NASA's Commercial Crew/Cargo Market Assessment

NASA has released a 40-page Commercial Crew/Cargo Market Assessment for Low Earth Orbit.  RLV News pointed me to the softcopy – thanks Clark.

Here is NASA’s summary of the next ten years of projected commercial demand for cargo and crew to Low Earth Orbit (LEO) with commercial demand ranging from 7K-60K lbs of cargo and from 44 to 360 commercial astronauts.

Here are the Nuggets from NASA's assessment I found especially valuable:

• Crew Transportation drives the overall market.
• 4 Commercial Crew/Cargo Markets: (1) Countries lacking Space Programs, (2) Space Tourism, (3) Applied Research, (4) Other Markets – Satellite Servicing, Media, Education
• Report looked at a ten year time horizon
• Report excluded NASA Crew/Cargo usage - commercial usage only
• The average ISS crew member uses 10.3 lb/cargo per day (based on historical NASA/Russian usage)
• 4 Space Tourism Growth Constraints: (1) Crew Transport Availability, (2) Cost per customer, (3) lack of destinations besides ISS, (4) long training time
• ISS’s Upmass Requirements 2011-2020 = 318K lbs: (1) Core Systems/Operations = 194,820 lbs, (2) Funded Research = 80,067 lbs, (3) National Lab Utilization (unfunded) = 43,266 lbs
• Current ISS limitations as a research platform: (1) Inadequate HW/instruments to support research, (2) lack of frequent and affordable up/downmass to/from ISS
• Report concludes that availability of up and downmass is “a major constraint to development of the market” and quotes the National Research Council as saying, “conditioned down mass of particular importance…”
• Current research on ISS: Basic Research. Over next ten years, ISS research will gradually shift to governments paying for proof of concepts and private ventures pursuing commercialization of successful proof of concepts.
• NASA is on contract to purchase 132K lbs of ISS cargo through 2015. According to the authors, NASA ISS cargo demand from 2016-2020 is currently flat for another 132K lbs
• 4 Classes of Research conducted on ISS: (1) Biology/Biotech – 70% of ISS research to date, (2) Earth Observation, (3) Physical/Material Sciences, (4) Technology Development/Space Qualifying
• United States does 36% of the research on ISS
• But only 9% of all research on ISS to date is “Commercial” in nature – and even this “commercial” research to date has been subsidized by non-commercial sources.

Comments:

• Although not presenting very much new data, the authors confirmed and consolidated a significant amount of commercial market data into one place
• The authors relied heavily on industry values to determine the upper end of these markets.
• The authors never exceeded industry's optimism.  The authors in every case established low end demand by extrapolating from history.
• Although mentioning the critical importance of downmass to station research, the authors did not provide a downmass demand estimate for the next decade
• I look forward to the day when commercial research on orbiting stations far exceeds the current 9%!
• Overall, a very helpful report (if, perhaps conservative) that will stay on my shelf as a reference.

NLV Market Analysis

Garvey's Prospector 7C

In October of 2004, I attended the Space Frontier Foundation’s conference in Southern California on the Queen Mary. There, Masten Space Systems made a big splash announcing it was joining Armadillo Aerospace in developing Suborbital RLV’s.

I remember thinking at the time, how did Masten have enough market data to make that decision? Masten, Armadillo, XCOR, Virgin, Blue Origin – these guys & gals threw their hat in the ring long before there were significant studies confirming suborbital RLV’s made “market sense”. They had vision. They had guts. Or if the data did exist, at the time, I did not know how to find it.

And now, NASA is offering a prize for a Nano-satellite Launch Vehicle (NLV) – “launching very small things quite often”. And as candidate NLV teams consider throwing their hats in this ring, the market data is a little more available for an NLV service than there was for suborbital service almost a decade ago.

This post attempts to consolidate that NLV market analysis. Of course this will be incomplete, so I need your help. Add links to other NLV market data in the comments of this post to benefit the whole group. I will skip a discussion of NASA's NLV Challenge.  Here is NASA's NLV Challenge Page  for more details. 
I have broken the NLV market analysis down into the following categories:

• NLV Market Sources
• Market Overview
• NLV Market Differentiators 
• NLV Substitutes
• Interesting NLV Market Nuggets
• Potential Market Competitors
• Market Demand Graph
• NLV Pricing Discussion
• Market Impactors

NLV Market Sources.  The authors of these study deserve your business. Buy their papers. They are doing good work. Instead of at the end of this post, I wanted these links near the top!

• Foust, J. 2010. “Emerging Opportunities for Low-Cost Small Satellites in Civil and Commercial Space”
• Foust, J. 2008. “If you Build It, Who will Come? Identifying Markets for Low-Cost Small Satellites”
• Christensen, I, et al. 2010. “Market Characterization: Launch of Very-Small and Nano Sized Payloads Enabled By New Launch Vehicles.” This link will give you the first few pages, have to buy the full version.

Market Overview.  The NLV market can be dissected in at least two ways: (1) by payload size and (2) by payload type.

Payload Size. I have heard various naming conventions for small payload launch vehicles.  For this blog post, I will use “Nano”, “Micro”, “Small” as three payload sizes to consider.  However, I will group them all together and use the name NLV most of the time.

