This ship for hire: NASA hopes competition spurs commercial space growth

CAPE CANAVERAL, Fla. -- It took help from the U.S. Postal Service to jump-start the nation's commercial aviation industry in the late 1920s and early 1930s.

NASA administrator Michael Griffin thinks a little push from government could do the same for the commercial space industry in the next several years.

The U.S. space agency is sponsoring a competition in which winning companies will get $500 million in seed money to develop space vehicles that NASA will never design, build or own. Like a U-Haul truck rental, NASA instead will merely lease them on a per-trip basis for sending cargo and eventually crew to the international space station.

The arrangement is unprecedented in the nearly 50-year history of the space agency, which traditionally oversees the development and construction of its own space vehicles instead of purchasing trips from private companies. NASA will pay out the money incrementally for each milestone achieved in the vehicles' development. After that, the company or companies who win the competition will have to finance the vehicles on their own.

"I consider it to be a big gamble," Griffin told a U.S. Senate committee recently. "It is well past time for NASA to do everything it can to stimulate commercial space transportation ... and I'm trying to do that."

NASA hopes the private-sector vehicles can bridge an expected gap between when the space shuttle fleet is grounded in 2010 and the crew exploration vehicle is flying in 2014. A thriving commercial space transportation industry also can offer researchers and others opportunities to send payloads into space without relying on NASA's crowded space shuttle schedule or worrying "that the government will decide next month or next year not to launch," Griffin said.

About two dozen companies made initial proposals to the government and only six companies have made it to the final round. The winning proposals were expected to be picked late this summer.

The $500 million seed money, which could be won by more than one company, represents only a percentage of the likely development and construction costs, which a NASA market survey puts as high as $2 billion. The winning companies will have to pay the rest of the cost of development and construction on their own. Many of the companies in the running, like Spacehab Inc., already were developing private vehicles before NASA began dangling the incentive money.

"This is a program whose time has come," said Kimberly Campbell, a vice president at Spacehab, a Webster, Texas-based aerospace company. "Prices with competition will generally be driven down, but the ease of doing business with the government will get better ... What you'll get is better efficiency."

NASA isn't the first to use a competition to encourage the development of private sector space vehicles.

Las Vegas-based entrepreneur Robert Bigelow in 2004 announced a $50 million prize to anyone able to build a space vehicle capable of carrying up to seven astronauts to an orbital outpost by the end of the decade. Also in 2004, SpaceShipOne became the first privately owned and operated spacecraft to exceed an altitude of 62 miles twice within a period of 14 days, winning the $10 million Ansari X-Prize designed to encourage development of space tourism.

NASA has been tightlipped about who the finalists are. But Campbell said they included her company; El Segundo, Calif.-based Space X; Poway, Calif.-based SpaceDev; Reston, Va.-based Transformational Space Corp.; Seattle-based Andrews Space; and Oklahoma City-based Rocketplane Kistler.

"Some of the best, most innovative ideas came from the lesser-known names in the aerospace industry," said James Bailey, a NASA contracting officer in Houston, who wouldn't confirm the finalists.

Elon Musk, chief executive of Space X, said the competition could end up being "the greatest value for money that NASA has gotten from any program." But he worried that the amount offered by the space agency may not be enough to develop a successful space vehicle if the prize money is split, given that the cost of a single space shuttle flight is $1 billion.

"For a commercial company to develop a complete system ... for $250 million, even for $500 million, is a pretty tall order," Musk said. "I'm a little concerned that NASA potentially endangers the outcome by splitting the baby here."

The competition comes as NASA separately prepares this summer to select a contractor to build its own crew exploration vehicle, which the space agency hopes will return astronauts to the moon and eventually Mars.

Two contractors, Lockheed Martin Corp. and a team consisting of Northrop Grumman Corp. and Boeing Co., are in the running to build the spacecraft, which unlike the private-sector vehicles will have NASA overseeing its development and operation. NASA is spending $18.3 billion over the next 15 years on developing it and related next-generation vehicles.

Griffin has taken a page from the Hoover-era U.S. Postal Service in offering an incentive to the private sector to develop commercial space transportation.

The U.S. Postal Service took the lead in developing commercial aviation when it began flying mail in 1918. The agency developed a system of routes across the country and then turned the job over to private companies in 1927.

Not much later, President Hoover's postmaster general, Walter Folger Brown, developed a system of bonuses for the companies if they offered seats to passengers in addition to space for the mail. He wanted the industry to mature but realized it wouldn't happen without economic incentives.

The result was that commercial air traffic jumped from 6,000 passengers in the late 1920s to 450,000 passengers in 1934, said Bob van der Linden, a curator at the Smithsonian Institution's National Air and Space Museum.

"Traditionally, Uncle Sam has done this many times before," said van der Linden. "Prove it can be done, help business get involved and when business can make money, you step back and everybody benefits."

---

On the Net:

NASA's Commercial Orbital Transportation Services (COTS) program: procurement.jsc.nasa.gov/cots/