5

Benefits and Challenges of New Business Models

INTRODUCTION

Government managers are faced with both opportunities and challenges in understanding the benefits of the commercial marketplace and how to best achieve/establish mutually acceptable “win-win” business arrangements. This chapter provides insight into such arrangements, and discusses the benefits, challenges, and mitigations for using commercial commodity-based capabilities that are able to meet the unique needs of the Hybrid Space Architecture (HSA), while also being extensible to the needs of both traditional and nontraditional users.

As discussed in Chapters 3 and 4, the National Oceanographic Partnership Program (NOPP) can benefit from evolving government procurement practices that emphasize the use of commercially developed capabilities, such as those for HSA, to meet government user space mission needs (see Appendix A). If properly structured and incentivized, there is the potential to develop and then expand a space ecosystem that will broaden the technological options for a large pool of both traditional and nontraditional government users. The nature of commercial services within a public–private partnership (PPP) contractual relationship is that a market needs to exist for such services outside the unique government customer and, accordingly, the market sets the price for the service rather than the government “making the market.” If circumstances demand, however, commercial services can generally be customized to meet unique government customer needs at an added cost.

PPP business arrangements offer many options within existing Federal Acquisition Regulations (FAR), including contracting for a wide range of commercial space services and capabilities to enable data-buys, technology maturation, mission needs, and operational support. In addressing the Office of Naval Research (ONR) current and future needs for sensor technology demonstration and oceanographic science, the anchor tenant and commercial services models may offer the greatest potential benefit, as they leverage accelerating commercial investment in the development of flight technology, ground systems, and infrastructure.

The business relationship for a PPP can be either (1) a formal agreement between the government and a commercial capability provider to meet mission-specific government requirements, or to privatize existing multimission government capabilities, or (2) a government procurement of commercially marketed capability such as data products, satellite buses, satellite components, or payload hosting.

New Space commercial growth has the potential to provide government managers with opportunities to leverage the private investment in these capabilities to meet their needs at a lower cost. However, there are also potential risks and challenges, both perceived and real, presented by a confusing array of commercial capabilities with various levels of maturity, reliability, unique tailoring, lack of flexibility and underlying business stability.

Reciprocally, commercial providers and the investors in these companies in most cases find working with the government as a trusted partner in a commercial business arrangement to be equally challenging.

THE CHANGING COMMERCIAL LANDSCAPE

The established government organizational culture for space systems is generally oriented toward a low tolerance to risk, an approach tending to exclude nontraditional product and service acquisition practices as well as product-driven investment strategies that are common in the commercial space sector.

It is understandable that government managers would be reluctant to put their program and high-priority missions at risk by dependence on a commercial resource, especially in places where the marketplace has many new players and is changing rapidly at a pace that is out of sync with traditional space procurement practices. In the early stages, the challenge was even greater with the emergence of commercial providers that, in many cases, were limited to one or two suppliers that were considered fragile at best and unproven and/or untrusted at worst.

Rapid and sustained growth in the commercial sector is dramatically changing this situation as a New Space ecosystem takes hold offering services from multiple providers competing in nearly every segment of the space business including commercial launch, SmallSat buses, and communications services. Commercial space practices are changing the procurement dynamic by allowing for multiple suppliers and competitive pricing for both individually purchased capabilities and through the bundling of such capabilities. The growth of the New Space ecosystem is mitigating many of the risks associated with commercial sources and opening the door to potential use of such systems for high priority missions. As HSA has recognized, costs have fallen to the point that previously unaffordable approaches such as redundant satellites or a constellation of satellites may be an appropriate means of reducing mission risk. It is also becoming possible to implement multiple procurements covering a range of cost, capability, and risk levels such that the aggregate outcome is better than a single large procurement, even if some elements fail.

On the business side, commercial providers typically develop capabilities as a commodity to address a broad range of customer needs in a very competitive marketplace. In many cases, product pricing is based on having a production line of standard capabilities and/or delivering standard services with limited ability to customize or make late changes. Government managers on the other hand, have traditionally developed mission-unique capabilities, and in most cases, have cost-reimbursable business arrangements to accommodate changes. Thus, in terms of cost and schedule, there can be real risk reduction benefits to working with commercial providers, to be traded against other risks such as sustained technical availability and having firm enough requirements early in the program development cycle to avoid costly scope changes.

