The National Space Transportation Policy:

Issues for Congress

May 1995

OTA-ISS-620

GPO stock #052-003-01415-7
ii

Recommended Citation: U.S. Congress, Office of Technology Assessment, The National

Space Transportation Policy: Issues for Congress, OTA-ISS-620 (Washington, DC: U.S.

Government Printing Office, May 1995).
iii

oreword

n responding to the political and military challenges of the Cold War, and the urge to explore

and exploit outer space, the United States developed a capable fleet of space transportation

systems for carrying cargo and people into space, and for ensuring a credible strategic nuclear deterrent. These systems are owned and managed by the National Aeronautics and

Space Administration, the Department of Defense, and private industry. In recent years, increasing

federal budget constraints, commercial competition from foreign launch firms, and a desire to continue an ambitious space program have created pressures within the United States to reduce the

costs of access to space. Significantly lower space transportation costs would make the U.S. space

industry more commercially competitive, foster the expansion and creation of new space markets,

and ensure access to space for government payloads and manned missions.

This report, prepared for the House Committee on Science, is the first in a broad assessment of

the health and future prospects of the U.S. space transportation technology and industrial base. The

report focuses on the Clinton Administration’s National Space Transportation Policy, which was

released last fall. It examines administration policy in light of the implementation plans prepared

by NASA, DOD, and the Transportation and Commerce Departments. As the report notes, the new

policy brings a welcome measure of order to the sometimes chaotic structure of U.S. space transportation activities. The policy also emphasizes the important contribution private industry can

make to the direction and development of U.S. space transportation capabilities. However, an

analysis of the policy and implementation plans also raises some issues that might be of interest to

Congress as it debates space transportation legislation, oversight, and funding. These issues involve decisions on NASA and DOD development programs, the use of foreign launch vehicles and

components, the conversion of excess long-range ballistic missiles for use as launch vehicles, and

the new role of the private sector in space transportation research and development decisionmaking. This report also identifies two issues omitted from the Administration’s policy: the preservation of long-range ballistic missile capabilities after final production in 2005, and the perspective

of lower industrial tier firms toward national space transportation policy.

In undertaking this effort, the Office of Technology Assessment sought the contributions of a

wide spectrum of knowledgeable individuals and organizations. Some provided information, others reviewed drafts. OTA gratefully acknowledges their contributions of time and intellectual effort. OTA also appreciates the help of NASA and the Defense, Transportation, and Commerce

Departments. As with all OTA reports, the content of this report is the sole responsibility of OTA

and does not necessarily represent the views of our advisors or reviewers.

ROGER C. HERDMAN

Director
iv

dvisory Panel

Ronald Brunner, Chairman

Director

Center for Public Policy Research

University of Colorado

Edward C. Aldridge, Jr.

President and CEO

The Aerospace Corporation

Buzz Aldrin

Apollo 11 Astronaut and

Consultant

Radford Byerly, Jr.

Consultant

Thomas Burson

Vice President and General

Manager, Space Transportation

McDonnell Douglas Aerospace

Paul J. Coleman, Jr.

Director

National Institute for Global

Environmental Change

University of California at

Los Angeles

Lt. Gen. Donald L. Cromer, 

USAF (retired)

President

Hughes Space and

Communications Co.

Henry J. Dinenno

Vice President, Advanced

Programs & Business

Development

Space Systems Division

Rockwell International Corp.

Isaac T. Gillam, IV

Senior Vice President

OAO Corporation

Michael D. Griffin

Senior Vice President,

Program Development

Space Industries

Frederick H. Hauck

President and CEO

INTEC

Clark W. Hawk

Director

Propulsion Research Center

University of Alabama

at Huntsville

Douglas A. Heydon

President

Arianespace, Inc.

Joan Johnson-Freese

Associate Professor

Department of National

Security Studies

Air War College

Jon B. Kutler

President

Quarterdeck Investment Partners,

Inc.

Ronald G. Peterson

Vice President and General

Manager, Space/Strategic

Propulsion

Hercules Aerospace Co.

James D. Phillips

Director of Engineering

Development (Retired)

Kennedy Space Center

Thomas F. Rogers

President

Sophron Foundation

Jerome Simonoff

Consultant

Larry N. Speight

Vice President, Space and

Strategic Systems

Honeywell

Courtney A. Stadd

Managing Partner

Global Technology Ventures

Peter B. Teets

President, Information and

Services Sector

Lockheed Martin Corp.

David W. Thompson

President and CEO

Orbital Sciences Corp.

Joseph P. Zimonis

Executive Vice President and

General Manager

USBI Co.

Note: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members.

The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report

and the accuracy of its contents.
v

roject Staff

Peter Blair

Assistant Director

Industry, Commerce, and

International Security Division

Alan Shaw

Program Director

International Security and

Space Program

PROJECT STAFF

Christopher M. Waychoff

Project Director

S. Yousef Hashimi

Analyst

Jack Nunn

Senior Associate

Mark Suskin

Analyst

Ray A. Williamson

Senior Associate

ADMINISTRATIVE STAFF

Jacqueline Robinson Boykin

Office Administrator

N. Ellis Lewis

Administrative Secretary

Don Gallagher

Secretary

CONTRACTORS

Leonard David

Donald Fowler

Carol Gaelick

Joel S. Greenberg

Ivars Gutmanis

Elizabeth Sheley

INTERNAL REVIEWERS

Kevin Dopart

Thomas H. Karas

Peter G. Smith

Michael G. Snyder
vi

cknowledgments

Jonathan C. Ball

U.S. Department of Commerce

Washington, DC

Col. Charles R. Banta

U.S. Air Force

Washington, DC

Mark Bitterman

Orbital Sciences Corp.

Dulles, VA

C.R. Carlson

McDonnell Douglas Aerospace

Huntington Beach, CA

JoAnn Clayton

National Research Council

Washington, DC

Lee Edwards

U.S. General Accounting Office

Huntsville, AL

Don Eiss

Office of the U.S. Trade

Representative

Washington, DC

William A. Gaubatz

McDonnell Douglas Aerospace

Huntington Beach, CA

Dennis Granato

U.S. Deparment of Defense

Washington, DC

Jaak Holemans

Booz-Allen & Hamilton, Inc.

Arlington, VA

Dave Hubbell

U.S. General Accounting Office

Los Angeles, CA

Alan Ladwig

National Aeronautics and

Space Administration

Washington, DC

J. Wayne Littles

National Aeronautics and

Space Administration

Washington, DC

Capt. Gavin D. Lowder

U.S. Navy

Washington, DC

John E. Mansfield

National Aeronautics and

Space Administration

Washington, DC

Larry Mattson

TRW

Redondo Beach, CA

Wallace A. McClure

Westminster, CA

Richard L. McMillion

Rocketdyne

Canoga Park, CA

Henry M. Minami

Rocketdyne

Canoga Park, CA

David H. Moore

U.S. Congressional Budget Office

Washington, DC

Warren G. Morimoto

Pratt and Whitney

West Palm Beach, FL

Arthur C. Morrissey

Lockheed Martin Corp.

Crystal City, VA

David E. Mosher

U.S. Congressional Budget Office

Washington, DC

Eric E. Nichols

Naval Space Command

Dahlgren, VA

William Piland

NASA Langley Research Center

Hampton, VA

Karen S. Poniatowski

National Aeronautics and

Space Administration

Washington, DC

Col. Charles Pugsley

U.S. Air Force

Arlington, VA
vii

David P. Radzanowski

U.S. Congressional

Research Service

Washington, DC

Jim Sanders

NASA Marshall Space

Flight Center (retired)

Huntsville, AL

Richard Scott

U.S. Department of

Transportation

Washington, DC

Lt. Col. Jess Sponable

USAF Phillips Laboratory

Albuquerque, NM

Homer Thompson

U.S. General Accounting Office

Washington, DC

Sam Van Wagner

U.S. General Accounting Office

Los Angeles, CA

Note: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by these individuals. They do not,

however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report and the accuracy of its

contents.
viii

cronyms and Initialisms

BMDO Ballistic Missile Defense Organization

CAN cooperative agreement notice

CSTS Commercial Space Transportation Study

DOC Department of Commerce

DOD Department of Defense

DOT Department of Transportation

EELV Evolved Expendable Launch Vehicle

ELV expendable launch vehicle

ESA European Space Agency

FSU former Soviet Union

GEO geosynchronous Earth orbit

GTO geosynchronous transfer orbit

HLV heavy launch vehicle

ICBM intercontinental ballistic missile

LFBB Liquid Fly Back Booster

LLV Lockheed Launch Vehicle

MLV medium launch vehicle

MTCR Missile Technology Control Regime

NASA National Aeronautics and Space Administration

NASP National Aerospace Plane

nmi nautical miles

NSTC National Science and Technology Council

NSTP National Space Transportation Policy

OSTP Office of Science and Technology Policy

OTA Office of Technology Assessment

R&D research and development

RFP request for proposal

RLV reusable launch vehicle

SLBM submarine-launched ballistic missile

SLV small launch vehicle

SRB solid rocket booster

SSTO single-stage-to-orbit (vehicle)

START Strategic Arms Reduction Talks

TSTO two-stages-to-orbit (vehicle)

USRA Universities Space Research Association

USTR U.S. Trade Representative
ix

1 Summary 1

General Findings 2

Lack of Consensus on U.S. Space Policy Goals 2

Living Within Severe Budget Constraints 3

Government Demand Dominates the Space

Transportation Market 3

Current Capabilities Can Meet National Security

Requirements 4

Competing Interests Make Common Strategy

Difficult 4

Issues for Congress 4

Fundamental Objective #1: Space Transportation

Funding and the Division of Responsibilities 4

 Issue 1a: Divided responsibility and interagency

coordination 6

 Issue 1b: Potential conflicts and redundancies 6

 Issue 1c: HLVs drive the EELV program 7

 Issue 1d: RLV development 7

 Issue 1e: SSTO? 8

 Issue 1f: Space Shuttle—beyond 2000 8

Fundamental Objective #2: U.S. Use of Foreign

Launch Systems and Components 9

 Issue 2a: The use of foreign launch

technology 9

 Issue 2b: International trade in launch

services 10

 Issue 2c: Technology transfer and foreign policy

objectives 12

Fundamental Objective #3: The Use of Excess

Ballistic Missiles 12

 Issue 3a: Unfair competition or market

creation? 13

 Issue 3b: Russian excess ballistic missiles 13

Fundamental Objective #4: The Private Sector

Role in Space Transportation Decisionmaking 13

 Issue 4a: Will the estimated market support policy

goals? 14

ontents
x

 Issue 4b: The nature of the government-industry

space transportation partnership 14

 Issue 4c: Risk management—striking the proper

balance 15

 Issue 4d: Infrastructure 15

 Issue 4e: Accommodating commercial needs 16

Additional Issues for Congress 16

 Issue 5: Preservation of long-range ballistic

missile capabilities 16

 Issue 6: The invisible lower industrial tiers 16

Critical Decision Points 17

1 The National Space Transportation Policy:

Issues for Congress 19

Introduction 19

The U.S. Space Transportation Technology and

Industrial Base 21

The National Space Transportation Policy and Its

Implementation Plans 25

Meeting the Fundamental Objectives

of the Policy 26

Fundamental Objective #1: Space Transportation

Funding and the Division of Responsibilities 26

 DOD 27

 NASA 31

 Issues for Congress 42

Issue 1a: Divided responsibility and inter-agency

coordination 43

Issue 1b: Potential conflicts and

redundancies 44

Issue 1c: HLVs drive the EELV program 48

Issue 1d: RLV development 49

Issue 1e: SSTO? 51

Issue 1f: Space Shuttle—beyond 2000 55

Fundamental Objective #2: U.S. Use of Foreign

Launch Systems and Components 56

 Incorporating Foreign Technology into U.S.

Launch Systems 58

 U.S. Government Use of Foreign Launch

Systems 59

 International Trade in Launch Services 62

 Issues for Congress 69

Issue 2a: Effects of the use of foreign launch

technologies on the U.S. aerospace industrial

base 69
xi

Issue 2b: The ground rules for international trade

in launch services 71

Issue 2c: Controlling technology transfer and

other foreign policy objectives 73

Fundamental Objective #3: The Use of Excess

Ballistic Missiles 74

 Background 75

 Issues for Congress 77

Issue 3a: Unfair competition or market

creation? 77

Issue 3b: Russian excess ballistic missiles 80

Fundamental Objective #4: The Private Sector

Role in Space Transportation Decisionmaking 81

 Government-Industry Goals and Policy 82

 The Implementation Plans 83

 Issues for Congress 87

Issue 4a: Will the estimated market support

policy goals? 87

Issue 4b: The government-industry

relationship 95

Issue 4c: Risk management—striking the

proper balance 99

Issue 4d: Launch operations and

infrastructure 101

Issue 4e: Accommodating commercial

needs 103

Additional Issues for Congress 104

Issue 5: Preservation of long-range ballistic

missile capabilities 104

Issue 6: The invisible lower industrial tiers 106

A Appendix: Clinton Administration Policy

 Statement and Fact Sheet 107
ummary

s the year 2001 approaches, visions of annular space stations and tourist flights to the Moon remain science fiction. With fewer than six years until the new millennium,

the U.S. space transportation technology and industrial

base is faced with a number of challenges, and some opportunities.1

The federal government has been the primary customer for

space transportation services since the early days of rocketry. Recent efforts to reduce the federal budget deficit, cut the national

debt, and shift development responsibilities to the private sector,

however, have limited government funding for new space transportation technologies and missions. Similarly, the end of the

Cold War has led to a reexamination of defense and national security spending on space missions and long-range ballistic missiles.

Meanwhile, European, Russian, and Chinese launch providers

have captured more than 60 percent of the global commercial

launch market for medium launch vehicles (MLVs). At the same

time, entrepreneurs in the telecommunication, navigational, and

remote sensing satellite industries predict an increasing need for

launch services to establish and maintain large constellations of

new satellites.

1Space transportation in this report refers to vehicles able to carry payloads or passengers to orbit. Space transportation systems may be expendable launch vehicles (ELVs),

partially or fully reusable launch vehicles (RLVs), and long-range ballistic missiles. Currently, the U.S. Space Shuttle is the world’s only operational RLV. This report does not

address suborbital launch systems or transportation systems designed primarily to move

payload or passengers between or beyond Earth orbits.

| 1
2 | Summary

To address these challenges and opportunities,

on August 5, 1994, the White House announced

the National Space Transportation Policy

(NSTP), developed by the National Science and

Technology Council and approved by President

Clinton.2 The Clinton Administration’s four fundamental objectives for the NSTP were to establish new national policy regarding:

1. federal space transportation spending, consistent with current budget constraints and the

opportunities presented by emerging technologies;

2. federal agencies’ use of foreign launch systems

and components;

3. federal agencies’ use of excess ballistic missile

assets for space launch, to prevent adverse impacts on the U.S. commercial space launch industry; and

4. an expanded private sector role in the federal

space transportation research and development

(R&D) decisionmaking process.3

This report examines the new policy and the

implementation plans of the Department of Defense (DOD), the National Aeronautics and Space

Administration (NASA), and the Departments of

Transportation (DOT) and Commerce (DOC) in

the context of these four fundamental objectives.

The report raises issues for Congress to consider

as it debates the funding, oversight, and legislative requirements of the new space transportation

policy. General findings, issues for Congress, and

critical decision points identified in the report are

summarized below. The main body of the report

provides background on the fundamental objectives and examines each issue for Congress in

detail.

GENERAL FINDINGS

❚ Lack of Consensus on

U.S. Space Policy Goals

The U.S. space transportation technology and industrial base is in a period of tumult and uncertainty brought about by the end of the Cold War, a

constrained fiscal environment, and a pending

shift in responsibilities from the public to the private sector. Even more than ordinary times, such a

period demands clear intermediate and long-term

goals, strong Presidential leadership, and the

formation of a national consensus among the

executive branch, Congress, industry, and the

public.

The NSTP states that “assuring reliable and affordable access to space through U.S. space transportation capabilities is a fundamental goal of the

U.S. space program.”4 Most observers agree that

reducing costs and improving reliability are important objectives for the U.S. space program. Reliable, affordable access to space is a necessary

part of the nation’s infrastructure for achieving

broader space goals.

The policy implies that lowering the cost of access to space will allow the United States to do

whatever it wants in space. It may be difficult to

achieve lower launch costs, however, without a

clearly articulated, long-term plan supported by

adequate funding, especially when the government is asking industry to make significant investments in ambitious new space transportation

development programs. Indeed, the Office of

Technology Assessment (OTA) previously noted

that “until the nation chooses what it wants to accomplish in space, and what the U.S. taxpayer is

2 Presidential Decision Directive NSTC-4. Most, if not all, the text of this internal policy was released publicly in The White House, Office of

Science and Technology Policy, “National Space Transportation Policy,” Fact Sheet, Washington, DC, Aug. 5, 1994. See appendix for complete

text.

3 The White House, Office of Science and Technology Policy, “Statement on National Space Transportation Policy,” Washington, DC, Aug.

5, 1994. See appendix for complete text.

4 The White House Office, Office of Science and Technology Policy, op. cit., footnote 2, Intro.
The National Space Transportation Policy: Issues for Congress | 3

willing to pay for, neither the type nor number of

necessary launchers and facilities can be estimated with accuracy.”5

Establishing a national consensus first requires

a clear delineation of specific national space goals

by the Administration and its implementing departments and agencies. Then the Administration

must cultivate congressional and public support

for these goals, and convince industry that pursuing and achieving these goals would serve its interests.

The Administration has outlined some broad

national space goals, such as achieving the International Space Station. It has not made clear,

however, how specific goals relate to each other. It

has not issued, for example, an overall space

policy to replace the 1989 space policy of the Bush

Administration. Without a clear articulation of

space policy and how it relates to the broader national agenda, it may be difficult for both industry

and government to pursue space transportation

goals with vigor.

As the experience of the last decade has shown,

even if the Administration were to delineate clear

and specific national space goals, industry officials might still be reluctant to commit corporate

resources to new space transportation ventures

without strong congressional support. This support, in turn, depends on the ability of Members of

Congress to bridge jurisdictional divisions and

reach a consensus on how to buttress national

space goals.

❚ Living Within Severe

Budget Constraints

Fiscal constraints imposed by the budget deficit,

the federal debt, competition from other programs, and a desire to reduce government spending have forced DOD and NASA to cut back on

space transportation programs, and to attempt to

fund more creatively those programs that remain

(e.g., through public-private partnerships). Both

DOD and NASA state that they can meet their current space goals, but many government and industry officials are skeptical. These officials point out

the previous commitments to new space transportation systems that failed to produce operational vehicles despite less severe budget constraints

(e.g., the National Launch System, the Advanced

Launch System, the Air Force Space Lifter, the

Shuttle C, the Shuttle II, and the National Aerospace Plane). The U.S. government could afford

to fund fully new space transportation systems,

but it has currently placed its spending priorities

elsewhere. In the absence of more government

spending, the government and industry will have

to sustain a commitment to new ways of doing

business if the challenges and opportunities confronting U.S. space transportation are to be met.

❚ Government Demand Dominates

the Space Transportation Market

Since the advent of the space age, the U.S. government has played a large and critical role in shaping

the domestic space transportation technology and

industrial base. The U.S. government created the

base to build long-range ballistic missiles and

place men on the Moon. The U.S. government and

industry remain tightly entwined through R&D

and procurement contracts, federal regulations,

and the need for licenses, despite the rise of commercial space launch markets.

For at least the next decade, U.S. national security and civil demands for space transportation

will continue to dominate the domestic industry.

Even the most optimistic growth projections for

the global commercial market do not forecast a

significant shift away from the government without major changes in the marketplace (e.g., the development of a dramatically less-expensive space

transportation system or the discovery of a commercially lucrative space activity). Moreover,

some launch providers are reluctant to take the

steps necessary to make their launch operations

5 U.S. Congress, Office of Technology Assessment, Access to Space: The Future of U.S. Space Transportation Systems, OTA-ISC-415

(Washington, DC: U.S. Government Printing Office, April 1990), p. 21.
4 | Summary

more commercially price-competitive, because

the changes might conflict with government requirements or the government might demand similar savings.

❚ Current Capabilities Can Meet

National Security Requirements

The national security community currently requires a domestic capability to launch payloads

into orbit. The existing fleet of launch vehicles can

continue to meet this requirement for the foreseeable future. DOD’s major new development program, the Evolved Expendable Launch Vehicle

(EELV), is intended to reduce DOD space transportation costs, rather than ensure continued access to space. The EELV program attempts to

maximize cost savings by replacing DOD’s current stable of MLVs and heavy launch vehicles

(HLVs), procured from several vendors, with a

unified family of vehicles that share many common components and launch infrastructure and

are built by a single launch provider. One consequence of this consolidation, however, is that a

systemic failure in one vehicle might ground the

entire family of vehicles along with its national security payloads.

❚ Competing Interests Make

Common Strategy Difficult

While all members of the space transportation

technology and industrial base see a critical need

to reduce the cost of space transportation, their

differing interests make it difficult to agree on a

common space transportation development strategy. National security space transportation decisions are largely driven by the need to reduce

expensive HLV launch costs through the EELV

program. NASA hopes to replace its aging Space

Shuttle fleet with a new, low-cost reusable launch

vehicle (RLV) in the high MLV class that would

carry crews and cargo to and from the International Space Station. Most industry representatives

want to focus development dollars on a smaller,

reusable MLV, designed to recapture lost commercial market share worldwide, while small launch

vehicle (SLV) producers and selected space scientists want to maintain U.S. leadership in SLVs.

Recognizing and balancing these competing

interests is critical to the success of a truly national

space policy. The NSTP and its implementation

plans are careful to ensure that DOD and NASA

needs are met, but are less diligent about meeting

the needs of the private sector.

ISSUES FOR CONGRESS

The following section summarizes OTA’s discussion of issues that may be of interest to Congress

as it debates the future of U.S. space transportation. These issues are divided among the Clinton

Administration’s four fundamental objectives for

the NSTP and correspond directly to the main

body of the report.

❚ Fundamental Objective #1:

Space Transportation Funding

and the Division of Responsibilities

The NSTP attempts to set government spending

priorities for current and future space transportation systems by assigning specific roles and functions to designated departments and agencies. By

placing DOD in charge of expendable launch vehicle (ELV) development and NASA in charge of

continued Space Shuttle operation and RLV development, the Administration has taken a step

toward reducing conflicts and redundancies within government space transportation development

programs.

DOD currently spends roughly $1.6 billion

(about 84 percent) of its $1.9-billion space transportation budget on its HLV program, the Titan

IV, while NASA spends just over $4 billion per

year on Space Shuttle modifications and operations. Each organization has individually initiated

a set of programs to address the budgetary difficulties posed by these high costs (see table S-1).

An added dimension to the current effort to develop new space transportation systems is the role

of the private sector—both in decisionmaking and
The National Space Transportation Policy: Issues for Congress 5

Program Description Objective

DOD Existing ELV

upgrades

Evolved Expendable Launch

Vehicle (EELV)

NASA Space Shuttle

upgrades

Med-Lite

DC-XA

x-33

x-34

Supporting RLV

technology

demonstration

Upgrades to the current fleet of

launch systems and supporting

infrastructure,

A new, single family of MLVs and

HLVs based on an evolutionary

redesign of one or more existing

ELVs.

System Improvements and replacement of aging subsystems and components.

A launch system with capacity falling

between existing SLVs and MLVs.

Upgrades to the DC-X (a verticaltakeoff/vertical-landing, sub-scale, fully reusable, single-stage-to-orbit

technology demonstrator) with more

advanced components

A sub-scale advanced technology

demonstrator that will be, at a minimum, an autonomous, suborbital,

experimental, single-stage-to-orbit

RLV.

A partially reusable demonstration

vehicle for small payloads.

Development and validation of

propulsion, structural, and operations

technologies

Keep the existing ELV fleet flying safely and

reliably. Achieve significant, short-term payoffs

where possible,

Lower overall cost of access to space for

DOD, especially for heavy payloads, by

using common subsystems, components, and

Infrastructure,

Keep the Space Shuttle flying safely and

reliably,

Acquire a less expensive vehicle to serve

future planetary exploration mission requirements.

Demonstrate system operability by testing new

components and the Integrated system in a

realistic flight environment

By 2000, prove the concept of a fully reusable

single-stage-to-orbit space transportation system in the high MLV class by demonstrating

key technology, operations, and reliability in an

integrated flight vehicle, Encourage private

Investment in a commercial follow-on RLV by

reducing the technical risks of SSTO.

Investigate technologies that may be incorporated into future RLVs, Demonstrate streamlined management of joint Industry-government

development effort. Address commercial and

U.S. government need for an inexpensive SLV.

Progressively Integrate and flight-demonstrate

these technologies on three experimental test

vehicles (DC-XA, X-33, and X-34) in order to 1 )

mature technologies required for a next-generation launch system, 2) demonstrate the capability to achieve low development and

operational costs, and rapid launch turnarounds, and 3) reduce technical risk to encourage private Investment in the commercial

development and operation of next-generation

systems.

SOURCE Off Ice of Technology Assessment, 1995
6 | Summary

financing. This has important implications on the

nature of space transportation development programs and raises an entirely new set of considerations that must be taken into account when

evaluating development programs proposed by

both DOD and NASA.

ISSUE 1a: Divided responsibility and

interagency coordination

The NSTP divides the government’s primary

responsibilities for space transportation between

DOD and NASA. If existing space transportation

assets and those under development are to be managed in a manner conducive to all interests, this division of responsibility will increase the need for

both organizations to coordinate with one another,

as well as with the private sector.

That DOD and NASA will adequately account

for the interests of all parties is not a certainty, especially as funds available for space transportation diminish. Conflicts over how to approach the

development of new space transportation systems

will undoubtedly arise. At present, it appears that

resolution of these conflicts will be achieved via

negotiations between DOD and NASA on a caseby-case basis, possibly with some mediation by a

third party within the executive branch. Such negotiations may succeed in satisfying both DOD

and NASA, but could fail to account for the interests of all relevant parties, especially those in the

private sector.

Such negotiations could also lead to programmatic redundancies. In the absence of central authority or leadership, DOD and NASA may

discount potential redundancies and simply continue to promote those projects that best address

their own organizational requirements. As a result, hard space transportation policy choices may

go unmade.

Many analysts and policymakers have proposed a central authority as a way to better account

for all interests and avoid programmatic redundancies. In the Bush Administration, for example,

Vice President Quayle was given considerable authority over space transportation policy. It is not

clear, however, that the imposition of a central authority has remedied these problems in the past, or

that it will necessarily do so in the future. Given

the considerable bureaucratic and political weight

of DOD and NASA, competing organizational interests could potentially override the wishes of a

central authority. Furthermore, existing legal and

organizational obstacles may prevent the level of

interagency and private sector coordination

sought by a central authority.

The recent controversy between DOD and

NASA over NASA’s Med-Lite procurement may

be emblematic of this latter problem. This controversy illustrates how interagency coordination

can be precluded by current law, divergent interpretations of that law, and competing organizational interests. Therefore, although the NSTP

calls on DOD and NASA to “combine their [ELV]

requirements into single procurements when such

procurements would result in cost savings or are

otherwise advantageous to the government,”

achieving this level of interagency coordination

may prove extremely difficult.

ISSUE 1b: Potential conflicts and redundancies

DOD and NASA have collectively proposed a

sizable portfolio of new space transportation

technology development programs. While this

multitrack approach may reduce the overall risk of

pursuing new space transportation systems, it may

also lead to potential conflicts and redundancies

and higher overall costs. For example, development of a commercially competitive EELV by

DOD could undercut NASA’s effort to commercialize a follow-on to the X-33 by reducing the incentive for private investors to fund a technically

risky RLV.

If a low-cost RLV is developed, nonetheless, it

may be difficult for the EELV program to achieve

the long-term cost reduction targets set by DOD.

At a minimum, the RLV will compete with the

EELV for payloads, possibly attracting payloads

away from the EELV. Were this to occur, it would

reduce savings generated by the EELV program

by offsetting or potentially outweighing any gains

in production volume created by commonality

within the EELV family.
The National Space Transportation Policy: Issues for Congress | 7

As for NASA’s dual-track RLV development

strategy, the Agency believes that early X-34 test

flights could positively affect X-33 development

by steering it toward or away from certain technologies. Moreover, proponents note that the X-34

could generate significant benefits for the government, industry, and consumers of space-based services if its target of threefold cost reductions for

launching small payloads are achieved.

Critics, however, have suggested canceling the

X-34 program, arguing that it is geared toward developing an operational vehicle, not an experimental vehicle, and that its cancellation would

not affect the technological success of the X-33

program.

There are other potential conflicts and redundancies. In particular, DOD officials are concerned that the Med-Lite vehicle might eventually

compete with the EELV for medium payloads,

thereby threatening the ability of the EELV program to achieve maximum launch cost reductions

for DOD. In addition, NASA has proposed to

phase in any newly developed RLV follow-on to

the X-33 between 2005 and 2012 while continuing to fly the Space Shuttle in support of the International Space Station.

ISSUE 1c: HLVs drive the EELV program

DOD currently spends $1.6 billion of its

$1.9-billion space transportation budget on its

HLV program. Therefore, DOD has geared the

EELV program toward achieving significant HLV

cost reductions. DOD’s focus on HLV cost reductions, however, ignores the need of U.S. launch

providers to develop a commercially competitive

launch vehicle in the hotly contested MLV market. While the EELV program may reduce MLV

costs by as much as 10 percent, such a cost reduction would probably not help the EELV manufacturer recapture a significant portion of the global

market for launch services. And without an increased share of the available market, DOD will

receive little, if any, additional price reductions

generated by larger production volumes.

On the other hand, the European Space

Agency’s (ESA’s) development of the heavy-lift

Ariane 5 suggests that significant HLV cost reductions may be commercially attractive. It is unlikely, however, that the heavy-lift EELV will be

inexpensive enough to compete with the Ariane 5,

even if it achieves a 40 percent cost reduction over

the Titan IV.

ISSUE 1d: RLV development

NASA has pointed to its RLV development

strategy as one example of its “new way of doing

business.” Outside of NASA, however, some have

expressed concern over NASA’s proposed RLV

development strategy. In particular, industry officials are concerned that property and data rights

issues, as well as the uncertainty surrounding the

distribution of core RLV technology development

funds, may slow or prevent RLV commercialization.

Other analysts and policymakers believe the

X-33 program should be structured differently.

Some critics have argued that the X-33 is being

designed in the shadow cast by future requirements for the International Space Station, and that

it would be better if NASA opted to fund fully an

X-33 program that focuses solely on demonstrating single-stage-to-orbit (SSTO) technology.

NASA officials believe the X-33 does focus on

demonstrating SSTO technology, but contend that

industry investment is appropriate because the

successful development of a low-cost, commercial RLV will significantly improve the competitiveness of the U.S. space transportation industry,

and because government space budgets are declining.

Others critics of the X-33 program structure

have suggested a competitive fly-off among competing X-33 concepts, a strategy in which NASA

has expressed some interest. Proponents of a flyoff believe that it would decrease the possibility of

choosing the “wrong” technology and increase the

likelihood of retaining competition in the domestic launch vehicle industry. Critics note, however,

that a fly-off strategy would require larger nearterm budgets than currently planned.

Another concern surrounding RLV development has been the role of DOD payloads and
8 | Summary

whether or not they will be used during the early

testing of a commercial RLV. NASA and its commercial partners will need a sufficient number of

payloads to both prove the reliability of RLV

technology and attract potential investors. DOD

officials, however, do not wish to repeat their negative experiences with the Space Shuttle and are,

therefore, hesitant to contribute DOD payloads to

the RLV until it is proven. Unless NASA and its

industry partners can entice other payloads to fly

aboard an RLV, DOD’s reluctance could potentially drive up the price of launching payloads on the

RLV.

ISSUE 1e: SSTO?

SSTO development entails significant technical risks. NASA has proposed a phased SSTO

technology maturation program that periodically

pauses along the way to determine the prudence of

continuing. In the event the pursuit of SSTO is terminated at any point, NASA suggests that other

RLV concepts (e.g., two-stages-to-orbit or TSTO

systems) can then be considered and that new

RLV efforts could possibly draw on past SSTO

technology development efforts.

Some analysts and policymakers have taken issue with this approach, arguing that it grants too

much upfront attention to the SSTO concept.

They note that pursuing another RLV concept

such as TSTO after investing significant resources

in SSTO risks a suboptimal result that does not

achieve the desired level of cost reductions.

Also, there has been some concern that NASA

has not adequately defined its criteria for judging

the success of the X-33 program. NASA, in conjunction with the Office of Science and Technology Policy and the Office of Management and

Budget, has established criteria to support decisions in 1996 and 2000. Nevertheless, some analysts and policymakers are concerned that these

criteria are insufficient and suggest that NASA

provide Congress with a set of specific intermediate criteria for evaluating the success of the X-33

program on an annual basis. Such a requirement

may, however, slow the development process.

Finally, although NASA has claimed that it

must pursue block upgrades to the Space Shuttle if

the government or industry decides in 2000 to forgo development of a commercial RLV follow-on

to the X-33, there are other alternatives. For example, NASA could decide to extend SSTO development efforts, initiate TSTO development efforts,

support development of a commercial TSTO, pursue block upgrades to the Space Shuttle, commission a new space transportation study, or

reconsider alternative options already examined

in past studies. Which alternative NASA chooses

in coordination with its industry partners will depend on the progress made during the X-33 program, as well as the commercial prospects of an

RLV.

