Perhaps It Is Transformational Change After All, Part 1: Acquisition Strategy

“If you don’t like something change it; if you can’t change it, change the way you think about it.”
–Mary Engelbreit

I’ve been giving a lot of consideration recently to the degree of change facing NASA’s human spaceflight endeavor under the proposed new space policy where NASA hands off routine access to low Earth orbit to the commercial sector and concentrates on exploration beyond.  On one hand, I offered that the change is transitional (i.e., mid-range) on the transactional, transitional, and transformational change spectrum.  (Transactional change occurs when the number, breadth, and depth of change is small and the outcome is predictable; transitional change is when the number is small yet the outcome is unpredictable, or the number is huge yet the outcome is predictable; and transformational change is when the number is huge and the outcome is unpredictable.)

So is it?

I offered previously that NASA’s internal human spaceflight endeavor is about to undergo a transitional change for two reasons:

1) The number, breadth, and depth of pieces involved in changing NASA’s human spaceflight effort from operations-oriented to research and development-oriented is quite numerous and complex when taking into account all the technical, budgetary, workforce, and political factors.  Yet, the outcome is quite simple: NASA needs a sustainable and affordable launch service for access to low Earth orbit provided by the commercial sector for which NASA is one of several paying customers, or else NASA’s human spaceflight endeavor faces a bleak future.

2) NASA’s current human spaceflight effort implemented as the Constellation Program is on an unsustainable trajectory from an affordability standpoint, according to the Augustine Committee.  In terms of business models, this means that NASA’s internal human spaceflight endeavor needs to transition from its current realignment state to a sustaining success state.

Some recent readings and conversations I’ve had around assumptions that underlie these reasons have given me pause.  First, is the outcome in the first point really as predictable as I offer above?  Second, should the target for the internal elements of NASA’s human spaceflight in the second point be to return to the business models of the past that characterized NASA’s previous successes in human spaceflight, or to something completely different?  Part 1 covers the predictability question in the first point, and part 2 will cover the future target from a business model perspective.

First, are we really looking at a predictable outcome regarding the details behind the acquisition of commercial crew transportation services by NASA?

A number of the bloggerati, NASA’s top leadership, and I’m sure countless others, have offered the opinion that the commercial sector can provide crew transport sometime in the future for two basic reasons: (1) NASA doesn’t build its own human spaceflight vehicles anyway (the commercial sector does), so NASA’s human spaceflight effort is already dependent upon the commercial sector today; and (2) there is already an affordable commercial satellite launching business in place independent of NASA (witness United Launch Alliance and others).  I offer that both are true statements, in the context of the acquisition process used in each of the respective domains.  However, with this in mind, I ask the following question: can we assume that the acquisition process for commercial crew transport will lead to a predictable outcome?  I think most people would hope for that being the case; yet hope is neither a good predictor of the future nor an effective management tool.  Let’s look at the elements that play a role in developing an acquisition strategy and decide if we are dealing with a predictable situation, or if the realities of how the federal acquisition process works will lead to an unpredictable outcome.

In an acquisition strategy, one of the key factors to be addressed is risk: how much risk exposure is the private sector willing to take, and how much risk does the government want the private sector to take?  (Ideally, you want the two to be as close as possible, so that you can proceed with a solicitation for the needed goods and services.)  Risk can be discussed in three terms: technical risk, schedule risk, and cost risk.  The technical risk basis for saying that today’s commercial industry can provide commercial crew transport is somewhat of a leap of faith; it assumes that the requirement for crew transportation can be achieved with vehicles very much like in existence today.  Here’s the key point: the assumption may be invalid because of the lack of firm requirements to date for commercial crew transport.  For instance, when the time comes for NASA to define the requirements for commercial crew transport, I don’t know if NASA will levy such exacting requirements that industry would be forced into developing point-solutions to meet NASA’s needs for transportation to and from the International Space Station.  What NASA needs to do is offer a solicitation that looks at commercial crew transport in a very simple, outcome-oriented way – one that gives consideration to a broader need that goes beyond crew transport services to/from ISS – and not one that over-specifies the requirements of implementation in terms of a strict focus on NASA’s crew transportation needs.  Think beyond NASA reach out to others who will need the service. Tell the commercial sector what is required for a viable crew transportation service, not how to do it specifically for just transporting NASA astronauts to and from ISS.  Given my experience in the federal acquisition process and all the NASA procedural and policy requirements in place, this may be a tremendous challenge.

