So, last week, Darksydes' had a great piece about the current situation with regard to space policy. However, it became very clear to me that there are some fundamental misunderstandings about the policy. Specifically, the question of what it means to commercialize, vs privatize, and how that impacts the goings on at NASA.
Join me over the fold for an explanation
So, typically when people hear about the NewSpace approach, which "involves greater utilization of private companies" (and this is a bit of a myth, as you see later), the knee-jerk reaction tends to be
So, we are going to turn space & NASA over to BP and Haliburton. We've had such "great" results with those situations.
In point of fact, if you go back roughly 10-15 years ago, that was my first response when I first heard the NewSpace philosophy (of which, a huge part is commercialization).
But here is the reality: Commercialization & Privatization are fundamentally different things. Here are the details.
Privatization takes an existing government asset or service, and replaces it with a private asset or service. We are all aware of the situation with Blackwater, and private military contractors. The common claim is that this will reduce costs of operations (making no claim as to whether this actually works or not - merely that this is the claim)
Commercialization is a different beast. When we talk about Commercializing space, what we are talking about is creating private customers/users of spaceflight. This involves developing business plans, customer surveys, business practices, financing strategies - all aimed at targeting a new market and new customers, that are not only government based. There will still be the astronaut heros, like Buzz Aldrin. But they'll be joined by the private users, like Richard Garriott.
The point worth noting here is one is about eliminating government involvement (privatization), while the other is about increasing the user base (commercialization). It should be clear that these are fundamentally different actions. There are some great examples of commercialization - comm sats, the Internet, GPS, to name a few. They all took a situation where the only customer was the government, and added new users who were private.
So what are the practical effects? Well, first you have to stop assuming that every customer is exactly like the government, and one of the biggest changes is you have to stop assuming that you can have endless cost overruns. This means you have to stop using cost-plus, sole source contracting. It means that, if a company has cost-overruns, they are responsible for them, not the government. This means that when a company fails to deliver on time, they will be on the hook for failing to do so. It means that if the product fails, the company is out millions, even possibly billions.
We already have a great example of a company who promised more than they could deliver, and ultimately went into bankruptcy because of it. Instead of being on the hook for hundreds of millions, or even billions of dollars, due to cost overruns, the US government only lost a small amount of money, and a new company emerged to offer a real product.
Finally, I am going to let you into the dirty secret of the situation. Right now, NASA is entirely dependent on the private sector. NASA doesn't build its rockets (Chrysler built part of the Saturn V, and Rockwell built the Space Shuttle), and it contracts out the operations of the Space Shuttle (to a joint venture between Lockheed Martin & Boeing). Something like 70-80% of the people who "work at NASA" are private contractors.
What this means is that major defense contractors will have to either start producing real hardware, that can serve both the government and the private citizen, or they'll go out of business.
No wonder companies like ATK & Lockheed Martin are scared. The government cost-plus world of easy money is coming to an end!!