ISSUE 1f: Space Shuttle—beyond 2000

As noted, NASA may decide in 2000 to pursue

block upgrades to the Space Shuttle in order to ensure safe operations until 2020. Discussions with

both NASA and industry officials reveal, however, that little planning for this possibility and

little investigation into whether or not the industrial base will be able to support these upgrades are

currently being done by NASA.

In its implementation plan, NASA has proposed replacing the existing solid rocket boosters

(SRBs) with Liquid Fly Back Boosters (LFBBs)

between 2007 and 2010. NASA claims that

LFBBs would increase Shuttle safety, payload

performance, and launch probability, and would

also reduce annual Shuttle operating costs

compared with SRBs. The implementation plan

does not, however, outline any contingencies to

address the significant impact that replacing

SRBs with LFBBs might have on the solid rocket

motor industry and the nation’s continued ability

to produce long-range ballistic missiles.

Finally, there remains the prospect of another

Space Shuttle accident that results in the loss of an
The National Space Transportation Policy: Issues for Congress | 9

Orbiter. Such a loss would have major repercussions for both the Space Shuttle and X-33 programs.

❚ Fundamental Objective #2:

U.S. Use of Foreign Launch

Systems and Components

The NSTP encourages federal agencies to take advantage of foreign technologies in U.S. space

transportation systems. It also limits the flight of

U.S. government payloads to U.S. space transportation systems, in effect removing U.S. government payloads from the available international

marketplace for launch services. In this, it follows

past policy. In addition, the policy allows the

launch of government payloads on foreign launch

vehicles if they are made available on a no-exchange-of-funds basis and if they support cooperative scientific programs.

ISSUE 2a: The use of foreign launch technology

The use of foreign technologies in U.S. space

transportation systems may improve the efficiencies of U.S. launch systems, assist U.S. access to

space, and improve U.S. competitiveness in the

international space transportation market. With

the important exception of the Space Shuttle and

its main engines, the United States has done relatively little launch system R&D since the 1960s.

The use of foreign technologies in U.S. space

transportation systems could reduce the amount of

R&D now required of U.S. firms in efforts to improve the performance and reduce the costs of

U.S. systems. Russian launch vehicles and related

systems (particularly propulsion) have significant

potential for commercial use. Russian hardware

and space transportation skills can fill important

gaps in U.S. capabilities. The United States might

benefit from European space transportation

technologies as well.

On the other hand, U.S. national security interests demand that the United States maintain a viable national launch capability and technology

base. The use of foreign technologies might reduce the incentives for maintaining the domestic

R&D that underlies that technology base.

The simple purchase of either vehicles or

launch services appears to be less attractive than

joint ventures, co-production of vehicles and/or

systems, and analogous business arrangements, as

ways of harmonizing these differing interests. For

example, Aerojet and Pratt and Whitney, both

U.S. manufacturers of liquid-fueled engines, are

exploring ways in which to capitalize on the use of

Russian liquid-fueled engines in U.S. vehicles.6

U.S. launch operations experts have expressed interest in Russian and European methods to reduce

operations costs. In its implementation plan, DOD

has expressed openness to the use of foreign

technologies in U.S. launch vehicles, but only under conditions that would protect the supply of

critical components should foreign sources become unavailable. Each proposed technology insertion would be judged on a case-by-case basis.

Methods to protect component supply, such as

stockpiling critical components or duplicating

production lines in the United States would likely

result in higher costs to the government, but might

ensure that the United States will be able to fulfill

its space-related national security needs in times

of crisis. Officials of Arianespace have offered to

sell the Ariane 5, or license rights to build it, to service U.S. HLV needs. Such an arrangement could

substantially reduce the costs of building and operating a U.S. HLV.7 However, building a vehicle

under license might inhibit the development of

new U.S. technology that could be used to improve the U.S. MLV fleet.

Experts disagree over the extent to which cooperation with the Russian government and industry

on space projects would affect U.S. competitive6 Michael A. Dornheim, “Aerojet Imports Trud NK-33 Rocket Engine,” Aviation Week and Space Technology, Oct. 25, 1993, p. 29; and

Jeffrey M. Lenorovitz, “Pratt Signs Accord with NPO Energomash,” Aviation Week and Space Technology, Nov. 2, 1992, pp. 25-26.

7 Ben Ionatta and Cheri Privor, “Arianespace’s EELV Proposal Finds Little Favor,” Space News, Apr. 10, 1995, p. 3.
10 | Summary

ness and the retention of U.S. jobs. Some industry

officials, for example, express concern that the

United States could lose employment in the

launch services industry if Russian technology

were used extensively in U.S. launch systems.

Others have argued that skillful incorporation of

Russian technologies in U.S. systems could save

taxpayer dollars in publicly funded programs like

the International Space Station and boost U.S. international competitiveness in commercial programs. Greater competitiveness might generate

new jobs in space transportation and space-related

fields, partially or fully offsetting job losses due to

the use of foreign technology.

Second-, third-, and fourth-tier launch system

equipment suppliers appear to be most vulnerable

to the extensive use of Russian technology in U.S.

launch systems, especially those that now supply

subsystems and parts for U.S. propulsion systems.

Loss of critical skills in the lower tiers of the space

transportation industrial base may, in some

instances, adversely affect the nation’s ability to

maintain assured domestic access to space and reconstitute production of long-range ballistic missiles. Nevertheless, reducing the cost of access to

space may well lead to more aerospace jobs as a

whole.

Some observers worry that given the precarious

state of the Russian economy and government,

Russian equipment suppliers may not be able to

sustain their ability to produce space goods and

services.8 Russian firms, recently privatized and

undergoing massive restructuring, have experienced difficulties in moving to a demand-driven,

market-oriented economy. Concern over the future ability of Russian firms to perform could be

eased, in part, if Russian firms successfully demonstrate that they can produce goods and services

on time and within the terms of cooperative contracts with the U.S. government and industry. The

existing cooperative activities between NASA

and the Russian Space Agency, especially with regard to construction and operation of the International Space Station, will provide considerable

insight into the long-term viability of the Russian

space transportation industry.9

The NSTP also allows the use of foreign launch

systems to carry U.S. instruments and spacecraft

on a no-exchange-of-funds basis when supporting

cooperative programs with other countries. Examples of such cooperative use of non-U.S.

launchers include the shipment of U.S. equipment

to the Russian Mir space station aboard a Russian

Spektr spacecraft launched on a Russian Proton

launch vehicle in May 1995, and the earlier launch

of the TOPEX/Poseidon spacecraft on an Ariane 4

in 1992. Such use can sharply reduce U.S. costs

for science programs and may facilitate some

projects that might otherwise not be flown, but

could deprive U.S. launch providers of a few

launch opportunities. The launching country

gains by receiving access to data generated by the

U.S.-built, or jointly built, instrument or spacecraft.

ISSUE 2b: International trade in launch services

In keeping with broader U.S. international

trade principles, the NSTP seeks to achieve free

and fair trade in launch services. However, as a result of the close connections between defense and

launch system technologies, and the desire to

achieve or retain autonomy in launch services, all

spacefaring nations subsidize their launch services industry to some extent. Because the economic structure of each country is different, it is

difficult to determine the true extent of the subsidy

each extends to its launch industry. In addition,

each spacefaring country generally reserves government payloads for its own launch systems. For

example, in keeping with past U.S. policies, the

NSTP requires that U.S. government payloads fly

8 Judyth L. Twigg, “The Russian Space Program: What Lies Ahead?” Space Policy 10(1):19-31, 1994.

9 U.S. Congress, Office of Technology Assessment, U.S.-Russian Cooperation in Space, OTA-ISS-618 (Washington, DC: U.S. Government Printing Office, April 1995).
The National Space Transportation Policy: Issues for Congress | 11

on U.S. space transportation systems, except for

well-defined cooperative programs.

Trade agreements with China and Russia,

which are intended to manage the international

market for launch services and reduce the impact

of low Chinese and Russian prices on U.S. launch

service companies, may also reduce international

competition and raise the overall price of launch

services. The United States first faced competition from non-U.S. launch service entities after

ESA developed the Ariane launch system in the

late 1970s. Specifically designed to carry payloads to geosynchronous Earth orbit (GEO), and

marketed by the European corporation Arianespace, the Ariane system was designed and built

on the premise that it would capture a significant

share of the available world market in commercial

payload launch services. Since the loss of the

Space Shuttle Challenger in January 1986, Arianespace has garnered a dominant share of the international commercial payload market.10

During the late 1980s, China and Russia (then

the Soviet Union) began to offer launch services

on the international market, increasing the competitive pressure on the U.S. commercial launch

services industry. Faced with growing competition in launch services, increasing concern that

launch systems built in non-market economies

would unfairly compete with U.S. launch systems, and pressure from U.S. satellite manufacturers to allow the launch of U.S.-built satellites on

Chinese and Russian launch systems, the United

States sought and obtained launch service agreements with China and Russia.

In addition to setting limits on the total number

of Chinese and Russian launches within a specified period, the agreements attempt to establish

rules by which the market will operate. The

United States is able to exert influence over trade

in launch services because it sells more satellites

on the international market than any other country.

Russia and China have signed trade agreements

because the United States could severely restrict

the international sale of U.S.-manufactured satellites launched on other countries’ vehicles. The

Office of the U.S. Trade Representative (USTR)is

the U.S. agent in negotiating these agreements.

U.S. satellite manufacturers have begun to

pressure the USTR to relax or do away with the existing restrictions on the number of Russian commercial launches allowed between now and the

end of the century. They have been joined by U.S.

partners of Russian launch companies, which

would profit from relaxed restrictions. Existing

and planned partnerships between U.S. and Russian companies are likely to complicate U.S. considerations of these agreements, making it much

more difficult to assess overall benefits and drawbacks of changes in the agreements.11 Relaxation

of the U.S.-Russia agreement would make the

launch services market more competitive. It might

also undercut the ability of U.S. launch service

providers to compete and indirectly raise the costs

of space transportation services to the federal government.

Arianespace, which now commands the largest

share of the commercial launch services market,

may be more affected by a relaxation of the U.S.-

Russia launch services agreement than U.S. firms.

Although a relaxation of the agreement would increase the competitive pressures on U.S. launch

companies not now associated with Russian companies (such as McDonnell Douglas, which markets the Delta MLV, and Orbital Sciences, which

markets the Pegasus and Taurus SLVs), those companies launch payloads for the U.S. government

and therefore would retain a strong core market for

launch services. Lockheed Martin, which markets

the Atlas ELV, also markets the Russian Proton

10 Prior to the loss of Challenger, NASA actively marketed commercial launch services on the government-owned and -operated Space

Shuttle. In August 1986, President Reagan issued a policy directive limiting the use of the Shuttle to payloads that required the unique capabilities of the Shuttle.

11 Craig Covault, “Russian Proton Challenges Ariane,” Aviation Week and Space Technology, Apr. 24, 1995, pp. 40-43.
12 | Summary

through LKE International. Lockheed Martin intends to use the two vehicles to back each other up,

should one be temporarily removed from service

to correct a system failure.

ISSUE 2c: Technology transfer and foreign

policy objectives

Cooperative ventures risk transferring domestic technologies that could be used to strengthen

a competitor’s position in the international aerospace market and to assist belligerent countries in

developing the means of delivering weapons of

mass destruction (nuclear, chemical, and biological weapons). Experts disagree over how effective

means to prevent such transfer can really be, but

present policy clearly moves toward loosening

trade restrictions. For example, many items having to do with satellites and satellite technology

have been moved from the U.S. Munitions List

onto the Commerce Control List, effectively making it easier to trade in those items. Further loosening of restrictions could result in improved U.S.

trade in space transportation technologies. On the

other hand, the United States must also remain

sensitive to the potential proliferation of missilerelated technologies.12

U.S. cooperative agreements with other countries must conform with related U.S. obligations

and treaties, such as technology transfer policies

and the Missile Technology Control Regime

(MTCR), which was developed in 1987 to limit

proliferation of long-range delivery systems capable of delivering weapons of mass destruction.

Admittance to the U.S. satellite market has become a tool in encouraging adherence by China,

Russia, and Ukraine to the MTCR. Russia and

Ukraine have agreed to join the MTCR. The Clinton Administration believes that helping the Russian civilian space program stay as healthy as

possible and capable of retaining its experts will

reduce global proliferation of missile technology.

China has declined to join the MTCR, but has

agreed to abide by its restrictions. However, the

United States has raised several issues of noncompliance with Chinese officials. On October 4,

1994, the United States and China agreed to “work

together to promote missile nonproliferation

through a step-by-step approach to resolve differences over missile exports.”13 The United States

could levy sanctions against the Chinese launch

company, including prohibition of satellite

launches, if the United States found that the entity

was selling missile-related technology to a country that did not previously possess such technology.

❚ Fundamental Objective #3:

The Use of Excess Ballistic Missiles

The NSTP reserves use of excess ballistic missiles

for government payloads only, and only when

their use results in cost savings to the government

over the use of commercial launch services. Excess ballistic missiles can be used by the government for engineering tests and suborbital flights,

but orbital flights that might compete with private

launch services must satisfy tough conditions before they are allowed.

Some 650 long-range ballistic missiles will be

made available by U.S. adherence to the first Strategic Arms Reduction Talks treaty alone. These

missiles, and others to be retired under other treaties, could be used to launch government and commercial satellites into orbit. Even if the missiles

themselves are not used, parts of the missiles and

the tooling for building those parts could be useful

to industry.

12 U.S. Congress, Office of Technology Assessment, Export Controls and Nonproliferation Policy, OTA-ISS-596 (Washington, DC: U.S.

Government Printing Office, May 1994).

13 U.S. Department of State, Office of the Spokesman, “Joint United States-People’s Republic of China Statement on Missile Proliferation,”

Fact Sheet, Oct. 4, 1994.
The National Space Transportation Policy: Issues for Congress | 13

ISSUE 3a: Unfair competition or market

creation?

The Clinton Administration’s policy continues

the Bush Administration’s policy of tightly restricting the use of excess long-range ballistic

missiles. Some analysts argue that making these

missiles more widely available for use as space

launch systems would not only save much needed

government resources, but could also demonstrate

the viability of new markets for SLVs. Others argue, however, that although such a scheme might

save the taxpayers money in the short term, it

might also drive commercial SLV vendors from

the market, leaving the U.S. industry with no SLV

producers in the long term.

There is a lack of data on how much it would

cost to convert surplus ballistic missiles for new

payloads, how useful these missiles might be for

more delicate payloads, and how SLV providers

might maintain their ability to develop new systems should converted ballistic missiles be priced

below current SLVs. Those questions must be answered before the debate on how to use excess ballistic missiles can be resolved.

ISSUE 3b: Russian excess ballistic missiles

In contrast to American policy regarding surplus missiles assets, former Soviet Union firms

are promoting a number of converted intercontinental ballistic missiles (ICBMs) and submarinelaunched ballistic missiles for an assortment of

commercial duties. Two already on the market are

the Start-1 and the Rokot, derived from the SS-25

and SS-19 ICBMs, respectively.

Russia’s use of its excess ballistic missiles as

SLVs has not yet proven to be a viable commercial

strategy. If Russia is successful in marketing its

surplus ballistic missiles, however, U.S. SLV

launch service providers will face international

competition from Russian excess ballistic missiles, while the U.S. government will receive none

of the benefits of selling its stockpiles.

❚ Fundamental Objective #4:

The Private Sector Role in

Space Transportation Decisionmaking

The private sector is expected to play a crucial role

in accomplishing many of the space transportation

goals set forth in the NSTP and the supporting implementation plans. It is, for example, designated

to be a source of: 1) significant funding in a fiscally constrained budget environment; 2) expertise to

manage space launch activities more efficiently;

and 3) innovative ideas and products in the design

and development of future space transportation

systems. Placing greater reliance on the private

sector is in keeping with general trends that emphasize reducing government’s responsibilities in

areas in which the private sector might reasonably

be expected to provide the desired goods and services.

But the private sector is not a monolithic entity

with a single coherent view of space transportation needs or the goals outlined in the NSTP.

While the principal prime contractors for space

transportation are in general agreement on many

aspects of the Clinton Administration’s space

transportation policy, they have different views

about the implications of particular elements of

policy. Additionally, some subtier firms are skeptical about the potential for the government to

achieve the goals of the NSTP.

The willingness and, indeed, the ability of private sector firms to fulfill the roles suggested in

the national space transportation planning documents depend in many instances on factors that

possess a great deal of uncertainty and are difficult

to estimate accurately (e.g., the size and character

of the future commercial space transportation

market) and that are highly dependent on actions

by the government (e.g., the nature of any government-industry partnership). These facts raise several issues that Congress might wish to consider in

evaluating the role that the private sector plays in

implementing the Administration’s policy.
14 | Summary

ISSUE 4a: Will the estimated market support

policy goals?

In the absence of a major increase in the government’s space transportation budget, private sector

investment is viewed as essential for the development and production of an RLV follow-on to the

X-33 possessing the characteristics desired by

NASA. But any private sector investment depends on the potential for sufficient return on that

investment to make it attractive. The assessment

of the size, character, availability, and relationship

(potential overlap) of future space transportation

markets is therefore critical to industry’s attitude

toward new launch vehicle development programs and government cost-sharing arrangements.

The current industry assessment of the space

transportation market appears to be that the potential market for commercial payloads in the MLV

class is by itself insufficient to entice enough private sector investment to build a future RLV capable of meeting NASA’s needs.

Current analysis indicates that the government

is likely to continue to be the largest single market

for U.S. space transportation for at least the next

10 to 15 years. Expansion of the commercial market in areas such as communications and earth observation is probable, but the size and rapidity of

such expansion is uncertain. A number of potential new markets, such as space manufacturing and

tourism, are on the horizon, but the size and speed

of development of these markets are uncertain.

This uncertainty about future markets inhibits private sector investment.

Industry analysis indicates that the potential

commercial market for small payloads may be

sufficient to attract enough private sector investment to develop vehicles to meet both commercial

and government needs for small payloads. The

willingness of firms to invest in the X-34 program

supports this conclusion.

U.S. industry sees little commercial need for

heavy lift and views this as principally a government market. The private sector is unlikely to put

much of its own funds in this area without strong

government support. Some observers note, however, that Arianespace plans to replace its medium-lift Ariane 4 with the heavy-lift Ariane 5.

Such assessments imply that if the government

desires an RLV replacement for the Space Shuttle,

it will have to provide a significant amount of the

funding—either through a direct development

and procurement process or through some form of

guaranteed business.

ISSUE 4b: The nature of the governmentindustry space transportation partnership

The NSTP and implementation plans stress the

need for closer government-industry cooperation—what NASA terms a partnership. Government planners believe that a more important role

for industry in decisionmaking is essential if industry is going to be asked to help finance much

of the production of a future medium-to-heavy-lift

RLV. There are, however, a number of questions

about the nature of any new government-industry

relationship and the possible implications of closer ties between the government and any particular

firm.

There appear to be a number of advantages to

closer cooperation between government and industry. One is a potentially more efficient and less

costly management structure. Another benefit is

more effective use of the nation’s public and private sector space transportation industry’s technical expertise and facilities. But closer cooperation

raises serious questions about who decides what

research topics to pursue, which efforts will be

funded, who will own the technical data rights resulting from this partnership, and how these rights

might be transferred if such transfer appears to

benefit the government. These questions and

many others will have to be addressed if a partnership is to be successful.

Each government organization appears to have

different expectations for the government-industry relationship. The designated advocates of increased commercial participation are the DOT and

DOC, but with little money and small staffs, these

two Departments are likely to play a limited role.

NASA needs private sector investment to build a

new RLV. It is, therefore, interested in policies
The National Space Transportation Policy: Issues for Congress | 15

that will provide support for industry, as well as

incentives for industry to invest. It has streamlined its program management, changed funding

rules, and made its research staff available to industry.

DOD, in contrast to NASA, does not have the

same perceived need for a new space launch vehicle to perform its missions. Its current capabilities are more costly and less flexible than desired,

but they perform well enough to meet the Department’s fundamental mission requirements. DOD

therefore appears less concerned about developing a close partnership with industry than is

NASA.

ISSUE 4c: Risk management—striking the

proper balance

Uncertainties about the future space transportation markets increase the need for private sector

firms to protect any investment against losses.

With estimates on the cost of development and

production of a future medium-to-heavy-lift RLV

ranging from $6 billion to $20 billion, many in industry are supporting the concept of anchor tenancy (e.g., committing the federal government to

purchase an agreed upon amount of launch services from commercial firms) as a means of encouraging industry to invest in RLV development

and production. By providing a guaranteed market for a specific period, anchor tenancy would reduce investment risk for the private sector during

the formation of a more robust commercial market. A recent example of a commercial anchor tenancy is McDonnell Douglas’ agreement to

develop a Delta III ELV in exchange for a commitment by Hughes Telecommunications and Space

Co. to purchase 10 future launches.

There are a number of issues that must be addressed. One is that a program based on anchor

tenancy might be considered a “lease-purchase”

arrangement. This could make the arrangement

problematic because current government accounting rules require that such an arrangement be recorded in the budget as if the government

purchases the assets outright. The discounted value of the expected costs of space launch services

would be recorded as budget authority when the

contract was signed. Outlays would be recorded

(scored) in proportion to the construction activity

on the launchers, as if the government were building the system.

Other observers argue that there is a need for

new thinking in anchor tenancy, particularly when

the government is slated to be less involved in the

development of goods and services that might

come from the private sector. They argue that anchor tenancy might be successfully used if the situation is one in which there is little technological

risk, the contractor is taking the risk of performance, the contractor is financing the project, and

the contractor has design control. Competitive

bidding to help establish the market assessment of

risk is also important.

Several industry representatives have argued

that the basis for an anchor tenancy arrangement

needs to be established by April 1996, when industry must begin to commit significant funds toward the development of the X-33 technology

demonstrator. Without this commitment, industry

may still participate in the X-33 program, but will

probably reduce its share of the investment.

Industry also argues that termination liability

(e.g., requiring the government to compensate industry should the government cancel a launch

contract for its own convenience) is essential for

reducing the risk to the private sector of entering

into a long-term launch service agreement with

the government. Skeptics have argued that such

arrangements amount to providing a “risk-free”

environment for U.S. business. Still, termination

liability usually does not provide for loss of future

revenue, only for money already spent. Thus firms

continue to risk the loss of future returns on the

money invested and bear the opportunity cost of

not having invested the money elsewhere, even if

compensation for funds already spent is guaranteed.

ISSUE 4d: Infrastructure

Many analysts argue that significant launch

cost savings might be realized through changes in

launch operations and infrastructure. Some have
16 | Summary

suggested building new, more generic launch facilities. Many analysts indicate that important

launch cost reductions are unlikely unless launch

operations engineers and facility managers have a

greater role in the design of future launch systems.14 Efficient launch operations are key competitive advantages for both Arianespace and

Russia. A future RLV may have a completely different launch infrastructure than that of ELVs.

Because of the importance of the impact of

launch services and infrastructure to long-term

government costs and commercial competitiveness, Congress may wish to pay particular attention to activities in these often overlooked areas.

Questions of how future space transportation systems will operate and how such operations will

save money in comparison with current operations might be key oversight issues.

ISSUE 4e: Accommodating commercial needs

Many in industry express concern over the extent to which development of new space transportation systems will be influenced by rigid

government space launch and payload requirements rather than by accommodation of commercial space transportation competitiveness

considerations. For example, although NASA has

restructured its program management and made a

number of procedural changes that can aid development, its program may still be best structured to

produce an RLV that will serve the U.S. government’s space transportation needs first—rather

than producing a commercially viable vehicle that

will also meet government needs.

Part of the problem is the NASA requirement to

carry crews to and from the International Space

Station. Another part of the problem is the inability to define what might be commercially viable.

Some industry representatives have noted, for example, the need to design commercial vehicles to

serve the GEO market. This might result in very

different designs from those optimized for

NASA’s International Space Station mission.

These issues will need to be resolved if the programs are to meet their objectives.

❚ Additional Issues for Congress

Two important issues were not addressed by either

the NSTP or its implementation plans, but warrant

consideration by Congress. These are the preservation of long-range ballistic missile capabilities and the status of the lower tiers of the space

transportation technology and industrial base.

ISSUE 5: Preservation of long-range ballistic

missile capabilities

The U.S. Navy plans to procure the last longrange ballistic missile in the strategic nuclear arsenal in 2005. No plans currently exist to produce

any additional missiles after that time. Without

producing missiles, however, the United States’

ability and capacity to design and produce longrange ballistic missiles will deteriorate unless significant efforts are made to preserve them.

Both the U.S. Air Force and the Navy have

preservation programs underway, but they are

limited to a small set of critical components. Solid

rocket motor technology may be particularly

threatened. At present, all U.S. long-range ballistic missiles use solid rocket motors. If both the

EELV and RLV designs use only liquid-fueled engines, and if liquid-fueled boosters replace the

Space Shuttle’s solid rocket motors, the market

for large solid rocket motors in the United States

may all but disappear.

ISSUE 6: The invisible lower industrial tiers

Current policy focuses on the large prime contractors, but there is more to the U.S. space transportation industry than just those firms. Hundreds

of smaller firms provide subsystems and components, to the extent that about 50 cents of every

procurement dollar flows down to these lower tiers of the industry.

14 See U.S. Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTA-TMISC-28 (Washington, DC: U.S. Government Printing Office, September 1988).
The National Space Transportation Policy: Issues for Congress | 17

OTA found that many of the lower-tier firms

are pessimistic about their chances of survival.

They believe that the government is not committed to the actual completion of new launch vehicles, and that research and development money

will not find its way past the prime contractors.

Congress may wish to consider what the

chances are that some of these lower-tier firms

might be forced out of business, and what effect

that is likely to have on the United States’ ability

to compete in the international market. If all the

companies that produce a particular component or

material critical to the space transportation industry go out of business because of lack of funds

from the upper-tier firms, it could be very difficult

and expensive to regain the capability to produce

that component again.

CRITICAL DECISION POINTS

Each of the space transportation policy implementation plans was accompanied by an idealized

timeline. While each department and agency was

careful to say that the timelines were not set in

stone, they do provide policymakers with some

sense of the important decisions that await them

and some of the hidden problems they may face in

a few short years. Table S-2 lists some of the more

critical decision points and their potential implications. Changes in political leadership, new

space program goals, stretched out or terminated

programs, unforeseen technical difficulties, and

launch failures are just a few events that could dramatically alter the timing of these important decisions.
18 Summary

Date Decision or event Possible implications

1995

1996

1998

1999

2000

2000+

2001

2001/2

2005

2005

2005

2012

Corporate investment strategies

for X-33 and X-34 development

programs must be formulated

Down-selection for Phase II of

X-33 single-stage-to-orbit

demonstration vehicle

Down-selection to one EELV

producer

X-34 RLV demonstration vehicle

fight tests are completed

Government decision required to

pursue either a manned RLV variant or major block upgrades to

the Space Shuttle

Corporate decision to build a

commercial RLV

Medium EELV becomes

operational

Trade agreements with Russia/

China expire

Heavy EELV becomes operational

Limited RLV fights commence

Last of the current generation of

long-range ballistic missiles IS

produced

International Space Station IS

scheduled to cease operation just

as a manned RLV replaces the

Space Shuttle or block upgrades

of the Shuttle commence

Corporate evaluation that government programs are unlikely to transpire as

advertised could result in inadequate corporate Investment, creating a selffulfilling prophesy.

Industry participation in Phase II may require early government commitment

to and legislative action on cost and risk sharing on the follow-on operational

RLV. This is four years before NASA’s specified 2000 decision on Space

Shuttle upgrades (see below). Contract winner has an advantage for production of follow-on RLV unless other companies invest in their own competitive

vehicles or the contract winner fails to meet program performance and cost

objectives

Contract winner will develop family of medium-to-heavy vehicles for DOD,

perhaps consolidating U.S. ELV business to one firm Med-Lite winner, however, may compete at lower payload range

A successful X-34 producer could potentially dominate the SLV market if significant per flight price reductions are achieved, U.S. government costs for

SLVs drops New markets may develop for LEO Iight satellites if X-34 producer drastically lowers per flight prices

A premature decision to develop a manned RLV could result in a less-thanrevolutionary vehicle Spending on major upgrades to the Shuttle could indefinitely postpone RLV development to the detriment of government launch expenditures and U.S. competitiveness in the commercial launch market

Size of government market and government commitment to RLV producer

may lead producer to focus exclusively on government needs, at the expense

of capturing and creating commercial markets Alternately, RLV producer

may choose to construct two vehicles or a single vehicle with optional strapon boosters to accommodate heavy government payloads and medium commercial payloads.

A maximum 10-percent cost savings from new MLV improves U.S. position in

the commercial market, but not enough to hold off Russian and Chinese competition, To ensure success of its EELV program, DOD may avoid early participation on RLV flights, Iimiting the customer base for potential RLV investors

Unless new agreements are negotiated, U S launch providers find themselves at a severe pricing disadvantage. Without an RLV or greater than expected savings from a medium EELV, launch providers may find themselves

unable to compete in the commercial market

A maximum 40-percent savings on new HLV results in substantial cost savings to the government Potential for the development of a multipayload version, like the Ariane 5, for limited, expensive commercial use

RLV begins direct competition for flights with the Space Shuttle, the EELV

family, and other ELVs.

Lack of development or production programs may result in loss of ability to

make new ballistic missiles without significant startup costs and delays Move

of industry to all Iiquid-fueled boosters on the Space Shuttle, EELV, and future

RLVs would all but eliminate domestic production of large solid rocket motors

One of the few planning goals identified for the RLV IS its ability to deliver

passengers and cargo to the space station orbit. Life extension of the lnternational Space Station seems Iikely, especially if operations are passed to a

commercial venture

SOURCE Off Ice of Technology Assessment, 1995
he National

Space Transportation

Policy: Issues

for Congress

INTRODUCTION

or nearly four decades, the United States has relied on its

national space transportation technology and industrial

base to support a multitude of defense, intelligence, civil,1

and commercial needs. This base has produced the rockets to explore the planets and land the first man on the moon;

assure the nation’s strategic nuclear deterrent; and supply policymakers with intelligence, geodesy, weather, navigation, and other

important information. It has generated new technologies, supported new space-based businesses, and helped the U.S. balance

of trade.

This vital industry, however, is currently being buffeted by

events and trends that are forcing its major restructuring. The end

of the Cold War has reduced the demand for defense and intelligence space launches and halted new development of long-range

ballistic missiles. Federal budget deficit and debt concerns have

put additional pressure on government departments and agencies

to be more efficient and to reduce the number and cost of civil and

national security space launches. And a debate has begun within

the executive branch and Congress over the proper balance between public and private investment in space transportation.

In the commercial market, the aging domestic fleet of expendable launch vehicles (ELVs) is facing stiff global competition

from the commercially focused European Ariane rocket, as well

as from Russian and Chinese ELVs, which benefit from hidden

1 Government other than national security.

| 19
20 Office of Technology Assessment

The Altas MLV is marketed by Lockheed Martin and serves

the upper end of the medium-sized payload market.

The Delta MLV is marketed by McDonnell Douglas and serves

the Iower end Of the medium-sized payload market.

real costs and low-wage labor forces.2 Meanwhile, entrepreneurs in the telecommunication,

navigation, and remote sensing satellite industries

project a moderate increase in demand for small

and medium launch vehicles (SLVs and MLVs) to

support their business ventures. Other potential

space markets remain dormant, in part because of

the high cost of access to space.

In response to these challenges, the Clinton Administration released anew National Space Transportation Policy (NSTP) on August 5,1994.3 The

NSTP established the President’s strategic vision

for space transportation and directed the Department of Defense (DOD), the National Aeronautics

and Space Administration (NASA), and the Departments of Transportation (DOT) and Commerce (DOC) to prepare detailed implementation

plans supporting the new policy within 90 days.

2 The mostly reuseable Space Shuttle carried some commercial payloads before the Challenger accident in 1986. All other currently operational space transportation systems are ELVs. This report does not address suborbital launch systems or transportation systems designed primarily to move payload or passengers between or beyond Earth orbits. 3

Presidential Decision Directive NSTC-4. Most, if not all, of the text of this internal policy was released publicly in The White House, Office of

Science and Technology Policy. “National Space Transportation Policy,’’ Fact Sheet, Washington, DC, Aug.5, 1994. See appendix for complete

text of the fact sheet.
The National Space Transportation Policy: Issues for Congress 21

National

Missions and activities security Civil Commercial

Intelligence collection and arms

control monitoring Current N/A Potential

Human space flight and life sciences Potential Current Potential

Telecommunications and entertainment Current Current Current

Weather observation Current Current Current

Navigation Current N/A Potential

Environmental monitoring Potential Current Current

Geodesy Current Current Current

Planetary exploration N/A Current Potential

Photogrammetry Current Current Current

Space sciences and astrophysics Current Current Potential

Space manufacturing and materials science Potential Current Potential

Hazardous waste disposal Potential Potential Potential

SOURCE. Off Ice of Technology Assessment, 1995

This report examines the policy and supporting

implementation plans and raises issues that Congress may wish to consider as it debates the future

of U.S. space transportation. It is structured

around the four fundamental objectives identified

by the Administration when it announced its new

policy.4

❚ The U.S. Space Transportation

Technology and Industrial Base

The U.S. space transportation technology and industrial base is the vast and complex collection of

people, institutions, technological know-how,

and facilities needed to conceptualize, design, develop, test, produce, operate, and maintain space

transportation systems and their supporting infrastructure. 5 This base spans government, academia, and industry from the largest prime

contractor to the smallest commodity supplier.