• Nano - Under 10kg
• Micro - 10-100 kg
• Small - 100-200 kg

NASA is focused on a 1kg payload for its NLV Challenge. The Army is interested in at least 20kg payloads. Even if first generation vehicles are only able to launch a few kg of payload, commercial NLV ventures would be wise to endeavor to grow to larger payload sizes over time. Current 200-400kg payloads launched currently on larger vehicles would surely be interested in "going on a diet" if an NLV launcher could carry 100-200Kg yet offer more frequent launches.

Payload Type. The second NLV market subdivision will be the option of (1) launching a functioning satellite or (2) delivering cargo to stations or depots. Of the two, cargo delivery may very well be the larger of the two sub-markets. It will take far less preparation to send the ISS an NLV-load of fresh apples than it would be to fund, develop, integrate, and launch a nanosat. Both satellite launches and cargo delivery will be sub-markets. Expect the satellite market to retain a diversified customer base. Expect the cargo delivery customer base to be dominated by station owners in the early days (ISS partners and Bigelow), but to expand to Space Station customers in the not so distant future (see: NanoRacks).

NLV Market Differentiators.  What makes an NLV unique? An NLV won’t be able to carry as much payload to orbit as its bigger cousins, why would any customers want to use an NLV?  Answer: Frequent launches, low integration time.

• Cost: Higher Cost per LB than larger launchers but lower Cost per launch
• Launch Frequency: Launch *much* more frequently than larger launchers (weekly? Daily?)
• Launch Lead Time: Integrate payloads in less time to take advantage of more frequent launches
• Payload Mass: a few kg (at first)
• Orbit Choice: Customers can choose since not a secondary payload
• Suborbit/LEO/GEO: Limited to LEO (at first) – Suborbital applications? Maybe.

NLV Substitutes.  Prices for NLV’s cannot be set independent of substitutes. Here’s a list of some big ones:

• Launch as secondary payload. Spaceflight Services (Andrews Space) offers a turnkey solution for your payload to fly on the BIG rockets as a secondary payload.
• Hosted payloads. Boeing just launched a new service to combine your payload with others on a single satellite bus thus reducing customer costs since they do not need to procure an entire satellite. Note: this would be a substitute only for satellite payloads, not for cargo payloads
• Commercial RLV suborbital spaceflight. Masten, Armadillo, and Blue Origin are stuck at 100km for now, but not for long. Watch as future generations of their vehicles climb higher and higher giving customers a greater flight-time, frequent launches, and very low costs.
• With COTS deliveries to ISS approaching, deliveries to station will be made by NASA several times per year with ISS partners also delivering cargo to station several times per year.

Interesting NLV Market Nuggets.

• Microcosm Inc, identified potential market-wide launch savings of more than $15B over a 12-year period, resulting from the development of a low-cost responsive launch vehicle focused on the SmallSat market (above 100Kg)
• In a 2008 presentation, Pete Worden said there were ~80 universities with active cubesat (nanosat) programs 
• A 2006 Futron Study identified over 30 markets in 6 principle areas for services provided by low-cost satellites in the 100-200 kilogram class
• The US Army is interested in Nano Launch and had put a price point of $1M per launch.
• My interview with the CEO of CubeSat component manufacturer Clyde Space revealed he thought $250K for a 3u is definitely too much for most customers.
• My interview with Professor Jordi Puig-Suari from Cal Poly and professors from MIT, and St. Louis University who are currently active in either university satellite development or active in space research of some kind show they are targeting a price point under $50K per CubeSat with $20K being preferred. Relooking at my notes from those interviews, at a $20K price point, these professors thought the US demand for CubeSat launches would grow to 50-100 each year. Interesting they thought the low flight opps of the current “secondary payload” system a bigger problem than the high cost. Prof Michael Swartwout said in my interview with him, he waits 5-7 years to secure a spot on a rocket to launch his CubeSats. This is longer than an undergrads college career – not too inspiring for young engineers!

Potential Market Competitors.  Non-exhaustive – From the Paper: "Market Characterization: Launch of Very-Small and Nano Sized Payloads" by Christsensen, et all. 2010.

Market Demand Graph:

This graph is incomplete but should convey the significant number of different areas where an NLV could gain market share. For an explanation of these categories I would encourage you to get a copy of the wonderful papers I list under the “sources” section of this post.

NLV Pricing Discussion.  A major portion of any market analysis is not just what the needs are but what are potential customers willing to pay to meet those needs. For the NLV market you have customers at different ends of a spectrum. Government customers like the Army have stated a willingness to pay $1M to place 20kg in LEO. Universities want to keep Cubesat costs (usually 1-3 kg) to under $20K per U.

Variable Pricing seems like the right answer, where Primary customers pay a premium to fly on their schedule to their orbit and others willing to fly “standby” get a much reduced price but operate on someone else’s schedule and flies to someone else’s orbit. Rather than rewrite the variable pricing details now, here is the post I wrote on variable NLV pricing a few months ago.