Let’s move to the schedule risk.  The simplified way of looking at schedule risk is in broad terms: the proposed extension of ISS operational life to 2020 is a long way away, and we’re bound to see a commercial crew transportation capability before then.  Right?  We also have the Russians from whom we can purchase services until our home-grown commercial effort is ready.  Therefore, if one is confident that we can achieve a commercial crew transport capability well before 2020, and do so far enough in advance that NASA can take advantage of it and the commercial sector can turn a profit on it, let’s not worry about forcing an artificial early target date for delivery of the service that would increase schedule risk and thus jeopardize the overall acquisition or drive up costs.

Finally, we have cost risk.  Many have derided the cost reimbursable contracts that NASA has used for many of its programs, and I suppose that many of the same people would advocate using a fixed price contract for commercial crew transport.  A fixed price arrangement places more risk on the commercial provider and less on the Government, by the very nature of the contract vehicle: the commercial provider bids a price, and if it can provide the good or service for less than the price, the remainder is all profit; however, if the vendor overruns, the overrun comes out of the hide of the company, not the Government.  To go with a fixed price arrangement, one must ask this question: is there low risk for the cost associated with commercial crew transport, or alternatively can the cost risk be predicted with an acceptable degree of certainty?  This might be quite a challenge at present given the uncertainties in requirements I mentioned in the technical risk section.  OK, let’s set aside the requirement uncertainty and take a different angle, by bounding the problem based upon costs cited to-date.  On one hand, we have the Russians who can provide seats today for $51 million per seat, and we have conjectures from SpaceX CEO Elon Musk that he might be able to provide seats for $20 million each.  That is a pretty wide band, $20m with no experience to $51m with experience; so, what is the actual cost uncertainty?  Would we be willing to walk away from a home-grown commercial transport service for a decreased cost uncertainty by going with Russia into perpetuity?  Or would we be willing to somehow mitigate and accept the cost uncertainty in favor of a home-grown commercial effort?  This might be the scenario that NASA Administrator Charlie Bolden had in mind when the “bailout” word came up in his conversation with Gene Cernan; seek a fixed price arrangement knowing that cost uncertainties exist, yet make provisions for “helping” the commercial crew transport companies if costs exceed the agreed-to target price for “reasonable reasons”, even if the cost-per-seat exceeds that of rides on Soyuz.

In terms of procuring commercial crew transportation services, there are so many unknowns at present that I’m starting to lean towards an unpredictable outcome until proven otherwise by actual requirements, an approach to the schedule more thorough than my earlier analysis, and a better understanding of the cost uncertainties.  An unpredictable outcome, coupled with a large number, breadth, and depth of pieces involved in changing NASA’s human spaceflight, leads to a transformational change in terms of what we know today regarding an acquisition strategy for commercial crew transportation services to low Earth orbit.  Put a different way, if a broad commercial crew transportation service capable of supporting access to low Earth orbit for many customers is to work for NASA, NASA needs an internal transformational approach to how it acquires those services – how it specifies the requirements, drives the schedule, and manages the cost uncertainty.

What about the second point, involving the transition of NASA’s internal operations organizations to research and development organizations?  Should the target be to return to the business models of the past that characterized NASA’s previous successes in human spaceflight, or to something completely different?  I’ll cover this in Part 2.

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Perhaps It Is Transformational Change After All, Part 1: Acquisition Strategy