This is not only a prestigious industry involving many high-skilled jobs, but also one entwined

with other high-technology industries that depend

on access to space or technologies developed for

space.

6 It is vital to many intelligence and defense

missions. (See table 1.)

The U.S. space transportation technology and

industrial base provides launch services to government and commercial customers, as well as

long-range ballistic missiles to DOD. Historically, the U.S. government has been, and still is, the

largest customer for U.S. launch services, buying

launches for defense, intelligence, and civil pur4 The White House, Office of Science and Technology Policy, “Statement on National Space Transportation Policy,” Washington, DC, Aug.

5, 1994. See appendix for complete text of the statement.

5 As a part of its current assessment. OTA will publish a detailed report on the long-term prospects for the space transportation technology

and industrial base in 1996.

6 Space transportation services accounted for less than 10 percent of the $6.5 billion commercial space market in 1994. See U.S. Department

of Transportation and U.S. Department of Commerce, “National Space Transportation Policy Implementation Plan,” submitted to the White

House Nov. 7, 1994, but not yet validated, p. 4.
22 Office of Technology Assessment

poses. In 1994, it procured about 85 percent of all

domestic space launches to meet national security

or scientific objectives. About half of these

launches involved the most expensive U.S. space

transportation systems: the Titan IV and the Space

Shuttle.7

The large government role in the U.S. space

transportation technology and industrial base has

had a major effect on its character and culture.

Like many defense-oriented industries, the space

transportation industry has operated in a business

environment significantly different from that of

8 

purely commercial businesses. The regulations

and controls that have been a part of doing business with the government have contributed to the

slowness of the U.S. response to growing international competition in the commercial market.

Moreover, the relatively small number of

launches worldwide open to international commercial competition has been less attractive than

the sizable U.S. government market.

Some analysts predict the deployment of a new

generation of smaller satellites, forming lowEarth-orbit (LEO) constellations that will enable

voice, video, data, and multimedia services

around the globe. They believe these satellites

will spark a telecommunications revolution and

thus spur new SLV development to meet the growing demands of a competitive marketplace. Moreover, some analysts see a number of other new

markets developing, particularly for remote sensing and global positioning/navigation services.

And a few analysts foresee even greater market

opportunities in the more distant future (e.g.,

space manufacturing, tourism, nuclear waste disposal, and life-science research), if space transportation were made safer, more reliable, and

much less costly.9

Ibs to Ibs to 1994

Country Vehicle LEO G T O

a flights

United

States

Russia

France

China

Japan

India

scout

Pegasus

Taurus

Titan II

Atlas E

Delta II

Atlas I

Atlas IIA

Atlas IIAS

Titan IV

Shuttle

Rokot

Start-1

Kosmos

Tsyklon

Molniya

Soyuz

Zen it

Proton

Ariane 42P

Ariane 42L

Ariane 42LP

Ariane 44L

Long March 2D

Long March 3A

Long March 2E

H-II

ASLV

500

620b

2,100b

4,200b

1,750b

11,110

13,000

16,050

19,050

39,100

53,500

154C

1,000

3,000

8,800

N/A

15,400

30,300

44,100

13,200

16,300

18,300

21,100

N/A

15,800

19,400

22,040

330b

N/A

N/A

N/A

N/A

N/A

4,010

5,240

6,970

8,450

14,000

13,000

N/A

N/A

N/A

N/A

N/A

N/A

N/A

12,100

5,730

7,050

8,160

9,260

2,750

5,500

7,430

8,816

N/A

PSLV 6,610 990

1

3

1

1

2

3

2

2

1

4

7

1

0

5

8

3

15

4

13

2

1

3

2

1

3

1

2

1

1

a GTO = Geosynchronous transfer orbit, a temporary orbit used to reposition spacecraft into geosynchronous Earth orbit (GEO)

b Polar orbit

c Demonstrated

SOURCE: Bretton S Alexander et al. , 1994 Space Launch Activities

(Arlington, VA: ANSER, January 1995) Off Ice of Technology Assessment, 1995

7 Bretton S. Alexander et a]., 1994 Space Launch Activities (Arlington, VA: ANSER, January 1995).

8 For a discussion of how defense and commercial industries differ, see U.S. Congress, Office of Technology Assessment. Assessing the

Potential for Civil-Military Integration: Technologies, Processes, and Practices, OTA-ISS-61 1 (Washington, DC: U.S. Government Printing

Office, September 1994).

9 See, e.g., T.F. Rogers, "Toward a New Public-Private Space Transportation Strategy,” The Journal of Practical Applications in Space

5(l): 1-41, 1993.
The National Space Transportation Policy: issues for Congress 23

Today, six major centers offer space transportation services: Russia,10 the United States, Western

Europe, Japan, the People’s Republic of China

(hereafter China), and India. Table 2 lists the primary orbital launch systems in operation in 1994.

The rise of a competitive, global market for

commercial launch services in the past decade has

cost U.S. launch service providers their previous

monopoly on launching commercial satellites.ll

In 1979, the European Space Agency (ESA) successfully launched its first Ariane 1 rocket and

began to compete for commercial payloads.

Meanwhile, the U.S. government began to promote the Space Shuttle for commercial and government payloads by charging below-market

prices, and in the process weakened domestic ELV

producers.

The U.S. share of the world commercial space

transportation market, however, plummeted in

1986 after the explosion of the Space Shuttle

Challenger and did not begin to recover until

about 1990, when payloads designed to be carried

aboard the Space Shuttle were reconfigured for

launch on domestic ELVs and DOD investments

in the MLV I and MLV II lowered Delta and Atlas

prices to rates competitive with Ariane. 12

Still, current U.S. MLV launch vehicles are

based on decades-old designs and are generally

less competitive than foreign launchers in terms of

price, launch schedule, launch operations, regulatory environment, and launch facilities.

ESA developed the Ariane 4 MLV and the

forthcoming Ariane 5 heavy launch vehicle

(HLV) to serve not only the launch needs of ESA

and its member countries, but also the commercial

market at large. Commercial competitiveness

Arianespace's Ariane 4 currently dominates the commercial

market for launching medium-sized payloads.

played an important part not only in the design and

sizing of the Ariane family of vehicles, but in

launch infrastructure and operations that are optimized to meet commercial payload needs and

schedules.

More recently, China and Russia have entered

the commercial launch market, confronting U.S.

launch providers with non-market economy competitors who are able to undercut U.S. launch bids

significantly even under the terms of existing

launch service trade agreements.13

10 Russia has launch sites in Russia and Kazakhstan. Ukraine is on the verge of entering the world space transportation services market.

11 Some analysts argue that there is not a true global commercial market today, because of various government subsidies by the U.S. and

foreign governments. 12 All commercial payloads that had been booked for the Space Shuttle from 1987 to 1989 were flown on the Ariane, giving Ariane 100

percent of the commercial market for that period. 1 3These trade agreements do, however, set quotas on the number of Russian and Chinese vehicles winning commercial competition

agreements are discussed in detail in the section covering fundamental objective #2.
24 | Office of Technology Assessment

The United States remains the world commercial market leader in SLVs. These small rockets,

however, account for relatively few of the total

dollars spent on space transportation.

At the same time, the end of the Cold War, the

desperate state of the Russian economy, and the

Russian interest in developing a market economy

have opened numerous opportunities for cooperation in space transportation technologies. Several

American companies are negotiating with their

Russian counterparts to secure Russian space

launch technology, expertise, and hardware (e.g.,

engines). The recently merged Lockheed Martin

Corp. now finds itself in the interesting position of

being a partner in a U.S.-Russian joint venture

(LKE International) to sell Russian launch services that compete directly with its own U.S.-

made vehicles.14

The degree to which current commercial trends

create problems for the United States space transportation effort is a matter of dispute. Some analysts argue that U.S. government requirements are

sufficient to maintain a viable space transportation technology and industrial base and suggest

that the government should not be overly concerned by the global competitive position of U.S.

launch providers.15

Other analysts, however, believe that the development of new, low-cost space transportation

systems must be encouraged to enhance the competitiveness of the U.S. space transportation industry and other domestic industries that require

access to space. In their view, the government will

also benefit from lower vehicle costs brought

about by new technologies and larger sales volumes. With sufficiently low prices, the space

transportation industry will be able to capture

greater commercial market share. And domestic

satellite vendors will not find themselves dependent on the possible vagaries of foreign launch

providers. These analysts would like to see commercial market interests actively considered when

the government embarks on development of a

next-generation space transportation system:

The future space transportation system selected must be responsive to commercial user

requirements in addition to those of government

users. While low operating cost is fundamental,

other parameters, such as launch dependability,

higher reliability, very short booking time, and

user friendliness, are of equal importance.

Another commercial requirement that will

eventually emerge is the ability to accommodate

the general public (in space flight) without rigorous astronaut-type training. These varied requirements and systems capabilities must be

introduced in the current technology development plans. Unless the next space transportation

system satisfies these needs, that system will not

be widely used commercially.16

In general, however, industry officials are skeptical about the prospects for the development of

new, low-cost space transportation systems. In the

past decade, several new and often revolutionary

proposals have been put forth, only to be dropped.

These included the Advanced Launch System,

National Launch System, the Air Force Space

Lifter, the Space Shuttle C, the Space Shuttle II,

and the National Aerospace Plane (NASP). This

skepticism seems particularly profound within the

lower tiers of the space transportation industry.17

14 LKE International President Charles Lloyd says that the Russian Proton and American Atlas rockets could serve as backups for each

other. See Patrick Seitz, “Lockheed Martin Corp. Officials Ready Ax,” Space News, Mar. 20, 1995, p. 6.

15 See, e.g., U.S. Department of Defense, Office of the Deputy Assistant Secretary of Defense, “Industrial Assessment for Space Launch

Vehicles,” Washington, DC, January 1995, p. ES-1.

16 The Commercial Space Transportation Study Alliance, “The Commercial Space Transportation Study: Executive Summary,” April

1994, p. 18.

17 OTA conducted a workshop on the lower tiers of the space transportation technology and industrial base on March 2, 1995. Findings of

this workshop will be presented in a short background paper to be released in June 1995.
The National Space Transportation Policy: issues for Congress 25

The multi-warhead Peacekeeper lCBM could be removed

from the U.S. strategic arsenal under future arms control

agreements and converted for space launch.

Finally, long-range ballistic missiles constitute

an important but often overlooked segment of the

space transportation technology and industrial

base. Originally, most space launch vehicles were

derived from ballistic missiles or ballistic missile

technology. Today, these two segments of the industrial base have diverged significantly, but important overlaps in both technology and business

arrangements remain. Therefore, reductions in the

numbers of long-range ballistic missiles under

various arms control agreements and the planned

cessation of production in 2005 may have an important impact on the space transportation industrial base. Similarly, future choices in launch

vehicle technologies may have important consequences on future capabilities to reconstitute

long-range ballistic missile design and production.

❚ The National Space Transportation

Policy and Its Implementation Plans

The origins of the new space transportation policy

and its implementation plans can be traced to the

congressional request in the FY 1993 VA-HUDIndependent Agencies Appropriation Act for

NASA to study government space launch needs

and NASA plans for space transportation and the

International Space Station. The “Access to Space

Study,” published by NASA in January 1994, responded to the congressional request as well as to

NASA’s own internal planning needs.18

Subsequently, Congress requested a similar assessment by DOD in its 1994 Defense Authorization Act (see appendix A). DOD’s 1994 “Space

Launch Modernization Study,” more commonly

known as the Moorman Report, responded to this

congressional mandate. 19 This report built on

previous studies, including the 1990 Augustine

Report, 20 the 1992 Aldridge Study,21 DOD’s

“Bottom-Up Review” in 1993, and NASA’s “Access to Space Study”.

The “Access to Space Study” and the Moorman

Report provided the opening Department and

Agency positions in interagency negotiations that

led to the new Administration policy.

The NSTP released by the White House on August 5, 1994, was developed by the National Science and Technology Council (NSTC) and

approved by President Clinton after an extensive

18 NASA, “Access to Space Study: Summary Report,” Washington, DC, January 1994.

19 U.S. Deaprtment of Defense, “Space Launch Modernization Study: Executive Summary,” Washington, DC, 1994. 2 0 “Report of the Advisory Committee on the Future of the U.S. Space Program,” Independent Report for NASA, December 1990.

21 Vice President's Space Policy Advisory Board, “The Future of U.S. Space Launch Capability,” Washington, DC, November 1992.
26 Office of Technology Assessment

interagency review of current and future space

transportation plans and budgets.

The policy provides overall guidance and

direction for the executive branch. The specifics

for implementing the policy were left to a second

round of negotiations between the individual departments and agencies and the Office of Science

and Technology Policy (OSTP). The policy required that DOD, NASA, and DOT/DOC (in combination) submit implementation plans within 90

days. 22 The DOD and NASA implementation

plans were submitted to the White House in November 1994 and approved in November 1994

and January 1995, respectively. The DOT/DOC

implementation plan was also submitted in November 1994, but has not received final approval.

MEETING THE FUNDAMENTAL

OBJECTIVES OF THE POLICY

The Clinton Administration’s four fundamental

objectives for the NSTP were to establish new national policy regarding:

1.

2.

3.

4.

federal space transportation spending, consistent with current budget constraints and the

opportunities presented by emerging technologies;

federal agencies’ use of foreign launch systems

and components;

federal agencies’ use of excess ballistic missile

assets for space launch, to prevent adverse impacts on the U.S. commercial space launch industry; and

an expanded private sector role in the federal

space transportation R&D decision making

process.

23

In the following sections, the Office of

Technology Assessment (OTA) examines each of

these fundamental objectives and how the DOD,

NASA, and combined DOT/DOC implementation plans propose to achieve them. The report

then raises several issues of potential interest to

Congress as it considers funding and oversight of

the Administration’s space policy, as well as

changes in the laws governing space transportation.

❚ Fundamental Objective #l:

Space Transportation Funding

and the Division of Responsibilities

The first objective of the NSTP is to set government spending priorities for current and future

space transportation systems by assigning specific roles and functions to designated departments

and agencies. The policy assigns to DOD the responsibility of overseeing improvements to the

existing fleet of ELV systems and guiding development of new ELVs. NASA will continue to support the Space Shuttle and undertake research and

development (R&D) that could lead to a new, reusable launch vehicle (RLV), replacing the Space

Shuttle.

Establishes new national policy for federal space transportation spending, consistent with current budget

constraints and the opportunities presented by emerging

technologies. Under the new policy, DOD will assume the

lead responsibility for modernization of the current expendable launch vehicle fleet. NASA will assume lead responsibility for research and development of next generation

reusable systems. NASA will focus their investments on

technologies to support a decision no later than December

1996 on whether to proceed with a flight demonstration program. This program would, in turn, provide the basis for deciding by the end of the decade whether to proceed with a

new launch system to replace the aging shuttle fleet.

This section examines the proposed division of

responsibility between DOD and NASA and the

development of new launch vehicle systems proposed in the DOD and NASA implementation

plans. This examination suggests that, while the

Clinton Administration’s attempt to eliminate

conflicts and redundancies may be a step in the

22 The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. VIII(1).

23 The White House, Office of Science and Technology Policy, op. cit., footnote 4.
The National Space Transportation Policy: lssues for Congress 27

right direction, several potential conflicts and redundancies remain. The examination further suggests that a number of additional concerns with

the DOD and NASA implementation plans-especially the proposed development programs—

also remain.

DOD

DOD’s implementation plan initiates an ELV development program known as the Evolved Expendable Launch Vehicle (EELV) program. The

EELV program would draw on existing launch

technology to build a family of MLVs and HLVs

that uses common components and subsystems.

Table 3 shows the payload delivery capacities for

both existing and proposed international space

transportation systems.

By developing the EELV family of launch vehicles, DOD hopes to bring down the cost of putting its payloads into space, especially in the

heavy payload class. Compared with current expenditures, DOD officials expect to achieve a 25-

to 50-percent reduction in overall life-cycle costs

for launching DOD payloads. 24 DOD anticipates

that the EELV program will achieve these savings

through the acquisition process, increased use of

commercial products and practices, minimal use

of unique government specifications, maximum

use of common components and subsystems, and

decrease in launch infrastructure costs.

Specifically, DOD believes that using common

components and subsystems will, for the most

part, eliminate the need to maintain an independent HLV production line and will also result in

larger production volumes, possibly capturing

economies of scale. The Department expects that

the EELV program will benefit from current industry consolidation and reduce the need to maintain unique launch infrastructure and operations

crews for multiple types of launch vehicles.

Test flights of the DC-X RLV demonstrated the potential for

rapid turnaround and simplified operations.

Why EELV?

DOD is—and rojects that it will continue to be—

a primary user of ELVsin all payload classes.25

DOD officials believes that space transportation is

too costly and note that DOD currently spends

roughly $1.9 billion per year for space launch services. Of this money, $1.6 billion goes to support

24U.S. Department of Defense, personal communication, March 1995.

25 U.S. Department of Defense, op. cit., footnote 15, p. II-11.
28 Office of Technology Assessment
The National Space Transportation Policy: issues for Congress 29
30 Office of Technology Assessment

Option 1 Option 2 Option 3 Option 4

Develop new Develop new

Sustain existing Evolve expendable expendable launch reusable launch

launch systems launch vehicles system system

Key features Maintain the current

fleet of launch systems for the foreseeable future

Only upgrade to enable missions, improve reliability and

safety, or address obsolescence

Allow market-driven

industry downsizing

in order to reduce operations costs from

current levels

Projected

costs per

flight

Medium: $50-125M

Heavy: $250-320M

Fly current launch

vehicles already on

contract

Evolve a family of

launch vehicles from

current systems by

consolidating medium- and heavy-lift

booster families

Lower operations

costs by increasing

production rates

Cost: $1-2.5B

Medium, $50-80M

Heavy $100-150M

Correct deficiencies in

current ELV fleet

Significantly improve

reliability, operability,

and cost

Develop a modular

family comprised of a

common core vehicle

and/or common major

subsystems

Option A: replace existing ELVs

Option B: replace existing ELVs and Space

Shuttle

Medium: $40-75M

Heavy: $80-140M

Personnel: $90-190M

Cargo: $130-230M

Substantially reduce

flight costs while improving operability and responsiveness

Tech. dev./demo. Costs,

$0.6-0.9B

Engr./dev. costs.

$6-20+B

Procure fleet of four

vehicle between

2004-2009

$2.5-$10.5B

Future operations costs

$0.5-1.5B per year

None projected

SOURCE: U.S. Department of Defense, “Space Launch Modernization Study, ” 1994

DOD’s HLV program, the Titan IV.26 The remaining $300 million is spent primarily on MLVs, with

some of this remaining money going to SLVs.

DOD has focused on cost reduction as its primary

objective, especially in the heavy payload class .27

DOD’s 1994 “Space Launch Modernization

Study” offered a host of options for modernizing

DOD’s ELV fleet in a manner that would bring

down the cost of access to space, especially for

heavy payloads (see table 4). The EELV program

is the implemented version of Option 2 presented

in the study.

EELV Schedule and Funding

The EELV program schedule, which spans the period FY 1995-2005, is divided into three phases

(see table 5). During Phase 3, DOD expects MLV

development to precede HLV development. DOD

projects that the MLV will become operational in

2001, while the HLV will become operational in

2005. DOD officials claim that this staggered

introduction is likely to make the EELV procurement more attractive to potential producers since a

new MLV will probably improve industry’s com26The production cost of a Titan IV—although not firmly established—is on the order of $250 million per vehicle. Assuming an average

launch rate of three Titan IVs per year, $750 million goes to the actual launch vehicles and the remaining $850 million goes to support payload

integration, operational staff, and other supporting infrastructure.

27DOD is currently investigating ways to reduce its requirement for HLVs.
The National Space Transportation Policy: Issues for Congress 31

Expected

number of

Phase Name Duration contractors

1 Low-cost concept validationa Aug. 1995 -Nov. 1996 3-4

b

2 Preliminary engineering, management, and development Dec. 1996 -Apr. 1998 2

3 Engineering, management, and development May 1998-2005 1

a DOD has scheduled this 15-month period to allow Industry to demonstrate, with about 90-percent confidence, that It can achieve EELV cost reductions targets within the proposed $2017 billion budget U S Department of Defense, personal communication, March 1995

b DOD has allotted $120 million in contract money for this phase DOD plans to award four contracts for this phase, with each team receiving $30

million for 15 months of work DOD IS exploring, however, the Idea of awarding only three contracts for this phase, which would add $10 million to each

contract DOD wiII determine how many contracts to award for this phase based on whether the Department believes the $10 million add-on per

contract wiII produce significant added value or not U S Department of Defense, personal communication, March 1995

SOURCE: U.S. Air Force, “EELV Briefing,” Space Day, Colorado Springs, CO, Dec. 15, 1994

Fiscal year Funding ($M)

1995b

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

TOTAL

40

111

72

104

173

107

110

250

460

330

260

2,017

a FY 1995 dollars

b Includes $30 million appropriation for FY 1995 and redesignation of

$10 million from FY 1994.

SOURCE: U.S. Air Force, “EELV Briefing,” Space Day, Colorado

Springs, CO, Dec. 15, 1994

petitiveness in the commercial space launch marketplace. Table 6 provides the proposed EELV

funding for FY 1995-2005.

Existing ELV Upgrades

When DOD began to formulate its EELV development program, it had several ELV upgrade programs underway. Since its decision to pursue the

EELV, DOD has sought to limit redundancies by

cutting back on ELV upgrade programs—retaining those programs that it believes are necessary to

keep the existing ELV fleet flying safely or have

significant short-term payoff (see box 1).

NASA

In its implementation plan, NASA outlines an

RLV development strategy consisting of two Xvehicle programs—the X-33 Advanced Technology Demonstrator and the X-34 Small Reusable

Booster. The X-33 program is designed to prove

the feasibility of a medium-size, reusable, singlestage-to-orbit (SSTO) launch vehicle, while the

X-34 program focuses on providing early test experience with a variety of technologies projected

to go on commercial RLVs, as well as early experience with government-industry cooperative endeavors. The X-34 program is also expected to

lead to a small, commercially operated, partially

reusable launch vehicle. The impetus behind both

X-vehicle programs is the belief that technology

has advanced sufficiently to pursue development

of reusable space transportation systems that

could dramatically lower the cost of access to

space.

NASA plans to spend just under $1.2 billion

between FY 1995 and FY 1999 on its two X-vehicle programs. The X-33 program will receive
32 Office of Technology Assessment

Although DOD has scaled back its long-term efforts to upgrade expendable launch systems, several

ELV-related upgrade programs with short-term benefits are still underway. Ongoing DOD programs Include

the Range Standardization and Automation (RSA) program and vehicle and infrastructure upgrade programs for the Titan II, Delta II, Atlas II, and Titan IV.

DOD views RSA as an essential upgrade to existing range operations infrastructure and expects the

benefits to apply to all future launch systems—whether they be upgraded versions of existing ELVs or a

family of EELVs. DOD’s implementation plan notes that the RSA program—which includes significant computer and electronics upgrades—will overhaul operations at both the Eastern and Western ranges, and that

DOD expects the program to be completed by FY 2004 at a cost of more than $1 billion.

Also, according to DOD’s implementation plan, the Department will continue to operate several expendable launch systems and intends to complete ongoing development programs for these vehicles. The Delta

launch vehicle flight safety and avionics upgrades are scheduled for completion in FY 1996. DOD expects

that upgrades to the Atlas II propulsion system aimed at improving the launch vehicle’s reliability will be

completed in FY 1998.1 And near-term Titan IV initiatives to improve reliability, enhance schedule dependability, and lower Iife-cycle costs are ongoing.

With regard to Infrastructure, DOD’s implementation plan states that the Department will maintain its

launch capabilities for the Delta, Atlas, and Titan IV at Cape Canaveral. At Vandenberg Air Force Base,

Titan II and Titan IV launch capability will be sustained, the construction of a new Atlas II Space Launch

Complex will continue, and the Delta launch complex will still be jointly supported by DOD and NASA. The

new Atlas I I launch facility at Vandenberg is projected to be ready for NASA and national security missions

in FY 1998,

1 This refers to continuing development efforts of an RL-10C upper-stage engine DOD does not currently have plans to incorporate a newly developed RL-10C engine in the Atlas launch vehicle

SOURCE: Office of Technology Assessment, 1995

$662 million of this funding, with an additional

$339 million going to fund “Supporting Technology Demonstration” and other RLV-related

technology development programs.28 The X-34

program—which will span a shorter period of

time than the X-33—will receive a fixed NASA

contribution of $70 million. Both the X-33 and

X-34 programs will likely draw from the operational and technological experiences of NASA’s

ongoing DC-XA program (see box 2).

Declining space transportation budgets have

prompted NASA to pursue a strategy of close

cooperation with industry in the development of

reusable launch systems. NASA outlined this

strategy in the cooperative agreement notices

(CANS) it issued for each X-vehicle program.

Each CAN delineates NASA’s cooperative development policies and guidelines and includes the

proposed funding contribution from NASA.

NASA expects industry to contribute funding to

each program because it believes that the X-33

and X-34 programs will help industry build RLVs

capable of competing in the launch services mar28 "Supporting Technology Demonstration” and other RLV-related technology development programs are sometimes collectively referred

to as the “core technology development programs” for the RLV.
The National Space Transportation Policy: issues for Congress 33

In 1990, the Ballistic Missile Defense Organization (BMDO) was exploring concepts to launch hundreds

of space-based interceptors designed to provide the nation with a shield against incoming ballistic missiles. In the view of BMDO officials, a fully reusable single-stage-to-orbit (SSTO) vehicle was the most

promising concept for reducing space transportation costs.

BMDO initiated the Single Stage Rocket Technology program to design an SSTO vehicle, then fly a subscale experimental vehicle as a proof-of-concept demonstrator. Four contractors were selected to develop

SSTO designs between 1990 and 1991. Primarily because of funding limitations, McDonnell Douglas,

which proposed a vertical-takeoff/vertical-landing configuration, was the only firm selected to build and fly

the experimental DC-X vehicle. Using support from the U.S. Air Force’s Phillips Laboratory, a streamlined

management structure at BMDO, and a rapid prototyping team at McDonnell Douglas, the DC-X was built

in 24 months and flown for the first time on August 18, 1993.

The DC-X flew two more times in the summer of 1993 before flight testing was terminated for lack of

funding. With funding support from NASA, BMDO was able to restart the DC-X test flight program in the

summer of 1994. During the second flight of this series (flight number 5), a detonation in the ground support equipment ripped a large hole in the vehicle’s composite skin. Despite the damage, the vehicle

executed a successful emergency landing on the desert floor and was subsequently returned to the factory for repair. During the repair interval, the DC-X contract and all program management responsibility was

transferred from BMDO to the Phillips Laboratory at Kirtland Air Force Base, New Mexico.

Several lessons have been learned from the DC-X program to date. Namely, streamlined government

management of experimental programs is capable of reducing development costs while meeting schedule

milestones; “aircraft-like” operations (including rapid turnaround between launches) and maintenance of

space transportation systems are feasible; and the number of people required to operate a space transportation sytem can be reduced through automated test and control. Furthermore, the DC-X successfully

flight tested several critical—but not all encompassing—SSTO technologies such as navigation aided by

the Global Positioning System and a gaseous oxygen/hydrogen reaction control system.

The next flight series of the DC-X is scheduled for May 1995 through July 1995. This flight test phase is

scheduled to culminate with the DC-X performing a “pitch maneuver” by which the vehicle transitions from

the nose-down position required for atmospheric reentry, to the tall-first position required for landing, Upon

completion of the DC-X flight test program, Phillips Laboratory will transfer the vehicle and test equipment

to NASA for the DC-XA program. The DC-XA program will incorporate numerous additional critical SSTO

technologies into a highly modified DC-X and flight test them in mid-1996. NASA has designated Phillips

Laboratory to manage the DC-XA flight test program.

SOURCE: U.S. Air Force, 1995

ket. Boxes 3 and 4 summarize the CANS for the dustry initiatives where the use of NASA facilities

X-33 and X-34, respectively. and resources can minimize the cost and enhance

In addition to its RLV efforts, NASA plans to the value of the technology efforts.”29

continue its support of ELV development—al- Furthermore, NASA’s implementation plan

though in a more reserved manner. NASA’s imple- states that NASA retains the right to procure new

mentation plan states that “in coordination with ELV services “where

DOD, NASA will continue to support [ELV] in29 NASA, "NASA Implementation plan for the National Space Transportation Policy,” Washington,

mission-unique modificaDC, Nov. 7, 1994, p. 25.
34 Office of Technology Assessment

NASA issued a cooperate agreement notice for the X-33 reusable launch vehicle on January 12, 1995.

This CAN solicited proposals ‘[that offer a new way of doing business, consistent with space policy. ”1 The

CAN divided the X-33 program into three phases: Phase l—Concept Definition/Design; Phase n-Design/

Demonstration; and Phase Ill—Commercial RLV Development/Operation. Phase I commenced in March

1995 and is scheduled to run for 15 months. Phase II, which includes design, build, and flight demonstration, will begin by the end of FY 1996 and continue though the end of the decade. At the end of the decade, the government and private sector wiII jointly decide whether or not to proceed with Phase III.2

NASA requested detailed proposals from Industry on Phase I and preliminary plans for Phases II and Ill.

Four teams, lead by Lockheed Advanced Development, McDonnell Douglas Aerospace, Rockwell International, and Space Access, Inc., submitted proposals to NASA on February 24. NASA selected three

(Lockheed Martin, McDonnell Douglas, and Rockwell) to proceed with Phase I. NASA and the selected

companies wiII share expenses during Phase 1, with a total NASA contribution of $24 million.3

Selection of one or more X-33 concepts to proceed into Phase II will be based on specific criteria (which

NASA reserves the right to change at any time up until Phase II proposals are requested) that reflect mature business and design plans.4

The technical composition of the X-33 program is based on the goal of continually lowering the cost of

access to space “to promote the creation and delivery of new space services and other activities that will

improve economic competitiveness.”5 In the technical description of the X-33, the CAN states that “the

X-33 must adequately demonstrate the key design and operation aspects of [a single-stage-to-orbit] RLV

rocket system. "

6 The CAN notes that an SSTO rocket system is the goal of Phases I and II “because

past studies Indicate it has the best potential for achieving the lowest cost access to space while acting as

an RLV technology driver..."7 Nevertheless, the CAN grants the private sector the option of proposing

any RLV technology—not necessarily SSTO—in Phase Ill.

The government contribution to the X-33 program for Phases I and II (i.e., FY 1995-99) is projected to

be roughly $662 million. During the same period, an additional $339 million has been allocated for core RLV

technology development programs.8 NASA expects industry to fund final development (i.e., Phase Ill) of a

commercial RLV, although the Agency realizes that a small government contribution may be necessary.

1 NASA, “A Cooperative Agreement Notice: Reusable Launch Vehicle (RLV) Advance Technology Demonstrator—X-33, ” Jan. 12,

1995, p. ii.

2 Ibid., p. ii-iii.

3 NASA, “X-33, X-34 Contractors Selected for Negotiations, ” NASANews Press Release, Mar. 8, 1995.

4 NASA, op. cit. , footnote 1, p. iii.

5 Ibid., p. A-2.

6 Ibid.

7 Ibid.

8 “Supporting technology demonstration” and “RLV technology program (focused phase I and current NRA activities)” are often

collectively referred to as the “core technology development programs." (See table 8). 

SOURCE: Office of Technology Assessment, 1995.
The National Space Transportation Policy: Issues for Congress 35

NASA issued a cooperative agreement notice for the X-34 RLV on January 12, 1995, According to the

CAN, “the intent of (the X-34) solicitation IS to stimulate the joint industry/government funded development

of a small reusable, or partially reusable, booster that has potential application to commercial launch vehicle capabilities, which will provide significantly reduced mission costs for placing small payloads in LEO

The booster must demonstrate technologies applicable to future reusable launch vehicles.”1

The X-34 program is much shorter than the X-33 program and is not divided into major phases, Nevertheless, the CAN does set out three milestones for the X-34 program test flights beginning in late 1997,

orbital launch by mid-l 998, and two test flights later in 1998 as a NASA research platform,

After reviewing CAN proposals from Space Access, Kelly Space and Technology, and a team led by

Orbital Sciences, NASA selected the Orbital Sciences team (Orbital Sciences and Rockwell International)

as the contractor for the X-34.2 The proposed government contribution to the X-34 program for FY 1995-99

IS $70 million. Orbital Sciences and Rockwell plan to invest $50 million each—for a total program cost of

$170 million.3

Despite losing the X-34 competition, both Space Access and Kelly Space and Technology are reportedly looking for private backing for their concepts. Each company plans to continue its development effort

without government support.4

1 NASA, “A Cooperative Agreement Notice Reusable Launch Vehicle (RLV) Small Reusable Booster—X-34, “Jan 12, 1995, p. ii.

2 NASA, “X-33, X-34 Contractors Selected for Negotiations,” NASANews Press Release, Mar. 8, 1995.

3 Any cost overruns on the X-34 program will fall upon the Orbital Sciences/Rockwell team. See Ben lannotta, “OSC, Rockwell

Selected To Run X-34 Project, ” Space News, Mar 13, 1995, pp 4, 37.

4 Ibid.

SOURCE: Office of Technology Assessment, 1995.

tions are required of the existing medium/heavy- springboard to a commercial RLV in the mediumlift vehicles-

.”30 This statement signals NASA’s

intent to proceed with a special procurement of a

new, low-end medium or “Med-Lite” launch vehicle, and according to the implementation plan,

“NASA’s budget contains funding to continue to

acquire launch services from the U.S. commercial

ELV industry to support civil government launch

service requirements.”31

x-33

The X-33 Advanced Technology Demonstrator is

the flagship of NASA’s RLV Technology Program. NASA hopes that the X-33 will provide the

to-heavy payload class that radically reduces the

cost of access to space while improving both reliability and operability.