If you made me guess right now, I would assume the following prices per U would be acceptable by the market:

• Government: $50-200K per U (with discounts per U for larger payloads)
• Academia: $20K per U
• Commercial: ???, perhaps somewhere between

Market Impactors.  Any market has externalities to the market that can help or hurt the industry. Here are just a few:

• Of all of the substitutes available to the NLV market, the one that has most potential to steal market share is the second or third generation of suborbital RLV’s. As mentioned earlier in this post, a subset of the NLV market could be served with the extended micro-gravity offered by suborbital RLV’s flying to 500 or 1000 km. But the opposite is also true, a delay or accident affecting the un-manned portion of the suborbital RLV industry (primarily Masten, Armadillo, and Blue Origin) could make some customers consider launching on an NLV rather than waiting for the suborbital ride. 
• One of the two key sub-markets for NLV’s will be package delivery. More successful space stations, more package delivery. The proliferation of commercial space stations will be a major driver of this sub-market
• How the last mile problem gets solved will directly affect the viability of micro package delivery (one of my two submarkets). We need solutions for the last mile problem – the solution will be part technology, part policy, part management. If NLV packages can’t be routinely delivered to space stations, the NLV industry will be severely hampered and space stations will miss out on an enabling method to gain just-in-time deliveries.
• NLV’s only work as a market if they can launch frequently with low integration turnarounds. Even if low costs had to come later, the ability to launch frequently with streamlined payload integration will be the driving force behind early NLV success stories. The question operators will need to ask is, “How do I design and manage NLV operations in such a way to achieve the goals of frequent flight opps and low integration turnarounds?”
• Although depot development is still years down the road, the potential “match made in heaven” between depots need for frequent propellant deliveries and NLV’s ability to fly frequently should not be overlooked…but I would not build a business plan around depot assumptions just yet.

That is a good dataset to start.  I will add some commentary in future posts.  Here is the spreadsheet containing the tables used in this post. 

Now I welcome your additions.  Use the comments section to your links to even more NLV market data.

Funding your "Game Changing" Space Innovation

NASA’s Game Changing Technology Division (GCT) within NASA’s Office of the Chief Technologist (OCT) announced this week it is looking for “Unique and Innovative Space Technologies” that helps achieve one of the fourteen Technology Areas (TA’s) on NASA’s Space Technology Roadmap:

• TA01 Launch Propulsion Systems
• TA02 In-Space Propulsion Technologies
• TA03 Space Power and Energy Storage
• TA04 Robotics, Tele-Robotics and Autonomous Systems
• TA05 Communication and Navigation
• TA06 Human Health, Life Support and Habitation Systems
• TA07 Human Exploration Destination Systems
• TA08 Science Instruments, Observatories and Sensor Systems
• TA09 Entry, Descent and Landing Systems
• TA10 Nanotechnology
• TA11 Modeling, Simulation, Information Technology and Processing
• TA12 Materials, Structures, Mechanical Systems and Manufacturing
• TA13 Ground and Launch Systems Processing
• TA14 Thermal Management Systems

The GCT is offering five to ten awards up to $5M per year with no individual award valued at more than $3M over three years ($1M per year max?). GCT is looking for technologies at a TRL of 3-4 and wants to mature them to a TRL of 5-6.

One of the challenges facing a new company with an idea is how to fund development of that idea. Seeking external capital too early usually results in interested investors taking a sizeable chunk of ownership for a relatively small investment since the company valuation is so low. And in many cases, these companies don’t even find interested investors. NASA’s GCT is offering an alternative method to jump start development to bring these innovations to market faster.

Here were some of the solicitation quotes I found interesting:

• "This solicitation is focused upon these types of sudden and unexpected innovations that hold a potential for providing a “game changing” impact on the efficiency and effectiveness of space capability"
• Speaking of the DARPA-like proposal process, “NASA expects this process to prevent unproductive proposal preparation for technology concepts that are unsuitable for unsuitable under this particular BAA"
• "While other technology development activities seek the steady and deliberate evolution of well-understood systems, GCT focuses on developing radically new approaches to the Agency’s future space missions and the nation’s significant aerospace needs. Successful products of GCT will provide or lead to revolutionary advances in capability."
• "Appropriateness for GCT: Does the proposed technology or concept have the potential to make radical improvement s in the way NASA accomplishes its missions?"

The GCT proposal process is also innovative (more DARPA-like). Instead of requiring these innovators to submit a full proposal up front (consuming precious time that could otherwise be devoted to innovating), the GCT contracting process starts small:

1. A one-page exec summary. If NASA GCT likes it then…
2. A White-paper describing the technology in more detail. If NASA GCT likes it then…
3. A full proposal.

And all along the way GCT is offering feedback and improvements.  All you need right now is a “game changing” innovation and an executive summary. Let’s get to work.

11 Space Business Ideas from NASA JSC

"Bottle Suit" Concept

Last Thursday, NASA’s Johnson Space Center published the presentation, Human Spaceflight Affordability: Advanced In-house Development, a series of projects…space problems, that they would like to go solve (or work toward solving) using “primarily civil servants” but willing to “engage non-traditional partnerships” when needed.

On the one hand, JSC is looking to keep its workforce busy on value-add projects, so it is not surprising they are seeking to accomplish these projects primarily in-house.

But more importantly for an entrepreneur, JSC has just published eleven problems they believe are worth spending money to go solve. Can you close a business case around all of them…no. Will JSC solve them all...no.  But some of these ideas could be developed and offered commercially. 

Here is my summary of the eleven ideas, but do read JSC's full presentation.  For some of the ideas JSC goes into significant detail of their development plans or their proposed final solution.