For a PPP business arrangement to be successful and sustainable, it needs to have a contract that protects both parties and enables equitable mitigation options to be exercised as needed to manage the partnership as it changes and evolves. A workable business relationship functions best when the customer requirements, the capabilities of the commercial provider/agency partner, and resource risks are fully understood, contractually recognized, and accepted from both a benefit and a risk perspective. Given the emerging commercial suppliers, one mitigation option would be to engage multiple sources for the commercial capabilities with the goal of reducing the availability risk while also ensuring competitive pricing.

Brokers can also play an important intermediary role in helping to forge partnerships between the public and private sectors. The role of these intermediaries can also be expanded to match the needs of a user (or users) to appropriate New Space commercial options and capabilities. For example, rapidly emerging commercial hardware/software technologies, satellite constellations, sensor hosting opportunities (on both free flyers and space stations), launch vehicles, rideshares, and operational support services, create a complex landscape where a trusted intermediary can be very valuable for identifying, characterizing, and accessing such capabilities. Thus, the use of brokers could greatly benefit government managers in the understanding and leveraging of these capabilities.

Although other business arrangements exist, historically there are three major models typically used for government engagement of commercial services specific to space acquisition: (1) privatization, (2) anchor tenant/agency partnerships, and (3) commercial services, products, and data-buys. These are discussed below. It should be noted that the following examples are not isolated cases but can be merged in different ways that benefit the government.

Privatization

Privatization, also referred to as “outsourcing,” is a model where a private entity takes over government assets and provides services for the government as well as commercial customers, resulting in a reduction of the government share of infrastructure overhead costs. Government initiatives to privatize and outsource launch capacity and communications services are part of a wide-ranging three-decade outsourcing trend across the government including the Department of Defense (DoD). Commercialization of the Delta and Atlas launch vehicles in the 1980s is an excellent privatization example where industry took over the government launch facilities, expanded services for nongovernment satellites, and invested in upgrades and maintenance of these facilities, with the net result of reducing government space infrastructure costs. The National Aeronautics and Space Administration’s (NASA’s) privatization of the Alaska Satellite Facility (ASF) is a second example, enabling nongovernment satellites to use these capabilities and the government to buy services as needed rather than pay full infrastructure and maintenance costs. NASA’s experience using ASF and a few other commercial ground stations, provided a template to expand their use and attracted private investment by multiple providers in commercial ground stations. This successful transition led the way for the current use of commercial ground stations to provide the Near Earth Network (NEN) tracking and communications services currently supporting NASA and DoD missions in addition to a large customer base of commercial satellites.

Anchor Tenant/Agency Partnerships

In the anchor tenant/agency partnership model, the government commits to buy or fund a significant amount of a private/partner agency developed capability and provides an upfront payment or funding commitment that is used to supplement and also possibly incentivize the partner investment. Data-buys, satellite in-orbit servicing, and International Space Station (ISS) crew and cargo delivery are examples where the government committed to, and in many cases made, advanced payment for products and services that supplemented private investment in the development of commercial capabilities aligned to government needs.

Anchor tenant/agency partnerships are not without challenges—both partners need to commit and then sustain that commitment. This is challenging, with the potential for the government to change priorities, or as in the example of the U.S. Air Force (USAF) Hosted Payload Solutions (HOPS) contract changes in leadership and commitment to using commercial services. The commercial partner has an equal challenge to develop a reliable capability and sustain a competitive position in the marketplace such that they remain a reliable provider to the government. As illustrated by the launch vehicles, ground station, imaging data-buys, and ISS crew and cargo partnerships, these challenges are not insurmountable and, if recognized and addressed in the formation of the partnership, can provide a faster schedule combined with significant initial as well as operational cost savings.

