Everything Must Go!

istorically on the leading edge of technology, NASA now is on the leading edge of government privatization. The nation's premier research-and-development agency is rapidly selling itself off to the private sector, outsourcing everything from desktop computers to rocket science in its efforts to control or cut costs. Although the 40-year-old space agency has often been criticized for standing in the way of free enterprise, the pace, depth and theory of NASA's commercialization go far beyond what would be considered ag- gressive in other government agencies. This is a new frontier in privatized federal government, where almost anything is up for sale and little is considered sacrosanct-inherently governmental, that is.

"Every year, we tell the Congress that the goal of our government should be nothing short of opening the frontier of space to all Americans," says Ransom Wuller, an Illinois lawyer who presides over the nationwide ProSpace lobby and its annual "March Storm" of legislative offices on Capitol Hill. "We think that can happen if the government helps stimulate the private sector to take over the functions we think we could do better. I would propose putting the [space] shuttle up for auction-at least one of them," Wuller says, "and seeing what it would fetch."

With their exorbitant operating costs-not to mention the number of miles on them and their nearly obsolete early-1970s technology-none of the space shuttles would fetch close to the $2 billion it cost to build. But selling a taxpayer-financed shuttle to a private space company is just one of many options NASA is considering as it pushes to commercialize its day-to-day activities, guided in part by the 1998 Commercial Space Act.

Among other things, the law:

• requires the federal government to buy space-transportation services instead of building and operating its own vehicles;
• permits the use of surplus intercontinental ballistic missiles as low-cost disposable space launchers;
• authorizes the Transportation Department to issue atmospheric reentry licenses for a new generation of space shuttles-privately developed reusable launch vehicles, or RLVs-that will fly back to land after completing commercial space missions;
• orders NASA to plan for the privatization of the space shuttle, the nation's only space transportation for humans;
• instructs NASA to evaluate markets for commercializing the international space station now under construction.

"The vast potential of the commercial space industry has been constrained by government regulations and laws that have not kept pace with the latest technology and changes in the marketplace," said Rep. James Sensenbrenner, R-Wis., a sponsor of the law, in a written statement upon passage of the bill in October. For NASA, which already considers itself 90 percent contracted, the new law is merely a navigational aid to be used on a course the agency already has charted.

Spinoff City

In 1962, the year John Glenn made America's first Earth orbit in a piloted capsule, NASA spun off control of commercial communications satellites to Comsat Corp., a worldwide network established by the U.S. government. Since 1992, Columbia Communications Corp. has resold commercial transmission capacity on communications satellites NASA still owns.

In July 1996, NASA struck an innovative cooperative agreement with Lockheed Martin's Skunk Works to produce the X-33-a half-scale, suborbital technology demonstrator of a reusable launch vehicle that Lockheed Martin calls "VentureStar." NASA committed $1 billion to the program through 2000; Lockheed Martin is putting up $220 million. The X-33 is designed to demonstrate the technical and financial viability of an RLV fleet sustained by the commercial space-launch market. NASA would be just one of many customers for VentureStar. The goal is to cut the cost of putting a pound of payload into space from $10,000 to $1,000. Flight tests of the X-33, delayed a year by technical problems, begin in July 2000. NASA's 1999 budget request included follow-on funding for the program should industry decide not to take it on.

NASA also took the first step toward shuttle privatization in 1996, when it shifted responsibility for shuttle operations to United Space Alliance (USA), a joint venture of Lockheed Martin and Boeing. As more tasks are consolidated, USA's six-year, performance-based contract increases in value. It's now worth about $8.5 billion, up from $6.9 billion at its inception. Only a year after winning the contract, USA began negotiating with NASA to take one of the orbiters for commercial use.

On Feb. 1, Litton/PRC took over NASA's sounding rocket operation at Wallops Island, Va., under a four-year, $12 million indefinite-delivery/indefinite-quantity contract with six years of options and a potential value of $572.5 million.

Even more recently, NASA lured back Daniel Tam, director of planning and investments for TRW's Space and Electronics Group, to be the agency's first commercialization czar. He had served as space station business manager from 1994 to 1997. Tam's new job is to look for opportunities to commercialize NASA's infrastructure, operations and technology. He will reach out to the broader public sectors, including industry, academia and other government organizations, to accelerate deployment of NASA-developed technologies outside the aerospace sector.

"We believe [that] by increasing and accelerating the commercial application and utilization of some of what we do, we'll help NASA focus on what we do best, which is the cutting-edge technologies-the going places where nobody has gone before," Tam says. He is a headquarters employee but is based at NASA's Jet Propulsion Laboratory in Pasadena, Calif., where all of the agency's deep-space missions are managed. For Tam, the location is no more than a matter of convenience, being close to his home. But the symbolism is undeniable: JPL isn't operated by civil servants; it has been a division of California Institute of Technology since 1936 and became affiliated with NASA in 1958.