The CAN does not restrict the X-33 commercial follow-on to any one particular RLV concept,

and NASA officials insist industry will decide for

itself what kind of commercial RLV to build. Nevertheless, NASA believes that an SSTO space

transportation system—if it proves technologically feasible—will be the lowest cost solution (see

box 5). Therefore, NASA has limited X-33 development to the SSTO concept.

30 Ibid.

31 Ibid.
36 Office of Technology Assessment

Since at least the early 1960s, launch vehicle engineers have dreamed of building reusable launchers

because they offer the potential of relative operational simplicity and reduced costs compared with expendable vehicles.1 Until recently, the necessary technologies were not available. Now, thanks to recent

technology improvements,2 many engineers believe that the United States is technically able to design and

produce an SSTO vehicle with sufficient payload capacity to meet most government and commercial space

transportation requirements.

Notwithstanding these recent technological advances, the development of an SSTO space transportation system revolves significant risk. For example, because an SSTO launch vehicle will have no expendable components, it wiII need to carry more fuel than would otherwise be necessary if it were shedding

weight by dropping stages during ascent. Achieving the fuel mass fraction3 necessary to reach orbit with a

useful payload will require a host of technological advances that improve fuel efficiency and lower structural weight without compromising structural integrity. Additionally, completely reusable launch vehicles are

technologically much more difficult to achieve because components must be capable of resisting deterioration and surviving multiple launches and reentries.

The best configuration—if there is one—for an SSTO vehicle is yet undetermined. The difficulties of a horizontal takeoff-horizontal landing vehicle are known from the National Aerospace Plane Program, and it is likely

that this configuration will not receive much consideration. Three other potential configurations pose unique

technical obstacles, but are likely to receive more serious consideration: vertical-takeoff/vertical-landing, vertical-takeoff/horizontal-landing (winged body), and vertical-takeoff/horizontal-landing (Iifting body)

Vertical-takeoff/

vertical-landing

Vertical-takeoff/

horizontal-landing (winged body)

Vertical-takeoff/

horizontal-landing (lifting body)

The decision to focus on SSTO development in the X-33 program was based on NASA’s 1994 “Access

to Space Study. ” This study investigated three options for reducing the cost of access to space. The first

option called for an overhaul of several Space Shuttle subsystems and continued operation of an upgraded

Space Shuttle. NASA estimated that such an operation would fail to reduce sufficiently the cost of access

to space. The second option proposed the development of new multistage ELV technologies that would

deploy either a cargo pod or manned vehicle. While NASA viewed this option as more appealing than the

first, it was less attractive to NASA than the third option—development of an SSTO.

1 For the early history of attempts to build reusable launch vehicles, see Richard P. Hallion (ed.), The Hypersonic Revolution: Eight

Case Studies In the History of Hypersonic Technology, Volume II (Wright-Patterson Air Force Base, Ohio Special Staff Office, Aeronautical Systems Division, 1987), p 948.

2 Some of these improvements were funded through the National Aerospace Plane Program (1986-94) The goal of NASP was to

design and build a horizontal takeoff-horizontal Ianding, air-breathing SSTO.

3 The term fuel mass fraction refers to the ratio of the weight of fuel required to accomplish the mission to the total initial vehicle

weight (excluding payload). An SSTO launch vehicle wiII require a higher fuel mass fraction (i.e., lower structural weight fraction) than

existing multiple-stage vehicles in order to reach orbit.

SOURCE Off Ice of Technology Assessment, 1995
The National Space Transportation Policy: Issues for Congress | 37

Pending the successful completion of the X-33

program, NASA sees the RLV as a potential replacement vehicle for the Space Shuttle.32 For this

reason, the X-33 CAN requires that the commercial follow-on RLV support the International

Space Station. The X-33 CAN sets the required dimensions of the follow-on RLV’s payload bay to a

15 ft diameter and a 30 ft length, with a required

mass payload deployment capability of 20,000 to

25,000 lbs to a 220 nmi (maximum 244 nmi) altitude inclined at 51.6°.

33

Although the CAN requires a commercial follow-on to the X-33 to service the International

Space Station, it requires only suborbital flight of

the X-33 during Phase II test flights. Table 7 summarizes the technical requirements for the X-33

program.

The CAN outlines the cost-sharing arrangement between government and industry for the development and operation of the X-33. Table 8

shows NASA’s projected funding contribution for

Phases I and II. NASA expects that industry will

roughly match the government’s overall Phase I/II

contribution. A number of core technology development programs were started in FY 1994,34 and

Phase I award winners have already been selected.

Table 9 summarizes the Phase I award winners,

their major team members, and their respective

vehicle concepts.

Although NASA has the lead role in RLV development, DOD maintains a supporting role.35

Within DOD there are both skeptics and optimists

about whether RLV technology will mature to a

point where it will be useful to the Department.

Nevertheless, DOD engineers and managers hope

to retain some influence over the direction of RLV

development so that DOD will be in a position to

benefit from future RLVs.

Already DOD has budgeted $20 to $30 million

per year for RLV-related technology projects over

the projected life of NASA’s program.36 Additionally, DOD has accelerated some of its propulsion technology programs to provide data to

NASA to support its December 1996 decision on

the X-33. DOD is also involved in materials research that could be useful to RLV development,

and it will play a key role in helping NASA design

and execute a launch operations concept for both

the X-33 and X-34 programs.37

X-34

NASA views the X-34 program as a means of

gaining early experience with government-indus32 Industry may choose to develop one RLV to capture NASA flights and another to serve the commercial space transportation market.

33 Text in the CAN states that this requirement “is a preliminary assessment of minimum single payload element weights that are required to

support the Space Station [and that this] estimate is for planning purposes only and [does] not represent a commitment by the Space Station

Program.” See NASA, “A Cooperative Agreement Notice: Reusable Launch Vehicle (RLV) Advance Technology Demonstrator—X-33,”

Washington, DC, Jan. 12, 1995, p. vi. NASA officials contend that this language allows for the possibility of satisfying the 20,000- to 25,000-lb

payload delivery requirement with multiple flights and that the ultimate decision on RLV payload capacity will be made by industry. Industry

officials and other analysts note, however, that NASA is not precluded by this text from setting a final requirement that dictates a payload delivery capability of 20,000 to 25,000 lbs to International Space Station orbit in a single flight.

34 The $20 million budgeted in FY 1995 for these core technology development programs is controlled by DOD. The DOD Comptrollers

Office has held up distribution of this money to Phillips Laboratory. Phillips Laboratory, once it receives the money, is expected to use it to

support the ongoing core technology development programs. The delay in transferring this money could potentially jeopardize successful

completion of Phase I by each of the remaining contractors.

35 The White House Office, Office of Science and Technology Policy, op. cit., footnote 3, sec. III(2)(c).

36 U.S. Department of Defense, personal communication, February 1995.

37 NASA and the U.S. Air Force’s Phillips Laboratory are taking steps to ensure technical coordination between DOD and NASA on RLVrelated technology development.
38 Office of Technology Assessment

Corresponding

x-33 RLV

CAPABLE

Performance

Sub-orbital, reusable rocket-based flight system

Mission applications:

Payload delivery. government (civil/military) and commercial missions.

Capable of delwerlng/returning cargo and crew complement to/from the International Space Station (ISS) in accordance with ISS requirements (e.g., minimum

sizes, loads, schedule).

● ISS located at 220 nmi (244 nmi max.) altitude and 51.6 Inclination.

■ Current estimated payload delivery requirement: 20,000-25,000 Ibs.

Launch and Flight Operations

Automated pre-flight and flight operations (launch, ascent, on-orbit, reentry, Ianding).

The flight vehicle shall be capable of safely aborting to the launch site during the

ascent phase if required.

7-day maximum mission duration.

7-day ground processing time from landing to launch.

3.5-day ground processing time from Ianding to launch for reflight under emergency

conditions.

On-Orb/t Operations

The system shall be able to autonomously rendezvous and station keep with the ISS

and other orbital spacecraft.

The system shall be able to autonomously dock payloads with the ISS.

Accommodate Payloads

The flight vehicle shall provide standardized structural, mechanical, electrical, communications, and other interfaces to payload.

15-ft-diameter x 30-ft-long cargo bay.

OPERABLE

Schedule Dependability

The probability of launching within TBD days of scheduled is 0.95.

Responsive

Maximize robustness to adverse weather conditions.

Supportable

Launch and Ianding at same location (nominal condition).

The flight vehicle shall be capable of unplanned landing at alternate landing sites

with minimal support equipment/facilities, e.g.:

No existing cryogenic facilities, launch stands/equipment, etc.

Self-ferry of flight vehicle between landing and launch sites (add-on engines,

landing/nav, lights, etc., equipment allowed).

Maintainable

To the extent practical, on-board subsystems required for the flight vehicle shall be field

repairable/replaceable.

Equipment required to repair, process, and return vehicle to launch site shall be

transportable.

RELIABLE

0.995 probability of safe recovery of the flight vehicle per mission.

0.999 probability of safe recovery of the human passengers per mission.

REQ N/A

N/A REQ

REQ

GOAL

N/A

GOAL

GOAL

N/A

N/A

N/A

N/A

GOAL

REQ

REQ

GOAL

REQ

REQ

REQ

GOAL

GOAL

AS REQ

REQ

REQ

REQ

REQ

REQ

REQ

REQ

GOAL REQ

GOAL REQ

N/A REQ

N/A REQ

NOTE GOAL= Desirable Attribute, N/A= Not Applicable, REQ=Required, AS REQ=As Required

SOURCE NASA, “A Cooperate Agreement Notice: Reusable Launch Vehicle (RLV) Advance Technology Demonstrator—X-33, ” Jan 12, 1995, p

A-4
The National Space Transportation Policy: Issues for Congress 39

Phase I I & II II

FY 95b ($M) FY 96 ($M) FY 97 ($M) FY 98 ($M) FY 99 ($M)

Concept definition/design

(phase 1)

Design/demonstration

(phase II)

Supporting technology

demonstration

RLV technology program

(focused phase I &

current NRA activity)

System engineering and

analysis

Long-term, high-payoff

technology Investment

Total

18.0 6.0 — —

— 43.0 147,0 270.0 178.0

20.0 — — 40,0 147.0

51.2 50.7 30.6 — —

4.6 4.7 4.7 4,7 4,7

.

8.7 8.6 15.6 25.7 30.1

102.5 113.0 197.9 340.4 359.8

a FY 1995 dolIars

b Includes DOD funding

SOURCE: NASA, “A Cooperative Agreement Notice Reusable Launch Vehicle (RLV) Advance Technology Demonstrator—X-33, ” Jan 12, 1995, p

A-9

Prime Contractor Major team members Vehicle concept Concept details

Lockheed Martin

(Advanced Development,

a.k.a. Skunk Works)

McDonnell Douglas

Aerospace

Rockwell (Space

Systems Division)

Lockheed Martin (5 divisions plus Rocketdyne),

Rohr, Allied Signal, Bankers

Trust, and Space Express

Boeing, Douglas Aircraft,

Rocketdyne, Aerojet, Pratt

and Whitney, and Honeywell

Rockwell (North American

Aircraft, Rocketdyne),

Northrop Grumman, Federal

Express, and Orbital

Sciences

Vertical-takeoff/

horizontal-landing

(lifting body)

Vertical-takeoff/

vertical-landing or

vertical-takeoff/

horizontal-landing

Vertical-takeoff/

horizontal-landing

(delta wing with twin

tails)

126-ft-long, 1.6 million Ibs at

Iiftoff (87.5 % fuel)

To be announced in June 1995

X-33 52 % scale of RLV, 100-ftIong, 55-ft wingspan, 350,000

Ibs at liftoff, 3 engines

RLV: 187-ft-long, 1.9 million Ibs

at liftoff, 15,000-40,000 Ibs

payload

SOURCES: Bruce A Smith, “NASA Speeds Selection of X-33, X-34 Plans, ” Aviation Week and Space Technology, vol. 142, No 11, Mar 13, 1995,

pp. 107, 109 Office of Technology Assessment, 1995
40 Office of Technology Assessment

The partially reusable X-34 hopes to achieve threefold cost reductions for launching small payloads.

Fiscal year Funding ($M)

1995 1 0

1996 30

1997 1 5

1998 10

1999 5

TOTAL 70

a FY 1995 dollars.

SOURCE: NASA, “A Cooperative Agreement Notice: Reusable Launch

Vehicle (RLV) Small Reusable Booster---X-34,” Jan. 12, 1995, p. A-5,

try cooperation and hopes that the program will

provide opportunities to develop and demonstrate

technologies applicable to future development of

a commercial follow-onto the X-33.38A low-cost

commercial version of the X-34 could significantly reduce NASA’s cost for launching small payloads (about 10 to 12 per year) as well as further

expand the commercial LEO market for small

payloads.

The X-34 CAN sets out three milestones for the

program: 1) test flights beginning in late 1997,2)

orbital launch by mid-1998, and 3) use as a NASA

test bed later in 1998. The X-34 planned by the

team of Orbital Sciences and Rockwell is a partially reusable, two-stages-to-orbit (TSTO) vehicle.39 NASA’s portion of the budget for the X-34

program is provided in table 10. Orbital Sciences

and Rockwell will each contribute an additional

$50 million and cover any cost overruns experienced by the program.

Space Shuttle

The NSTP also directs NASA to “continue to

maintain the capability to operate the Space

38 In particular, NASA hopes to advance the use of graphite composites in the primary vehicle structure, gain experience with autonomous

vehicle health management and monitoring, improve reusable cryogenic tank systems and thermal protection systems, and learn more about

RLV operations. 3 9The proposed X-34 will be carried on a large jet aircarft ---much like Orbital Sciences’ Pegasus SLV—to a specific altitude and distance

from the landing field. The aerodynamic, fully reusable booster vehicle of the X-34 will then be launched from the jet, climb out of the Earth’s

atmosphere, release a non-aerodynamic, expendable orbiting vehicle that is attached to the payload and then return to its landing field. The

orbiting vehicle, after separation from the reusable booster, will continue on and deliver the payload to its intended orbit.
The National Space Transportation Policy: Issues for Congress 41

Safety and obsolescence /

Selected cost reduction items I

Yes

Common technology

STS testbed

Liquid Fly Back Booster studies

■ Safety and obsolescence: major system upgrades

● Cost reduction

■ Major ground facility modernization

, Liquid Fly Back Booster implementation

■ Fleet augmentation—additional Shuttle units

Next Generation

System (NGS) decision

2005

Initial 2012

NGS STS availability with

operation minimum maintenance

d/

. Safety and obsolescence

■ Selected cost reduction items

■ Selected ground facility modernization

■ STS testbed for RLV

RLV phases

Tech/ DDT&E Transition Operations

demo

SOURCE: NASA, “NASA Implementation Plan for the National Space Transportation Policy, ” Washington, DC, Nov. 7,

1994, p. 19

Shuttle fleet and associated facilities.”40 In doing components and subsystems in an effort to reduce

so, the NSTP notes that NASA should focus on costs and improve safety, performance, and reliimproving “reliability, safety, and cost-effective- ability.

ness.” 41 NASA contends that in 2000 the government

In response to this directive, NASA proposes a and industry must decide on whether or not to purphased approach for the Space Shuttle program sue commercial development of a follow-on RLV.

(see figure 1). Until 2000, the RLV technology de- If either the government or industry decides to forvelopment program will proceed on a path to re- go commercial development of an RLV, NASA

place the Space Shuttle in 2012. Simultaneously, states that it “may need to embark on a substantial

NASA will continue to upgrade Space Shuttle [Space Shuttle] upgrade program” that would in40 The White House Office, Office of Science and Technology Policy, op. cit., footnote 3, sec.III(1).

41Ibid., sec. I(2).
42 | Office of Technology Assessment

clude ground facility modernization, Liquid Fly

Back Booster (LFBB) development, and likely

additional Shuttles.42 All improvements will be

aimed at reducing cost without comprising

Shuttle safety and reliability.

If, on the other hand, the government and industry decide to develop a commercial follow-on

RLV between 2000 and 2012, NASA will maintain those activities needed to “ensure that the

Shuttle system flies safely, reliably, and at a lower

cost until a replacement vehicle is operational.”43

Furthermore, NASA states that many of the

technologies developed during the X-33 and X-34

programs could potentially be implemented in the

Shuttle system to achieve safety, reliability, and

cost objectives.44

Med-Lite

NASA issued a request for proposal (RFP) for a

new ELV called Med-Lite on December 5, 1994.

NASA designed its Med-Lite procurement to

meet its planetary mission requirements for the

next 10 years. NASA believes the Med-Lite vehicle will fill a launch capacity gap between current small and medium launchers. NASA also

believes that procurement of the Med-Lite vehicle

will cost less than purchasing existing ELVs for its

future planetary missions. NASA’s projects a cost

of $25 million to $30 million per launch for the

Med-Lite.45

NASA received two proposals for the Med-Lite

procurement on February 28, 1995. One proposal

was made by McDonnell Douglas with Orbital

Science as a primary partner. The other proposal

was made by Russian-owned Polyot, which proposed using the Kosmos launch vehicle for

NASA’s planetary missions.46 NASA has officially selected the McDonnell Douglas/Orbital

Sciences team for negotiations leading to eventual

award of the Med-Lite contract.47 According to

NASA officials, final selection of a Med-Lite contractor will be made by August 1995.48

ELV Technology Programs

NASA has a rich history of ELV technology development. In response to the NSTP, however,

NASA is reducing its allocations for continued investment in ELV technologies. NASA expects to

complete its Cooperative ELV Tasks in 1996 at a

cost of $34 million in FY 1996.49 Nevertheless,

NASA will continue to make its facilities and expertise available to DOD to support ongoing efforts to improve existing ELV technology.

Issues for Congress

The NSTP and the DOD and NASA implementation plans raise several issues for Congress

relating to the development of new space transportation systems. In particular, this section discusses:

 questions raised by divided development responsibility between DOD and NASA;

 existing impediments to improved interagency

coordination;

 the potential for conflicts and redundancies

among the development programs;

 the effect of DOD’s emphasis on HLVs in the

EELV program;

42 NASA, op. cit., footnote 29, pp. 18, 21-22.

43 Ibid., p. 20.

44 Ibid., pp. 17-18.

45 This does not include extra costs that might be incurred due to launch delays. NASA, personal communication, February 1995.

46 The Med-Lite RFP contained two qualification criteria. First, the prime contractor must be a U.S.-owned company. Second, more than 50

percent of the Med-Lite vehicle must be produced in the United States. The Polyot proposal does not meet either of these qualification criteria.

47 Warren Ferster, “NASA Makes Med-Lite Award,” Space News, Mar. 27, 1995, pp. 1, 20.

48 NASA, personal communication, March 1995.

49 NASA, Office of Space Access and Technology, “Science, Aeronautics and Technology Fiscal Year 1996 Estimates,” Washington, DC,

p. SAT 5-5.
The National Space Transportation Policy: Issues for Congress | 43

 issues surrounding RLV development;

 questions about NASA’s current focus on

SSTO and what might happen if commercialization of an SSTO is forgone in 2000; and finally,

 NASA’s plans and contingencies for the Space

Shuttle beyond 2000.

ISSUE 1a: Divided responsibility and

inter-agency coordination

The NSTP divides the government’s primary

responsibilities for space transportation between

DOD and NASA, but it does not discuss how conflicts in space transportation policy will be resolved between the two organizations. The lack of

any such discussion in the policy and OTA’s interviews with Administration officials suggest that

conflicts in space transportation policy will be resolved on a case-by-case basis via negotiations between DOD and NASA, possibly with some

mediation by a third party within the executive

branch.50

At a minimum, divided responsibility will increase the need for DOD and NASA to coordinate

with one another as well as with the private sector,

especially if national space policy objectives are

to be achieved within tight budget constraints.

DOD will have to consult with each party that uses

ELV assets in order to manage those assets in a

manner conducive to all interests, and the same

applies to NASA for RLVs.

That DOD and NASA will adequately account

for the interests of all parties is not a certainty,

especially as funds available for space transportation diminish. When conflicts arise over how to

approach development of new space transportation systems, negotiations may succeed in keeping both DOD and NASA satisfied, but could fail

to account for the interests of all relevant parties,

especially those in the private sector.

Such negotiations could also lead to programmatic redundancies.51 The absence of central authority or leadership may allow DOD and NASA

to discount potential redundancies and promote

those projects that best address their own organizational requirements. As a result, hard space

transportation decisions may go unmade.

The imposition of a central authority has been

proposed by many analysts and policymakers as a

way to better account for all interests and avoid

programmatic redundancies.52 It is not clear, however, that a central authority would necessarily

remedy these problems. Both DOD and NASA

possess a considerable amount of bureaucratic and

political weight. Therefore, competing organizational interests could potentially override the

wishes of a central authority.

Existing legal and organizational obstacles

may also stand in the way of achieving the level of

interagency and private sector coordination

sought by a central authority. The recent controversy over NASA’s Med-Lite procurement may be

emblematic of this problem (see box 6). Med-Lite

has engendered a great amount of debate between

DOD and NASA, and illustrates how interagency

coordination can be precluded by current law, divergent interpretations of that law, and competing

organizational interests.

Therefore, although the Administration’s

policy calls on DOD and NASA to “combine their

[ELV] requirements into single procurements

when such procurements would result in cost savings or are otherwise advantageous to the government,” achieving this level of interagency

coordination may prove extremely difficult. Congress may wish to consider legislative action that

would facilitate improved interagency coordination on all space transportation policy matters. If

Congress decides to take up this issue, a comprehensive review of existing laws affecting such in50 Potential third parties within the executive branch include OSTP, NSTC, or either the President or Vice President.

51 See the discussion below about potential conflicts and redundancies within the proposed development programs.

52 For example, in the Bush Administration Vice President Quayle was given considerable authority over space transportation policy.
44 Office of Technology Assessment

In NASA’s view, the Med-Lite procurement will fill a gap in ELV launch capacity that lies between smalland medium-size launch vehicles, NASA officials see the Med-Lite program as a procurement of launch

services for planetary exploration that complies with the Launch Services Purchase Act of 1990,

DOD, on the other hand, has several concerns about the Med-Lite program.1 In particular, DOD officials

view Med-Lite as a launch vehicle development program—not a procurement of launch services. In their

eyes, the Med-Lite vehicle may threaten the ability of the EELV program to achieve maximum launch cost

reductions for DOD.2 NASA officials reject the claim that Med-Lite is a development program, They contend

that DOD’s position on the matter is heavily influenced by a traditional DOD philosophy of procuring launch

vehicles. NASA contends that it procures launch services-not launch vehicles —and that NASA gets its

money back if a launch is canceled, s

In response, DOD officials accuse NASA of using this argument to divert attention away from the development nature of the Med-Lite program. DOD points to the unusually long procurement period of four

years4 for the Med-Lite as an indication that, indeed, the procurement is a development program. Furthermore, DOD officials claim that the Med-Lite request for proposal clearly lays out a development program, s

This dispute over procurement philosophy shows just how difficult it is to reconcile conflicting interests,

This difficulty becomes even more apparent when one reviews the divergent interpretations regarding the

legality of the Med-Lite procurement. DOD has suggested that the Med-Lite procurement may be in violation of Public Law 102-139, Title Ill, October 28, 1991, section 2459d entitled “Prohibition of grant or contract providing guaranteed customer base for new commercial space hardware or services. ” This statute

1 DOD, “Med-Lite: A DOD White Paper,” Washington, DC, December 1994.

2 This point IS discussed in further detail later in this report.

3 DOD officials take issue with this characterization of DOD launch procurement by NASA. In their view, the Department procures

launch services as well, but writes in reflight provisions in its contracts in the event that a launch is canceled.

4 DOD notes that “typical lead times for procurements conducted by commercial satellite builders are about two years [and that]

NASA typically orders expendable launch vehicles 24-30 months ahead of launch, ” See DOD, op. cit. , footnote 1, p. 3.

5 DOD originally made this observation based on a draft Med-Lite request for proposal dated September 27, 1994, and noted that

this draft RFP provided for “extensive NASA oversight through design review, technical Interchange meetings, hardware acceptance

reviews, quarterly program reviews, daily engineering interface, Independent flight assurance reviews, hardware and software pedigree reviews, full approval of designs and modifications, and a series of mission and launch readiness reviews. ” See DOD, op cit ,

footnote 1, p 3

teragency coordination may be a prudent first time continuing some upgrades to the existing

step, as there will likely be much disagreement on

how the necessary reforms should be formulated.

Potential conflicts and redundancies

NASA has a number of space transportation

programs underway. Work has already begun on

both the X-33 and X-34 programs; test flights of

the DC-XA resumed in May 1995; upgrades to the

Shuttle continue; and the Med-Lite procurement

is moving forward. DOD, for its part, is pressing

ahead with the EELV program and at the same

ELV fleet. All of this amounts to a sizable portfolio of new space transportation technology development and procurement. While this multitrack

approach may reduce the overall risk of pursuing

new space transportation systems, it may also lead

to potential conflicts and redundancies.

EELV and RLV

NASA officials hope the proposed X-33 development program will lead to a commercial RLV that

will provide dramatically lower launch costs than
The National Space Transportation Policy: Issues for Congress 45

states that “no amount appropriated to the National Aeronautics and Space Administration in this or any

other Act with respect to any fiscal year may be used to fund grants, contracts or other agreements with an

expected duration of more than one year, when a primary effect of the grant, contract, or agreement is to

provide a guaranteed customer base for or establish an anchor tenancy in new commercial space hardware or services..."6 DOD officials think that NASA has designated its planetary missions as an anchor

tenant for Med-Lite and notes that it is unusual for any government entity to purchase launch services for

yet unspecified payloads.7

NASA officials counter this contention and argue that, in fact, the Med-Lite procurement is required by

the law. Pointing to the Launch Services Procurement Act of 1990, NASA officials believe that—with minor

exception—it must purchase launch services in a competitive manner from commercial providers for its

primary payloads,8 NASA officials do not believe that any of the exceptions provided for in the law apply.

Therefore, in their view, NASA must go forward with the Med-Lite procurement.

While divergent legal interpretations have proven problematic, other legal intricacies not under dispute

have also influenced the Med-Lite debate. DOD offered to launch three NASA planetary exploration missions on three Titan II launch vehicles. In return, DOD asked only that NASA pay for refurbishment and

launch operations at an approximate cost of $18 million per vehicle. This option, however, was legally precluded by the Economy Act, which requires that DOD sell its launch vehicles to NASA at full priceapproximately $54 million per vehicle. This difference in cost effectively precluded NASA from considering

this option because the Med-Lite cost target is $25 million to $30 million per launch.

6 DOD, op. cit. , footnote 1, p. 3-4

7 NASA projects five “firm” launches between now and 1999 Only three, however, have been named Mars Orbiter-2, Mars

Lander-1, and the Far Ultraviolet Spectroscopic Explorer (FUSE) See Warren Ferster, “NASA Makes Med-Lite Award, ” Space News,

Mar 27, 1995, pp. 1, 20

8 Exceptions include instances in which “(1) the payload requires the unique capabilities of the space shuttle, (2) cost effective

commercial launch services to meet specific mission requirements are not reasonably available and would not be available when

required, (3) the use of commercial launch services poses an unacceptable risk of loss of a unique scientific opportunity, or (4) the

payload serves national security or foreign policy purposes “ See Title II, Section 204b of the National Aeronautics and Space Administration Authorization Act, FY 1991

SOURCE Off Ice of Technology Assessment, 1995

existing launch systems. DOD’s investment in EELV program from achieving long-term cost reEELV could potentially preclude or hinder

achievement of this objective. If the EELV program succeeds in making the U.S. space transportation industry more competitive in the global

marketplace for launch services, the incentive to

sustain a continuous stream of private investment

into the commercial development of an RLV over

several years may well diminish.

Nonetheless if commercial development of an

extremely low-cost RLV proceeds, then, at a minimum, the RLV will compete with the EELV for

payloads. This competition could prevent the

duction targets set by DOD. For example, if extremely low launch prices were charged during the

pioneering flight stage of the RLV, the RLV would

probably attract payloads away from the EELV.

This would reduce EELV production volumes—

offsetting or potentially outweighing any gains in

production volume created by commonality within the EELV family.

This conflict between the EELV and RLV programs has prompted some analysts to question the

prudence of pursuing both programs simultaneously. Some have suggested forgoing the EELV
46 Office of Technology Assessment

Artist's conception of Rockwell's proposed commercial

follow-on RLV to the X-33.

program and investing the $2 billion in RLV development instead. They argue that the existing

ELV fleet can adequately support DOD’s manifest

of payloads indefinitely or until a low-cost RLV is

developed.

In response to this proposal, DOD officials note

that, in an environment of declining space budgets, the Department must act now to lower its

launch costs. They further note that there is substantial uncertainty surrounding the RLV development program and its ability to achieve radical

launch cost reductions. Therefore, DOD officials--who are fairly confident that the EELV

program can reduce overall launch costs for the

Department-believe they have chosen a prudent

course of action.

NASA officials offer a similar line of reasoning

for the RLV development program to those that

suggest it be eliminated in favor of a scaled-up

EELV program. Current operating costs for the

Space Shuttle and growing budget constraints

have put NASA in the position of pursuing SSTO

as a potentially low-cost Shuttle alternative, and

NASA officials argue that any delay in pursuing

SSTO would require a major investment in the aging Shuttle fleet to keep it in operation beyond

2012.

X-33 and X-34

NASA officials issued CANS for both the X-33

and X-34 because they believe that a successful

technology development and demonstration effort must fund a diverse number of projects. While

conceding that some projects will be successful in

maturing the technology and others will not, they

argue that a premature cessation of any given project would leave the overall program vulnerable to

reliance on a potentially “wrong” technology.

A dual-track strategy, however, is most effective when both tracks are on course to solve the

same problem. The X-33 and X-34 programs do

not address the same problem. The X-33 program

is focused on developing a fully reusable SSTO to

replace the Space Shuttle (i.e., for use as a medium-to-heavy-lift booster). The X-34, on the other hand, addresses the problem of developing a

partially reusable launch system for delivering

small payloads to orbit (i.e., a small-sized booster). Therefore, critics of NASA’s dual-track strategy contend that the absence of one or the other

X-vehicle would not increase the likelihood of arriving at the “wrong” technological answer, because each program-from the start-has been

designed to pursue a different technological answer.

Some analysts and policymakers have suggested canceling the X-34 program based on this

argument. Others have suggested terminating the

X-34 program because they believe it is more of

an operational vehicle development program than

a true experimental vehicle program. Those making this latter argument note that the X-34 program is scheduled to conduct only a small number

of test flights (which critics do not believe will be

conducted in time to inform X-33 development),

with only two technology demonstration flights
The National Space Transportation Policy: Issues for Congress | 47

before becoming a commercially operated vehicle

sometime in 1999.53

Despite the criticisms leveled against the X-34

program, there are several reasons for proceeding

with X-34 development. First, the X-34 could potentially provide an early in-flight test bed for

RLV-related technologies.54 This experience

could positively affect the design of the X-33 by

steering it toward or away from certain technologies. Second, one of the objectives of the X-34

program is to achieve a threefold reduction in the

cost of access to space for small payloads.

NASA and other government payloads constitute a major portion of the small payload market.55 Therefore, if the X-34 program succeeds in

achieving targeted cost reductions, NASA—for a

relatively small investment in the X-34 program—will have achieved significant long-term

savings for the government and will quickly recoup its $70 million investment.56 Additionally, if

the X-34 dramatically reduces the price charged

for launching small payloads, the commercial

benefit to the United States could show up in a

larger market share of the global launch services

industry, expanded space-based business opportunities, and lower prices for consumers for both existing and new space-based services (e.g.,

telecommunications).

Med-Lite and EELV

As noted in box 6, NASA is committed to the

Med-Lite procurement while DOD officials are

concerned that the Med-Lite vehicle may threaten

the ability of the EELV program to achieve maximum launch cost reductions for DOD. DOD officials would be less concerned if they felt that the

manufacturer of the Med-Lite could successfully

scale up its vehicle design to meet DOD heavy-lift

requirements. If this were possible, then the MedLite would be a potential EELV candidate. But because DOD officials have little confidence that the

Med-Lite can be successfully scaled up, they are

concerned that the Med-Lite might eventually

compete with the EELV for medium payloads—

thereby reducing EELV production volumes and

possibly dampening overall EELV cost savings.57

Additionally, the Med-Lite vehicle may slow, if

not undermine, the industry consolidation currently underway in space launch services that

some DOD officials believe is necessary.

Space Shuttle and RLV

NASA has proposed to phase in any newly developed RLV between 2005 and 2012. During this

period, the Space Shuttle would continue flying,

while the RLV would fly only a few times a year.

The yet unproved reliability of the RLV combined

53 At present, NASA has yet to decide what technologies it wishes to test on these flights. NASA officials are contemplating using the flights

to conduct high-speed aerodynamic, aeropropulsion, or structural tests. Although such tests would be conducted on the reusable suborbital

rocket booster, they would not necessarily be geared toward testing reusable launch technologies. Because the small reusable rocket booster

resembles an aircraft in many respects, the tests could potentially be geared to test aircraft-related technologies instead.

54 Many RLV-related technologies have undergone extensive ground testing. This testing seldom mimics what might occur in flight. Therefore, first-time flight testing of these technologies on a relatively inexpensive X-34 may be more prudent than trying them out for the first time

on either the Space Shuttle or the X-33.

