Elon Musk's SpaceX could be the target of a provision of the NASA appropriations bill.

SpaceX Versus Senator Shelby's Rocket to Nowhere

Adam Minter is a Bloomberg View columnist. He is the author of “Junkyard Planet: Travels in the Billion-Dollar Trash Trade.”
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Should Elon Musk and the engineers at Space Exploration Technologies Corp., do more paperwork? Senator Richard Shelby, Republican of Alabama, thinks so. He has inserted language into a Senate appropriations bill to force private space entrepreneurs such as Musk to navigate the kind of red tape that has transformed NASA into a directionless, sclerotic bureaucracy. Even worse, the provision guarantees to perpetuate U.S. dependence on Russian rockets to deliver Americans into space at a cost of $70 million per astronaut.

As far back as the mid-2000s, NASA began planning for its own "space taxi" to replace the shuttle after its final launch in 2011. Funding issues, congressional meddling, policy differences between the George W. Bush and the Barack Obama administrations, and bureaucratic roadblocks, caused that goal to be missed by years. Nonetheless, there remained reason for hope. In 2010, Congress created the Commercial Crew Development program to promote the development of technology and companies capable of delivering crews to low Earth orbit by 2015 (due to funding concerns, this deadline was extended to 2017).

To do so, NASA selects private companies, provides funding, and sets them to work on specific technologies and benchmarks. Along the way, the companies and their technologies are evaluated and culled. To further speed development, NASA dispenses with its traditional "cost-plus" method of paying contractors, which requires every cost in a mission's development to be accounted for along the way, and reimbursed (with a profit added on top). The Space Access Society, an organization dedicated to promoting commercial access to space, described "cost-plus" in a June 4 legislative alert:

It essentially turns productive workers into part-time accountants. Lots of hours that used to go to producing beans get spent on counting them instead. This significantly increases costs and cripples companies for normal commercial competition.

In place of cost-plus, Commercial Crew offers contractors fixed fees (called Space Act Agreements) for projects. The idea is simple. Contractors who complete work on such projects under-budget keep the difference; those who don't, swallow the losses. The risks are bigger, but so are the rewards -- and everything happens at a quicker pace.

Commercial Crew's unmanned predecessor, Commercial Cargo, also used a fixed-fee system -- with wild success. The Falcon 9 series of rockets from Musk's SpaceX, for example, which have since docked with the International Space Station, were developed for $390 million. In a 2011 report, NASA conceded that development of Falcon 9 would have cost "between $1.7 billion and $4.0 billion," if done in-house (the agency said it didn't understand what accounted for the savings precisely).

In a perfect world, SpaceX would be allowed to develop a similarly cheap and effective means for sending Americans to space (it is one of three companies currently competing to do so under Commercial Crew). But thanks to Shelby, that may not happen. In June, the senator inserted language into NASA's appropriation bill requiring that Commercial Crew contractors begin the burdensome process of reporting their costs and purchases as if they were being paid via a cost-plus contract. Why? On Wednesday, Shelby said this would ensure "the government is not saddled with mounting bills and no recourse." This is absurd. Companies signed to a fixed-fee contract have no incentive to pad their government billings, unlike companies that are reimbursed for every expense, such as those contracted under cost-plus.

Shelby's maneuver probably has more to do with the 6,000 home-state jobs at NASA's Marshall Space Center in Huntsville, Alabama, and the threat that SpaceX and other private space contractors pose to them. Indeed, while SpaceX develops fast, cheap and efficient launch vehicles for specific missions (in part with NASA money that Shelby would like to see in Huntsville), Marshall is working on a $9 billion project to build the Space Launch System, the largest U.S. rocket in decades -- even though NASA has no planned mission for it.

Shelby, who'd like to see that "rocket to nowhere" built, can't kill SpaceX -- but he can slow it, raise its costs and further delay a U.S. return to space with its own rockets. Passage of his red tape amendment would all but assure this outcome. If it values a strong U.S. presence in space, the Senate should remove this innovation-killing provision at the earliest opportunity.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Adam Minter at aminter@bloomberg.net

To contact the editor on this story:
Nisid Hajari at nhajari@bloomberg.net