Commercial Services, Products, and Data-Buys

This model utilizes commercial services and products developed through private investment developing capabilities and providing services to the government as one of many customers. Growing engagement of the private investment community combined with increased demand by nongovernment customers is driving the New Space ecosystem in many new ways that are making products and services increasingly affordable. Direct procurement of Earth remote sensing data by the image from commercial sources is one such example. Advances in SmallSat technology combined with increasing demand for data by private corporations as well as state and local governments is driving significant growth in the number and capability of commercial Earth Remote Sensing satellites and opportunities for government data-buys. The NRO contract for subscription services for Planet’s satellite and Maxar’s Digital Globe imagery offers a similar example of meeting a government need with a data-buy from commercially developed and operated satellites. Other commercial Earth remote sensing data sources such as Spire Global’s weather and oceanographic data, and emerging Synthetic Aperture Radar (SAR)/Multispectral Sensor constellations also offer the potential for meeting a subset of the oceanographic and Earth science data needs (discussed in Chapter 4) in a far more cost effective and timely manner than traditional methods.

In closing this discussion, there are hybrid versions of the above acquisition approaches with the NASA data-buy for the SeaWifS and the Commercial Resupply Services for Space Station provided by SpaceX and Northrop Grumman serving as such examples. These are anchor tenant contracts that created highly successful partnerships under a Space Act Agreement. In the case of SeaWifS, Orbital Sciences Corporation (OSC) leveraged the up-front payments for oceanographic data to be collected when the satellite was operational to offset their development private capital needs. SeaWiFS launched in 1997 and successfully provided oceanographic data for 5 years. The project was paid for by the upfront funding and remained operational for an additional 7 years—providing both a continued data source for the global ocean biogeochemistry research community and a greater return on investment to OSC. Additional examples on the civil space side are NASA’s Commercial SmallSat Data Acquisition program, which buys data from providers such as Spire Global and Planet, and NOAA’s Commercial Weather Data Pilot, including Geo Optics and Spire Global data-buys.

Technology Development and Mission Services

For Standard Satellite Buses and Mission Services, the NASA Goddard Rapid Spacecraft Development Office (RSDO)¹Rapid Spacecraft Catalog was developed in the 1990s as a streamlined procurement vehicle. The RSDO successfully demonstrated that adapting payloads to leverage existing satellite bus designs, versus developing a mission-specific bus using traditional contracting mechanisms, provides both a significant cost and development timeline reduction. In addition to an enabling contract structure based on a competitive fixed price starting point, the RSDO office put into place a mission design environment and engineering support tools for payload developers to use for both evaluation and selection of standard buses from the catalog. The Rapid Spacecraft Catalog (the current version is referred to as Rapid IV), while managed by NASA, has been used by other agencies to successfully reduce the government development time and cost of missions. The first mission, launched in 1996, using the Rapid Spacecraft process was the Quick Total Ozone Mapping Spectrometer (TOMS) satellite, a replacement for the TOMS satellite, which was lost due to a launch vehicle failure. The replacement using a backup TOMS sensor was ready for launch about 13 months later. Repositories of information, such as this catalog and associated standardization approaches, could help government stakeholders and also enable brokers who are working to forge PPPs to connect to resource offerings from commercial industry.

The original RSDO concept was developed to specifically support traditional government missions and, while a forerunner to the current New Space commercial paradigm, was not fully aligned to the reduced cost and schedule opportunities afforded by the emergence of multiple commercial satellite bus product lines. The recent inclusion in the latest Rapid IV catalog of emerging New Space commercial satellite bus product lines expands this concept by providing the opportunity for rapid and cost-effective platforms to support HSA objectives as well as NOPP and other government payload technology demonstration flights. Many of the commercial satellite bus providers also offer full mission integration and on-orbit operations services—further simplifying the technical and business arrangements needed to support payload technology development and operational mission needs. Some of these providers also offer custom solutions based on commercial products and services. Spire Global, for example, provides CubeSat configurations, payload hosting, data, and cloud-based data analytics capabilities tailored to meet specific customer needs. Rocket Lab and Loft Orbital are also developing a complete payload-to-orbit service that in many cases is capable of integrating a customer’s payload onto their standard bus, conducting systems tests, launches, and, if needed, providing mission operations services² and payload data delivery to the customer.

In addition to these services, there is the option for procuring standard components and payload hosting opportunities. The growth in the commercial satellite industry, especially the large constellations, has fueled commercial technology investments in mass production of star trackers, reaction wheels, magnetics, flight computers, GPS receivers, communications receivers/transmitters, propulsion, and other subsystem capabilities that enable a reduction in cost and development time for both commercial and government “make your own” users.

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¹ NASA, “RSDO Mission Statement,” https://rsdo.gsfc.nasa.gov/about.html.