1. Dual purpose EVA suits: for space and surface work. Focused on grit tolerant joints. 
2. Suit-Port: Half a space suit, rear-entry, easy access, eliminates pre-breathing, low risk of contaminating habitable environment.
3. Man-In-A-Can/Bottle Suit: personal space pods for extended Astronaut EVA’s (see the image at the beginning of this post)
4. Low-Mass/Low-Volume Exercise equipment. Perhaps wearable robotics to simulate the gravity’s effects on muscles (the opposite of what such exoskeleton projects are used for on earth).
5. Free-Flying Cameras: Remote controlled cameras for inside and outside space stations. Deployable through the JEM airlock.
6. Down Mass from ISS: capsule to return low-mass, high-value payloads down to earth from the ISS. Deployable through the JEM airlock.
7. Demonstrate Earth aerocapture prior to using technique for future human missions
8. “The Multi-Mission Space Exploration Vehicle (MMSEV, or just SEV) is a pressurized robotic vehicle designed to carry two astronauts to various destinations in space.” When in space, the MMSEV is similar to idea number 3. Put wheels on the MMSEV and it drives around the moon. (page 163 of this NASA document for an MMSEV overview)
9. Advanced Environment Control and Life Support System (ECLSS) – develop now for when humans need to travel a long way from home.  Significant work could be done advancing this idea without the need for rocket launch.
10. Beyond LEO Habitats.
11. Use ISS Waste to make propellant (maybe to fuel Free-Flying Cameras listed in number 5).

Eleven ideas. Thanks JSC. Entrepreneurs, sharpen those calculators.

25 SBIR Winners to Watch

The Small Business Innovation Research (SBIR) Program was created by Congress in 1985 as a tool to promote small business, commercialization, innovation and US competitiveness.

NASA’s version of an SBIR (similar to programs run by other agencies) awards a series of contract “Phases” to small business helping them demonstrate their technologies.  Upon completion of these phases, small businesses would be empowered to independently pursue commercialization of their technologies.

Good for the company: marketable product.
Good for NASA: access to technologies at commercial-off-the-shelf prices

Phase I contracts: $100K (or less) over 6mo.
Phase II contracts: $600K over 24mo.

The SBIR program continues to show great potential, but sadly produces far fewer commercializations then anyone would like. The low commercialization success is driven by several factors (I am sure there are more than these):

• NASA chooses SBIR technologies that they want commercialized , not necessarily ones that have been analyzed to thrive in the marketplace (SBIRs are more tech development than business development). Check out #24 on my list below for a firm attempting to change this for NASA's biomedical SBIRs.
• The SBIR program has some companies that win and execute an SBIR through all of its phases, but never commercialize anything preferring the low-risk approach of perpetually submitting new SBIRs without taking the high risk/high reward attempt at commercialization. Have you heard of the term, “SBIR Shop”?
• Aerospace components don't sell nearly as well as integrated products.  Since SBIRs focus on components (usually), it may take the integration of several SBIR contracts to gain enough components to turn into an integrated product slowing the path to commercialization.

But let’s talk about the good news. Wow, there are a lot of cool ideas in this batch of NASA SBIR Phase I winners. Below is my summary of 25 SBIR Ideas to watch.  To make my list, the SBIR idea had to meet these loose standards:

• Have a market (I could easily think of) beyond NASA
• Be hypothetically commercialized by a small firm
• Demonstrate a space focus (sorry to all of the air-traffic control and UAV SBIR winners, you did not make the list)

Forgive me if I missed the market opportunity from your firm’s SBIR submittal (there were many more winners than the twenty-five I chose):

1. Advanced Scientific Concepts, Inc. 3D Flash LIDAR real time embedded processing  
2. Altius Space Machines, Inc. Attractive docking technology
3. Aspen Aerogels, Inc. Ablative Flexible Aerogel TPS Materials for Mars Aerocapture and Entry
4. Aurora Flight Sciences Corporation Rendezvous and Docking Technologies for Orbiting Sample Capture
5. Composite Technology Development, Inc. De-orbit Devices/Technologies for Small Spacecraft
6. EM Photonics Compressed Sensing for Space-Based High-Definition Video Technologies
7. Firestar Engineering, LLC Low Cost Carbon-Carbon Rocket Nozzle Development
8. Gloyer-Taylor Laboratories LLC Reliable, Reusable Cryotank
9. HKM Enterprises Inc. Interface for grouping multiple secondary payloads into a primary mission
10. Honeybee Robotics Ltd. Magnetic Bearings for Small Satellite CMG’s & Other Miniature Spacecraft Mechanisms
11. Hyper-Therm High-Temperature Composites Novel Fabrication Approach for SiC/SiC Thermal Protection System Elements
12. Innoflight, Inc. CubeSat Power Management Controller and Solar Array Articulation System
13. Materials Technologies Corporation Durable and Conductive IR witness coatings for High Accuracy IR Thermography
14. Pacific Design Technologies, Inc. High Performance Space Pump (mentions re-fueling hydrazine on orbit)
15. Picometrix, LLC Miniaturized Non Destructive Evaluation for In-Orbit Inspection.
16. Pioneer Astronautics Nitrous Oxide Micro Engines
17. Powdermet, Inc. Aerogel Modified Structural Thermal Protection System
18. Rocketstar Robotics Inc Modular Actuators for Space Applications
19. Sierra Lobo, Inc. A CubeSat-Scale Testbed for Cryogenic Fluid Management Technologies
20. Technology Applications, Inc. Lightweight Inflatable Cryogenic Tank
21. Techshot, Inc. Life Science Research Sample Transfer Technology for On Orbit Analysis.
22. Tethers Unlimited PowerCube: Integrated Power, Propulsion, and Pointing for CubeSats
23. Tethers Unlimited High Thrust Efficiency MPD Thruster
24. Virtual Incubation Company, LLC A venture capitalist market assessment of NASA’s Human Research Program Technologies
25. XCOR Aerospace Cryogenic Composite Tank Fabrication for Reusable Launch Vehicles

Promising Innovations...yes.  But it's long road to commercialization.  Good luck to all of these companies in implementing both their technology and business solutions.