Throughout government, the controversy about privatization and outsourcing centers on what is inherently governmental-and, therefore, should remain in government hands-and what is not. The 1998 Federal Activities Inventory Reform Act (FAIR) requires executive agencies annually to publish a list of their activities that are not inherently governmental and could be contracted out to federal or private bidders. The Pentagon is trying to put up for public-private competition some 230,000 civilian jobs from now through 2005-far more than the 90,000 it competed between 1979 and 1996.

NASA has taken a different path, one far beyond that contemplated by FAIR or even the Defense Department. Nonetheless, Tam's biggest challenge will be to convince the entrenched bureaucracy that there should be no limits. "I personally don't have any desire or requirements to say that there are certain things that are holier than the others or more sacred than the others. It's all a matter of how and when," he says. "To me, the ultimate end game is to commercialize all of this."

Merchandising Missions

For example, NASA has handed contractors control of its desktop computers. The Outsourcing Desktop Initiative (ODIN) put seven vendors under contract late last year to take delivery orders for computers and computer services for various organizations across the agency. "By outsourcing, we can concentrate on things that are harder and more important," says David Nelson, the agency's deputy chief information officer in Washington.

ODIN vendors will repair and maintain the computers NASA owns until they become obsolete, then replace them with vendor-owned machines that meet NASA specifications for processor speed, storage and memory. The computers will be leased to NASA at an average cost of $2,000 per seat per year. Nelson says that price is "eye-openingly small" compared with national survey data showing the average annual cost of computer ownership at $8,000 to $12,000. ODIN gives NASA state-of-the-art equipment that is renewed at a rate the space agency might not otherwise be able to afford. NASA has invited other federal agencies to join the initiative, but response has been slow. "I think they've heard about it, but I'll speculate that they are nervous about losing control," Nelson says.

In September, Lockheed Martin-already NASA's second-highest-paid prime contractor-won a $3.4 billion, 10-year contract to manage all NASA's communications, data collection and telemetry for human space flights, satellites and planetary exploration missions. The Consolidated Space Operations Contract (CSOC) merges about 15 separately managed and separately executed contracts under a single management structure. NASA expects Lockheed Martin and its team of 40 companies to "reduce overlap, eliminate duplication, and increase efficiency by streamlining service delivery," according to an
agency news release about the new contract. Despite the estimated $1.4 billion savings to the government, contract monitor Patrick Duffin says CSOC isn't popular. "Rightly so, the congressional representatives of the local areas, especially in states where layoffs are occurring, want to know what is going on. We are bound by process. We have to grease the skids as we go along."

Lockheed Martin now supports about four dozen government-owned science and communications satellites, each with its own command system and control center. "We intend to build what we call an integrated mission ops center," says program manager Jay Honeycutt, president of Lockheed Martin Space Operations Co. in Houston. "We would take a dozen or so control centers at a location and shrink them down into one, and then with one control center and one flight ops team look at controlling the whole dozen simultaneously."

Once Lockheed Martin develops the technology to consolidate ground control this way, it will have the tools necessary to sell similar satellite services in the commercial marketplace. And that's another part of the government's plan: Lockheed Martin will spin off to the private sector parts of the communications system in order to cut the costs of future space missions. "We're looking at other areas where we're able to essentially sell excess capacity," says Honeycutt. "If we have a control center that's doing the job for the government and it's running at less than full capacity, can we find a customer for the excess capacity and support their mission through a common set of facilities?"

Honeycutt has seen consolidation from both sides of the fence. He was director of Florida's Kennedy Space Center when Houston-based United Space Alliance assumed responsibility for the shuttle. "I'm sympathetic to those centers which are going to the CSOC concept," he says. "We are going to do whatever we have to do to make sure it works, from our perspective as well as from theirs."

Now NASA is eyeing the shuttle for outright privatization. In October 1997, USA presented NASA with a plan to use shuttles to launch commercial satellites or to repair and maintain them once aloft, to haul commercial payloads to and from the space station and to fly Earth observation and science missions for other countries. "We are not intended to be just the shuttle contractor," says USA chief executive officer Russ Turner. "My vision for United Space Alliance is, by 2002, a third of our business is outside of the support work we do for NASA . . . as we pursue commercial and international space operations activities." Those activities could include operating other launch vehicles such as Lockheed Martin's VentureStar and off-planet systems such as a space station or a moon base.

Laws passed after the 1986 Challenger disaster prohibit NASA from using the shuttle to launch primary commercial and military payloads. The agency has, however, given USA permission to "test the market" by booking payloads to fly on two so-called "reimbursable" shuttle missions in June 2002 and July 2003. While the missions aboard the Columbia orbiter are on NASA's planning manifest, a senior official says, they are not funded by the agency. They are intended as pathfinders for flying commercial payloads using excess shuttle capacity after the space station is assembled. Even if finding customers proves easy, it will be a challenge to convince the Office of Science and Technology Policy, the Office of Management and Budget, Congress and even some NASA stakeholders that lifting the ban is a good idea.