² Not all solutions are necessarily equal due to possible mission-unique needs such as contamination, electromagnetic self-compatibility, and other special requirements.

The Government Accountability Office (GAO) found that “using commercial satellites to host government payloads may be one way DoD can achieve on-orbit capability faster and more affordably.”³ Commercial satellites, hosted payloads, and the ISS or one of the future commercial space stations are consistent with the GAO finding and may provide faster and lower cost opportunities for payload technology demonstrations and operational missions. Similarly, a USAF Commercially Hosted Infrared Payload (CHIRP) was hosted on an SES-2 Communications Satellite and was estimated by GAO to save $300 million versus using a government satellite. As part of its Responsive Environmental Assessment Commercially Hosted (REACH) program, an Iridium Next launch in 2017 hosted 64 USAF operational sensors on 32 satellites that continuously monitor and measure radiation with the GAO estimate of savings at $230 million over a dedicated USAF mission. The GAO also pointed out in its report that “DoD’s use of commercial satellites to host defense payloads would benefit from centralizing data”⁴ so that future procurements take full advantage of lessons learned.

The preceding discussion is an indicator of the potential offered by what is a dynamic and constantly changing New Space ecosystem offering a continuously evolving menu of commercial services that requires monitoring. NASA’s October 2020 State-of-the-Art Small Spacecraft Technology report⁵ provides insight into many of the existing capabilities of both private- and government-funded commercial SmallSat component, buses, launch, and mission services available to meet government mission needs.

BENEFITS AND CHALLENGES OF NEW BUSINESS MODELS

The breadth of commercial capabilities is rapidly growing and evolving, making it challenging for government program managers to gain information on their varying states of technical and business maturity needed to make cost-benefit trades against risk. Table 5.1 indicates the benefits and risks for a broad range of commercial capabilities and business arrangements to draw on that could potentially satisfy government space program needs, including needs related to oceanographic data collection and other science applications. The benefits to the government by employing commercial capabilities are very real. They reduce cost and schedule, and/or ensure technology currency, but it is important to balance these benefits against the potential risks, which can be both real and perceived. The real risks are related to organizational practices, intellectual property (IP) rights, and other factors unique to each partnership, and the perceived risks are largely cultural.

While Congress has mandated its preference for commercial solutions where commercial services could meet mission needs, there is still insufficient incentive for the government manager to use commercial services or products. In the experience of the committee, although there has been a maturation of commercial services, many government managers still perceive using commercial solutions as an unacceptable mission (and career) risk due to the lack of control over performance, quality, and sustainability.

Historically, government space system development and mission management have pushed the technological and operational envelopes, making cost-reimbursable contracts the typical business arrangement to manage the scope of changes in requirements as the system design was development and matured. The emergence of New Space commercial providers for capabilities, such as a satellite bus, ground stations, data relay communications, and launch purchased as a fixed price commodity, opens the door to many potential benefits but also requires a change in development discipline, as scope and technical changes after contract signing can be impactful.

Challenges

Historically, space organization risk tolerance, culture, stability of needs/funding, and variations in service/product acquisition practices have made it more difficult for commercial providers to do business with the government. An essential goal of commercial business models is maximizing stakeholder return-on-investment. The New Space commercial industry is pursuing an increasing number of space-based systems applications, with

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³ Government Accountability Office, 2018, Military Space Systems: DOD’s Use of Commercial Satellites to Host Defense Payloads Would Benefit from Centralizing Data, GAO-18-493, July, https://www.gao.gov/assets/gao-18-493.pdf.

⁴ Ibid.

⁵ NASA, 2020, State-of-the-Art: Small Spacecraft Technology, NASA/TP-2020-5008734, October, https://www.nasa.gov/sites/default/files/atoms/files/soa2020_final3.pdf.

TABLE 5.1 Benefits and Risks in Using Commercial Services

business plans based on credible, but unvalidated, market demands. The commercial providers seek to find the optimum product and service mix that support the underlying differences in customer needs, at competitive price points and within an acceptable business risk tolerance. The typical model for achieving this is providing a set of standard products or service delivery models that take advantage of shared infrastructure and economies of scale that, based on customer capability, can be integrated to meet their specific need. Although this model appears attractive, injecting the government into the customer mix presents additional, but not insurmountable challenges for commercial providers.