Airplanes or Automobiles?

Is Human Space Flight more like the airline industry or the automobile industry?

In a recent post at Space News, guest-blogger Gordon Smith, Ph.D., acknowledges  the reality that Human Space Flight has not been truly commercialized while other highly complicated and risky industries have flourished privately.  Smith believes those attempting to commercialize human spaceflight utilizing an airline industry business model could be more successful by changing models.

Might the automobile industry provide a better business model for Human Space Flight to be patterned after? Cars and trucks are specialized for the needs of their users and onboard redundancies are minimized through the use of AAA, tow trucks, gas stations, and other readily available "emergency services" that are easily accessible to motorists on the road. Smith argues in favor of:

• Rescue craft capable of reaching both space stations and free-flying spacecraft on short notice (perhaps already on-orbit)
• Maintenance craft (think spare parts)
• Rendezvous craft (think tugs)
• and of course depots

NASA could provide the rescue service or perhaps such a rescue service could be offered as a private venture:

• Added redundancy for NASA
• Like COTS, another way for NASA to stimulate the industry
• Lower Insurance premiums for Bigelow
• Lower Insurance premiums for all private manned launches

Note: for these to be a help to humans in space, these vehicles do not necessarily need to be manned themselves. This quote from his blog post sums up Smith’s position:

“The automotive industry operates similarly to human spaceflight, if one looks at the broad operational behaviors. A vehicle departs from a certain location, travels for a period of time that may be limited or indefinite (but the car may pause as needed), and can return to any number of locations. However, the automotive industry prevents DTD and redundancy costs from growing prohibitive using government or private means to render assistance in the form of ambulances and tow trucks.

We gain so much by adjusting the human spaceflight industry model to better support their operations. Creating a means by which aid may quickly be dispatched to space stations or vehicles on orbit is within the scope of the 2010 National Space Policy, reduces the costs associated with human spaceflight and makes it easier for private commercialization to grow. Instead of having to counter every possibility, known and unanticipated, private vehicles and stations need only ensure that if something goes wrong, their occupants will be able to safely wait for help. This is an improved response over escape pods currently under consideration, as it does not leave an abandoned asset worth billions of dollars to drift unattended in orbit, where it may easily be lost.”

Gordon Smith has also written this paper on the macro-economic impacts on the space industry where he strikes similar tones.  This paper warrants closer scrutiny.  Perhaps in an upcoming post.  For now, I like this quote from the paper:

"This emergency response capability, then, should be made a priority in forthcoming policy so that the long promised commercial sector may finally develop."

Interview with the Founder of The NewSpace Business Group

Are you a NewSpace organization? Could you use a group of MBA’s at your disposal to complete company projects without the cost of keeping them on your payroll? Meet the NewSpace Business Group. Think of the NewSpace Business Group as a network for nearly minted passionate, space-minded MBA’s that gain valuable business experience by solving real world problems for the NewSpace industry.

So listen up Altius, Armadillo, Bigelow, Masten, XCOR, SFF, and NLV Challenge competitors. The NewSpace Business Group is available to assist with your:

• Market Research
• Competitive Analysis
• Pricing Strategies
• Business Development Strategies
• Business Plan Development
• Internships
• and more.

Here is an interview with the group's founder, Jonathan Card (another interview in the series from Space Studies Institute’s Space Manufacturing Conference 14).


Q: Describe the NewSpace Business Group.

Jonathan Card: The NewSpace Business Group is a student group for business students, historically at the MBA level, interested in space businesses. We are focused on bridging the gap between the space technical community and other specialties in business that are necessary to run a successful company. One of the most destructive things that our current space policy has done is that NASA has frequently had to act as the intermediary between the space companies and the public. NASA's goal has been to foment experimentation and technical advances that were necessary in the 1960s to get humans to space.

Unfortunately, it's not enough for the technology to exist, but it has to exist in a network of social institutions that manufacture it, improve it, and operate it and there has been limited success in forming these kinds of institutions. This is very difficult for the government to do in a democracy, but NASA has recently begun to rectify this. COTS, SBIR, and, I think, Obama's recent NASA budget have started to bridge this gap.

The NewSpace Business Group is a setting for people in the space community to apply what they are learning in school to the industry that needs to learn it and so that business people that specialize in Marketing, in Finance, or in other aspects of private companies can learn from the NewSpace Business Group members on their campus that space is a viable place to do business and make a profit. It's less and less true that there's only one customer (NASA), that you need to get money (from NASA) before you can build anything, that you need to structure your company around government contracting and procedures.

Q: There are many other campus organizations. Why do you think you will be able to attract top business talent?

Jonathan Card: Because space is awesome, of course! It's space! Seriously, though, space is the New World of our time. It's a place that is unsettled and full of riches, from solutions to the energy crisis to new IP that can only be discovered in space. It is what will keep our civilization alive when an asteroid comes to finish us off like the dinosaurs before us, when nuclear weapons finally get out of hand, and when some unknowable tragedy strikes our ecosphere. In the end, money is the way for the people to show what's important to them; since space is important, there must be money to be made and the one to figure it out, gets to keep it. Fortunes were made, lost, and made over and over in the transatlantic trade and in the mines and forests of the New World. It will happen again in space.

