NASA and The Private Sector

NASAOver the past 50 years, the majority of space research and exploration has been initiated through the government.  However, in recent years the United States has begun transitioning away from this trend. Private companies are starting to enter a new market: space exploration. These “New Space” companies have a lot to offer but also bring some downsides

The emergence of these companies is largely due to NASA’s Commercial Orbital Transport Services Program (COTS) was starting in 2006 and subsidized commercial firms for the development and testing of a spacecraft that could replace the space shuttle.

The program was such a success because it removed many of the barriers to entry that existed in the emerging market. In addition, the program acted as a sort of fiscal policy.  Most of the $700 million dollars spent stayed within the US and created serious jobs for the US economy.  Funding these firms has jumpstarted the market to lead the world in this emerging industry.  More than 20 businesses applied for the COTS Program. The contenders were eventually narrowed to Boeing, SpaceX, and Sierra Nevada. 

By awarding more than one company the contract NASA encouraged competition. In the past, both Boeing and Lockheed Martin have held near monopolies on some aspects of the demand (such as launching military satellites).  As a result of their strong grasp on the market, Boeing has been able to charge high prices for its products.  Now, these monopolies are beginning to crumble as NASA shifts its funding toward awarding contracts and relying more heavily on commercial industry. Consequently, companies like SpaceX, Sierra Nevada, Blue Orbit, and Boeing now compete for federal funding and contracts. By enabling competition (through reducing the cost to entry for many space startups like SpaceX), market forces have driven down prices and incentivized firms to find ways to get to space cheaper and faster than NASA ever could. Private firms are iss-wallpaperincreasingly looking to NASA to fund their own missions and development.  For example, just recently, SpaceX and Boeing received US government contract to deliver astronauts to the International Space Station (ISS).  Planetary Resources are working towards mining near-earth astroids and astroids in the astroid belt.

spacex-latino

NASA’s role has obviously changed. Part of the government agency has become a sort of regulator/consumer for a market by issuing licenses and contracts to private firms. However, some aspects of space exploration aren’t yet practical for businesses to pursue.  Thus, National Space Programs have narrowed their mission to invest in areas of space exploration where profits aren’t yet realistic or fit for commercial endeavors. 

Their are also some downsides that come from an increased reliance on the private sector.  A lack of experience makes reliance on these firms more risky both in terms of safety and as an economic investment thus many people are not interested in funding dicy business plans that haven’t been proven in the market. In addition, the way our space program is structured would place the profit motive ahead of the research motive for all space missions, possibly making the missions less scientifically efficient.

In conclusion, we find that though private space companies help with two hugely important things: development of new technologies and lower costs.  By investing in the formation of these companies the United States is pushing our industry to the forefront of an emerging market, all the while creating good jobs and fostering innovation.

-Eric Rannestad

References:

“NASA vs. the Free Market: Which Is Better for American Space Dominance?” Digital Trends. 31 Aug. 2012. Web. 6 May 2015.

“Taxi to Orbit: NASA Goes with Old Space and New Space (with a Cameo by Jeff Bezos).” Washington Post. The Washington Post. Web. 6 May 2015.

Cuadra, Alberto, and Katie Park, Published: Nov. 22, 2013. “New Players in the Space Race.” Washington Post. The Washington Post. Web. 6 May 2015.

http://www.bloomberg.com/news/articles/2014-04-28/elon-musk-challenges-lockheed-boeing-rocket-monopoly

http://www.forbes.com/sites/forbesleadershipforum/2013/10/02/houston-we-have-a-market-privatizing-space-launches-pays-off-big/

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