Commercial Provider Performance

The current suite of commercial capabilities are provided by corporations that range from large and traditional to small start-ups. The large amount of available private and investment funds are spawning new and innovative commercial space start-ups with innovative products and services at an unprecedented rate. Service sustainability is one of the more noteworthy risks when relying on innovative but inexperienced commercial providers of space products and services. Retaining key personnel and the need to remain commercially competitive are all part of the sustainability risk equation when considering the ability to meet government mission commitments. Although less of a risk with large companies, it clearly is a concern with start-ups that are trying to develop their business base and investment support. Thus, it is important in the current environment that government managers consider not only technical performance of commercial providers but also the business viability risk. On the positive side, multiple commercial providers are emerging for most products and services, which allows for dual source options to be considered in the commercial sourcing decision process.

Government Customer Culture

Few, if any, legislative or regulatory mandates or prohibitions impede government from the procurement of commercial services. Congress currently mandates that agencies acquire commercial items when they are available to meet government needs. There is sufficient latitude within and outside the FAR to provide contracting structures to support a long-term sustainable activity. The challenge is overcoming cultural and traditional processes that are not used to new ways of doing business. As discussed earlier in this chapter, the RSDO Standard Bus Catalog is a pioneering example of space procurement strategies where the culture shift has begun, offering standard “commercial off-the-shelf” components, buses, and service capabilities with the potential for reduced costs, controlled technology risk, and faster schedules to meet government space mission needs.

The transition from relying principally on a government controlled and managed capability to a hybrid of government and commercial capability or buying a complete commercial service is a major cultural shift and an evolving business model. Although government use of commercially available space capabilities is increasing, and has to date enjoyed some major successes, challenges remain for providers attempting to meet the government’s needs while remaining competitive in the commercial marketplace, especially where price is dependent on efficiencies of scale.

Incorporating government unique requirements into design, production process control, or services can potentially demand a significant amount of upfront effort, impacting commercial competitiveness in terms of time to market as well as driving up the development and production/delivery cost. Commercial satellite buses and components are developed, optimized, and qualified to meet requirements driven by the market at a level of quality achieved at the lowest practical price point using adapted commercial and mass production processes. In this business model, it will be challenging to meet low-volume, mission-unique requirements or to supply unique services without incurring increases in overhead or production costs.

Government Requirements and Funding Stability

Stable funding facilitates agency efforts to fulfill their requirements. Unfortunately, experience teaches that agency priorities, approved budgets, program schedules, and leadership commitments to using commercial services

are vulnerable to change. This challenge affects not only the government program managers but also the external supplier community, and especially, emerging commercial providers. Moreover, investors may be reluctant to support a business dependent upon revenue from potential government contracts, especially if it is limited to a few programs or a single agency’s needs.

The ability of the government to follow through on initiatives and estimates of government revenues factored into business plans is a very real and heavily discounted risk by private investors. Familiarity with the history of federal procurement, and innumerable GAO reports, is a reminder that the government consistently underestimates the cost and schedule of major system developments although there are some counter examples discussed earlier, such as where the USAF realized significant benefits for CHIRP and REACH.

Some programs have successfully emphasized the need for a close alignment between the different cultures coming together in partnership (e.g., commercial sector versus public sector), government mission needs, and commercial capabilities in order to be successful. For example, the USAF Hosted Payloads Solutions (HOPS) was a government/commercial provider relationship that did not live up to the expectations of the commercial partners or the sponsoring USAF program office and was discontinued after the initial 5-year contract. Based on a forecast of USAF stakeholders’ requirements, 14 companies were selected to provide payload hosting services on the HOPS Indefinite Delivery, Indefinite Quantity (IDIQ)-based contract. Post-award, no USAF payloads used the HOPS contracting vehicle; this was attributed to shifting alignments between mission needs that reprioritized budgets and hosting opportunities. It was also the result of cultural mismatches between providers and program managers in combination with USAF Space Systems Command (SSC) leadership changes. Notably, both NOAA and NASA used HOPS to secure hosted payload opportunities. The HOPS paradigm is also consistent with ONR’s desire for leveraging New Space capabilities across agencies. NOAA’s Argos Advance Data Collection system used HOPS to develop a contract to be hosted on a General Atomics Orbital Test Platform, and NASA used it for hosting the Tropospheric Emissions: Monitoring of Pollution (TEMPO) sensor on a Maxar geostationary communications satellite. As noted in the GAO reports for HOPS and CHIRP, if ONR decides to initiate a hosted payloads or in fact any multi-user PPP, it will be important to ensure cultural buy-in from the stakeholders together with consistent leadership guidance and recognition of potential funding challenges.

