Today’s class will be discussion-based. This prompt is meant to help guide your discussion. We will convene as a class after 20-30 minutes to discuss the issues raised.
Spend enough time reading about the US government’s approach to space or talking to experts in the field, and you’ll hear the phrase “leveraging commercial capabilities” thrown around. It’s not just in the US for that matter—the UK government used similar language in deciding to purchase the OneWeb constellation. The Indian government has been using similar language in its space policy statements. Everyone wants to “leverage commercial capabilities”, but how?
One approach discussed in the US is to stand up a “Civil Reserve Space Fleet” (often called CRSF or SpaceCRAF), similar to the Civil Reserve Air Fleet (CRAF) or the US Merchant Marine. Several of our readings for this week described aspects of the CRAF and quasi-similar programs like NASA’s COTS (here’s the CRAF wiki, and here’s the Air Force CRAF factsheet—the factsheet is shorter, but the wiki has numbers). Briefly, the CRAF is a program which expands US government airlift capacity in moments of need by using commercial providers. Providers are encouraged to enroll in the program by offering them access to Department of Defense contracts during peacetime. The trade is simple: get a slice of the peacetime contracts (guaranteed money to carry cargo and traffic) in exchange for being on-call when the US government needs capacity (chance to lose some money through forgone routine activities and risk of flying in potentially-dangerous areas). In this way, US government airlift capacity can significantly exceed what the US government itself owns.
Another approach is to build out government owned capacity, either through acquisitions as with the UK government’s approach to the OneWeb constellation or through dedicated development as in the US government’s MILSTAR constellation. But either way the idea would be for the US government to invest in its own capacity and keep it on tap when needed. That’s some of what happens in contracts like these. That way the government would be sure that the providers have the capabilities they need, that the capacity is available as needed without any delays, and the government is not committed to providing other contracts (thich may come with their own idiosyncratic issues and requirements). This article describes a bit of the interplay between the two modes of thinking.
Supporters of the CRSF approach argue that (1) the commercial sector has plenty of capabilities and capacity, (2) it would help preserve the domestic space industrial base, and (3) it would save taxpayer money. They argue that the “government-owned capacity” approach fails on all three counts, especially in wasting taxpayer money through excessive use of cost-plus contracts.
Supporters of the government-owned capacity approach argue that (1) the commercial sector is critically behind national security capabilities in many domains, and these capabilities are too sensitive to be released to even acknowledged, so there’s no way the commercial sector can really provide what’s needed (2) the government in a capitalist system ought not be in the business of doing industrial policy, as it entails picking winners and inducing greater inefficiencies in the market (if there’s not enough demand without government intervention then the product isn’t commercially viable and ought to fail), and (3) it isn’t a waste of taxpayer money to ensure access to mission-critical capabilities for national security. They argue that the CRSF approach fails on all three counts, especially in distorting market outcomes and failing to ensure access to the latest capabilities.
Funds are limited, so budget constraints limit the ability to simply do both (have a CRSF and fund government-owned capabilities). But a key question for either approach is, “how would this work for launch capacity?” In groups, referring to the readings and other sources you find, try to sketch out the elements of a CRSF program for launches. Below are some additional stubs of things to think about, followed by some questions to help focus your attention.
There are broadly two categories of contracts that governments offer: “fixed-price” and “cost-plus”. “Fixed-price” is similar to how we buy things: the government will pay a fixed price for the item, with the provider keeping (or eating) any difference between their production cost and the price as profit (or loss). “Cost-plus” is closer to how public sector electric utilities are regulated: the government will offer a guaranteed rate of return on the project, including any (reasonable) costs incurred along the way—cost-plus contracts need a lot of oversight. Many programs mix the two. We’ll study these a bit more in Unit 4, but you can broadly think of fixed-price as the contract for things that are easy to produce (or not a mystery) and are often produced in bulk, while cost-plus is the contract for new things (where failures along the way are expected) and hard to profitably produce in bulk. The COTS contracts were fixed-price, while the SLS contracts are cost-plus. Contracts for vehicle fuel and parts are typically fixed-price, while contracts for new weapons systems are typically cost-plus. On the downsides, fixed-price can lead to low-quality goods or insufficient participation while cost-plus can lead to cost overruns and delays.
There are some parallels between the CRSF idea and other programs: for example, NASA’s COTS program purchased commercial capacity to resupply the ISS and even induced some new product development from the commercial sector. The COTS program helped bring SpaceX into the commercial market—accounts from Elon Musk and others indicate that SpaceX would not have survived without the COTS contract. COTS also helped show that SpaceX was competent and that reusability was viable, which had important spillover effects on the space sector. COTS used fixed-price contracts. But cost-plus contracts for government owned capabilities have played a huge role in the American economy too—for example, cost-plus contracts for government-owned capabilities during the World Wars enabled small technology firms like Hewlett-Packard and Fairchild Semiconductor to bill DoD for R&D expenses they couldn’t have shouldered on their own.
From the perspective of an analyst in 2021: Is a CRSF a good idea for launch capacity? If yes, how should a CRSF for launch capacity be structured? If now, what is the better alternative?
Some questions to help focus your discussion:
Try to generate strong arguments on both sides of the main question, assessing which you find most compelling and why. Try also to think of additional questions which you may not be able to answer but think are important in thinking about these questions.