I die before I get the chance to go into space, I swear that my ghost will haunt Cape Canaveral for all time.

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