Congress Threatens To Anchor Private Spaceflight With Extra Costs

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


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.