Contracting Mechanisms

Sufficient leverage exists within and outside the FAR to enable contracting structures to support a long-term sustainable New Space activity driven by government needs. Culture change is difficult, and government users need to be open to consider alternatives to their traditional processes and embrace opportunities afforded by new ways of doing business. It is difficult to overstate the flexibility that federal agencies currently enjoy with regard to choosing acquisition strategies and contractual vehicles. The Defense Acquisition University’s (DAU’s) Contracting Cone⁶ offers a useful graphic with embedded descriptions of different contracting mechanisms. This tool is particularly helpful in demonstrating the breadth of options and highlighting innovative and evolving non-FAR-based options, such as Other Transactions Authority (OTAs), a long-standing feature of the Space Act. The FAR and the Space Act Agreements provide the ability for the government to procure commercial products, data, and services structured as partnerships, cooperative agreements, and commercial service procurement contracts.

OTAs, like the Space Enterprise Consortium (SPEC), allow the government to work with a qualified pool of commercial companies and academia to develop prototypes or research. This gives the government greater speed, flexibility, and access to a more diverse set of companies that might not be eligible or lack the experience to propose under traditional procurement contract solicitations. The OTA consortium acts as a “broker” to minimize barriers and to encourage partnering and collaboration on proposals that maximizes each company’s strengths, which benefits the government. In turn, the companies have access to the government to not only showcase their technologies or capabilities but also gain knowledge of future government mission needs.

Business arrangements within these structures can be tailored to meet specific government and commercial provider needs to serve a single agency or multiple agencies. They can support joint development of commercial

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⁶ Defense Acquisition University, “Contracting Cone,” https://aaf.dau.edu/aaf/contracting-cone.

capability using both the commercial provider and government technologies with appropriate IP licensing agreements. They can also provide for government anchor tenant commercial service buys with either firm deliverables or IDIQ contracts. They can work with one provider, as was the case for SeaWiFS, or multiple providers, such as the USAF HOPS Hosted Payload contract and the NASA Rapid Spacecraft Catalog.

IDIQ contracts—particularly multiple award IDIQs—currently dominate the federal procurement landscape. The growth and popularity of the multiple-award IDIQ contract since the 1990s is understandable. On a task-by-task basis, the government dramatically reduces its transaction costs and procurement lead times by only competing tasks among a prequalified pool of contractors within a specific market sector. Moreover, with the flexibility the agency enjoys to craft and negotiate tasks with its preferred vendor(s), the task negotiations process is streamlined because the “umbrella contract” or the IDIQ itself avoids the need to reinvent the contracting wheel for innumerable FAR-based terms and conditions.

Of course, the many benefits associated with adopting a more commercial approach to contracting are, in part, offset by (or balanced against) an alteration of the allocation of risk inherent in conventional FAR-based contracts. For example, commercial services contracting typically requires the government to rely on contractors’ existing quality assurance systems rather than a more conventional government inspection and testing regime. Moreover, the government sacrifices significant flexibility in managing its contractual relationships by giving up its familiar power to unilaterally modify its contracts. These trade-offs are further amplified when the government employs innovative, non-FAR contractual vehicles such as OTA’s. Within this context, the FAR provides the capability to add contract clauses to address specific insight, reviews, and approvals to commercial contracts where the provider is open to these arrangements.