Q: How do you see the NewSpace Business Group benefiting the NewSpace industry?

Jonathan Card: I would like to see NewSpace alumni forming the next cadre of managers and entrepreneurs of space-oriented companies. There are a lot of exciting companies coming of age right now and there are still holes to be filled in. Companies are just learning to talk to each other, how to do business with each other, and what institutions other industries created for themselves that space companies don't have because the unrelenting NASA-focus of the past has prevented a mature industry from emerging organically.

There are opportunities here that we haven't yet dreamt, and they are problems that MBAs and other business school students study full-time. We are the leaders that will make this industry make money and will make money elsewhere and bring it to NewSpace and so into the future.

Q: What you like the NewSpace Business Group to grow into over the next few years?

Jonathan Card: I'd like to make it into a national campus organization whose members know each other, work together, and can learn to rely on each other. I'd also like to make it into a group whose name becomes a credential; that, with the NewSpace Business Group on their resume, business school students can be assured of at least an interview with investors, companies, and other firms in the space industry.

Q: How can the New Space Industry benefit from your group’s efforts today? Internships? Projects? Other?

Jonathan Card: We have done projects for NewSpace groups already; we helped organize some of the events at the NewSpace 2009 conference (it was this experience that led to me becoming Treasurer of the Foundation) and we did an industry analysis of the future of the CubeSat industry for a Google Lunar X Prize competitor applying modern industry theories of innovation to see if we can establish some insight into the future growth of that technology. Portions of that paper are being prepared for public distribution; stay tuned to http://www.newspacebusiness.org/ or our LinkedIn group for more information on that, probably in December. We are always looking for projects and internships for our participants. The benefits are subtle and more widespread than you may think.

Last spring, we arranged a campus talk by Dannie Stamp, the former COO of Iridium (you can watch this on our YouTube channel); bringing such a luminary to campus was important to the school and it was my understanding at the end of the year that the school was interested in building stronger ties with him. This kind of relationship can be an important way for NewSpace to be highlighted in publications and to be used as examples in classrooms. That kind of publicity, in the context of other topics, is an important way to mainstream what we're doing.

Q: How can the New Space Industry help you become successful? Where do you need help to take the New Space Business Group to the next level?

Jonathan Card: I don't really want to focus on "how can the NewSpace industry help me". It's important to me that this remains a group that comes together to help the industry. Even when we are looking for projects, it's important that those projects are not just make-work for the sake of a good idea. If we can't help NewSpace, there's no point is being a group. If NewSpace can't help humanity, there's no point in it existing. I firmly believe that for-profit businesses, and those of us that believe in the power of the private sector, exist solely to serve others and be others-centered; usually our customers. I guess the most the NewSpace industry can do for us is to remember that we are there for them, and our members are a group of people that will know something about their industry, and if they need something done or they need good people, we are here to help.

Q: If anyone reading this wants to get involved how can they get a hold of you?


Jonathan Card: jcard@email.arizona.edu will still reach me, even though I've graduated, as will any message through the LinkedIn group. This has been dormant for the last few months, but we're revisiting it and will be re-opening it for new members soon. We welcome industry members, students, prospective students, or anyone else that wants to keep up on our activities.

Q: What should I have asked that I didn’t?

Jonathan Card: What are you doing now?

The NewSpace Business Group has alumni at Sargent Controls, which manufactures parts for military and civil space and airplane parts, and we have several members that have started their own businesses after business school.

I'm working at a cloud software company, B50 Data, making software for tracking maintenance for commercial shipping fleets. We're finishing our first round of sales calls without any venture or angel capital, and we're very optimistic. In addition to polishing the paper on CubeSats for publication, I'm finishing a paper overviewing international property law and various means of resolving complex IP legal situations, like those in cloud computing, other than expanding the power of the UN.

I've also started inquiring about re-establishing the Serviceable Spacecraft Committee on Standards at the AIAA so that we can start work on docking, berthing, and refueling standards that we need in order to have things like orbital fuel depots. I've heard so many people talk about how NASA needs to start establishing industry standards, but that's not NASA's job. It's our job, and it's time we did something about it. I've gotten some interest in it from some good people, but it's still an infant idea. I'm also heading up several committees for the Space Frontier Foundation, and I'm investigating some interesting possibilities that may lead to a NewSpace company. Nothing definite yet, but I'll keep you informed.

Micro-Cargo Delivery & The Last Mile Problem

Orbital Tech's Space Station Concept

With the NLV Challenge Seminar last weekend in Menlo Park, I have (again) been thinking about NanoSat Launcher markets.

First a quick refresher: a NanoSat Launch Vehicle (NLV) is an orbital launcher dedicated to very small payloads (~1-50kg). Currently there is no dedicated launch vehicle for such payloads. Interested customers are forced to seek out secondary payload status on larger launch vehicles. Secondary payloads are launched WHEN the primary payload dictates and WHERE (in the orbit that) the primary payload dictates.

In my estimation, two features of a commercial NLV system will disproportionately drive market demand. A successful commercial NanoSat Launch Vehicle service must be able to:

1. Launch with limited lead time (fast integration combined with frequent launch opportunities) and
2. Launch at low cost. I've heard price points between $500K to $1M per flight. At these price points, universities could bundle 12-24 CubeSats into a single payload and launch multiple times during a student’s college career (current wait time for a CubeSat launch can be 5-7 years).