55 Recall that NASA plans to launch 10 to 12 small payloads per year over the next 10 years. DOD will probably contribute another 1 to 4

small payloads per year over the same period of time.

56 If the X-34 achieves a threefold reduction in the cost of access to space for small payloads, NASA would recoup its investment after

launching approximately seven payloads of an average weight of 1,500 lbs. This estimate would vary depending on the actual cost reductions

achieved as well as the actual weights of the payloads launched.

57 Recent comments by industry officials regarding Med-Lite indicate that the threat perceived by DOD may not be very real. Industry

seems to be skeptical of the long-term viability of a Med-Lite vehicle—instead viewing the EELV as the vehicle of the future. See Warren Ferster, op. cit., footnote 47.
48 Office of Technology Assessment

with the need to fly missions to the International

Space Station would probably preclude the option

of grounding the Space Shuttle during this period.

Therefore, NASA might require substantial funding during these years in order to support the simultaneous operation of the Space Shuttle and

flight testing of the RLV.

 HLVs drive the EELV program

Historically, cost has taken aback seat to mission in defense-related space activities. Budget reductions, however, have prompted DOD to reduce

how much it spends on space transportation. The

U.S. Air Force plans to reduce its out-year space

transportation budgets by downsizing its payloads and phasing out its heavy-lift requirements. 58 The intelligence community, however,

has a continued need for HLVS.

59 Therefore, because DOD believes larger cost savings are possible in the HLV class than in the MLV class, it has

geared the EELV program toward achieving significant HLV cost reductions.60

Some industry officials have expressed concern that DOD’s focus on HLV cost reductions ignores private sector concerns.61 In their view, the

market for medium payloads is the biggest portion

of the satellite market. Therefore, U.S. launch providers, satellite owners, and ultimately the consumers of space-based services would much

prefer cheaper, more reliable MLVs over cheaper,

more reliable HLVs. Others note that commercial

geosynchronous-Earth-orbit (GEO) payloads are

getting heavier and contend that significant HLV

cost reductions would be commercially attractive,

DOD has a continuing need for HLVs, such as this Titan IV. A

heavy-lift EELV is scheduled to be operational in 2005.

as evidenced by ESA’s development of the heavylift Ariane 5. It is unlikely, however, that the

heavy-lift EELV will be able to compete successfully in the commercial market for launch services-even if it achieves a 40-percent cost

reduction over the Titan IV.62

58 Currently, the U.S. Air Force is purchasing enough Titan IVs to launch its remaining heavy payload manifest.

59 U.S. Department of Defense, personal communication,January 1995. See also U. S. Department of Defense, op. cit., footnote 15, p.II-11.

6 0DoD officials expect that the EELV program will achieve a maximum cost savings of 40 percent for HLVs, while only achieving a maximum of 10 percent cost savings for MLVs. U.S. Department of Defense, personal communication, January 1995. 61 See the section covering fundamental objective #4 for a more developed discussion of the private sector role in space transportation

policy decisionmaking. 6 2ESA developed the heavy-lift Ariane 5 so that Arianespace will be able to continue its practice of launching multiple payloads per launch

when such a practice is feasible.
The National Space Transportation Policy: Issues for Congress | 49

ISSUE 1d: RLV development

NASA has pointed to its RLV development

strategy as one example of its “new way of doing

business.” This section examines some of the concerns that have emerged outside of NASA as the

result of its proposed RLV development strategy.

Property and Data Rights and

Core Technologies

Both NASA and its X-34 industry partners have

argued that technical data acquired on the X-34

program could be of potential use to the X-33 program. Even if the technical data gathered on the

X-34 program were useful, however, any effort to

transfer that data to the X-33 program may face

notable difficulties.

The CANs for both the X-33 and X-34 grant

specific property and data rights to both prime and

lower-tier contractors. For example, the CANs

state that NASA—in the event of a joint invention

with an industrial partner—will attempt to “refrain from exercising rights which would adversely affect commercialization” by that industrial

partner.63

NASA’s desire to transfer technology from the

X-34 to the X-33 may put a strain on its ability to

adhere to the spirit of this language. This may be

especially true if a contractor or subcontractor that

has developed technology for the X-34 is not part

of the X-33 development team. It would be less

problematic if firms developing technology for

the X-34 were also on the X-33 team.64

Concerns about property and data rights are not

limited to technology transfer from the X-34 to the

X-33. In conversations with industry, OTA has

learned that property and data rights issues surrounding the proposed RLV core technology development programs are a point of major concern,

particularly those core technology development

programs planned for Phase II of the X-33 program.65 At present, NASA has not told industry

whether these core technology development programs will be controlled by NASA, awarded competitively, or granted to the X-33 contracting

team.66

Industry officials contend that if NASA retains

control or decides to offer these core technology

development programs to all of industry, property

and data rights issues could—in one way or another—potentially hamper technology transfer or

commercialization.

For example, if NASA decided to honor the

X-33 CAN language concerning property and data

rights and allow firms to retain title to property

and data rights,67 technology transfer would depend on industry negotiations. These negotiations

could potentially slow or thwart the commercialization of a follow-on RLV if compensation paid

to firms developing core technologies significantly reduced the return on investment for developers

of the RLV. Also, industry negotiations could result in a waste of government investment if developers of the RLV dismiss technologies developed

by other firms.

If NASA decides to take the opposite approach

and exercise its title rights, it could transfer a

technology out of the core technology development programs and into the commercial development of the follow-on RLV without compensating

the firm that developed the technology. Any firm

losing its title rights might reasonably complain

that NASA had violated the spirit of the CAN by

63 NASA, op. cit., footnote 33, p. ii.

64 Rockwell International is the only firm competing as a major team member on both X-vehicles. Orbital Sciences, for its part, has told OTA

of its willingness to share new X-34 technology with NASA and X-33 contractors.

65 NASA projects that it will contribute roughly $187 million toward core technology development during Phase II.

66 NASA’s current position appears to be that it will control core technology development program decisions and obtain input pertinent to

making those decisions from the X-33 contracting team.

67 In the case of inventions developed by small or disadvantaged businesses or nonprofit organizations, NASA must, by law, allow such

firms to keep their property and data rights if they elect to retain them. See NASA, op. cit., footnote 33, p. iii.
50 Office of Technology Assessment

ers of the RLV decide to fund additional core

technology programs of their own.

In any case, industry teams preparing business

plans for Phase II proposals of the X-33 program

will want to have a clearer understanding of how

funds for the core technology development programs will be distributed before they settle on

their final Phase II proposals.

X-33: Alternative Programmatic Approaches

Some critics of the proposed X-33 program argue

that NASA should look back to the early days of

jet aircraft for a development model. They argue

that the X-33 should not be designed in the shadow cast by future requirements for the International Space Station. Instead, NASA should fully fund

an X-33 program that focuses solely on demonstrating SSTO technology. 68

NASA contends that, although the X-33 program is not fully funded, it is, indeed, an X-program that focuses solely on demonstrating SSTO

technology. NASA justifies its approach because

of declining space budgets and because the

eventual intent of the program is to commercialize

a follow-on RLV. Therefore, NASA believes that

industry should be expected to contribute to X-33

development.

Others have suggested a competitive fly-off between or among competing X-33 concepts. 69

NASA has expressed an interest in conducting

such a fly-off. Proponents of a fly-off strategy believe that it would decrease the possibility of

choosing the “wrong” technology and increase the

likelihood of retaining competition in the domestic launch vehicle industry.

To conduct a fly-off that would be technologically meaningful, the government would need to

budget more money in the near term than currently

planned. This increased government investment

The YF-22 (top) beat the YF-23 (bottom) in a head-to-head

fly-off competition for the U.S. Air Force's advanced tactical

fighter procurement.

undercutting the fro’s ability to commercialize

technologies in which it invested.

And finally, if NASA chooses to compete the

core technology development programs on the

open market, NASA would effectively be the entity to decide what core technologies should or

should not be developed, rather than developers of

the RLV. While this may not be an unusual role for

government, it may not be the most cost-effective

path to a commercial RLV, especially if develop68 Some proponents of this view are suggesting a figure of approximately $2 billion for the period spanning FY 1996-2000, an amount

comparable to DOD EELV funding. 6 9A fly-off would entail development of multiple versions of the X-33 by competing teams. Each version of the X-33 would undergo a

similar regime of flight tests. At the end of flight testing, each team could move forward with commercialization of its concept if it chose to. A

fly-off competition need not be limited to SSTO concepts. Such a fly-off could be open to other RLV concepts such as TSTO.
The National Space Transportation Policy: Issues for Congress | 51

runs counter to the trend toward smaller government space budgets. Moreover, a fly-off strategy

would entail significant financial risk for industry

participants. This financial risk might be lowered

by a winner-take-all fly-off strategy, with the loser

being reimbursed for its efforts. This option, however, would further increase the cost to government for pursuing such a strategy.

The Role of DOD Payloads in

RLV Development

Many of the industry-government partnership

schemes for RLV funding under debate within the

executive branch contain an implicit requirement

that some DOD payloads be committed to early

RLV launches. DOD officials cite the Space

Shuttle experience as their reason for being hesitant to make any such commitment. DOD officials

also note that the proposed RLV will initially only

place payloads in LEO at altitudes comparable to

that of the International Space Station. Therefore,

because most DOD payloads are placed in higher

orbits, an upper stage would be required for DOD

payloads to reach their mission orbit. The addition

of an upper stage would add technical complexity

and increase the cost for such missions.70

Excluding DOD payloads during the pioneering flight phase of the commercial follow-on RLV

would drive the price of launching the RLV higher

if other payloads cannot be attracted to fly aboard

the new system.71 The commercial RLV developer could attract other payloads by offering to

deploy them at little to no cost during RLV test

flights. Critics of this proposal note, however, that

it would undercut other U.S. commercial launch

vehicles and limit their ability to become more

competitive by taking away a piece of their market, thereby reducing their volume of production.

At this time it is unclear how this issue will be

resolved. NASA and its commercial partners need

a sufficient number of payloads to both attract potential investors and prove the reliability of RLV

technology during its pioneering flight stage.

DOD wishes to safeguard its missions and is not

willing to contribute payloads in the pioneering

stage of RLV flight. And attempts to attract other

payloads to the pioneering flight stage of the RLV

may undercut the commercial position of the rest

of the U.S. space transportation industry.

ISSUE 1e: SSTO?

The prudence of focusing the RLV development program on the SSTO concept is a matter of

some debate. Some industry analysts claim that

NASA has prematurely committed to SSTO by

unnecessarily ruling out other RLV options, particularly a fully reusable TSTO. In their view, the

RLV development program may end up being less

revolutionary than it otherwise might be if the

TSTO option were retained in the short term. Other analysts believe that SSTO is the only alternative that will sufficiently reduce the cost of access

to space and claim that NASA is proceeding too

cautiously. Table 11 summarizes the advantages

and disadvantages of both the SSTO and TSTO reusable concepts.

SSTO or RLV?

The NSTP assigns NASA the responsibility of

leading the effort to develop and demonstrate

“next generation reusable space transportation

systems” and offers SSTO as only one possible

technological option.72 Yet, the policy also

instructs NASA to focus research “on technologies to support a decision no later than December

1996 to proceed with a sub-scale flight demon70 Similarly, most medium-sized commercial satellites are stationed in orbits higher than that of the International Space Station. Therefore,

they too would require an upper stage—at added expense—in order to reach their desired orbit.

71 The non-recurring development costs for a commercial RLV system would have to be amortized over a smaller number of launches,

thereby raising the cost per launch.

72 The White House Office, Office of Science and Technology Policy, op. cit., footnote 3, sec. I(3).
52 Office of Technology Assessment

SSTO TSTO

Pros Uses one vehicle Instead of two

Avoids cost and complexity of staging

Requires less complex aerodynamic analysis

and design than TSTO

Simplifies ground and flight operations compared to TSTO

Cons Requires high fuel mass fraction (i.e., low structural weight fraction) not achievable with existing

technology

Requires performance maximization (i.e., small

performance margins)a

Uses engines at all altitudes, although engines

are optimized for one altitudeb

Reduces technological difficulty of reaching orbit

compared to SSTO

Allows for use of expendable thrust augmentation

(i.e., strap on boosters)

Allows designers to build in larger performance

margins a than SSTO

Adds cost and complexity of staging

Makes ground and flight operations more costly and

complicated than SSTO

Requires more complex aerodynamic analysis and

design than SSTO

Requires reintegration of stages before reflight

a The term “performance margin” refers to the difference between the designed and required performance of any given component or subsystem A

space transportation system with small performance margins must operate close to its design limit A space transportation system with large performance margins does not have to, but can, operate close to its design Iimit.

b Engines could be optimized for multiple altitudes. This, however, would require complex and expensive variable geometry engines

SOURCES: Lt. Col. John London, U.S. Air Force, “Affordable Space Access: Issues, Choices, and Methods, ” Space Workshop ’95 Reducing Space

Mission Costs, Denver, CO, Mar 8-10, 1995 Off Ice of Technology Assessment, 1995.

stration which would prove the concept of singlestage-to-orbit.” 73

NASA has responded to this pair of directives

by proposing what it believes to be a phased

technology maturation program for the SSTO

concept that periodically pauses along the way to

evaluate its progress. If at any of the designated

evaluation points the Administration decides that

insufficient progress is being made, the pursuit of

SSTO can be called off. NASA could then consider other RLV concepts and possibly draw from

past SSTO technology development where applicable.

Some space policy analysts have taken issue

with this approach. They argue that it grants—to

the detriment of other RLV concepts—too much

attention to the SSTO concept. They note that, because SSTO truly is a revolutionary goal, pursuing it with such vigor and then having to break off

that pursuit in favor of upgrading the Space

Shuttle or perhaps pursuing another RLV concept

may lead to an inefficient and suboptimal result.

For example, the addition of any type of first stage

to a vehicle originally designed as an SSTO—

whether it be a reusable booster, a set of strap-on

solid rocket motors, or an expendable, liquidfueled engine—would probably require a costly

and time-consuming structural redesign in order

to accommodate the additional thrust at takeoff.

One alternative to NASA’s current RLV development strategy would be a more evolutionary approach—whereby “reusable building block”

technologies would be gradually developed and

tested in existing launch systems in the hope that

they could eventually be expanded upon and used

in an operational RLV (either SSTO or TSTO).74

Another alternative would be to design, from the

73 Ibid., sec. III(2)(b).

74 Buzz Aldrin with John Kross, “Reusable Launch Vehicles: A Perspective,” Ad Astra, Marcch/April 1995, p. 31.
52 Office of Technology Assessment

SSTO TSTO

Pros Uses one vehicle Instead of two

Avoids cost and complexity of staging

Requires less complex aerodynamic analysis

and design than TSTO

Simplifies ground and flight operations compared to TSTO

Cons Requires high fuel mass fraction (i.e., low structural weight fraction) not achievable with existing

technology

Requires performance maximization (i.e., small

performance margins)a

Uses engines at all altitudes, although engines

are optimized for one altitudeb

Reduces technological difficulty of reaching orbit

compared to SSTO

Allows for use of expendable thrust augmentation

(i.e., strap on boosters)

Allows designers to build in larger performance

margins a than SSTO

Adds cost and complexity of staging

Makes ground and flight operations more costly and

complicated than SSTO

Requires more complex aerodynamic analysis and

design than SSTO

Requires reintegration of stages before reflight

a The term “performance margin” refers to the difference between the designed and required performance of any given component or subsystem A

space transportation system with small performance margins must operate close to its design limit A space transportation system with large performance margins does not have to, but can, operate close to its design Iimit.

b Engines could be optimized for multiple altitudes. This, however, would require complex and expensive variable geometry engines

SOURCES: Lt. Col. John London, U.S. Air Force, “Affordable Space Access: Issues, Choices, and Methods, ” Space Workshop ’95 Reducing Space

Mission Costs, Denver, CO, Mar 8-10, 1995 Off Ice of Technology Assessment, 1995.

stration which would prove the concept of singlestage-to-orbit.” 73

NASA has responded to this pair of directives

by proposing what it believes to be a phased

technology maturation program for the SSTO

concept that periodically pauses along the way to

evaluate its progress. If at any of the designated

evaluation points the Administration decides that

insufficient progress is being made, the pursuit of

SSTO can be called off. NASA could then consider other RLV concepts and possibly draw from

past SSTO technology development where applicable.

Some space policy analysts have taken issue

with this approach. They argue that it grants—to

the detriment of other RLV concepts—too much

attention to the SSTO concept. They note that, because SSTO truly is a revolutionary goal, pursuing it with such vigor and then having to break off

that pursuit in favor of upgrading the Space

Shuttle or perhaps pursuing another RLV concept

may lead to an inefficient and suboptimal result.

For example, the addition of any type of first stage

to a vehicle originally designed as an SSTO—

whether it be a reusable booster, a set of strap-on

solid rocket motors, or an expendable, liquidfueled engine—would probably require a costly

and time-consuming structural redesign in order

to accommodate the additional thrust at takeoff.

One alternative to NASA’s current RLV development strategy would be a more evolutionary approach—whereby “reusable building block”

technologies would be gradually developed and

tested in existing launch systems in the hope that

they could eventually be expanded upon and used

in an operational RLV (either SSTO or TSTO).74

Another alternative would be to design, from the

73 Ibid., sec. III(2)(b).

74 Buzz Aldrin with John Kross, “Reusable Launch Vehicles: A Perspective,” Ad Astra, Marcch/April 1995, p. 31.
The National Space Transportation Policy: Issues for Congress | 53

beginning, an SSTO capable of accommodating

strap-on solid rocket motors to augment thrust.

This has the advantage of avoiding the structural

redesign noted above, and it would also provide a

contingency for ensuring the nation’s continued

ability to design and produce long-range ballistic

missiles.

Despite the criticisms, NASA believes that its

current approach is prudent. It believes that SSTO

is the RLV option that will reduce launch costs the

most. Therefore, SSTO is deserving of a vigorous,

yet carefully measured, technology development

program—something NASA believes it has

achieved with the X-33 program.

Criteria for Judging X-33 Program Success

Although the X-33 CAN sets out broad criteria for

selecting a contractor for the fabrication and test

flight phase (i.e., Phase II) of the program,75 these

criteria address the conditions for initiating Phase

II and awarding a Phase II contract, but not for

judging the success of Phase II.

The absence of specifically delineated criteria

for evaluating the success of Phase II is troubling

for two reasons. First, it may make it difficult for

industry to predict how NASA will reach future

X-33 program decisions. This uncertainty will affect the amount of money firms will be willing to

invest in the X-33, if they choose to participate at

all. Second, it will make it more difficult for

NASA to explain to Congress and others why certain X-33 program decisions were made.

NASA, in conjunction with OSTP and the Office of Management and Budget (OMB), has established criteria to support both the 1996 and

2000 decisions.76 They note that these criteria address cost, operations, and design and development factors and that all of the criteria (for both the

1996 and 2000 decisions) include a link to any follow-on commercial RLV development activities

that might be proposed by prospective contractors.77

Some have suggested that because, in the future, Congress will be asked to provide continued

annual support for the X-33 program, Congress

may wish to ask that NASA provide a set of specific intermediate criteria for evaluating X-33 program success on an annual basis. Some analysts

have noted, however, that annual evaluation of the

X-33 program may slow the development process

as a result of increased industry reporting requirements and the added dimension of program uncertainty that such evaluations would introduce.

If SSTO Commercialization Does Not

Begin in 2000: What Next?

There is a distinct chance that industry will forgo

commercial development of an RLV in 2000, either because the technical risks associated with the

SSTO concept were not sufficiently resolved by

the X-33 program or because market conditions

do not justify the investment. If industry decides

not to proceed with commercialization of an

SSTO vehicle in 2000, one of five scenarios could

unfold.

Scenario 1: NASA decides to extend the

SSTO development program beyond 2000 and

upgrade the Space Shuttle to extend its operation until the newly projected date (sometime

beyond 2012) for RLV replacement. NASA

might choose this course of action if it believes

that the technical risks associated with SSTO are

75 These criteria address cost, operations, and design and development factors, and all of the criteria include a link to any follow-on commercial RLV development activities that might be proposed by a prospective contractor.

76 NASA, The White House, Office of Science and Technology Policy, and U.S. Office of Management and Budget, “Decision Criteria for

the Reusable Launch Vehicle Technology Program Phases II and III,” May 1, 1995.

77 These criteria link the decision to proceed with Phase III of the X-33 program (i.e., development of a commercial follow-on RLV) to the

ability of the X-33 and X-34 programs to meet “their respective program goals within a fixed Government budget [and demonstrate] that the

industry-led, co-funded development of advanced space technology is an efficient, cost-saving program approach.” Ibid., p. 12. Industry officials involved in the X-33 program are troubled by this link because they do not believe that X-34 program success is necessary to justify proceeding with Phase III of the X-33.
54 | Office of Technology Assessment

on the verge of being resolved. NASA’s ability to

choose this option would be constrained in two

ways. First, NASA would have to convince Congress to fund both a continued SSTO development

program and a Shuttle upgrade program that will

probably cost more than current upgrade plans.

Second, industry may decide that it is not in its

long-term interest to pursue continued development of SSTO.78

Scenario 2: NASA decides to initiate a partially or fully reusable TSTO development program starting in 2000 and upgrade to the Space

Shuttle to extend its operation until the newly

projected date (sometime beyond 2012) for

RLV replacement. NASA might pursue this option if it believes that the X-33 program achieved

significant advances in RLV-related technologies,

but decides that an SSTO vehicle remains beyond

reach. NASA would probably request a more significant budget increase than that required for the

previous scenario because NASA is skeptical that

a TSTO designed to replace the Space Shuttle

would be commercially viable and believes TSTO

development would have to be fully funded by

NASA. Without a significant budget increase,

fully funding TSTO development might hamper

NASA’s ability to pursue the requisite Shuttle upgrades necessary to keep it flying safely until the

TSTO comes on line.

The X-33 contractor would likely have an advantage over its competition in a TSTO competition if NASA could obtain from Congress the

budget needed to fund the entire development of

the vehicle. This advantage might be lessened if

NASA, for whatever reason, turned to industry to

partially or fully fund TSTO development.79

Were NASA to decide to select another contractor for the TSTO, it could resurrect NASA’s dilemma over property and data rights for

technologies developed during the X-33 program.

NASA could exercise its title rights to inventions

(and any associated data) developed in the X-33

program and transfer this knowledge to the new

TSTO contractor. Alternatively, NASA could allow property and data rights issues to be worked

out within industry. This, however, would raise

costs and possibly slow down the development of

the TSTO.

Regardless of the route that NASA takes to develop a TSTO under this scenario, some analysts

believe that the resultant TSTO would be suboptimal because all prior development work will have

focused on SSTO. Furthermore, they believe that

the resultant TSTO would probably fall short of

achieving the level of launch cost reductions that

might otherwise have been achieved with a partially or fully reusable TSTO had the TSTO concept not been discounted by NASA earlier in the

development process.

Scenario 3: Industry decides to commercialize a partially or fully reusable TSTO that

would allow NASA to retain its current plans

for replacing the Space Shuttle in 2012 with the

new RLV. Industry might pursue this option if it

thought that RLV-related technology advances

achieved in the X-33 program were not enough to

justify SSTO development, but did make TSTO a

viable technology option. As noted in the discussion of the previous scenario, NASA officials

question the commercial viability of TSTO.

Therefore, industry would likely require a package of financial incentives—similar to, if not

78 The X-33 contractor may decide that any continued investment in SSTO will not reap sufficient financial returns. Other potential contractors may conclude that the level of investment required for it to spool up an SSTO program and bring it to fruition by commercializing an SSTO

vehicle would outweigh any potential financial reward from doing so.

79 Any technical advantage gained by the X-33 contractor during development may be partially counterbalanced by the fact that the contractor invested substantial resources in a technology development program that did not result in an operational vehicle.
The National Space Transportation Policy: Issues for Congress 55

greater than, those it is currently demanding for

SSTO development—before proceeding with

commercialization of a TSTO vehicle.80 Any

TSTO developed under this scenario might be

suboptimal for the same reasons articulated in the

previous scenario.

Scenario 4: NASA decides that it wants to

initiate a program of block upgrades to the

Space Shuttle that would extend its operations

until 2020. NASA would likely pursue this option

if its current RLV technology development effort

failed to reduce the technical risk associated with

RLV launch systems sufficiently. NASA contends

that wholesale block upgrades to the Space

Shuttle would cost roughly $5 billion to $10 billion81 on top of the current expenditures of about

$4 billion per year for Space Shuttle operations.

Improvements would likely include a handful of

options listed in NASA’s implementation plan as

well as the incorporation of certain technologies

successfully proven during the X-33 program (see

section below on the Space Shuttle beyond 2000).

Scenario 5: NASA decides to reevaluate its

plans for the future, possibly commissioning a

new space transportation study or perhaps

considering alternative options already examined in past studies (e.g., development of a

new, low-cost ELV that is capable of deploying

either a cargo canister or a small, manned

space vehicle). NASA might pursue this option if

it believes all other options are not viable. Continued Space Shuttle operation would depend on the

operational status of the International Space Station. If operation of the International Space Station ceases, for any reason, Shuttle flights could

potentially be suspended-which would enable

NASA to direct more funds toward the development of alternative space transportation options.

Block upgrades initiated in 2000 could keep the Space

Shuttle in operation until 2020.

If Shuttle flights to the International Space Station

are still necessary, the range of alternative space

transportation options that NASA would be capable of pursuing may well be limited.

 Space Shuttle--beyond 2000

If the government and industry decide in 2000

to forgo continued RLV development, NASA

plans block upgrades to the Space Shuttle. These

improvements are needed to ensure safe operations until 2020. At some point, however, the

introduction of new technologies results in a substantially new vehicle with many of the same testing and safety concerns of a new vehicle.

Furthermore, if reconstitution of old Space

Shuttle production capabilities becomes necessary, it will require both time and money.

8 0Possible financial incentives include some type of guarantee fromthe government to launch its payloads exclusively on the newly developed TSTO. Another option would be to simply contribute government funds to the development of the vehicle. 81 Daniel S. Goldin, NASA Administrator, testimony at a hearing before the Subcommittee on Space and Aeronautics, Committee On Science, U.S. House of Representatives, Washington, DC, Feb. 13, 1995. Some industry officials believe that this projection is an overestimate.

One official suggests that Shuttle operations costs could be reduced by a $1 billion per year by privatizing the Shuttle and initiating a targeted

upgrade program costing only $200 million per year.
56 | Office of Technology Assessment

NASA’s implementation plan lists several potential upgrades that might be pursued. One of the

main improvements proposed by NASA is the

substitution of LFBBs for the existing solid rocket

boosters (SRBs) between 2007 and 2010.82

NASA touts the benefits of LFBBs in its implementation plan—namely increased safety, payload performance, and launch probability as well

as reduced annual operating costs compared with

SRBs. The implementation plan does not, however, outline any contingencies to address potential negative consequences associated with the

switch over to LFBBs.83

Those concerned with maintaining a continued

capability to produce ballistic missiles might have

reason to be troubled by this omission. Replacing

SRBs with LFBBs may have a significant impact

on the solid rocket motor industry. NASA’s implementation plan, however, does not address the

national security implications of its SRB phaseout.84

In fact, NASA’s implementation plan pays little

direct attention to the Space Shuttle industrial

base.85 NASA’s implementation plan seems to assume that the industrial base will possess the vitality to perform the block upgrade efforts cited by

NASA as necessary to keep the Space Shuttle flying until 2020. OTA has spoken with a number of

industrialists, however, particularly in the lower

tiers, who are concerned with the present health of

the industrial base and warn that reconstituting the

Space Shuttle industrial base for the block upgrades requires more planning than NASA is currently doing.86 The lack of planning suggests to

some industrialists that NASA is not serious about

upgrading the Space Shuttle beginning in 2000.

Finally, there remains the prospect of another

Space Shuttle accident that results in the loss of an

Orbiter. Past OTA analysis has shown that if

Shuttle reliability is 98 percent there is a 50-50

chance of an Orbiter loss in the next 34

launches.87 Such a loss would have major repercussions for both the Space Shuttle and X-33 programs.

❚ Fundamental Objective #2:

U.S. Use of Foreign Launch

Systems and Components

The NSTP expressly encourages federal departments and agencies “to take advantage of foreign

components or technologies in upgrading U.S.

space transportation systems or developing next

generation space transportation systems.”88 The

Administration’s new policy also limits the flight

of U.S. government payloads to U.S. space trans82 NASA, op. cit., footnote 29, p. 21.

83 NASA officials maintain that the decision to use LFBBs or make any other upgrade will not be made until the year 2000. They contend

that at that time, as part of the decision process, a thorough analysis will be completed to assess the efficacy of changeover to LFBB or any other

technology.

84 See the discussion later in this report on preservation of long-range missile capabilities.

85 NASA was unable to provide OTA with any studies by NASA of the Space Shuttle technology and industrial base. NASA, personal communication, March 1995.

86 Recent discussion in the press may lend support to this concern. It seems that NASA might be considering consolidating Space Shuttle

efforts by closing down Rockwell operations in both Downey and Palmdale, California and shifting all Shuttle related work to Kennedy Space

Center in Florida. Although this is only one of several proposals currently under consideration by NASA, it suggests that major changes in the

industrial base are inevitable. How these changes will affect NASA’s ability to carry out block upgrades to the Space Shuttle appears to remain

an open question. See United Press International, “NASA document targets Rockwell plants,” Mar. 2, 1994

87 At the time of OTA’s analysis, experts considered Space Shuttle reliability to fall between 97 and 99 percent. See U.S. Congress, Office of

Technology Assessment, Access to Space: The Future of U.S. Space Transportation Systems, OTA-ISC-415 (Washington, DC: U.S. Government Printing Office, April, 1990). NASA has made a variety of improvements to the Space Shuttle, some of which may improve its reliability

and reduce the chance of losing an orbiter.

88 The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. VI(2).
The National Space Transportation Policy: lssues for Congress 57

portation systems, in effect removing U.S. government payloads from the available international

marketplace for launch services. In this, it follows

past policy.

Establishes policy on federal agencies’ use of foreign

Iaunch systems and components. With the end of the Cold

War, it is important for the U.S. to be in a position to capitalize on foreign technologies-including Russian technologies-without, at the same time, becoming dependent on

them. The policy allows the use of foreign components,

technologies and (under certain conditions) foreign launch

services, consistent with U.S. national security, foreign

policy and commercial space guidelines in the policy.

The NSTP recognizes the growing international interdependence of space activities by allowing

launch of government payloads on foreign launch

vehicles that are made available on “a no-exchange-of-funds basis to support the following:

flight of scientific instruments on foreign spacecraft, international scientific programs, or other

cooperative government-to-government programs. "

89 This provision would cover, for exam--

ple, such undertakings as the 1992 launch of the

U.S.-French TOPEX-Poseidon spacecraft on an

Ariane 4 launcher, and the use of non-U.S. launch

vehicles during construction and operation of the

International Space Station.90

The NSTP supports the negotiation of “international space launch trade agreements with other

nations that define principles of free and fair trade

for commercial space launch services.”91 It also

notes that such agreements must conform with related U.S. obligations and treaties, such as

Ariane 4 in flight. The Ariane family of vehicles was primarily

designed to serve the international commercial market.

technology transfer policies and the Missile

Technology Control Regime (MTCR).92

The past two decades have brought striking

changes in the character of space transportation

services on the world market. The international

marketplace for space transportation services has

become far more complex and interdependent

than it was just a few years ago. Before 1979,

when the ESA successfully launched its first pay89 The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. VI(l)(a).

90 It also covers the planned launch of the Stratospheric Aeorsol and Gas Experiment (SAGE) and Total Ozone Mapping Spectrometer

(TOMS) instruments on Russian Meteor 3 spacecraft, on Russian boosters. 9 1The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. V(l).

9 2The General Agreement on Tariffs and Trade (GATT)does not affect the international trade of launch services. Subsidy language in the

Uruguay round of GATT pertains only to goods traded across borders--not services. Therefore, at present, the launch services market falls

outside of the domain of GATT. Indeed, the unique nature of the launch service industry was a key factor behind the United States’ pursuit and

acquisition of launch service trade agreements outside of the GATT framework with both China and Russia.
58 | Office of Technology Assessment

load aboard the Ariane 1 ELV, the U.S. government was the only supplier of launch services for

commercial satellites.93 In the mid-1980s, the

United States made the first moves toward commercializing its ELV fleet. In the late 1980s, first

China, then the Soviet Union began to offer

launch services aboard indigenous launchers.

Most recently, as a direct result of the collapse of

the Soviet Union, Russian and Ukrainian launch

services and Russian subsystem technology have

become available on the international marketplace.

These circumstances have forced policymakers

to account not only for U.S. space transportation

development needs, but also for the effects of the

use of foreign technology in U.S. launch systems

and competitive foreign launch services on the

U.S. space transportation industry.

In particular, the high performance and low

costs of Russian liquid-fueled engines and other

launch technologies has led U.S. firms to consider

incorporating Russian technology into current

and future U.S. space transportation systems.

Such uses of Russian technologies may reduce the

costs and increase the performance of U.S. launch

systems, making them more attractive to purchasers of U.S.-built satellites. Some policymakers

and industry leaders, however, are concerned that

incorporating Russian technology into U.S.

launch systems might also lead to the loss of U.S.

jobs in the space transportation industry. In addition, dependence on Russian technology raises

concerns about the maintenance of the U.S. space

transportation technology and industrial base, and

U.S. readiness to meet national security challenges.