Training, expertise, and support are critical to agency experimentation with innovative contracting techniques. Government users are already experimenting with innovative contracting techniques such as the USAF AFWERX,⁷ a nontraditional scheme to transition commercial capabilities to more rapidly fulfill government needs. There is also NASA’s Entrepreneurs Challenge, which invites entrepreneurs to compete for initial funding (up to $90,000) and then take part in follow-on activities awarded through its Small Business Innovative Research (SBIR) program.⁸ Both of these approaches are attempts to more effectively engage commercial companies. They are also both experiments, and it is too early to know if they will be successful. Even if they are not, the resulting lessons learned will be important in the design of follow-on efforts. Meanwhile, they signal a willingness to industry that the government is committed to developing more agile and innovative procurement methods. For example, to the extent that innovative vehicles, such as OTA’s, are not FAR-based contracts (and so are not constructed using the extensive suite of standard remedy-granting contract clauses found in FAR Subpart 52.2), the contracting parties’ rights are negotiable. How these agreements address critical issues that allocate common risks, such as flexibility to modify the agreement, quality assurance, liability and insurance, and termination rights will dramatically alter the parties’ relationship and the pricing of the services.

CONCLUDING THOUGHTS

The emergence and rapid expansion of the commercial space sector, with appropriate contract vehicles, can serve the development of HSA and also open the door to a growing ecosystem providing for the needs of government science as well as nontraditional users. There are sufficient provisions within the current FAR and contracting practices to support creative and mutually beneficial PPPs. Given the emergence of multiple providers for most commercial products and services along with the growing examples of real cost savings to the government, the mechanisms can be put in place to mitigate the potential risk of PPPs so that win-win outcomes are possible for all stakeholders.

DoD and the government civil space agencies are successfully using hosted payloads, Earth Remote Sensing constellation data-buys, and commercial SmallSat technology, all of which could also be used meet ONR technology development and mission data needs. For example, there are commercially available services to help

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⁷ For more information, see U.S. Air Force AFWERX website at https://www.afwerx.af.mil.

⁸ NASA, 2021, “NASA Launches Entrepreneurs Challenge to Identify Innovative Ideas,” Release 21-093, July 12, https://www.nasa.gov/press-release/nasa-launches-entrepreneurs-challenge-to-identify-innovative-ideas.

ONR facilitate sensor demonstrations and space qualification using the ISS capabilities. In addition, PPPs for commercially high-repeat-cycle constellations acquiring oceanographic data flying either ONR sensors or through data-buys from sensors jointly defined could meet both commercial market and ONR mission needs. The increasing commercial investment in these constellations provides another opportunity for ONR.

Examining and potentially using the current USSF, NRO, NASA, and NOAA contract vehicles or developing an ONR commercial contracting model that leverages lessons learned from these business models could be a good starting point to enable access to commercial data and technology. In addition, past partnerships, such as the HOPS, may provide lessons learned in terms of leadership, cultural, and fiscal challenges toward building successful commercial partnerships.

It is clear that there are potentially significant cost and schedule benefits for the government, including NOPP, to leverage HSA in concert with commercially developed capabilities to meet a wide range of technology, development, and operational requirements. The breadth and continued emergence of commercial capability offerings make understanding their suitability for creating effective partnerships a daunting task for government managers. On the other hand, the broad scope of the government civil and defense space programs, funding challenges, and organizational contracting practices present a reciprocal challenge for industry. A trusted agent can be a bridge between these two challenges. Having a trusted agent or broker establish a clearinghouse to maintain a “catalog” of available and emerging capabilities, and also emerging government needs, could significantly improve access to commercial capabilities for government managers and clarify the government market needs for commercial capabilities providers.

Last, the New Space ecosystem envisioned in this report is a place where the creativity and innovation of the commercial space sector is enabled to grow and prosper but is also harnessed to provide important services of high value to the government. As discussed in this chapter, there are potentially significant cost and schedule benefits for the government, including NOPP, that are worth harnessing to leverage HSA in concert with commercially developed capabilities to meet a wide range of technology, development, and operational requirements. While the breadth and continued emergence of commercial capability offerings make understanding their suitability for creating effective partnerships a potentially daunting challenge for government managers, the broad scope of the government civil and defense space programs, funding challenges, and organizational contracting practices present a reciprocal challenge for industry. The substantial potential benefits for the government and its commercial partners justify finding a way to bridge these challenges through a broker or some other acquisition approach capable of enabling a trusted partnership.

CONCLUSIONS AND RECOMMENDATIONS

CONCLUSION: The technical infrastructure required to support needed services in the New Space ecosystem currently exists or is expected to come into existence if actively enabled through expanding government procurement opportunities. However, the U.S. government space community’s current and potential future exploitation of that infrastructure is impeded by lack of familiarity with existing technical capabilities as well as new capabilities evolving out of the rapid growth of the commercial space industry. In the case of the Office of Naval Research, space science procurement practices are artificially constrained by traditional approaches in ways that limit them from taking full advantage of available New Space opportunities related to the rapid demonstration of the ocean and coastal sensor technologies under development for the National Oceanographic Partnership Program.

