Association for Public Policy Analysis & Management

Tradeoffs across cost and risk are a fundamental element of space program management. Under the traditional public sector approach, ostensible solutions have been unstable and ineffective, as incentives often drive technologists and officials in opposite directions. The first section of this paper describes how the National Aeronautics and Space Administration (NASA) has sought to reconcile Congressional mandates, military needs, contractor demands, and public interests as it managed cost-risk tradeoffs. The dynamic nature of the system, particularly given shifting national priorities, has resulted in an iterative approach to policy making that is ill suited to meet stakeholder demands efficiently. Under this paradigm, even technological marvels such as the Space Shuttle can be seen as policy failures. The Space Shuttle has been criticized by funding authorities for not meeting original cost objectives, while engineers point, in part, to necessary risk mitigations as sources of cost growth. Now with the partial privatization of the U.S. space program, a new set of commercial actors has come to play a central role in this apparent conflict of interests. The second section of this paper describes how the commercialization of the United States space industry is affecting the management of financial expenses and technical risks. For example, the simultaneous development of the NASA Space Launch System (SLS), Space Exploration Technologies Falcon Heavy, and United Launch Alliance Delta Heavy rockets thus far, has highlighted the differences in how government and private launch developers pursue program objectives, subject to cost and risk constraints, and demonstrated potential for biased competitions, unless the use cases for SLS, as opposed to its commercial competitors, are made clear by regulators.

This work identifies policy shortcomings that have resulted in a misalignment of incentives between the regulatory and commercial spheres, pertaining to the tradeoff between launch vehicle cost and program risk. There are three primary areas of concern facing policy makers and industry leaders. The first is the transitory state of NASA as both a technological innovator and regulatory agent. NASA, as the operator of many government space projects, is a primary customer for the space industry, but has also competed with private companies for launch opportunities and has thereby shaped the developing market. The second is the United States Air Force (USAF) certification procedure that determines which companies are eligible to compete for USAF launch opportunities. Certification is not problematic; however, when applied to a small commercial market, certification can become the basis for monopolistic market conditions. The third is NASA program development contracts, which function much like government subsidies, but allow regulators to impose technical requirements on launch vehicles in exchange for NASA funding. While development contracts are a valuable risk mitigation tool, they can become an overreaching means of government intervention in private enterprise, dictating how companies should utilize certain resources. This work outlines the impacts of current commercial space policy and offers preliminary recommendations for policy adaptation to promote more effective management of cost and risk, while simultaneously creating fertile ground for innovation to the benefit of all stakeholders.