Now, let's talk markets: I believe the demand for an NLV will be divided into two major categories:






I believe micro-cargo delivery to orbiting stations will be the larger of the two markets. I admit, with no current demonstrated market, this assertion is a bit speculative, but here is my simple logic. Developing a complex system like a satellite can take months or years, emergency needs/wants can develop in seconds. For example, how do you get an emergency supply of insulin to a visiting astronaut on a Bigelow Aerospace or Orbital Technologies space station?  Not on a Dragon resupply mission which won't lauch for another month. 

Bigelow announced on Oct 7, 2010, his company's need for 24 flights per year to his stations starting in the year, 2017. But those flights will be planned months (years?) in advance. What happens when the stations need short-term "emergency" items: a wrench, a computer chip, fresh apples?

What opportunities for luxury, science, convenience, or commerce does such a micro-cargo service open up for those on station? This is where the NLV could really augment the larger deliveries from SpaceX, Boeing, and Orbital. With an NLV, station operators can have both large, regularly scheduled deliveries as well as more frequent micro-cargo deliveries working together to service their needs.

But once in LEO, how does the NLV actually deliver the payload to the station itself? We have a "last mile" problem. The ISS, Bigelow, or Orbital Technologies are going to require that vehicles approaching their stations do not damage them. But on-board rendezvous and docking technologies may be too massive for a NanoSat Launcher to include on board (not to mention expensive/time-consuming for the entrepreneur to develop).

In addition, it is unclear to me that orbiting stations are set up to handle the volume of deliveries an NLV service could theoretically provide. An NLV may be able to provide daily "milk runs" to an orbiting station, but could the station handle that much throughput at their airlocks? A last mile solution is required for micro-cargo delivery to truly become the "killer app" for NLV's that I believe it could be.

A Last Mile Solution would:

• Eliminate/minimize on-board NLV rendezvous and docking hardware
• Facilitate the increased opps tempo of frequent station deliveries
• Ensure the safety of delivered payload
• Ensure the safety of the orbital station itself

The company that solves this last mile problem for delivering micro-cargo to orbital destinations will significantly enhance the attractiveness of any NanoSat Launcher in operation. And if one company vertically integrates the last mile solution with a company-created NLV, such a combination could serve as a significant barrier to entry for other NLV competitors unable to offer such a comprehensive solution.

We need entrepreneurs to solve the last mile problem for micro-cargo delivery to orbital destinations.  There's profit in it for you if you do.

5 Ways to Make Government Contracting Cheaper

Since 2000, the US has doubled the amount it spends on contracted work (from $200B to $500B). According to the GAO, of the current 95 major defense acquisitions projects, one in four is overrun. Cost growth from these programs is valued at $295B.  In August 2010, the US Secretary of Defense, Robert Gates, announced sweeping efforts to reduce Defense spending. He announced base closures, overhead reduction targets for all branches of the military, the eradication of Joint Forces Command, and many other targeted reductions.

Because of my day job as a contractor, I see first-hand (or have talked to others who have seen) the system of cause and effect that prevents the current government/contractor system from incentivizing and institutionalizing cost savings. Let me explain a few of the forces at play (very simplified) and then elaborate on potential solutions to reduce the cost of NASA (and DoD) programs.

Background - Contractor:

• Wall Street primarily judges large aerospace companies on three criteria. What are your “Orders”? What are your “Sales”? What is your “EBIT”?
• Orders are the value of new contracts or the value of contract extensions you have won during this period. Usually orders represent work you have not yet done – kind of like “backlog”.
• Sales equal the contract costs incurred plus profit you have earned during this period.  This is the value of your labor, your subs’ labor, any material you procured while executing your contract, and your expected profit for those costs.  Sales represents the volume of work you have completed.
• EBIT is Earnings Before Income Tax – this is the contract profit you earned during the period.
• With Wall Street quarterly judging large aerospace firms on Orders, Sales, and EBIT, companies insist their program managers meet quarterly Orders, Sales, and EBIT targets. 
• Cost Plus Award Fee (CPAF) is the preferred contract vehicle for development contracts. Using this contract vehicle, the Government agrees to pay the contractor for their costs. Then periodically during the contract (at least annually), the contractor’s performance for that period will be judged. The resulting Award Fee (AF) score will dictate how much of each period’s award fee pool the contractor keeps as profit (e.g. 90% AF score would earn the contractor 90% of the AF pool for that period). This contract vehicle allows for easy and straightforward government contract scope changes because the contractor’s costs are covered regardless. Customer intimacy tends to be high with this contract type since the contractor is incentivized to work closely with the government to solve even small problems – growing the work scope and contract size in the process.
• Most development programs are CPAF which means if contractors performing a CPAF contract identify a way to save the Government money, such savings would reduce the contract’s costs which will reduce the company’s Sales and maybe reduce their fee. Saving money on a CPAF contract would reduce at least one (and perhaps two) of the three primary ways Wall Street and upper management judge a program manager and in aggregate, judge the firm.