This section explores the effects that the policies toward introducing non-U.S. launch components into U.S. launch systems, contained in the

NSTP and its supporting implementing plans,

might have on the competitive position of the U.S.

space transportation and satellite industries.94 It

also examines the use of non-U.S. launch services

for U.S. commercial and foreign payloads and international trade in launch services.

Incorporating Foreign Technology

into U.S. Launch Systems

Since the United States began work on the partially reusable Space Shuttle in the early 1970s, it has

spent relatively little on the development of new

technology for ELVs. Until the loss of Challenger

in January 1986, the United States had followed a

policy that focused on the Space Shuttle as the

sole provider of launch services for all payloads.95

The only new U.S. launch vehicle was the Titan

IV, developed to provide an alternative means of

placing large DOD payloads into orbit.

Although the manufacturers of ELVs have increased the payload capacity of U.S. systems and

reduced operational costs, they have not kept pace

with developments in foreign launch systems.

U.S. launchers still take longer to process and to

integrate with payloads than competing launch

systems. The United States might be able to improve its fleet of ELVs and reduce launch services

costs by adopting new technology and some of the

automated launch operations practices of its competitors.96

The end of the Cold War has greatly broadened

the available range of technology available to U.S.

93 Both the United States and the Soviet Union also launched payloads for other governments, but arrangements were always made on a

governmental level.

94 See the section covering fundamental objective #4 for a discussion of the private sector role in space transportation decisionmaking and

the status of the international market for launch services.

95 This policy was first stated publicly in President Reagan’s space policy of 1982. The White House, “National Space Policy Fact Sheet,”

Washington, DC, July 4, 1982.

96 See, e.g., U.S. Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTATM-ISC-28 (Washington, DC: U.S. Government Printing Office, September 1988).
The National Space Transportation Policy: Issues for Congress | 59

launch system manufacturers. During the Cold

War, because of the close connection between

launch vehicle technologies and ballistic missile

technologies, the United States and other spacefaring nations kept close control over the flow of

launch technologies to other countries. As a result,

U.S. insight into the details of the capabilities of

the Soviet Union was quite limited.97 U.S. and

Soviet officials closely scrutinized even high-profile cooperative programs such as the Apollo-Soyuz linkup in 1975 to prevent unwanted technology

transfers.

Beginning with the political reforms instituted

during the Gorbachev regime, the United States

began to gain direct access to Soviet technology,

including launch technology. This process accelerated dramatically after the dissolution of the Soviet Union in December 1991. In the past few

years, the United States has instituted closer relationships in space with the former Soviet Union

(FSU), especially with Russia. These new cooperative relationships extend from large, complex

partnerships like the International Space Station,

to smaller, simpler cooperative agreements on

space and earth science. Emblematic of the new

relationships are the cooperative commercial

agreements between U.S. and FSU firms, most of

which involve launch technology, a field in which

the Russians excel. U.S. firms have proposed employing Russian technology in U.S. boosters and

have entered into agreements to market Russian

boosters internationally.98

Incorporation of foreign technology might increase launch vehicle performance and reduce

costs. The use of Russian technology promises to

be particularly beneficial. The greatest strength of

the Russian space program, and the principal

strength of the Ukrainian program, lies in launch

vehicles and associated technologies, particularly

propulsion and rapid payload processing and integration. As noted above, several U.S. firms are

exploring the use of Russian expertise and

technology to enhance U.S. launch capabilities.

Box 7 examines Russian launch technologies and

outlines some U.S. efforts to incorporate them

into U.S. space transportation systems.

U.S. Government Use of Foreign

Launch Systems

As noted above, the NSTP explicitly allows the

use of foreign launch systems on a no-exchangeof-funds basis to support cooperative programs.

Such use can sharply reduce U.S. costs for scientific programs of interest to the United States.

The availability, robustness, and established

reliability of Russian ELVs—built on large-volume, series production over many years—are also

major assets for cooperative civil space activities.

Their use on a no-exchange-of-funds basis could

enable some projects that would not be undertaken otherwise.99 The United States and Russia are

pursuing this potential:

 Russian launch vehicles are being extensively

scheduled to provide critical transportation for

the assembly and operation of the International

Space Station.

 The two governments are discussing the use of

Russian launch vehicles in cooperative projects

such as planned missions to Mars and Pluto.

 In 1991, a Russian Tsyklon booster (SL-14)

and a Meteor-3 satellite carried a U.S. Total

Ozone Mapping Spectrometer into orbit. By

the end of the century, Russia will boost two

additional Meteor-3 spacecraft carrying U.S.

Earth observations instruments into space.

Such arrangements represent a way for Russia

to make use of their substantial space capabilities

97 Yet the relative openness of U.S. society always made U.S. technology developments more accessible to Soviet inquiry than the reverse.

98 For a detailed discussion of these new cooperative relationships, see U.S. Congress, Office of Technology Assessment, U.S.-Russian

Cooperation in Space, OTA-ISS-618 (Washington, DC: U.S. Government Printing Office, April 1995), chs. 3 and 6.

99 This section does not address the potential risks of working with the Russians, especially economic and political instabilities, and the

changing structure of Russian companies. See U.S. Congress, Office of Technology Assessment, op. cit., footnote 98, for such a discussion.
60 Office of Technology Assessment

Liquid-Fueled Engines

With the exception of the Space Shuttle Main Engine, the United States has developed no new liquidfueled rocket engines since the 1960s.1 Aerojet, a U.S. aerospace firm specializing in the design, testing,

and manufacture of rocket engines, has proposed to buy a number of Russian NK-33 engines from the

Samara Scientific and Technical Complex. These engines, which burn liquid oxygen and kerosene, were

manufactured in the 1970s, but have features such as high chamber pressures that allow them to perform

better than comparable U.S. engines. Aerojet believes that it can adapt the engines to make the U.S.-built

Delta or Atlas boosters less costly and more powerful,2 Similarly, Pratt and Whitney has proposed to

modify the Russian RD-180 for use on the Atlas.3 In each case the company involved expects that the

cooperative venture will result in reducing the price of launch services,

U.S. industry and government officials have also explored the potential for incorporating modified Russian propulsion systems in U.S. X-vehicles. For example, Pratt and Whitney and NASA have announced

plans to explore the application of tri-propellant rocket engine technology developed by NPO Energomash,

to new RLVS.

4 Tri-propellant engines are capable of using both kerosene and liquid hydrogen oxidized by

liquid oxygen. Such engines may offer the benefit of improving engine performance and reducing the size

of propellant tanks, but also require greater logistics and operations complexity and additional propellant

tanks.

Automated Launch Capabilities

The Russians perform their payload processing and integration and launch operations more efficiently

and faster than U.S. launch providers. By doing much of their launch vehicle and payload integration off

the launch pad, they are able to launch quickly and with less manpower than the United States, with no

discernible loss of reliability (see table 12). Incorporating Russian operations methods and technology into

U.S. launch operations could increase U.S. operability. Yet payload launch preparation and integration consume a large part of the time U.S. launch vehicles spend on the launch pad. To reduce pad time, U.S.

operators would have to change the design of satellites and the methods used to prepare them for launch,

U.S. firms would also have to redesign the launch vehicles themselves.

Advanced Materials

Russia also has extensive experience in the use of aluminum-lithium and other materials for space

transportation applications, which are lighter in weight and more ductile than the conventional aluminum

alloys used in the United States. This expertise allows manufacturers to use more cost-effective manufacturing processes, and to produce more durable engines.5 Russian technicians have developed special

1 The United States has, however, developed large solid rocket motors for the Space Shuttle, the Titan IV launch systems, and a

variety of long-range ballistic missiles.

2 Michael A Dornheim, "Aerojet Imports Trud NK-33 Rocket Engine, ’’Aviation Week and Space Technology, Oct. 25, 1993, P 29

3 The RD-180 is derived from the larger, more powerful RD-170 that powers the first stage of the Russian-Ukrame Zenit booster. In

November 1992, Pratt and Whitney signed an agreement with NPO Energomash to bring the latter’s propulsion technology to the

United States, See Jeffrey M Lenorovitz, ‘(Pratt Signs Accord with NPO Energomash, ’’Aviation Week and Space Technology Nov 2,

1992, p. 25-26.

4 Jeffrey M. Lenorovitz, “Tripropellent Engine Tested for SSTO Role, ” Aviation Week and Space Technology July 11, 1994, p 54

5 U S aircraft manufacturers have considered employing aluminum-lithium alloys in aircraft and NASA has funded a program to

Incorporate U S aluminum-lithium alloys in the Space Shuttle’s external tank, in order to reduce the mass of the external tank The

lighter tank will allow NASA to place some 8,000 additional pounds of payload m the Space Shuttle when launched to the planned

International Space Station.
The National Space Transportation Policy: Issues for Congress 61

coatings that permit engine turbine drive systems to run with a high proportion of oxidizer to fuel and increase engine thrust chamber durability. To date, the United States has not adopted the use of these materials because of the high cost of changing production lines. However, aluminum-lithium and other materials

developed by Russian materials scientists might find future application in U.S. space transportation systems if they prove less costly than comparable U.S. materials.

Launch Technology Expertise

The Russian aerospace industry has many engineers and technicians with years of experience in areas

such as rocket engine design, systems integration, and computer programming. The declining budgets for

the aerospace enterprises mean fewer job opportunities and lower salaries for Russian aerospace engineers. Cooperative U.S.-Russia ventures could give the United States access to some of Russia’s underutilized aerospace workforce, albeit at the expense of some American workers.

U.S.-Russian Joint Ventures

Rather than using Russian technologies in U.S. launch systems, some U.S. companies have sought to

establish partnerships with Russian launch firms. Lockheed Corporation, for example, in January 1993

teamed with the Russian firms Khrunichev and RSC Energia in a joint venture (LKE International) to market

launch services on the Proton launcher.6

In a similar arrangement, Boeing Commercial Space Development Company is seeking U.S. government approval for a joint venture with Ukraine’s NPO Yuzhnoye,7 RSC Energia, and Kvaerner A/S of Oslo, a

Norwegian builder of offshore oil platforms, to market launch services using the Zenit vehicle, which is

capable of placing 30,300 Ibs of payload into LEO.8

6 Jeffrey M. Lenorovitz, “Lockheed, Khrunichev To Market Proton Launcher, ’’Aviation Week and Space Technology Jan. 4, 1993

7 This proposal awaits Iicensing by the Department of State. See “U.S. Eyes Zenit Warily,” Space News, Dec. 12, 1994, pp. 1,28

8

The Zenit uses a highly automated launch processing system, which could give it a competitive advantage. This Russian innovation could, in principle, be applied to evolving U.S. systems as well.

SOURCE: Office of Technology Assessment, 1995.

and participate in cooperative space activities. In

Average total Average time

processing on launch

Launch vehicle time (days) pad (days)

return Russian scientists would receive access to

data that could enhance their capabilities in space

science and applications. Potentially, the Ukrainian Zenit and Tsyklon boosters could be used for

similar purposes, should Ukraine wish to participate in cooperative scientific activities.

Several U.S. instruments have already flown

on European spacecraft, which were launched by

Ariane launchers. In 1992, the U.S.-French TOPEX/Poseidon ocean topography spacecraft was

launched into orbit aboard an Ariane 4 launcher.

Europe has also sought to reduce its cash contributions to the International Space Station by offering

U.S. Delta 70 40

U.S. Atlas 62 59

U.S. Titan IV 198 100

Russian Tsyklon 3 2 hrs

Russian Soyuz 18 2

Russian Proton 21 6

Russian-Ukraine Zenit 17 1

SOURCE U S Department of Defense, 1994
62 Office of Technology Assessment

Russia's Proton MLV is being marketed by LKE International,

a U.S.-Russian joint venture.

the recently developed Ariane 5 launcher for carrying payloads to the space station.

Japan would like to employ its new H-II

launcher to carry payloads to the space station. In

early 1996, Japan plans to use its H-II to boost the

Japanese Earth observation ADEOS spacecraft

into orbit. ADEOS will carry two U.S. instruments.

International Trade in Launch Services

Beginning in the 1970s with the development of

the Ariane launch system by ESA, the United

States faced foreign competition in providing

commercial launch services. Arianespace, S.A.,

the launch operations company incorporated in

Europe, offers flights on the Ariane 4 series of

MLVs and now commands about 60 percent of the

world’s available market for launch services. 100 In

the late 1980s, Russia (then the Soviet Union) began to market the Proton, and China offered

launch services on its Long March 2 and Long 

March 3. In 1992, LKE International began to

market launch services on the Proton. In early

1995, Khrunichev and Daimler-Benz Aerospace

formed Eurorokot, a consortium to market the Rokot SLV, developed from the SS-19 ballistic missile.

In the near future, firms in India, Israel, and Japan might begin offering launch services on the

commercial market. The overall available market

for launch services is currently small compared

with the supply of launch vehicles (see table

13).101 In the absence of new markets, the average

available number of GEO launches in the early

part of the next century will probably number

about 15. The market is also highly cyclical in nature.

Each launch company competes for payloads

from a different economic and political basis. Although the combined Russian and Chinese share

of the world’s market in launch services is currently quite small,102 some U.S. launch providers fear

100The “available market” for launch service is composed of the entire market for which all U.S. and foreign commercial launch companies can compete. It includes U.S. and foreign commercial payloads and some non-U.S. government payloads, but excludes most government

payloads of the launching entities. 101 The market for payloads is currently a “buyer's market,” in which the availability of launch systems exceeds the number of available

payloads. 102 Between January 1990 and September 1995, China captured about 10 percent of the commercial market for launch services. See U.S.

Department of Transportation, Office of Space Transportation, “Quarterly Launch Report: April 1995,” Washington, DC, April 1995. In the

future, if existing launch agreements hold, China is likely to garner an estimated 15 percent of the commercial launch services marketand Russia an estimated 10 percent.
The National Space Transportation Policy: Issues for Congress 63

China China Great Wall

Industry

Europe Arianespace

Russia LKEa

Eurorokot b

STC

United McDonnell Douglas

States

Lockheed Martin

Orbital Sciences

EER Systems

Long March 2

Long March 3

Ariane 4

Ariane 5

Proton

Rokot

Start-1

Delta

Atlas

LLV

Pegasus

Taurus

Conestoga

The perceived degree of European subsidy for

Ariane and the effects of non-market competition

from China and Russia have led to claims of unfair

competition by U.S. launch service firms. Other

countries respond that not only has the United

States subsidized its launch vehicle development,

it also maintains a relatively large, protected market of government launches for DOD and other

government departments and agencies. However,

other governments protect part or all of their

launch services market as well. ESA satellites

generally fly only on the Ariane launcher, and

Chinese and Russian government payloads fly

only on indigenous launchers. All these concerns

remain points of contention as China, Europe,

Russia, and the United States attempt to reach

agreement over appropriate mechanisms to manage international trade in launch services.

a U S -Russian joint venture offering Russian vehicle

b Russian-German joint venture offering Russian vehicle

SOURCE” Off Ice of Technology Assessment, 1995

that low prices made possible by a combination of

extremely low wages and a non-market economy

will undercut U.S. opportunities to sell launch services to the available market. U.S. satellite

manufacturers, however, generally support the

entry of Chinese and Russian launchers into the

world market because these launch systems provide a wider choice of launch schedule and performance, reduced launch prices, and incentive for

U.S. launch providers to lower their prices.103

Although all launch providers receive some

government support, the arrangements differ

among countries. These differences, and disagreements over what effects such differences make in

an international competition for launch services,

make it extremely difficult to achieve genuinely

free and fair trade in the commercial launch services market (see box 8).

The Missile Technology Control Regime

Managing trade in launch services is complicated

even further by the added dimensions of arms control, nonproliferation, and the control of technology transfer. The NSTP acknowledges this added

dimension by requiring that:

International space launch agreements in

which the U.S. is a party must be in conformity

with U.S. obligations under arms control agreements, U.S. nonproliferation policies, U.S.

technology transfer policies, and U.S. policies

regarding observance of the Guidelines and Annex of the Missile Technology Control Regime

(MTCR).

104

Although missile systems and space-launch

systems serve quite different purposes, they have

much in common. Hence, the United States has a

strong interest in limiting the ability of countries

that currently do not possess missile capabilities

from acquiring space launch technology. U.S. officials worry, in particular, that the testing and development of weapon delivery systems can be

103 Warren Ferster, “China Wins Big in Launch Deal,” Space News, Feb. 6, 1995, p. 1,20.

104 The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. V (1) (b).
64 Office of Technology Assessment

Europe

The European Space Agency paid for the full development costs of the Ariane family of launch vehicles

and the associated Infrastructure. From the beginning, ESA planned to operate the Ariane system as a

commercial Iauncher,1 and set up Arianespace, S. A., a European firm incorporated in France, to market

and operate launch services,2 Through thoughtful, cost-effective design and aggressive marketing, Arianespace is now the industry leader in providing commercial MLV services. 3 ESA continues to fund improvements to the Ariane system; most recently it has paid for the development of the Ariane 5 launch vehicle,

launch pad, and infrastructure in Kourou, French Guyana.

United States

The federal government developed the Atlas, Delta, and Titan launch systems in the 1960s and continued to improve them through the 1970s.4 The United States also began to develop the Titan IV HLV in the

mid-1980s, In 1983, the Reagan Administration made the Atlas, Delta, and Titan Ill launch systems available for private ownership and operation,5 but the development of private launch services was inhibited by

competition with the government-operated Space Shuttle.

Private sector entry into the commercial market for launch services became economically feasible only

after the Reagan Administration Iimited use of the Space Shuttle to payloads that require the unique features of the Shuttle.6 Several U.S. firms now offer commercial launch services (see table 13),

Both NASA and DOD continue to fund limited launch system improvements that will benefit the U.S.

government by improving performance or reducing costs. NASA contributed approximately $54.9 million to

such development work in FY 1994 and plans to spend $33.6 million in FY 1995. The Air Force spent about

$191.5 on ELV technology development in FY 1994 and will spend about $149.2 in FY 1995.7

1 ESA followed this route in order to 1) establish Europe as a supplier of commercial space services, and 2) help keep launch costs

down

2 Arianespace’s principal investors are 35 European companies, 13 European banks, and CNES, the French Space Agency

3 Arianespace received a boost in sales following the loss of Challenger when the United States decided not to offer commercial

launch services on the Space Shuttle. Before then, the U.S. government had been competing with both the European Ariane and U.S.

commercial launch service providers.

4 Each of these launch vehicles derives from ballistic missiles.

5 On May 16, 1983, the Reagan Administration announced that “the U.S. Government fully endorses and will facilitate commercial 

operations of [ELVs] by the U.S. private sector.”

6 Ronald Reagan, Presidential Decision, Aug. 15, 1986.

7 These budget figures include $507 million in FY 1994 and $67.0 million in FY 1995 for the Range Standardization and Automation 

program. Personal communication, U.S. Department of Defense, May 1995

achieved under the guise of developing a space other Western industrialized nations developed

launch program. Any country that can design and the MTCR. Admittance to the U.S. satellite marbuild space launch vehicles should be considered ket has become a tool in encouraging adherence

capable of developing ballistic missiles. by China and Russia to the MTCR. Recently, the

In 1987, in order to limit proliferation of long- members of the MTCR have encouraged Russia

range delivery systems capable of delivering and Ukraine to join the MTCR. Russia, for examweapons of mass destruction (nuclear, chemical, pie, has agreed to abide by MTCR rules until it beand biological weapons), the United States and comes a full-fledged member. Participation in the
The National Space Transportation Policy: Issues for Congress 165

Russia

The Soviet Union developed the world’s first space launch system in the late 1950s, derived from its

ballistic missile systems. Since then, the Soviet Union, and now Russia, has led the world in the number of

launches per year. Until very recently, the Soviet (now Russian) government funded all launch system development, manufacturing, and operations. Now, as a result of the collapse of the Soviet Union and the

moves by Russia to develop a market economy, Russia has privatized much of its space industry, and

markets a variety of launch services to the international community.8

On the international market, Russian firms benefit from low labor costs and large-scale, assembly-line

production. Although major elements of Russia’s command economy still exist, the new space enterprises

have begun to assume the costs of manufacturing. Whether the firms or the Russian government will shoulder the burden of new developments required to meet market needs for launch services is not yet clear.

Nevertheless, financial analysts experience great difficulties gaming insight into development and production costs, in part because Russian officials themselves often do not know how much goods and services

cost. Hence, it is extremely difficult to know how Russian pricing practices relate to the cost of providing

services.

China

The Chinese Introduced their Long March series of launchers to the world market in 1985.9 Like the

ELVs of other countries, China’s launchers were developed from ballistic missiles.io Marketed through the

government company, China Great Wall Industry Corporation, the Long March 2 and Long March 3 have

been used primarily to place communication satellites into GEO. Since China began to offer services to the

international community, it has successfully launched five satellites into space. 11 Although China Great

Wall Industry operates much like a private corporation, the costs of launcher development and manufacturing are borne by the Chinese government. China has the competitive cost advantage of very low wages

and non-market accounting practices.

8 Russia launched its first U.S. satellite on January 23, 1995 aboard a Kosmos launcher See James R Asker, “Russia Launches Its

First U.S. Satellite, ” Aviation Week and Space Technology, Jan. 30, 1995, pp. 68-69

9 “China Offering Space Launch Services to International Users, ” Aviation Week and Space Technology, Apr. 8, 1985, p 25

10 China received the basic ballistic missile technology from the Soviet Union in the 1960s

11 Long March Vehicles have also sustained several failures, the most recent was a failure of a Long March 2E on Jan 26,1995

which was carrying an American Hughes satellite, Apstar 2.

SOURCE: Office of Technology Assessment, 1995

MTCR requires that Russia prohibit the transfer of China has refused to join the MTCR, although

complete missile systems, components that could it too has agreed to abide by its terms. The United

be used to make complete systems, and technolo- States monitors China’s compliance to the MTCR

gy involved in the production of components or of and has raised issues of noncompliance. On Octocomplete systems. Ukraine has agreed to abide by ber 4, 1994, the United States and China agreed to

the terms of the MTCR to demonstrate that it “work together to promote missile nonproliferawould follow the MTCR upon admittance to the tion through a step-by-step approach to resolve

regime.
66 | Office of Technology Assessment

differences over missile exports.”105 The United

States and China agreed to “hold in-depth discussions on the MTCR. . .[and] to promote eventual

Chinese membership in the MTCR.”106 Under the

terms of the MTCR and U.S. law governing sanctions against foreign entities, the United States

could levy sanctions against a Chinese launch

company, including prohibition of satellite

launches, if the United States found that the entity

was selling missile-related technology to a country that did not previously possess such technology.

Although the MTCR has had some measure of

success in limiting the flow of missile-related

technology, it also inhibits the flow of technology

that could be used to develop new launch vehicles.

Officials in India and Brazil, for example, have

complained that their efforts to develop indigenous launch vehicles have been inhibited by the

MTCR. Recently, the Brazilian government has

agreed to join the MTCR, in part because member

countries had limited technology transfer to Brazil. This move may help Brazil obtain crucial

guidance technology for development of its indigenous launch vehicle.107

Space Launch Trade Agreements

The United States has considerable influence over

trade in launch services because it continues to sell

more satellites on the international market than

any other country, even as its share of the launch

services market has declined. When a U.S. satellite firm offers to sell a payload to a foreign company or government entity, it specifies launch

services as part of the package. These services are

selected in the international marketplace based on

several factors, including estimated reliability,

success in meeting schedules, and price. Typically, U.S. satellite firms may sell a satellite to a foreign firm or government and launch it on a

third-party launch vehicle.108

Because the United States could otherwise severely restrict the international sale of U.S.-manufactured satellites launched on other countries’

vehicles, the United States has been able to negotiate space launch trade agreements with both Russia and China. The fundamental premise of these

trade agreements is “to establish criteria regarding

participation by space launch industries in countries in transition from a non-market to a market

economy.”109 The office of the U.S. Trade Representative (USTR)110 is the U.S. agent in these negotiations.

The United States has depended on quantity restrictions and pricing guidelines to manage the

impact of Chinese and Russian launch services on

U.S. space transportation services providers. The

following paragraphs summarize the contents of

the existing and past trade agreements.

The 1989 U.S.-China Launch Agreement: The

United States reached its first launch services

agreement with China in January 1989. It remained in force until December 31, 1994, and established the fundamental structure for later

agreements with both China and Russia. The

agreement allowed only nine Chinese launches of

international payloads to GEO over the period of

105 U.S. Department of State, Office of the Spokesman, Fact Sheet, “Joint United States-People’s Republic of China Statement on Missile

Proliferation,” Washington, DC, Oct. 4, 1994.

106 Ibid.

107 Philip Finnegan, “Brazil Prepares to Sign MTCR,” Space News, Apr. 24, 1995, p. 3, 29.

108 For example, the Chinese have scheduled AsiaSat 2, a satellite built by Martin Marietta (now Lockheed Martin) for launch later this year

on a Long March 2E launcher. If successfully launched, AsiaSat 2 will be owned by Asia Satellite Telecommunications Co. of Hong Kong.

109 The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. V(1).

110 The various implementation plans submitted by DOD, NASA, and DOT/DOC do not speak to the issues of free and fair trade, since those

negotiations are the domain of the USTR. The DOT/DOC implementation plan does cite, however, the importance of trade agreements to limit

market perturbations.
The National Space Transportation Policy: Issues for Congress 67

the agreement.lll Additionally, the agreement essentially precluded Chinese launch service providers from collectively launching more than

three international payloads in any one calendar

year.

According to the agreement, both the United

States and China support “the application of market principles to international competition among

providers of commercial launch services, including the avoidance of below-cost pricing, government inducements, and unfair trade practices. ’’ 112

These premises were the basis for a pricing guideline known as pricing “on a par.” In effect, the

guideline required that Chinese launch service

providers establish prices, terms, and conditions

in a manner comparable to the prevailing norms of

the international launch services market.l13 Failure to price on a par, according to the agreement,

would be grounds for punitive actions by the

United States as permitted by U.S. laws and regulations. The agreement did provide for the less

stringent option of consultation on demand by either party. However, it failed to establish criteria

by which China could be judged to be in or out of

compliance with the provision of pricing on a par.

Therefore, the provision had little effect on Chinese behavior in the market, although the overall

agreement may have limited the number of commercial satellites launched by the Chinese.

The 1993 U.S.-Russia Launch Agreement: In September 1993, the United States and Russia signed

a launch agreement that is similar to the U.S.-China agreement, but which adds an additional measure of control. The agreement, which lasts until

December 31,2000, establishes pricing criteria on

which the actions of Russian launch service proThe Long March 2E. China began marketing its Long March

family of launch vehicles in the late 1980s.

viders can be judged on a bid-by-bid basis. Any

Russian bid more than 7.5 percent below the lowest Western bid for a comparable launch service

triggers automatic consultations between the two

parties.114 When such a consultation is called,

Russia is given the opportunity to provide valid

111 The agreement provided for annual consultations at which the quantity restriction could, at the request of China, be adjusted because of

changed conditions in the market for launch services. 112 “Memorandum of Agreement Between the Government of the United States of America and the Government of the People’s Republic of

China Regarding International Trade in Commercial Launch Services,” Washington, DC, Jan. 26, 1989, pp. 1-2. 113 Ibid., p. 2.

114 “Agreement Between the Government of the United States of America and the Government of the Russian Federation Regarding International Trade in Commercial Space Launch Services,” Washington, DC, September 1993, art. V(2).
68 | Office of Technology Assessment

reasons (e.g., different insurance conditions or

additional integration costs) for pricing below the

7.5 percent differential.

The Russian agreement allows for the launch of

eight principal payloads to GEO or geosynchronous transfer orbit (GTO) over seven years115 and

limits Russian launch service providers, as a

group, to two launches within any 12-month period. This provision is notably more restrictive than

the equivalent one in the 1989 U.S.-China agreement, which limited China to no more than three

launches in any one calendar year.

U.S. and Russian officials disagree over which

launches count against the agreement’s quota—a

disagreement that stems from a practice known as

“leasing on orbit,” whereby a satellite owned by a

firm from one country and launched by that country is leased to a foreign entity after the satellite

reaches orbit. Russian officials contend that leasing Russian satellites launched by Russian

launchers does not count as the launch of an international payload and thus should not be

counted against the quota. U.S. trade officials

strongly disagree, insisting that such launch opportunities should count against the quota on

grounds that they should be open to international

competition.116 Trade officials have also not

reached agreement on how to count the launch of

multiple satellites on a single launcher.

Unlike the 1989 U.S.-China agreement, the

agreement between the United States and Russia

requires the two countries to consult about commercial launches to orbits other than GEO and

GTO, and suborbital launches on a case-by-case

basis, including the emerging market of launches

to LEO.117 However, the agreement establishes

no specific quantity restrictions or pricing guidelines for LEO launch services.

The 1995 U.S.-China Launch Agreement: In March

1995, the United States and China entered into a

new launch agreement that will last until December 31, 2001. In developing this agreement, U.S.

officials benefited from experience with the earlier launch agreements and addressed three U.S.

concerns: the appropriate level of quantity restrictions and pricing guidelines, leasing on orbit, and

the emerging LEO market. U.S. satellite firms and

U.S. partners of Russian launch services firms had

criticized the U.S.-Russia agreement for its quantity restrictions and pricing guidelines,118 arguing

that the quantity restrictions deny U.S. satellite

manufacturers adequate access to highly reliable

Russian launch services and that the 7.5 percent

consultation trigger increases Russian launch service prices.

In response to these criticisms, and recognizing

that the new Chinese agreement would probably

set precedents for revising the U.S.-Russia agreement, the USTR added to the new agreement a

built-in adjustment to the quota in the event that

the GEO payload market improves. This provision allows China a total of two additional GEO

launches if, over the first three years of the agreement, an average of 20 or more GEO payloads per

year are launched in the available world market. It

allows for an additional three launches (for a total

of five extra launches), if this trend continues for a

fourth year.

The USTR relaxed the previous 7.5 percent

level for consultation to 15 percent. It was able to

do this because the new Chinese agreement also

delineates a set of quantified “comparability factors” to which both the United States and China

can refer in order to determine whether a Chinese

bid below the 15 percent level is justified. This

115 Excluding the INMARSAT 3 and three Iridium LEO satellite launches that Russia had contracted with consultations before signing the

agreement, four of the eight GEO/GTO launches may consist of two principal payloads on a single launch vehicle.

116 The United States did not count, however, the first such launch.

117 The agreement specifically mentions the Iridium communications constellation currently under development by Motorola and its partners.

118 Brian D. Dailey, “U.S. Trade Policy’s Future Role,” Space News, Oct. 17, 1994, p. 15.
The National Space Transportation Policy: Issues for Congress | 69

method is intended to account for differences in

business practices and market environments (e.g.,

payment terms and conditions, insurance costs,

intended orbit, or major differences in launch procedures) that would change the effective price to

the customer.

The new Chinese agreement clearly spells out

that a satellite leased on orbit counts against the

quota. Although the USTR believes that China is

unlikely to lease communication satellites on orbit because the country currently lacks adequate

communications satellite capacity, it sought this

clarification in order to provide leverage in later

negotiations with either Russia or China.

Finally, the latest U.S. agreement with China

states that China’s participation in the LEO market should be proportionate, nondisruptive, and

not interfere with U.S. participation in the LEO

market. The agreement requires consultations if

China contracts to launch over 50 percent of any

given LEO communications constellation.

Future Possible Agreements: U.S. officials expect

Russian trade officials to request changes in the

present launch agreement with the United States.

In particular, Russia is likely to push to have the

LEO provisions of the agreement brought into line

with those delineated in the latest U.S.-China

agreement. Russia, with the strong support of U.S.

satellite manufacturers and U.S.-Russian launch

company partners,119 may also seek an increase in

its quota120 and a relaxation of the 7.5 percent

consultation level.

Recently, the United States invited Ukrainian

officials to begin exploratory negotiations toward

establishing a bilateral launch services agreement

similar to those negotiated with China and Russia.121 Such an agreement could allow U.S. satellite manufacturers the choice of the Ukrainian

Zenit and Tsyklon vehicles for placing payloads

into orbit. Reaching agreement with Ukraine

would place even more pressure on the United

States to modify its agreement with Russia.

Issues for Congress

The use of foreign launch technology and foreign

launch services and cooperation between the

United States and other countries raise several issues of interest to Congress. These include the effects on U.S. industry, the U.S. technology base,

technology transfer, and possible rules for international trade in launch services.

ISSUE 2a: Effects of the use of foreign launch

technologies on the U.S. aerospace industrial

base

Provisions of the NSTP regarding U.S. use of

foreign technologies in U.S. space transportation

systems are designed to improve the efficiencies

of U.S. launch systems, in order to meet the domestic need for access to space and compete more

effectively in the international space transportation market. As noted earlier, Russian propulsion

technologies are of greatest interest to U.S. firms.

Because the requirements of the Soviet/Russian

space program have differed from those of the

U.S. program, Russia has developed systems with

different operational and design characteristics.

Access to Russian technological innovations

could offer U.S. manufacturers a wider range of

design possibilities from which to choose, many

of which have already been tested and implemented by the Russians. U.S. officials have also expressed interest in adopting some of the

technologies and techniques used by Arianespace,

Russia, and Ukraine for launch operations. Recently, an Arianespace official offered the Ariane

5 heavy-lift launcher as a candidate for the DOD

119 “We still believe the best outcome [in launch services agreements] is the removal of quotas in such agreements to best serve the [U.S.]

satellite community since they constitute 90 percent of the space market,” Brian Dailey, Lockheed vice president for Washington operations,

quoted in Warren Ferster, “China Wins Big in Launch Deal,” Space News, Feb. 6, 1995, pp. 1, 20.