Universal Underwriter Sought

The shuttle is now the workhorse hauling parts and builders to the $60 billion U.S.-led International Space Station, scheduled to be completed in November 2004. Already, NASA is marketing the space station's major components. In late March, it solicited corporate proposals for a module to house astronauts aboard the station. "Our objectives are to stimulate private investment, and particularly to stimulate it in non-aerospace markets," says utilization manager Mark Uhran. The announcement sought organizations interested in pooling private resources to produce the unique, inflatable living quarters that designers at the Johnson Space Center have been working on for about two years.

Called Transhab, it's envisioned as a precursor to the space-based private hotels and offices of the future. "A group could include a hotel company, an entertainment company, a health care company, a medical

equipment company and, of course, an aerospace company," Uhran says. "We could put a syndicate together of five such companies that would allow them to begin to learn how to put accommodations in space for non-government activities."

The solicitation was a first step in a plan to let a non-government organization (NGO)-not necessarily a private company-manage the orbiting complex as early as sometime in fiscal 2000. "That term, NGO, is new to a lot of people," says Uhran. "NASA has had a lot of success over its lifetime with non-government organizations, and people don't realize that." Comsat and JPL are NGOs. So is the Space Telescope Science Institute, which handles the Hubble Space Telescope. All, however, are single-mission organizations. "We are studying whether it is possible to apply an NGO management structure to a multi-mission spacecraft like the station. There are three major missions-science, technology and economic development-and, of course, there are five [major] international partners," says Uhran. "It's a much more complex situation than any of our prior experiences have been."

Last November, the 23,000-member National Space Society, a Washington advocacy group, lauded NASA's commercial development plan for the international space station as "an encouraging step in the right direction." The society's statement said, "A body outside government bureaucracy will be better positioned to respond to the needs of industrial users, which should accelerate the rate of commercial customer sign-up for use of the station." The most significant proposal in the plan, the society said, is to shift from a cost-based pricing system to one based on value for research and manufacturing aboard the space station.

How Far, How Fast?

With all the talk of privatization at the Defense Department and elsewhere, the handing off of NASA chunk by chunk to contractors hasn't captured much attention in the mainstream press. But the handoffs raise interesting questions about the appropriate role of government in one of its last frontiers, pure science; about how privatization should be handled; and about what functions are inherently governmental and what are not. NASA already is one of the most contracted agencies in government. How far can, and should, privatization go?

Historically, NASA has contracted for support of its activities. The contracts specified a level of effort to be provided, not the results to be achieved. Without clearly stated contract objectives, civil servants had to maintain heavy surveillance of the work. But for the past three years, the goal has been to implement performance-based contracting "wherever it makes sense," says Ken Sateriale, a NASA procurement specialist. Performance-based contracts can give the contractor incentives to innovate, save the government money because it no longer pays a "marching army" of workers for a term of employment, and reduce the need for government surveillance. The new rule is insight, as opposed to oversight. "You're monitoring the contractor's activity, but you might be doing it through reports or data," Sateriale says.

But the gradual loss of control by civil servants has brought out concerns ranging from technical security to astronaut safety. NASA's Aerospace Safety Advisory Panel has urged caution in the commercialization of the human space flight program. In its annual report released in February, the panel repeated earlier warnings about the combined effect of workforce downsizing, a hiring freeze and the USA takeover of space shuttle operations. The situation "has raised the possibility that NASA senior managers in the future will lack the necessary hands-on technical knowledge and in-line experience to provide effective insight," according to the panel.

After almost three years under the new contract with USA, NASA civil servants still try to exercise well-intentioned, but not necessarily legal, oversight of shuttle work. Launch integration manager Don McMonagle, a former astronaut, acknowledges that for many civil servants, "it's difficult to step back and monitor the performance of this contract and only insert yourselves where you see a problem has developed." Contract monitor Jack Boy- kin in Houston dismisses such reactions as "human nature," but acknowledges that "this has been one of the problems with consolidation all across the board. People don't like [it] when they're not controlling the purse strings."

The core concern is that as expertise migrates out of NASA and into the private sector, the agency loses its ability to monitor what the contractors do. "The argument is made that if the agency is not doing X anymore, does it still have the skills to monitor X? If the government loses those skills, then a lot of the benefits of the outsourcing may disappear," says Steven Kelman, former administrator of the Office of Federal Procurement Policy and now Weatherhead professor of public management at Harvard's John F. Kennedy School of Government. "What the government may need to be prepared to do in the long run is to start hiring more contractor employees as contract monitors. Given the salary structure in the commercial world, that has a lot of implications."

Throughout history, government's role has been to underwrite the exploration of new frontiers. The railroads and the airlines began as government enterprises. "The government paid for lots of that early development and infrastructure," says Tam, "and now you see the whole thing truly is commercialized." The engineers of NASA's commercialization see public-private partnerships as the only way NASA will be able to venture deeper into space. "If we try to do it on public funding alone, we won't get there," Uhran says. "This is not as much NASA selling out its assets as it is NASA getting into public-private partnerships to allow us to continue to move out."

Beth Dickey is a freelance writer who has covered the U.S. space shuttle program since 1981. She reports from Kennnedy Space Center for national and international news organizations.