RECOMMENDATION: The Office of Naval Research together with the National Oceanic and Atmospheric Administration, as the joint managers of the National Oceanographic Partnership Program (NOPP), should explore the broad range of available contractual mechanisms that enable quicker deployment of commercial space capabilities in pursuit of the NOPP technology demonstration objectives. It should empower its acquisition workforce to take full advantage of the rapidly evolving commercial space system opportunities.

CONCLUSION: The federal procurement regime—both the statutory and regulatory schemes—provides sufficient flexibility to take advantage of the evolving commercial marketplace and employ innovative approaches such as public–private partnerships and other forms of contractual relationships including Other Transactions Authority and Space Enterprise Consortium.

RECOMMENDATION: The U.S. government should employ a full range of available contractual mechanisms and actively support the use of innovative business models required to fully engage with both the traditional space and New Space commercial industries. These include a range of options from public–private partnerships and commercial services contracts, as well as newer mid-tier acquisition options in the categories of rapid prototyping and rapid fielding.

CONCLUSION: Currently, no existing mechanism permits forecasting future government needs to proactively inform the commercial space sector such that it can focus and prioritize the direction of its future investments. The National Aeronautics and Space Administration’s Rapid Spacecraft Development Office has addressed this forecasting problem related to indefinite delivery/indefinite quantity satellite bus acquisitions through the development of its Rapid Spacecraft Catalog satellite catalog.

RECOMMENDATION: The Office of Naval Research should leverage the National Aeronautics and Space Administration’s Rapid Spacecraft Catalog for its current needs and should also work with NASA’s Rapid Spacecraft Development Office and the Air Force Research Laboratory’s AFWERX to incorporate its forecasted future needs.

CONCLUSION: The development and adoption of the Hybrid Space Architecture (HSA) framework offers a potential roadmap to establish the timeline of SmallSat system capabilities for national needs. However, the capacity for building SmallSat services can be accelerated by the alignment of commercial SmallSat capabilities to HSA needs—this would reduce the time needed to reach a fully capable space ecosystem. Similarly, market-driven forces and sustained government investment programs could also accelerate technology, infrastructure, and process support responsive to customer and community needs and requirements.

RECOMMENDATION: The U.S. government should incentivize private investment to achieve faster and more integrated outcomes through advanced acquisition strategies such as public–private partnerships, establishing Indefinite Delivery Indefinite Quantity contracts with commercial providers, and anchor tenancy where the government is a stable facilitator for achieving faster and more integrated outcomes.

CONCLUSION: The commercial space sector appears fully capable of meeting the ocean sensor technology demonstration flight and launch needs of the National Oceanographic Partnership Program (NOPP) as presented to the committee. Many of these capabilities are accessible to NOPP today, through a variety of contractual mechanisms. Furthermore, these capabilities are expected to grow and evolve in concert with Hybrid Space Architecture–driven U.S. Space Force and other government procurements over the next 5 years, keeping pace with the NOPP objectives.

RECOMMENDATION: Innovative procurement practices offer substantial benefits, both in cost and the pace of flight, to meet government, and specifically, National Oceanographic Partnership Program (NOPP) requirements. Depending on technology readiness and mission requirements, NOPP should consider the following options:

1. Engage nascent commercial broker capabilities to explore and form appropriate partnerships to match existing and emerging commercial capabilities to achieve desired technical outcomes;
2. Explore existing government programs and consortiums, such as the National Aeronautics and Space Administration International Space Station or the Space Enterprise Consortium, and other programs that support technology prototyping and rideshare opportunities consistent with desired space flight objectives;

3. Engage a Federally Funded Research and Development Center (FFRDC) or a similar impartial agent as a trusted intermediary between interested government and commercial business entities to identify appropriate public–private partnership mechanisms and structure them to achieve a successful alignment of technical and procurement capabilities; and
4. Similarly employ an FFRDC or similarly trusted agent to develop guidelines for technical and business engagement to actively bridge existing gaps and new gaps as they occur between government and industry.