120 Peter B. de Selding, “Russian Quota Questioned,” Space News, Apr. 3, pp. 4, 45.

121 Warren Ferster and Peter B. de Selding, “Zenit, Cyclone Parley To Start,” Space News, Apr. 10, 1995, pp. 1, 20.
70 Office of Technology Assessment

The Russian NK-33 engine is one candidate for incorporation

into U.S. space transpiration systems.

EELV program, arguing that the United States

could thereby avoid a costly development program.122

The effect on the U.S. aerospace industry of using Russian technology in U.S. launch vehicle

systems will depend on how U.S. firms structure

commercial cooperation with the Russians and on

which part of the industry attention is focused. On

the one hand, access to different and up-to-date

technologies, production and processing methods, and cheaper hardware could make the U.S.

aerospace industry stronger in an increasingly

competitive world market for space-related services. On the other hand, cooperative arrangements could also lead to unwanted technology

transfer, strengthening of a competitor, loss of domestic production jobs, and a weakening of U.S.

capabilities because of dependence on a foreign

source.

Representatives of some lower-tier firms in the

U.S. launch industry expressed another viewpoint

at a recent OTA workshop. They believe that the

possible enhancement of U.S. capabilities

through cooperation with the Russians.123

U.S. firms could adopt several approaches to

using foreign technology. One approach is to buy

components directly from foreign suppliers. In the

case of Russian propulsion systems, for example,

such a buy would probably result in job losses for

the engine-manufacturing segment of the domestic industry. Yet, in most cases, testing and systems engineering will still be required. Also,

cheaper engines might make U.S. launch services

more competitive, potentially increasing business

and creating jobs in that sector of the industry, as

well as in others stimulated by low-cost launch

services.

Alternatively, a U.S. firm could buy a license

for a given engine technology and setup its own

production line. Licensing of technology would

result in increased employment for U.S. workers

if the licensing firm is successful in producing a

product. It could also make those parts of the industry that depend on the licensed technology

more competitive in the world market.

Ultimately, as the worldwide launch industry

becomes more like other commercial industries,

the use of foreign components and systems will

become more widespread, although the terms of

the MTCR will limit technology transfer. If the

U.S. launch industry is to become competitive on

the world market, it may have to become more

flexible and make effective use of non-U.S.

technologies. Currently, the United States leads in

the development of avionics, computers, electromechanical actuators, and other technologies that

support the launch industry. U.S. industry could

also improve its competitive stance by developing

domestic launch industry- is struggling and does launch technologies for non-U.S. launch systems.

not need another competitor in the medium-toheavy launch service market, irrespective of any

Exporting many of these technologies will require

the relaxation of U.S. export controls.

122 Ben Ionatta and Cheri Privor, “Arianespace’s EELV Proposal Finds Little Favor,” Space News, Apr. 10, 1995, p. 3. The official listed

several options, among which is the potential for licensing Ariane 5 technology to U.S. firms for construction in the United States. 123 A background paper on this workshop is forthcoming, June 1995.
The National Space Transportation Policy: Issues for Congress | 71

The United States must also decide how much

of its industrial base should be maintained to ensure access to space and to meet national security

needs. Use of foreign technologies could reduce

the amount of R&D required of U.S. firms,124 resulting in reduced costs, but it could also undercut

the development of U.S. capabilities in certain

areas. Because the space industry is considered to

be indispensable to the security of the United

States, many argue that the United States should

develop and maintain its capabilities in certain

critical areas to prevent any weakening in its technological base.

DOD is willing to use launch systems that have

foreign components and technology, but only in

such a way that foreign suppliers cannot deny

DOD access to space:

This can be accomplished by such measures

as stockpiling critical foreign components and

assuring that alternative sources of critical components could be developed in a timely fashion

should foreign sources cease to be available.125

Although this approach might result in higher

costs to the government, it ensures that the United

States will be able to fulfill its space-related national security needs without depending on foreign suppliers of launch services. Arianespace has

suggested that if the United States wished to pursue the use of Ariane 5 (developed by U.S. allies)

for the EELV program, it could license the entire

launcher for construction in the United States,

modifying it as needed and buying some parts in

Europe. Such an arrangement could substantially

reduce the costs of building and operating a U.S.

heavy-lift launch vehicle.126 However, building a

vehicle under license might inhibit the development of new U.S. technology that could be used to

improve the U.S. MLV fleet.

ISSUE 2b: The ground rules for international

trade in launch services

The United States’ response to the competitive

challenge posed by the market entry of Chinese

and Russian launch systems has been to work with

trade representatives of other countries to achieve

a common understanding of what constitutes fair

trade practices in selling launch services:

The U.S. and the PRC [China] support the application of market principles to international

competition among providers of commercial

launch services, including the avoidance of below-cost pricing, government inducements, and

unfair business practices.127

The resulting launch service agreements limit

the total number of commercial launches China

and Russia can sell on the world market. In allowing each country to sell launches to U.S. satellite

firms, but limiting them to a fixed total of the

world’s available launch services market over a

defined period, the USTR has steered a middle

course between a “hands-off” approach and allowing no foreign launches of U.S.-built satellites. In

other words, the USTR has attempted to manage

the commercial market in launch services.

Critics of this policy, who include U.S. satellite

manufacturers and satellite customers as well as

U.S. partners of Russian launch firms, complain

that such market management effectively raises

the overall price of launch services. They argue

that because the agreements limit the total number

of Chinese and Russian launches between now

and 2001,128 U.S. launch providers have little in124 U.S. industry could use the technologies to develop the base for the next generation of R&D. However, it might have less incentive to

invest in R&D if it were able to earn sufficient profit with foreign technology.

125 U.S. Department of Defense, “DOD Implementation Plan for National Space Transportation Policy,” PDD/NSTC-4, Washington, DC,

Nov. 4, 1994, p. 9.

126 Ben Ionatta and Cheri Privor, op. cit., footnote 122.

127 Op. cit., footnote 112, art. II(A).

128 The U.S.-Russia agreement concludes on December 31, 2000; the U.S.-China agreement concludes on December 31, 2001.
72 | Office of Technology Assessment

centive to reduce their prices. On the other hand,

U.S. launch services companies worry that without some limits on China’s and Russia’s ability to

sell launches below cost, U.S. market share will

slip even further than it has.

The USTR has attempted to structure the

launch service agreements to encourage China’s

and Russia’s moves away from their bureaucratic

command systems toward adopting the financial

practices of market economies, in which prices are

based primarily on actual costs of labor, manufacturing, and operations, while encouraging a viable

U.S. space transportation industry, as called for in

the NSTP.129

Some observers worry that the present launch

agreements with Russia and China do little to promote a change from centrally managed economies. They argue that the existing framework,

based on quantity restrictions combined with bidby-bid pricing guidelines, lacks the ability to foster market-oriented behavior. These skeptics

contend that the existing agreements simply hand

a portion of the launch services market to the Russians and Chinese in exchange for their agreement

not to undercut U.S. launch service providers with

very low launch prices, subsidized by other parts

of their economies.130 As they see it, the best

long-term protection available to U.S. launch service providers would be a marketplace where all

players engage in fair competition based on market principles—something they do not believe the

present agreements are designed to achieve. Competing on the basis of market mechanisms has the

benefit that a firm cannot long continue to offer

services substantially below cost and survive.

One of the major obstacles in policing the

launch services agreements is the difficulty of determining the actual price of a launch. Potential

customers must take many factors into account,

including demonstrated launch success rate, the

condition of payload integration facilities, geographical location of the launch pad, and cost of

insurance. For example, a $50-million Atlas

launch may provide more or less value than a

$50-million Ariane launch, and price alone will

not determine the winning bid.

Despite these criticisms, some argue that the

current launch agreements with Russia and China

are the best that can be expected under the circumstances. According to this view, trade agreements

of this sort are often cumbersome and disagreements over details are inevitable. Moreover, they

often include foreign policy considerations beyond the narrow scope of the agreements.

Competition between Arianespace and U.S.

launch firms presents the USTR and U.S. launch

firms with a set of issues different from those

raised in agreements with China and Russia. Although European governments generally maintain much closer relationships with their major

industrial firms than does the U.S. government,

European market norms and practices are much

closer to the U.S. example than are those of China

and Russia.

Nevertheless, U.S. launch companies complain that the European governments unfairly subsidize Arianespace’s operation.131 Attempts to

determine the amount and nature of these subsidies have generally concluded that, although such

subsidies may be greater than U.S. subsidies, determining the exact amount and how they may affect the pricing of launch services is extremely

difficult. The structural differences between U.S.

and European institutions, coupled with the financial complexities of a launch services agreement,

cloud the comparison of subsidies. Hence,

suggestions to impose sanctions on European

launch services have been short lived. In 1984, for

example, Transpace Carriers, Inc., filed a com129 The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. IV(1).

130 Andrew Lawler, “Industry Criticizes U.S. Launch Agreements,” Space News, Oct. 3, 1994, p. 3.

131 See “U.S. Space Launch Services Company Brings Unprecedented Complaint Against Europeans,” U.S. Import Weekly 9:1088, 1984.
The National Space Transportation Policy: Issues for Congress | 73

plaint under section 301 of the U.S. Trade Act of

1974, stating, among other things, that Arianespace was unfairly subsidized compared with U.S.

carriers.132 Investigation following the complaint

found that European subsidies and pricing practices were not out of line in comparison to U.S.

practices.

In addition, U.S. satellite manufacturers tend to

oppose any type of pricing agreement with Europe, seeing such an agreement as a barrier to

globally provided launch services, and an opportunity for both Europe and the United States to

raise prices artificially. Ultimately, the United

States may find it more effective to concentrate on

ways of reducing the costs of U.S. space transportation systems, rather than attempt to manage

the international market in launch services.

ISSUE 2c: Controlling technology transfer and

other foreign policy objectives

Cooperative ventures entail the risk of transfer

of domestic technologies that could be used to

strengthen a competitor’s position in the international aerospace market and could enable the development of ballistic missiles. Experts disagree

over how effective means to prevent such transfer

can really be, but present policy clearly moves toward loosening trade restrictions. Specifically,

many components having to do with satellites and

satellite technology have been moved from the

U.S. Munitions List133 onto the Commerce Control List, effectively making it easier to trade in

those items.

Recent reports suggest that the State and Commerce Departments are working on loosening restrictions further.134 As noted above, the greater

relaxation of these restrictions could result in improved U.S. trade in launch technologies. On the

other hand, the United States must remain sensitive to the potential proliferation of technologies

that would assist belligerent countries in developing the means of delivering weapons of mass destruction.135

The desperate economic state of Russia and

Ukraine makes the sale of expensive, hightechnology missile components and systems to

other countries extremely attractive. For example,

in 1992, India contracted with Russia to buy a liquid-oxygen/liquid-hydrogen-fueled engine to be

used as the upper stage for its Geosynchronous

Satellite Launch Vehicle. The United States opposed the sale on grounds that it violated the

MTCR, a move that both India and Russia resisted. U.S. officials were concerned that the

technology associated with the engines would assist India in building ballistic missiles. Fearing

that the United States would institute sanctions allowed by the terms of the MTCR, in 1993 Russia

agreed to break its contract with India and withhold the engine technology.136

Even if Russia abides by the MTCR and prohibits the export of hardware useful in ballistic

missiles, it might not be able to prevent the

emigration of rocket scientists to countries seeking to use their expertise. Despite Russia’s apparent concern over the loss of its aerospace

engineers, it might not be able to prevent the departure of many to countries that might be hostile

to U.S. interests. People with expertise can freely

emigrate from Russia to the neighboring Newly

Independent States, and keeping track of where

they go from there might not be possible.

The Clinton Administration considers that assisting the Russian civilian space program to stay

132 Ibid.

133 22 CFR Ch. 1, Subchapter M-International Traffic in Arms Regulations, Part 121-The United States Munitions List

134 “Satellite Export Controls to Ease,” Space News, Feb. 20, 1995, p.1

135 U.S. Congress, Office of Technology Assessment, Export Controls and Nonproliferation Policy, OTA-ISS-596 (Washington, DC: U.S.

Government Printing Office, May 1994).

136 Experts differ in their opinions about the usefulness of cryogenic engines for weapon systems. Weapon systems benefit from constant

readiness, and cryogenic engines take a long time to prepare for launch. Still, all early U.S. ballistic missiles were liquid-fueled.
74 I Office of Technology Assessment

as healthy as possible and capable of retaining its

experts will be in the interest of global nonproliferation. Similarly, the United States provides

some direct funding to scientific researchers responsible for the development and engineering of

nuclear, chemical, and biological weapons in an

effort to keep them employed in areas other than

the development of those weapons.137

Many of the scientists and engineers in the Russian civil and military space programs have expertise that could be usefully applied to space science

missions. The incorporation of Russia in the International Space Station has been undertaken in

part to support Russia’s attempts to maintain its

civilian space efforts. 1

38 Even during Cold War

periods when the political atmosphere made larger, high-profile cooperative science efforts unacceptable, small, low-profile science projects

involving Russian and U.S. scientists continued.

That ongoing cooperation kept the lines of communication between the two countries open and

fostered commonality of interest. With the lessening of tensions after the end of the Cold War, opportunities for including Russia in international

science projects and for joint U.S.-Russian space

missions have increased. Supporting Russian efforts to maintain Russia’s civilian space program

could, however, help Russia become a stronger

competitor to the United States.

Increased commercial ties between Russian

and Western aerospace companies could also provide added incentive for Russia to abide by the

MTCR. Russia has privatized several of its largest

aerospace enterprises, which are now seeking customers for their products.

❚ Fundamental Objective #3:

The Use of Excess Ballistic Missiles

The third fundamental objective of the Clinton

Administration’s new space transportation policy

addresses the use of long-range ballistic missiles

that have been either superseded by more modern

weapons or eliminated under the provisions of the

Strategic Arms Reductions Talks (START)

Treaty.

Establishes policy on federal agencies’ use of excess

ballistic missile assets for space launch, to prevent adverse

impacts on the U. S. commercial space Iaunch industry Under START, these assets may be used in certain circumstances for civilian space launch. A serious concern in

developing the policy was the possible impact that widespread use of these assets could have on U.S. commercial

launch companies. The policy obliges the government to

fully consider commercial services as part of the decision

making process and Imposes specific criteria on the use of

excess assets to avoid “flooding” the commercial market

The policy language regarding excess missile

assets reflects the consensus of an Interagency

Working Group with representatives from DOD,

NASA, DOT, DOC, the Department of State, the

U.S. Arms Control and Disarmament Agency, and

the USTR. The policy reflects the results of a subgroup jointly chaired by the National Security

Council and OSTP.

The policy states that U.S. excess ballistic missiles shall either be retained for government use or

be destroyed. DOD will consider whether to use

excess ballistic missiles on a case-by-case basis,

137 Since FY 1992, the Nunn-Lugar amendment to Public Law 102-228 and subsequent legislation have authorized the transfer of $1.6

billion of DOD funds to help destroy and secure weapons of mass destruction. Of that money, $25 million was to be the 1994U.S. contribution to

the International Science and Technology Center, which would provide research opportunities for FSU scientists in collaborative efforts with

Western scientists. See U.S. Congress, Office of Technology Assessment, Proliferation and the Former Soviet Union, OTA-ISS-605 (Washington, DC: U.S. Government Printing Office, September 1994), pp. 23-28. Some U.S. private foundations have also made money available to

Russian research institutions to try to curtail the proliferation of nuclear-weapons expertise.

138 U.S. Congress, Office of Technology Assessment, op. cit., footnote 98.
The National Space Transportation Policy: lssues for Congress 75

and will require approval from the Secretary of

Defense.139

The policy directs government departments

and agencies requiring access to space to purchase

commercially available U.S. space transportation

products and services to the fullest extent feasible,

and stipulates conditions on the use of excess ballistic missiles. Such use must support the sponsoring organization’s mission; be consistent with

international obligations, including the Missile

Technology Control Regime (MTCR) guidelines

and the START agreements; and result “in a cost

savings to the U.S. Government relative to the use

of available commercial launch services that

would also meet mission requirements, including

performance, schedule, and risk.”140

In testimony before the Subcommittee on

Space of the House Committee on Science, Space

and Technology, 141 John Gibbons, Assistant to

the President for Science and Technology, further

clarified U.S. policy on use of missile assets, stating that “engineering tests and suborbital flight

experiments are allowed, but orbital flights which

may compete with private sector providers would

have to satisfy some tough criteria.’’ 142

Gibbons argued that “these criteria are clear

and reasonable and . . . they provide sufficient

flexibility to protect government interests while

continuing to encourage private sector investment

in new space transportation systems. If converting

ballistic missiles to space launch vehicles can be

done in a manner that saves money for the government, this policy will still allow us to take advantage of those savings. ’’143

DOD does not currently plan to use intercontinental ballistic missile (ICBM) assets made exStatic firing destroys a Pershing II engine under provisions of

the Intermediate-Range Nuclear Feces treaty

cess by START agreements for launching

payloads into orbit, but its implementation plan

notes that:

. . several contractor use ICBM heritage

designs and tooling to produce new hardware

similar or identical in design. New production of

launch vehicle systems using ICBM technology

and design will be allowed for either EELV

competition or commercial application, but new

productions must comply with existing policies

of proliferation control of missile technology, as

well as START provisions. 144

Background

DOD currently has four U.S. strategic ballistic

missiles in stock that are either retired or being retired. They are the Minuteman II and Titan II

ICBMs, and the Trident I C4 and Poseidon C3

submarine launched ballistic missiles (SLBMs).

139The White House, Office of Science and Technology Policy, op. cit., footnote 3, sec. VII(l).

140 Ibid., sec. VII(l)(c).

141 Now the House Science Committee's Subcommittee on Space and Aeronautics.

142 John H. Gibbons, Director, Office of Science and Technology Policy, “Statement on National Space Transportation Policy,’’testimony at

hearings before the Subcommittee on Space, Committee on Science, Space and Technology, U.S. House of Representatives, Washington, DC,

Sept. 20, 1994. 143 Ibid.

144U.S. Department of Defense, op. cit., footnote 125.
76 Office of Technology Assessment

The first Strategic Arms Reduction Treaty (START l), signed by President Bush and Soviet President

Gorbachev on July 31, 1991, called for limiting each nation to 6,000 accountable warheads on 1,600 strategic offensive delivery vehicles,

As a result of START 1, the United States has removed warheads from all 450 single-warhead Minuteman

II ICBMs. In addition, the United States has removed the missiles from all its Poseidon ballistic missile

submarines. Nearly half of the missiles from 31 Poseidon submarines that were in the U.S. fleet have been

eliminated.

Protocols to the START I treaty now in force call for the elimination of most surplus ballistlc missiles. The

Nineteenth Agreed Statement annexed to the START I agreement requires that a party to the treaty wishing

to use surplus missiles to develop space launch boosters must get the consent of the Joint Compliance

and Inspection Commission. Converted space transportation systems would be allowed provided the resulting boosters differ verifiably from ICBMs and SLBMs, and provided the number of boosters produced

and stored do not exceed space launch requirements. START I might result in a surplus of as many as 450

ICBMs and 192 SLBMs.

START II was signed on January 3, 1992, but has not been approved by either the United States or

Russia. This treaty would further reduce warheads on strategic offensive delivery vehicles to 3,500 or fewer

and would ban multiple warhead ICBMs. Russian ratification appears uncertain.1 One U.S. deployment

option under START II could add 50 Peacekeeper ICBMs to the surplus created by START 1. START II also

calls for reducing the number of warheads on SLBMs from eight to four, but without reducing the number of

missiles themselves,

1 “Russian Parliament Approval of START II ‘Uncertain at Best’, CIA Aide, ” Aerospace Daily 173(40):311, 1995

SOURCE: Office of Technology Assessment, 1995.

Some of the retirements are a result of various IIs by the end of 1995. Martin Marietta has advoarms control agreements (see box 9).

Minuteman

All of the 450 single-warhead Minuteman IIs were

taken off alert in September 1991 and will be retired under START. 145 By the end of 1994, the Air

Force had removed 384 Minuteman II ICBMs

from their silos and had transported them to storage or to processing facilities. The United States

plans to deactivate the remaining 66 Minuteman

cated refurbishing the Minuteman II for use as a

small launcher capable of supporting suborbital

experiments and carrying 1,200-lb satellites to

LEO. Minuteman IIs have been used for several

Strategic Defense Initiative tests and were once

considered for use in evaluating National Aerospace Plane (NASP) technologies.146 Furthermore, a Minuteman II was an early booster choice

of the Universities Space Research Association

(USRA) to launch scientific payloads in its Student Explorer Demonstration Initiative.

145 The Arms Control Association, “U.S. and Commonwealth MIRVed Strategic Ballistic Missiles: Fact Sheet,” Washington, DC, Jan. 10,

1991.

146 Leonard David, “NASP Backers Seek Scramjet Tests on Surplus Missiles,” Space News, Mar. 22, 1993.
The National Space Transportation Policy: lssues for Congress 77

Titan II

The Air Force has retired some 53 Than II boosters from silos in Nebraska, Kansas, and Wyoming.147 The Air Force is currently evaluating

how many of these missiles to retain for other uses

and how many to destroy. Engines from the Titans

are likely to be returned to Martin Marietta Denver

for retrofitting into current Titan IIG SLVs. At

least two firms are believed to have contacted the

Air Force stating their intentions to bid on the

Med-Lite competition using Titan IIs, but the bids

never materialized.

Martin Marietta has an Air Force Space Command contract to refurbish retired Than IIs for use

as SLVs. The contract calls for the conversion of

14 Titan II missiles into Than IIG SLVs, to be

completed by September 1995. As a result of that

contract, the Ballistic Missile Defense Organization was able to boost its Clementine lunar spacecraft into orbit on a refurbished Titan IIG in

January 1994.

Trident/Poseidon

The United States plans to retire 92 Trident I C4

missiles when their submarine carriers are retired.

The current schedule calls for the destruction of

these SLBMs after Lockheed Missiles and Space

Co. evaluates whether they might have commercial use. Lockheed has expressed an interest in using the C4s for sounding rockets or small satellite

boosters. Navy officials, however, claim that the

C4s will ultimately be destroyed. The Navy also

plans to destroy the 160 Poseidon C3 missiles that

were retired as of the end of 1991.

Issues for Congress

Arms control agreements and military downsizing have left both the United States and Russia

with a significant surplus of long-range ballistic

missiles. Both countries have the option to conA Titan Il missile silo in Arizona is destroyed under terms o f

the Strategic Arms Limitation Treaty Il.

vert them to space launch vehicles, but, to date, the

United States has generally decided to forgo this

option. The Russians, on the other hand, are pursuing several conversion projects. Both of these

choices raise issues for Congress.

 Unfair competition or market creation?

Before the Clinton Administration’s policy on

use of missile assets, former Vice President

Quayle, while head of the National Space Council, sponsored a set of studies on the future of

America’s space capabilities. The Vice President’s Space Policy Advisory Board issued a report on U.S. space launch capability that called

attention to the promise of using excess ballistic

missiles. 148 At the time, the Bush Administration

had not taken a formal position on the use of excess ballistic missiles for commercial space

launch, but in the interim had denied the use of
78 Office of Technology Assessment

Benefits costs

Lowers cost of access to space. Undermines the commercial production of space

Increases space-related R&D in both the commercial and launch vehicles by reducing their volume, thereby

academic sectors. raising their cost.

Creates business opportunities to convert surplus mis- Stalls the development of new, more efficient SLVs.

siles and to provide associated launch services.

Tests the market for SLVs, which will allow entrepreneurial firms to raise investment capital for the creation of

new, more competitive launch vehicles and services.

SOURCE: Vice President’s Space Policy Advisory Board, “The Future of the U.S. Space Launch Capability A Task Group Report, ” November 1992

these assets pending completion of a review.149

The report’s review of potential benefits and costs

of converting Titan II, Poseidon, and Minuteman

assets is summarized in table 14.

The task group suggested that a balance between the two points of view must be found, and

recommended the establishment of a governmentsupported, small payload launch program. This

program would use low-cost launch vehicles to

promote and encourage space research and experimentation and permit the use of excess ballistic

missiles as space launch vehicles for governmentsponsored research or commercial applications

under specifically controlled conditions.

Most of the points raised by former Vice President Quayle’s task force continue to be valid. At a

time when the United States is trying to reduces its

budget, however, the requirement for less-expensive launch vehicles is paramount, not only for

military and scientific purposes, but for commercial needs as well.

Recycling missile assets has been viewed by

some as a means of reestablishing U.S. leadership

in commercial space transportation. Surplus missiles could be retrofitted to accommodate the

growing requirement for low-cost launch vehicles. In the process, the government would be

saved the expense of both scrapping the missiles

and buying new SLVs. Over 600 ballistic missiles

are slated for retirement by the end of the decade in

the United States alone. 150

A lucrative market is now evolving to provide a

new generation of global satellite telecommunications.151 Private firms are developing constellations of small satellites that are scheduled to be

placed in LEO in the near future. The number of

spacecraft required for each constellation, and the

need to replenish individual satellites as they deteriorate, is adding to an appetite for low-cost

launch vehicles. Moreover, the compact nature of

these spacecraft permits the use of smaller launch

vehicles.

Still, many U.S. commercial launch providers

view the release of retired missile assets as a threat

to their industry. They believe these assets will not

be priced according to their true costs. Moreover,

they point out that the United States is already the

dominant provider of commercial SLVs. Converting excess ballistic missiles might lower government costs and expand the U.S. share of the world

market in the near term, but could inhibit longterm investment in SLV development.

149 Ibid., p. 26.

150 David Mosher, Congressional Budget office, private communications, Mar. 22, 1995.

151 See the section covering fundamental objective #4.
The National Space Transportation Policy: lssues for Congress 79

Converted excess ballistic missile assets would compete with existing U.S. SLVs, such as this Pegasus.

The availability and possible use of retired missile assets in the United States has been hotly debated, most ardently between the Orbital Sciences

Corp. (OSC) of Dunes, Virginia, and officials at

USRA. OSC opposes use of missile assets for orbital insertion of payloads while USRA favors using the less-expensive assets, in particular the

Minuteman II, to launch small scientific payloads. 152

As a practical matter, DOD and NASA have

generally discouraged the conversion of ballistic

missiles. DOD did offer NASA use of its Titan II

for NASA’s Med-Lite missions, but NASA decided instead to purchase the services commercially.153

Some companies have opted to avoid the issue

of excess ballistic missiles, focusing instead on

and designs to new commercial vehicles. For example, on January 23, 1995, E’Prime Aerospace

Corp. of Titusville, Florida announced that it had

received DOD approval to market a space launch

vehicle based on Peacekeeper ICBM technology.

E’Prime claims that, under an amendment to its

Commercialization Agreement with the U.S. Air

Force, it has the rights to use Peacekeeper technology to develop a commercial launch vehicle—the

Eagle S Series. No existing Peacekeepers themselves will be used, but Peacekeeper tooling and

ground support equipment has been purchased

from the government.154

Lockheed Missiles and Space Co. offered to

use a modified Poseidon C3 to launch small satellites for the military several years ago, but “vague

and uncertain DOD policies” did not warrant deadapting ballistic missile production technology

152 OSC supports the conversion of ballistic missiles for suborbital launches. Such a policy poses no threat to OSC’s standing in the SLV

market. 153 For a detailed discussion of this decision, see box 6.

154 Bob Davies, President, E’Prime Aerospace Corp., private communications, April 1995.
80 Office of Technology Assessment

Lockheed privately financed development of the LLV

velopment of the concept, according to Lockheed

officials. 155 However, the effort led to the company’s development of a family of Lockheed Launch

Vehicles (LLV). LLV development has drawn on

tested and tried motors, as well as other off-theshelf components. The maiden flight of an LLV-1

is slated for flight from the Vandenberg Air Force

Base in California sometime in 1995.

Given the restricted budgets available within

the government to pursue new types of launch vehicles, the prospect of falling back on surplus missiles for certain smaller classes of payloads might

be attractive, particularly if these missiles could

be used to create a market for future SLVs. The

cost of using these missiles, however, might be

too high if it undermines the ability of commercial

SLV providers to develop new launch vehicles

and, perhaps, even drives them out of the space

transportation business.

Although in the United States the use of excess

ballistic missiles is being tightly controlled, some

Russian enterprises are promoting a number of

converted ICBMs and SLBMs for an assortment

of commercial uses.156 The Scientific and Technological Center (STC) of Moscow has begun to

market surplus SS-25 ICBMs,rebuilt to launch

satellites. Called the Start-1, the vehicle made a

demonstration flight from Russia’s Plesetsk Cosmodrome on March 25, 1993.

The Start-1 is a transportable, four-stage booster derived from a road-mobile, solid-propellant

ICBM, capable of launching small microgravity

payloads or small LEO satellites. Last year, CTA,

Inc. of Rockville, Maryland announced that the

Start-1 was the fro’s vehicle of choice to place

into orbit a commercial remote sensing satellite

built by CTA for Earth Watch, Inc.157 According

to CTA, the Russians offer cheaper SLVs with

preparation times faster than anything currently

available in the United States. CTA’s decision to

use the Start-1 could change if the Russians do not

155 Howard Trudeau, Vice President, Engineering, Missile Systems Division, Lockheed Missiles and Space Co., “The Lockheed Launch

Vehicle Family,” Sixteenth Annual Lockheed Technology Symposium, Washington, DC, Nov. 16, 1994, p. 2. 156U.S. Department of Transportation, Office of Commercial Space Transportation, Commercial Space Transportation Advisory Committee (COMSTAC), “Report of the COMSTAC Task Group on Soviet Entry Into the World Space Market,” Washington, DC, August 1992. 157 Boris Feldblyum, “Peace Dividends--Refurbished Russian ICBM To Carry U.S. Imaging Payload,” The International Small Satellite

Organization Newsletter 8(2):5-6, April/May 1994.
The National Space Transportation Policy: Issues for Congress 81

adequately analyze and explain recent failure of a

Start-1 fifth stage.158

The Russians have converted another ballistic

missile, the SS-19, into a space launch vehicle

called “Rokot.” This vehicle boosted an amateur

radio satellite into orbit on December 26, 1994.

The Rokot is a liquid-fueled ICBM developed by

the Salyut design bureau in Moscow, now under

the auspices of the Khrunichev Space Research

and Producing Association. An upper stage of this

converted missile, however, blew up after placing

its payload into orbit.159

In addition, the Russians are promoting conversion of the SS-18, the most powerful ICBM

(largest throw-weight) developed in either the

FSU or the United States. This two-stage, liquidfueled booster could easily provide LEO launch

services. Australian space officials and Russian

rocket producers from STC Complex have discussed converting SS-20 and SS-25 missile

stages, modified with a more accurate guidance

system, into SLVs.160 The resulting vehicle

would launch satellites from Australian launch

sites near the equator, which would allow the

SLVs to reach orbit using minimum fuel.

Russian companies have also unveiled plans to

develop launch vehicles derived from a number of

Russian SLBMs. The SS-N-8, -18, and -23 liquidfueled rockets have been touted as capable of lofting microgravity capsules based upon warhead

reentry vehicle designs.

Finally, a Ukrainian venture begun in 1990 and

led by Scientific Production Organization (NPO)

Yuzhnoye, in conjunction with NPOs Soyuz and

Iskra, converted the Ukrainian SS-24 into an airlaunched vehicle called “Space Clipper. ’’161 Converting this vehicle means retaining its lower three

solid-fueled stages, and developing a new fourth

stage and control system.

The availability of this wide assortment of

commercial launch assets, all based on converted

Cold War missiles, requires development and production money, as well as commercial customers.

Whether or not these military missiles of the FSU

will evolve to true commercial status remains to

be seen. Nonetheless, if the U.S. government believes that surplus U.S. ballistic missiles undermine our domestic SLV launch providers, then

Russian ballistic missiles may be seen as an equal,

or greater, threat.

❚ Fundamental Objective #4: The Private

Sector Role in Space Transportation

Decisionmaking

The NSTP’s fourth fundamental objective stresses

expansion of the role of the private sector in space

transportation R&D in order to meet the government’s need for assured access to space at an affordable price and improve the international

competitiveness of the U.S. private-sector space

transportation industry.

Provides for an expanded private sector role in the federal space transportation R&D decisionmaking process. In

contrast with previous national policy on space transportation, this policy specifically directs the Departments of

Transportation and Commerce to Identify opportunities for

government-industry cooperation and to factor these into

NASA’s and DOD’s Implementation plans.

The private sector has been included as a critical element of U.S. space transportation policy for

158 Sharone Parnes, “Israelis Regroup After Loss of Satellite on Russian Launcher,” Space News, Apr. 3, 1995, p. 38; and private communications with a representative of CTA, Inc.

159 “Converted Missile Explodes After Launch,” Space News, Feb. 6, 1995, p. 2.

160 Reuters Ltd. Wire Service, “Australia Eyes Russian Missiles for Space Industry,” from Canberra, Australia, Feb. 8, 1995.

161 Chris Bulloch, "Destroy Them or Launch Them?” Interavia, January 1995, pp. 44-47. The Space Clipper is not carrried outside the aircraft as is the OSC’s Pegasus, but is extracted from the rear cargo doors of the Russian AN-124 heavy transport plane.
82 Office of Technology Assessment

NASA hopes to replace the Space Shuttle with a commercially

owned and operated RLV, or perhaps privatize the Shuttle.

several years. One reason often cited for the commercial emphasis is the desire to preserve an important high-technology, commercial industrial

sector in the United States. But a more compelling

reason for the current emphasis on the private sector appears to be the judgment that, for the foreseeable future, budget constraints make it unlikely

that the government will pay the entire cost of developing and maintaining significantly new national space transportation capabilities. In this

fiscally constrained environment, private sector

financing is viewed by many observers as essential for NASA’s development of a follow-on to the

Space Shuttle. *62

Further, there is a perception that the government should have less responsibility in areas in

which the private sector might reasonably be expected to provide the desired goods and services.

