From: Wales.Larrison@ofa123.fidonet.org
Newsgroups: sci.space
Subject: Commercializing the Shuttle
X-Sender: newtout 0.06 Jan  3 1993
Date: 09 Jan 93  23:53:24

To All:
   I've been reading some of the discussions about "commercializing"
the shuttle.  I've worked with some of the teams putting together
the business plan on a couple of these attempts.  Currently, there
are rumors floating in the industry about high-level discussions
going on about turning shuttle operations over to a commercial
operator, with preliminary proposals floating around from two major
companies.
   Prior to this pass at commercializing the shuttle, there have
been (by my count) at least 4 very serious prior attempts and
proposals.  All of these have had real serious money backing them
up, including one pass that had several billions of dollars in a
letter of commitment from the folks who had financed the Alaska
pipeline project, as well as the usual corporate financial sources.
   Prior attempts had fallen down from two basic sticking points --
which can be summarized as termination liability on government
contracts and government indemnification from government damages to
the system.  Termination liability can be best illustrated as if the
government decided "that's it -- we won't use the shuttle any more"
after a commercial operator had booked government flights and bought
the hardware and supplies (ETs, SRBs, etc) and prepared a vehicle to
fly those flights.  Under the "termination for convenience" clause
in the current Federal Acquisition Regulations, the commercial firm
would be stuck.  Termination liability, in this case, is also linked
to multi-year procurement which gets into the government annual
funding process and the unwillingness of a current Congress to
obligate a future Congress commit future money to current
activities.
   The government indemnification is the government version of
standard commercial language.  Let us suppose a government
astronaut/passenger operating a payload damaged an orbiter, or if a
government employee accidentally damaged a vehicle in ground
transport.  Under current acquisition regulations, there is no easy
way to get payment to a commercial firm, or even a finding of harm,
to get recompense to the commercial operator.
  Fortunately, these issues have been thrashed out and repeatedly
hammered at in some little-publicized campaigns by some pro-
commercial space folks. There are now regulations on the books to
allow NASA to get termination liability for commercial contracts
(and back into a limited form of multi-year financing), and
indemnification has been attacked through some of the new commercial
space transportation regulations (not laws).
  
  The biggest stumbling block left is the NASA culture.  NASA has
embraced the shuttle as part of its core "identity".  Moving the
shuttle to a commercial operator will mean that folks will have to
find new jobs within the agency, and would radically change how NASA
operates and how NASA sees itself.
   This past year has seen some changes within the NASA culture --
not enough for them to relinquish Shuttle, but moving in the right
direction.  I feel somewhat hopeful that NASA will be able to
relinquish their inappropriate operational role and get back to
their R&D role.
  
  Now, let's talk economic viability of a "commercial shuttle".  By
comparison to other "commercial" ELVs, the development work for such
systems was paid for by government moneys, and the results turned
over to commercial operators.   Examples:  the Titan ICBM
development program, and the upgrade to spacelauncher, and similarly
for the Atlas ICBM development and upgrade.  Once turned over to
commercial operators, the commercial operator is responsible for any
future upgrades (either funded internally, or in a competitive sense
to provide new capabilities for customers, which may be the
government).  Examples of this would include the Delta II (expensed
under the MLV USAF contract), and the Atlas II.
   According to Goldin (and supported by my analyses), rationalizing
the current shuttle operations (about $3B/yr) could reduce current
operations costs by at least 25 % (Goldin's number) to 50 % (my
number). This would reduce shuttle launch costs from about $400
M/flt currently to $ 200-300 M/flt.  On a $/lb to orbit, this is
competitive with Ariane, Delta, Atlas, and other commercial market
ELVs.
   To pay for replacement shuttles (wearout or failure), these can
be covered by depreciation credits, or if we assume the current
shuttle reliability of .98+ is accurate, by adding back in about
$40-60 M per flight for replacement insurance, plus standard
indemnification.
   Of course, while the shuttle offers some capabilities which
cannot be matched by other systems and can be expected to capture a
core business of Space Station Freedom logistics and satellite
services (at least until competitors come along), real financial
success of any commercial shuttle venture means that it will have to
be able to compete with and win commercial business.  Current
government policies and regulations restrict government payloads
from flying on the shuttle.  IF the shuttle is being run
commercially, then these restrictions should also be lifted.
   There has been a lot of discussion in this forum about shuttle
costs and "the NASA way of doing things".  I figure that if someone
has the cojones to try to commercialize the shuttle, then we ought
to allow them a level playing field to do so.  It's a step in the
right direction -- and should encourage further commercial
developments of space transportation to compete with them.
 --------------------------------------------------------------
Wales Larrison                     Space Technology Investor
  

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