Government as Customer of Space Commerce
Overview
- Satellite Transponder Leasing
- Hosted Payloads
- Remote Sensing Data Buys
- Space Transportation Services
- COTS
- Rideshare/Multiple Manifesting
Introduction
The National Space Policy of 2010 calls upon the U.S. Government to promote the health of the U.S. commercial space industry, in part by becoming a better customer of the industry. The policy provides an extensive set of Commercial Space Guidelines prescribing steps for federal agencies to take in this regard, from buying commercially available space capabilities and services and exploring inventive space acquisition arrangements (hosted payloads, data buys, etc.) to transferring routine, operational space functions to the commercial space sector.
Read more about the Commercial Space Guidelines...The Office of Space Commercialization plays a key role in encouraging NOAA and other government space agencies to pursue commercial alternatives to traditional space procurement processes.
Benefits
There are many benefits to having the government purchase commercial space services rather than design, build, own, and operate its own space systems.
- Cost Savings: The cost to the taxpayer drops dramatically as space system development and operation expenses shift to the private sector. Rather than maintain a "standing army" of engineers and satellite operators, the government only has to pay the marginal cost of the services it uses -- usually at a known, fixed price. The system operator's ability to sell its services to additional customers outside the U.S. Government can create economies of scale that reduce unit costs for everyone. Open market competition among service providers can further reduce the cost to the government.
- Timely Delivery: Traditional government space acquisition and procurement processes often experience significant cost overruns and schedule slips, risking the continuity of critical operations. Commercial space companies, on the other hand, are highly motivated to satisfy their shareholders by delivering revenue-generating satellite services on time; otherwise, they could go out of business. In many cases, the problems in government space programs stem from excessive agency oversight ("red tape") and contract changes ("requirements creep") during system design and development. Keeping the government out of the development phase can help new space systems get completed and deployed more quickly, while freeing up agency resources to focus on the use of space instead of the maintenance of space infrastructures.
- Industry Growth: Government outsourcing of routine space operations to the commercial sector creates new opportunities for business growth, job creation, infrastructure development, and retention of skills and capabilities critical to the U.S. industrial base.
- Innovation: Profit incentives drive commercial space companies to meet customer needs in the most cost-effective, timely manner, and to expand their business by offering new, commercially valuable features. Commercial companies can incorporate the latest technologies into satellites and launch them whenever they are ready to provide the most cutting-edge capabilities and services. By contrast, the government usually cannot replace its satellites until they reach their end of life. Commercial companies are also free to monetize their space investments in ways the government cannot, such as adding and selling extra satellite capabilities, hosting secondary payloads, and offering space advertising/merchandising. This innovation expands markets for space commerce.
Impediments
- Lack of Commercial Feasibility: Not all government space systems are suitable for replacement with commercial space services. In many cases, the capabilities they provide have little monetary value to non-government customers, so there is no feasible way to create a robust commercial market to replace them.
- Future Appropriations: In cases where commercialization is feasible, the private sector must make significant capital investments to build and deploy the space systems that will provide the services. Investors trying to manage their financial risk often seek guarantees that the government will purchase the services once they become available. They ask government agencies to sign anchor tenancy agreements, termination liability contracts, or other long-term financial commitments. Agencies are generally prohibited from committing future appropriations, because Congress only funds the government one year at a time. This can be a major impediment to space commercialization. However, certain agencies do have legislative authority to enter into multiyear contracts under certain conditions. Read more about this...
- Resistance to Change: Many federal agencies have grown accustomed to developing, owning, and operating their own space sytems and do not wish to give up control over them. Shifting to commercially available services usually means losing some custom-tailored capabilities, and this can be hard to accept, even when gaining other capabilities at the same time. Some agencies also do not trust the private sector to meet the government's schedule, continuity, or quality requirements. In short, outsourcing operations that have been traditionally performed in-house requires a major cultural shift within government institutions, and this takes a great deal of time and education.
- Legal Requirements: In some areas, the law prevents the outsourcing of space capabilities. For example, the commercialization of NOAA's weather satellites is prohibited by law. Another example is the provision of safety-of-life navigation services, which is a statutory responsibility of the Department of Transportation.