Background – Government:

• Future budgets for Government programs are often based on current year spending. If you are not spending enough as a Government program manager, the perception will be that you don’t need as much money the following year. This may or may not be true. But such reductions, when they do happen, are usually seen as a bad thing within the local government program office. 
• Politically, it is often better for a large development program to be "Low-Risk and High-Cost" rather than "High-Risk and Low-Cost." Cost saving ideas that increase risk to program execution will often be resisted. I am not saying government programs want to overrun. I am saying the penalties for programs that do not achieve their performance objectives are often greater than the penalties for overrunning programs. Dollar savings at the cost of increased program risk is rarely a gamble government program offices feel incentivized to make.
• As a general rule, corporate profit-making is perceived in a negative light by government personnel. Many within the government feel that profit is the waste in the system.  If profit can be removed, optimum efficiency will be found.  This mindset is changing, but slowly.

5 Ways to Make Government Contracting Cheaper:

1. Stop using Sales as a method for evaluating company performance. Change Wall Street’s focus from judging the industry on Orders, Sales, and EBIT to evaluating the industry on Orders and EBIT only. I believe the volume measurement that the "Sales" category provided is a faulty measurement anyway, and does not necessarily measure company health.  Orders and EBIT do measure company health.  Wall Street, focus on these. 
2. Split cost savings between contractor and government. There are examples of this type of contract clause in use today – although it is used sparingly. The concept is this: If contractors can identify a method to save money on a contract and then demonstrate those savings for XX months, then all future savings could be shared equitably between both parties.
3. Ensure that the government's portion of the cost savings can be kept locally either on the program itself for later enhancements or within the local command as a hedge against future risk. The Secretary of Defense is promising similar treatment of cost savings found in his recent DoD Overhead cost savings efforts. 
4. Change the perception within the Government that profit is bad. In fact, I argue, the profit motive will drive cost savings. The more you can link cost savings to higher profits the more interest you will garner from for-profit companies.
5. Increase the rigor of government proposal auditing. The government already evaluates development contract proposals. These auditors are very thorough, but if we start offering contractors the opportunity to make more money through cost savings, the cynics among us will complain, “if we make it possible for contractors to share in cost savings, contractors will simply pad their initial proposals and then a year later, identify their original proposal padding as 'cost savings'. Such behavior will not help the Government save money at all.” Cynic, I hear you! By ensuring optimum contract sizes to begin with, you will lessen the ability of the unscrupulous to cheat this new system I am proposing. Tough up-front proposal audits are key to maintaining a fair system that rewards heroes, not villains.

So here is a short story of my proposed system in action:

Acme Aerospace signs a Cost Plus Award Fee (CPAF) contract for $100M to provide ISR equipment maintenance on the XX military installation for the next five years. Although the company grumbled at the length and intensity of the government proposal audit, they knew this was a needed step. In the first year of the contract, Sally, the program manager, built a strong relationship with the local program office and organized her team to efficiently and effectively honor all aspects of their contract. At the beginning of her second year, working with her now experienced team, Sally identified several maintenance steps that could be streamlined to eliminate two people on her team, a savings of $200,000 per year ($100K each for easy math). Sally approached her counter-part in the government program office highlighting these potential savings. The government liked Sally’s ideas. The program office authorized Sally to make her staffing reductions as a part of a three-month trial.

After three months of monitored implementation, the staffing reductions had, in no way, adversely impacted maintenance efforts (consistent with Acme’s predictions).  The government program office agreed the probationary period was over. 3.75 years worth of cost savings (the amount of time left on the contract) equal to $750,000 ($200K x 3.75) were split evenly between Acme Aero and the US Government. Some within the government complained that Acme just got paid for “doing nothing”, but the program office reminded these critics that the government also got paid for “doing nothing” and encouraged all parties involved to find more savings of this type. Acme got a check for $375,000 which was recorded as EBIT and included in their upcoming quarterly update to Wall Street. Sally remembered a day when achieving such cost savings would have made her miss her quarterly Sales target, and was grateful for the changes in the way Wall Street measured her company and her program. The US Government directed the government’s portion of the savings ($375K) to be retained on the contract to be used to benefit the war fighter at the program office’s discretion which they used to perform a tech refresh on old ISR servers and equipment that were badly out of date.

If we do nothing…

Without such changes, you will continue to see the CPAF contract vehicle and Wall Street reporting requirements incentivizing contractors to spend every penny of each contract which will continue to leave no reserves in case of unexpected technical challenges which will continue to drive overruns.

But by making these changes (and other ideas not mentioned here), you unleash the power of commerce on the problem. I cannot think of more powerful tools than creativity and self-interest to help reduce contractual costs and save NASA and the DoD some money. 

A Free-Market NASA Budget?

America has always performed best when promoting free markets and competition. President Obama's new direction for NASA holds the potential to transform our space agency from supplier to customer and significant market potential for our nation's brightest entrepreneurs and engineers. The budget changes include:

• Dropping Orion and Constellation (no more "near-term" manned moon focus)
• Keep ISS supported through 2020
• Extra $6B over five years
• Transition to Commercial LEO services (NASA now a customer instead of a supplier)
• Dollars for Robotic exploration
• Dollars for Technology demonstration to raise TRLs of some near-term technologies like automated rendezvous and docking and depots (for a crash course on depots – check out Jon Goff’s work – search depots on his blog)
• Dollars for basic research for some more long-term technologies.

Doug Messier has a nice summary of the proposed NASA budget over at Parabolic Arc. Let the Congressional battles begin!  And here is a fun quote from earlier today by NASA Administrator, Charles Bolden:

"Today we are launching a bold and ambitious new space initiative to enable us to explore new worlds, develop more innovative technologies, foster new industries, increase our understanding of the earth, expand our presence in the solar system, and inspire the next-generation of explorers..."