The privatization of most launch facilities and

many of the actual launch activities, for example,

is often considered by many to be necessary if the

United States is to have a viable space transportation industry in the future. Greater use of the private sector conforms with current DOD and

National Performance Review acquisition policy

initiatives that stress increased use of commercial

products and processes. Under these circumstances, increased private sector involvement in

the R&D decisionmaking process appears not

only prudent, but absolutely essential.

Nevertheless, the past experience of government research programs has caused some observers to question the potential for the private sector

to have meaningful input into the space transportation development process. Discussions with

industry raise significant questions about the

conditions under which the private sector (which

must remain profitable to survive) would be willing to finance the development and building of a

new space launch vehicle.

This section outlines government policy and

implementation plans related to an expanded role

for the private sector, discusses the potential of the

implementation plans to meet stated government

goals for the commercial sector, and identifies issues of potential concern relating to the current

policy and implementation plans.

Govemment-industry Goals and Policy

The U.S. government space transportation goal of

assuring reliable and affordable access to space

using domestic capabilities subsumes a commitment to a viable and internationally competitive

U.S. commercial space transportation industry.

Indeed, the policy directs government entities to

“encourage the cost-effective use of commercially

provided U.S. products and services, to the fullest

extent feasible, that meet mission requirements;

. . . [and] . . . foster the international competitive162 Ivan Bekey, NASA, “A Win-Win Concept for Comm ercial Development and Operation of a New, Large Reusable Space Launch Vehicle: An “Existence Proof’’ White Paper,” Dec. 21, 1994, pp.2-3. Bekey reports that NASA concluded that the government was very unlikely to

proceed into procurement of a new launch system in the future, and that both NASA and the DOD independently concluded that if the next

generation reusable launch vehicle were to be developed it would have to be done by the private sector using largely private sector funding.
The National Space Transportation Policy: Issues for Congress | 83

ness of the U.S. commercial space transportation

industry, actively considering commercial needs

and factoring them into decisions on improvements in launch facilities and launch vehicles.”163

Recognizing the need to design for dual or multiple use to enhance U.S. commercial competitiveness, the policy directs government planners

to involve the private sector in the design and

development of space transportation capabilities;

transfer unclassified, government-developed,

space transportation information to industry in a

timely and commercially relevant manner; and

promote common technical standards for space

products and services.

The policy further directs government planners

to help identify and promote innovative ways for

the private sector and federal, state, and local governments to work together to implement space

transportation policy; to avoid engaging in activities that have commercial applications and that

might deter commercial space activities; and to

provide industry stable and predictable access to

appropriate space transportation hardware, facilities, and services.

The Implementation Plans

The implementation plans all specifically address

the role of the private sector in meeting their assigned goals, but organizational views on this issue—as expressed in the policy, plans, and

funding levels—vary considerably.

Departments of Transportation and

Commerce Implementation Draft Plan

The DOT/DOC implementation plan was still under revision during the writing of this report.

However, the latest available draft advances an

objective for the U.S. space transportation industry to “capture a dominant portion” of the global

market for launch services by encouraging the development of a more internationally competitive

launch vehicle fleet and supporting infrastructure.164

The importance and difficulty of obtaining financing (private or public) in the space launch industry has been a matter of concern for several

years. The NSTP gives DOT and DOC specific responsibility for identifying opportunities for government-industry cooperation and for promoting

innovative types of arrangements to implement

the policy. The DOT/DOC implementation plan

lists, and briefly discusses, several options for

stimulating private investment in space transportation vehicle development and infrastructure

improvements.165 Some of these options are included in table 15. The potential benefits and

drawbacks of the most important of these options

are discussed later in the issues section.

Industry has expressed particular interest in anchor tenancy and termination liability. The private sector and the government frequently use

anchor tenancy agreements to support financing

of new building construction. Such agreements allow the building developer to raise funds to

construct the building. Early leases can result in

lower rates or other benefits for the anchor tenant.

Similarly, the government might act as an anchor tenant for a space transportation system by

providing a guaranteed launch market for a specific period of time to the space transportation provider. As an anchor tenant, the government would

provide an income stream and reduce the investment risk for the private sector during a period in

which commercial markets are being established.

For example, the government might negotiate to

purchase a designated amount of lift capacity

(with some specified performance and schedule

minimums) per year to LEO, to make a 10-year

163 The White House, Office of Science and Technology Policy, op. cit., footnote 3, secs. I(5) and I(6).

164 U.S. Department of Transportation/U.S. Department of Commerce, “Department of Transportation/Department of Commerce National

Space Transportation Policy Implementation Plan: Executive Summary,” Washington, DC, Apr. 19, 1995 (draft).

165 Ibid., pp. 8-11.
84 Office of Technology Assessment

General option Examples

Anchor tenancy Government commitment to procure a specified number or percentage of

goods and/or services over a number of years.

Termination liability Government commitment to reimburse a contractor for all or part of its

investment if the government terminates a contract for its convenience.

Public/private partnerships R&D limited partnerships, in which investors could form a limited partnership to conduct cooperative R&D; consortia; space transportation

corporations; space service brokerages; contracted partnerships; and

government prizes.

Other financial options Loan guarantees, tax deferments, exemptions, and credits.

SOURCES :DOT/DOC, “Department of Transportation/Department of Commerce National Space Transportation Policy Implementation Plan” (Draft),

Nov. 7, 1994, pp. 9-12. H.R. 6135, NASA FY 93 Authorization (Public Law 102-588) H.R. 258, Launch Services Corporation Act of 1995.

purchase commitment, and to have some potential

for increasing the commitment. 166

Termination liability commits the government to provide payment to a contractor in the

event the government terminates a contract for its

convenience. Advocates argue that, when applied

to the space transportation industry, this arrangement would protect private sector firms involved

in endeavors such as multiyear anchor tenancy

against the government’s terminating a contract

after a firm had made large investments.

A space transportation corporation might be

established to provide economies of scale to the

U.S. space transportation industry by pooling all

government launches as a central procurement

agent. It might be quasi-public, chartered by Congress, and modeled on COMSAT. 167 The corporation would work to increase the economic

exploitation of space and enhance the economic

competitiveness of the U.S. space transportation

industry. The corporation might initially have

some government capital and operate with an anchor tenancy arrangement. Whatever the structure, proponents argue that a corporation would

operate on business principles and use business

practices.

Activities such as R&D limited partnerships

and consortia would be aimed at leveraging investments by individual firms as well as the government. Such activities are currently sanctioned

by the National Cooperative Research Act of

1984.168 Joint R&D has been used extensively in

recent years in many fields.

The DOT/DOC plan also includes the idea of

offering a government prize for the development

of a good or service the government desires. This

concept has been advocated by some in industry as

an efficient way to entice private sector investment in space launch. Under this concept, the government might simply award a prize to the first

competitor meeting the government’s perfor166 See T.F. Rogers, "Toward a New Public-Private Space Transportation Strategy,” The Journal of Practical Applications in Space 5(1 ):17,

1993. Ivan Bekey, op. cit., footnote 162, suggests a five-year, above-market price guarantee to help industry secure initial financing. Industry

representatives provided OTA with a number of alternative anchor tenancy scenarios.

167 For one possible structure, see U.S. Congress, House of Representatives, H.R. 258, “Launch Services Corporation Act of 1995,” Washington, DC, 1995 (introduced on Jan. 4).

168U.S. Congress, Office of Technology Assessment, Making Things Better: Competing in Manufacturing, OTA-ITE-443 (Washington,

DC: U.S. Government Printing Office, February 1990), pp. 225-226. The National Cooperative Production Amendments of 1993 amended the

National Cooperative Research Act of 1984 to include joint production activities.
The National Space Transportation Policy: Issues for Congress | 85

mance needs (e.g., a vehicle that could deliver a

25,000 lbs of payload to the International Space

Station, have a total launch operations crew of

fewer than 50 people, and take less than four days

after return to be ready to launch on a new mission). A sufficiently large prize, some advocates

argue, would be a far greater stimulus of innovative developments and new entries into the launch

business than anchor tenancy or termination liability.

Loan guarantees, tax deferments, exemptions,

and credits are among the other financial options

listed in the DOT/DOC implementation plan. The

Japanese government, for example, has used success-dependent loans (hojokin) to assist risky enterprises in selected industries. Repayment for

these loans can wait for a positive cash flow.169

Tax credits and exemptions are more traditional

U.S. policies. DOD has employed Title III of the

Defense Production Act to develop production capabilities in areas deemed essential to national security. DPA money, for example, is currently

being used to fund part of the government’s Flat

Panel Display Initiative.170

The DOT/DOC implementation plan also suggests that significant economic savings might be

realized through the development of joint-use facilities. Many observers believe that important

savings are to be gained from changes in launch

operations and facilities. The DOD-administered,

dual-use space launch facility program has funded

studies of commercial spaceports, initially using

surplus government facilities. This is discussed in

more detail later.

The DOT/DOC implementation plan notes that

the principal role for federal funds may be as “the

provider of matching grant funds, venture capital,

credit capacity, and a ‘bankable’ stream of revenue to support commercial launches.” This view

of the government as the ultimate source of funding is a more traditional view of government’s

relationship to the launch industry. It is consistent

with the findings of the 1994 “Commercial Space

Transportation Study” (CSTS), whose participants reported they were unable to prove that the

foreseeable commercial space market was sufficiently robust to support a completely commercially developed system. The study therefore

concluded that some level of government financial participation was essential to attract commercial investment in U.S. space transportation.171

Department of Defense

The DOD implementation plan includes the private sector less as a partner in the development of

new, commercially applicable launch capabilities,

than as a provider of less costly launch vehicles to

meet DOD needs. The Department supports U.S.

commercial programs indirectly through its

EELV development and procurements. U.S. firms

are expected to derive a spinoff benefit from the

development of a lower cost EELV that might then

be offered to the commercial market.172 The Department’s operation and maintenance of much of

169 U.S. Congress, Office of Technology Assessment, Competing Economies: American, Europe and the Pacific Rim, OTA-ITE-498(Washington, DC: U.S. Government Printing Office, October 1991), p. 68.

170 Title III of the Defense Production Act of 1950 (50 U.S.C. App. 2061) addresses the expansion of productive capacity and supply. Under

this authority, the President may make purchases, guarantee purchases or guarantee loans to help develop a capability that is viewed as essential

for national security.

171 The Commercial Space Transportation Study Alliance, op. cit., footnote 16, p. 13. The CSTS is an examination of potential markets for

space transportation undertaken by the CSTS Alliance. The Alliance consisted of six firms: Boeing, General Dynamics, Lockheed, Martin Marietta, McDonnell Douglas, and Rockwell. The study began in March 1993 and reported findings in April 1994.

172 U.S. Department of Defense, op. cit., footnote 125, p. 8.
86 | Office of Technology Assessment

the national space launch infrastructure is a benefit to the private sector.

Moreover, DOD reports that it is making efforts

to design, or redesign its payloads to have more

“commercial” characteristics.173 One of the principal problems, however, is that the national security community retains a requirement for a

heavy-lift capability that is very costly. That capability is not currently of great use in the commercial market.

The DOD implementation plan incorporates

many of the recent DOD acquisition reforms

aimed at opening the Department to commercial

developments and commercial business practices.

Performance specifications and commercial specifications and standards will be used in lieu of military specifications and standards, for example,

unless there are no practical alternatives. Furthermore, the plan encourages industry to offer alternative solutions to the total government mission

model requirements, rather than to meet detailed

government specifications.174 As a part of these

changes, foreign components may also be used,

“but sole dependence on foreign sources of supply

will not be permitted.”175

The DOD plan encourages commercial investment, but with some caution. The plan directs that

if investment is included, bidders “must identify

how they intend to recover their investment in the

EELV recurring cost.”176

NASA

The NSTP directs NASA to actively involve the

private sector in planning and evaluating its

launch technology activities. NASA’s implementation plan envisions a “government-industry

partnership” aimed at developing and demonstrating new reusable space transportation technologies. The Agency believes that these technologies

have the potential to reduce the cost of access to

space radically and act as a catalyst for the increased use of space.

NASA reports that a government-industry partnership is essential, because:

. . . the private sector could have a significant

role in managing the development and operation

of a new reusable space transportation system.

In anticipation of this role, NASA shall actively

involve the private sector in planning and evaluating its launch technology activities.177

NASA’s program objectives for the RLV development program include the reduction of technical risks associated with building and operating a

reusable system in order to encourage private investment in the commercial development and operation of the next-generation system.178 The

Agency’s plan describes a concept in which industry might make significant decisions, and “involvement by the government, at industry’s

request, will be in areas where the government’s

technical expertise and assets can be used to their

fullest advantage.”179

NASA’s implementation plan describes joint

“government-industry synergy teams” that select

key technologies, design test programs, and develop evaluation criteria for validating the

technology in an integrated system with realistic

operations, maintenance, and flight environ173 U.S. Department of Defense, Office of the Under Secretary of Defense, Acquisition and Technology, “MED-LITE: A DOD White Paper,” Washington, DC, December 1994. This was discussed in detail earlier in the section on fundamental objective #1.

174 U.S. Department of Defense, op. cit., footnote 125, p. 7.

175 Ibid., p. 6. This is discussed earlier in the section covering fundamental objective #2.

176 Ibid. Foreign sourcing of components will be managed so that foreign suppliers cannot deny items to the United States, using stockpiling

and assuring that alternative sources of supply can be developed.

177 NASA, op. cit., footnote 29, p. 3. Some skeptics note that the implementation of any partnership may well be challenged by the fact that

NASA has man-rated space launch requirements, while the commercial industry does not generally need man-rated vehicles.

178 Ibid., p. 5.

179 Ibid., p. 4.
The National Space Transportation Policy: Issues for Congress 87

ments. The Agency believes such a program will

provide practical experience in routine operations

of reusable systems.180

Issues for Congress

The private sector policy goals and the measures

outlined to achieve them in the implementation

plans raise a number of critical issues involving

the size and nature of the future space transportation market; the nature of the government-industry relationship; the proper balance between risk

and incentives; launch operations and infrastructure; and the willingness of the government to accommodate commercial needs in seeking to

achieve its own goals. These issues are discussed

below.

 Will the estimated market support

policy goals?

The assessment of the size, character, availability, and relationship (e.g., potential overlap) of future space transportation markets is critical to

industry’s attitude toward new space transportation development programs and government costsharing schemes.

Industry sees several different market segments: U.S. government (defense, intelligence,

and civil), U.S. commercial, foreign government,

and foreign commercial. Assuming no significant

near-term change in the United States’ national security situation, a core market, composed of announced government and commercial programs,

is relatively well defined. There is, however, considerable uncertainty about the size and availability of the overall potential space transportation

market. The CSTS, for example, estimated a significant increase in the use of space, and therefore

in commercial launchings-if the cost of putting

payloads into orbit were greatly reduced. But

many of the increased uses of space envisioned in

the CSTS were expected to come in nontraditional

Satellites, such as this HS 601, provide capabilities for air

traffic control, mobil phone service, and television, voice,

facsimile, and data transmission.

areas (e.g., tourism and waste disposal). Indeed,

the study acknowledged that currently projected

markets are insufficient to attract major investments, and argued that “to become economically

viable, a new launch system must generate new

commercial markets. ’’181

The current industry assessment appears to be

that:

■

■

The potential commercial market for MLVs is

insufficient by itself to entice enough private

investment to build a future RLV capable of

meetings NASA’s needs.

The potential commercial market for small

payloads may be sufficient to attract enough

private investment to develop vehicles to meet

both commercial and government needs for

small payload delivery.

180 Ibid., p. 6. 181 The Commercial Space Transportation Study Alliance, op. cit., footnote 16, p. 1.
88 Office of Technology Assessment

A Navstar Global Positioning Satellite is prepared for launch

aboard a Delta Il.

■ There is little estimated commercial heavy-lift

market and the private sector is unlikely to put

much of its own funds in that area without substantial government support.

Such assessments imply that if the government

wishes to encourage the development of a commercial RLV, it will have to provide a significant

amount of funding---either through a direct development and procurement processor through some

form of guaranteed business.

Estimating the Market

Government and industry planners use “mission

models” that contain estimates of future space

transportation needs to help them make investment decisions. These models may vary depending on the developer’s judgment about the

likelihood of a particular action occurring (e.g.,

the deployment of one of a number of proposed

global satellite communications systems).

Because of the time involved in developing

new space transportation systems and the large investments involved, the investment time periods

of interest are necessarily long—usually 15 to 20

years. Market projections become progressively

ill-defined further in the future. The uncertainties

of these markets raise the financial risks for the

private sector. These higher perceived risks, in

turn, cause firms to seek risk mitigation alternatives such as anchor tenancy, termination liability,

and other arrangements designed to hedge against

inadequate financial returns.

The U.S. Defense and Intelligence Market

DOD payloads have been a major component of

the global space launch market for U.S. space

transportation firms. Under any scenario, they

will continue to be important in the foreseeable future. In the absence of a new, major, military

threat, or a change in defense planning, estimates

of the U.S. national security market for the next

decade are fairly well defined.182 The DOD recently estimated a demand for an average of about

two small, eight medium, and three heavy

launches per year between 1995 and 2010. 183 As

noted earlier, the heavy launches consume roughly 80 percent of the Department’s space transportation budget and are its principal target for

EELV savings. (See section on fundamental objective #l.)

182 Major new deployments such as a ballistic missile defense could have a significant effect on these estimates. 183 U.S. Deaprtment of Defense, op. cit., footnote 15, p. II-2. Estimates for commercial medium-class launches have recently increased

slightly, reducing the gov ernment’s percentage of that important market segment. In 1994, DOD launched 5 small payloads, 4 medium payloads, and 4 heavy payloads. These 13 launches constituted 48 percent of the 27 total U.S. launches. There was a worldwide a total of 94 space

launches in 1994. In addition to the United States; Russia launched 49; France launched 8; China, 5; India, 2; and Japan, 2.
The National Space Transportation Policy: Issues for Congress | 89

DOD estimated that government launches will

likely comprise almost all the of the U.S. HLV vehicle market, from 30 to 40 percent of the U.S.

market for MLVs (depending on commercial

communications developments), and from 15 to

30 percent of the U.S. SLV.184 Most industry estimates agree on the importance of the DOD market

to any U.S. space transportation business strategy.

DOD currently provides the principal U.S. ELV

market and is potentially an important component

of the future RLV market.

The Government’s Nondefense Market

The U.S. government’s civil space transportation

market is composed of weather and communications satellites; deployment and support of the International Space Station; and other planned

scientific missions. NASA relies primarily on the

Space Shuttle for its manned and scientific missions, but it also uses ELVs for some additional

scientific, communications, and Earth observation missions. The National Oceanic and Atmospheric Administration relies on ELVs. DOD’s

industrial base study estimated the government’s

nondefense launch market at 18 missions per year

(three small, seven medium, and eight Shuttle).

NASA has estimated a need for about 15 missions

per year, principally MLVs and the Shuttle.185

Industry planning estimates for the civil market

are generally conservative and are close to these

government figures, although they agree with the

findings of the CSTS that significantly lower

launch costs would probably expand current market segments as well as establish new ones. An

important issue, however, is how much and at

what rate expansion might occur. In a fiscally

constrained environment, the government’s nondefense market for space transportation may not

be very responsive (at least in terms of dollars

spent) to reduced launch costs.

The Commercial Market

The size and character of the future commercial

market are critical to private business as well as to

government space transportation decisions. How

large this market segment might grow, and how

fast that growth might occur, will decide the success or failure of many of the government’s policies involving industry participation. This market

segment is, however, the most difficult to predict.

Private sector interest in government guarantees,

such as anchor tenancy and termination liability,

indicates a broad skepticism about the size of

near-term commercial markets. An exception already noted may be the small payload (under

2,000 lbs to LEO) sector, which is widely viewed

as having considerable growth potential.

Since 1990, U.S. launch providers and Arianespace have launched an average of 23 commercial

satellites each year (see table 16). The draft DOT/

DOC implementation plan estimates a future

annual launch rate for the international commercial market of medium-to-large communications

satellites in the range of 12 to 15. NASA’s “Access

to Space Study” estimated a range of 5 to 14 commercial launches per year through the year 2030.

DOD estimated an average of 15 per year through

2010, excluding recently proposed LEO satellites.

The LEO constellations might be expected to add

4 to 10 medium-to-large launches per year during

the currently estimated deployment phases

(1996-98 and 2002-2005), depending on what

systems are deployed, and some 8 to 12 small vehicle launches per year.186

184 U.S. Department of Defense, op. cit., footnote 15, p. II-3.

185 U.S. Congress, Office of Technology Assessment, op. cit., footnote 87. These include 2 Pegasus/Taurus Class, 3 Delta Class. 2 Atlas

Class, 0.3 Titan IV Class, and 8 Shuttle, p. 5. There were seven Shuttle and three ELV NASA missions in 1994.

186 Frank C. Weaver, Director, Office of Commercial Space Transportation, U.S. Department of Transportation, “Dear Colleague,” letter to

industry addressing estimated LEO launch services, Mar. 13, 1994.
901 Office of Technology Assessment

Arianespace developed the heavy-lift Ariane 5 to launch more

than one small-or medium-sized payload at a time.

Industry estimates are generally of the same

magnitude, although industry points out the negative effects that the variability of the market can

have on business. Several communications satellites sent aloft about the same time as a part of a

communications network, for example, will need

replacement at about the same time, causing anticipated peaks and valleys in the launch business.

Industry is starting to include in its commercial

market forecasts some proposed LEO communication satellite constellations. The proposals include constellations that range from 12 to 840 or

more satellites (see table 17). These constellations

will provide cellular communications from

space. 187 The more mature LEO communications

concepts (e.g., Iridium) are going forward in the

absence of new and cheaper launch systems.

Commercial launch rate estimates are probably

fairly accurate out to about five years since they

are principally based on payloads already in production or scheduled for production. Further into

the future, however, commercial launch needs become much more uncertain and affected by new

technological developments and new areas for

market growth. From the U.S. industry viewpoint,

the market will also be affected by the number of

launch system providers—the United States, Europe, Russia, Japan, China, and others.

The CSTS estimated that the number of

launches, and the total mass in orbit, would increase sharply if launch costs (and launch prices to

users) were to drop (see figure 2).188 The team explored three threshold launch prices to LEO:

$1000/lb (believed to have a high probability of

being achievable and a price that might double the

mass in orbit over current levels); $600/lb (where

new markets such as space business parks and

hazardous nuclear waste disposal were estimated

to be created); and $400/lb (where both new and

old markets might show extensive growth).

But all three of the launch prices the CSTS investigated are significantly below most of the cur187The proposal generally call for initial deployment in clusters on MLVs or HLVs. Individual replacement satellites might be launched on

SLVs. The LEO satellites are expected to have a life span of four to five years as opposed to 10 years for GEO satellites. Satellite replacement will

require rapid launch responsiveness. Since there are a number of competing systems, launch costs will need to be minimized. See Ralph DePalma, U.S. Department of Transportation, “Responding to the Market,” U.S. Commercial Space Launch Industry, 1995. 188 Cost and price are often confused in the discussion of space transportation systems. providers look at cost, while users focus on the price

of launches. Even if launch coats were to be lowered dramatically, if launch prices were only lowered enough to capture much of the available

market, the expansion of new markets might be very small.
The National Space Transportation Policy: Issues for Congress 91

European Other European Other

Year satellites satellites Total satellites satellites Total Grand total

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1 994’

6

3

1

0

1

0

1

2

0

0

0

0

1

4

3

3

1

0

6

6

2

2

5

10

9

9

14

1

1

0

1

7

3

5

4

10

12

9

3

2

6

10

10

11

14

1

1

0

2

11

6

8

5

10

0

0

0

2

2

2

2

4

3

3

2

6

6

7

10

5

6

3

0

0

0

0

1

0

1

2

4

2

1

7

4

9

5

8

11

11

0

0

0

2

3

2

3

6

7

5

3

13

10

16

15

13

17

14

12

9

3

4

9

12

13

17

21

6

4

13

12

27

21

21

22

24

a Scheduled

SOURCE: U.S. General Accounting Off Ice, “National Space Issues. Observations on Defense Space Programs and Activities, ” GAO/NSlAD-94-253,

August 1994, p 26

Number of Orbital Projected initial

Type System Organization satellites location operations

“Mega” LEO Teledesic

Big LEO Iridiuma

Globalstara

Odyssey a

Ellipso

Little LEO Orbcomm

Starsys

Aries

Teledesic Corp.

Iridium

Loral/Qualcomm

TRW

Ellipsat Corp.

Orbital Communications

NACLS, Inc.

Constellation Communications

840

66

48

12

14-18

24

24

48

LEO

LEO

LEO

Medium orbit

Elliptical

LEO

LEO

LEO

1999

1996

1997

1997

1996

1994

1996

1995

a Licensed by the FCC in January 1995

SOURCES: U.S. Congress, Office of Technology Assessment, The 1992 World Administrative Radio Conference: Technology and Policy Implications

(Washington, DC U S. Government Printing Office, 1993), p. 114. Ralph DePalma, U.S. Department of Transportation, “Responding to the Market,”

US. Commercial Space Launch Industry, 1995. Frank C Weaver, Director, Off Ice of Commercial Space Transportation, U S Department of Transportation, “Dear Colleague,” letter to Industry addressing estimated LEO launch services, Mar 13, 1994
92 Office of Technology Assessment

$1000/lb $600/lb $400/lb

Gov’t. Other

Comm.

I

waste

disposal

Annual Mass to Leo Annual Mess to Leo

1.9 Mlbs 4.5 Mlbs

Annual Mess to Leo

6.7 Mlbs

't.

SOURCE: Commercial Space Transportation Study Alliance, “Commercial Space Transportation Study,” Executive Summary, 1994, p. 8.

rent estimates for launch prices to LE0.189 Thus,

until a new vehicle can radically lower launch

costs, the conservative market estimates appear

appropriate and are supported by government

findings. DOD’s “Space Launch Modernization

Study,” for example, concluded that the commercial launch market has little potential for significant growth or economies of scale. 190 Long-term

(15 to 20 years) growth, however, is an open question.

Factors other than price seem to influence the

market share for U.S. firms. The CSTS identified

several, including booking time, ability to launch

on need, ability to launch on schedule, high launch

rate, high reliability, simplified launch operations,

and standardized payload interface (see table

18).191

A recent General Accounting Office (GAO) report 192 asked industry representatives why they

had selected Arianespace over U.S. launchers.

GAO reported that price was an important consideration, but respondents considered U.S. launchers competitive in price. Other factors considered

were the aggressive and innovative marketing

techniques of Arianespace, and the European

firm’s perceived space launch success rate.

189U.S. Department of Defense, op. cit., footnote 15, p.II-10, cites prices to GTO of $12,000/lb for a U.S. provider, $8,000/lb as the Ariane

goal, and $4,000/lb as the Chinese/Russian possibility. An analysis of several U.S. launch vehicles indicates that, in the best case, they might put

roughly four times as much weight in LEO as in GTO. These estimates equate to roughly $3,000/lb, $2,000/lb, and $1,000/lb to LEO. 190 U.S. Department of Defense, op. cit., footnote 19, p. 9. 191 The Commercial Space Transportation Study Alliance, op. cit., footnote 16, p. 10.

192 U.S. General Accounting Office, “National Space Issues: Observations on Defense Space Programs and Activities,” GAO/

NSIAD-94-253, Washington, DC, pp. 26-27. The GAO reported that the U.S. commercial launch industry is price competitive with foreign

launchers and the future launch market appears limited. The report observed that “using requirements of the U.S. commercial launch industry as

justification for developing a new launch vehicle does not appear warranted.”
The National Space Transportation Policy: Issues for Congress 93

Factor Source of difference Potential influence on decision

Price

Reliability

Insurance rate

Interest rates

Expected

on-orbit life

Launch

schedule

Payment

schedule

Stand down

time after a

failure

Responsiveness

Technical

For firms basing price on market principles, different cost structures will result in different pricing.

And every bid represents a unique situation. For

firms operating on non-market principles, cost is

often unknown and the price can be set indiscriminately.

No one is quite certain of the actual reliability of

launch vehicles. Most observers use launch success rate as a substitute indicator of actual reliability.

Varying launch success rates of launch vehicles

(and other factors) lead the space insurance industry to charge different insurance rates for each

launch vehicle.

Interest rates vary with both time and place.

More station-keeping fuel can be stored on a satellite being launched on a vehicle with higher lift capacity. Therefore, for a satellite of equivalent functionality, the on-orbit life expectancy of the spacecraft will vary with the launcher.

Each launch vehicle adheres to a different launch

schedule. Factors that affect launch schedule include manufacturing time, payload integration,

launch licensing, and satellite licensing (in the

event of export).

Each launch service provider structures a unique

payment plan for its customers.

Varying regulatory policies affect the probable period of time that a launch vehicle is made to stand

down after a failure.

The ability to offer a launch date specified by the

customer.

Launch vehicles have different sizes and potential

payload configurations.

Price is often the primary factor in the acquisition of space launch services. Price is

affected by international exchange rates and

the availability of competition.

The expected value of a service varies with

the probability of the outcomes. The higher

the probability of success, the greater the

value of the service.

The insurance rate can be thought of as a

variable rate tax. It directly effects the perceived cost of the launch vehicle.

High interest rates increase overall launch

costs, particularly for those with very long

launch schedules.

For a commercial satellite, the longer a satellite is in orbit, the greater its revenue stream

(and hence profitability) will be. For civil and

military payloads, longer on-orbit Iife translates into greater functionality or reduced

program costs.

A long launch schedule may translate into

lost functionality and/or revenues for a commercial satellite owner. Launch schedule is

especially important when replacing a satellite rendered inoperable or approaching the

end of its life expectancy.

A payment schedule that pushes a good portion of the payments off into the future IS advantageous to the customer because the

customer can, in the meantime, invest the

resources elsewhere.

Longer than expected stand down times may

result in the loss of vital functionality (commercial, civil, or military) and/or significant

commercial revenues.

Provider may be selected on the ability to

launch a satellite in a certain quarter or year.

Satellite might be launched alone or bundled

with other satellites. In the latter case, position in the stack may be important.

SOURCE. Off Ice of Technology Assessment, 1995
94 | Office of Technology Assessment

The examination of the potential commercial

market raises a number of issues that might be

considered in evaluating U.S. policy toward the

private launch industry. One of the most important

is to gain a better understanding of the inhibitors

to U.S. business penetration of the global business. If price is a less important factor in customer

decisionmaking than it is often alleged, then

changes in design philosophy (e.g., that result in

reductions in launch personnel) and accommodation of commercial needs (e.g., responsiveness)

may be particularly important.

Overlap of Government and

Commercial Markets

Any government-industry partnership is challenged by the apparent disparity between the missions and current payloads of the government, and

the missions and payloads in the commercial

market.

The “Space Launch Modernization Study’s”

description of the often conflicting goals and

needs of the four major space launch user communities—defense, intelligence, civil, and commercial—is useful in considering the challenges in

achieving synergy among space transportation

systems. The report notes that the defense mission

demands a launch capability that can lift a mixed

collection of warning, surveillance, communications, weather, and navigation satellites into orbit

in a timely manner. The intelligence community

needs to lift relatively few payloads, which are

typically large and very expensive. The nondefense (civil) government market has a special need

for vehicles that can carry people back and forth to

space. The commercial market is currently dominated by geosynchronous communications satellites, although the mix of satellites in the

commercial market may change with the advent of

new commercial LEO satellite communications

constellations.

As noted above, DOD’s overall EELV policy

aims to bring down its overall space transportation

budget and most of the savings are expected in the

heavy payload range—not in the commercially

compatible medium launchers.193 This apparent

mismatch of focus need not preclude some spinoff

into the more commercially important sector—

depending on the nature of the modifications

made. DOD has generally been pursuing lighter

satellites to meet future needs and thus use medium-lift capabilities, but intelligence satellites

are still “generally large and expensive so that reliable, heavy-lift capability is a top concern.”194

Changing these configurations may be difficult

and costly, or impossible. But the EELV family

developed in the DOD program might be designed

to take less time on the pad, require fewer personnel to launch, and be more economical to produce.

NASA’s need for a vehicle that carries people

complicates the connection with commercial

space transportation service. Industry has little

use for such a capability, but the development of a

space tourism trade might pay for the marginal

cost of outfitting vehicles to carry humans with

reasonable safety.

Gaining the benefits of any synergy that might

exist among the markets will demand a detailed

investigation of the nature of the future market and

the likely phasing of any expanded commercial

market. A moderate expansion of the commercial

market might occur with the development of a less

costly family of EELV, but a greatly expanded

market depends on reduced costs to orbit that are

only thought possible with the development of a

viable RLV or partially reusable launch vehicle.

Moreover, these reduced costs have to translate

into reduced prices for space transportation. A

strategy of significantly reducing costs while only

reducing prices to the point that a majority market

share can be gained may not greatly expand the

193 U.S. Department of Defense, op. cit., footnote 19, figure II-6, p. II-10. The bulk of the commercial market is in launching 3,000 to 10,000

lbs to GTO—a range covered by the Delta II, Atlas IIA, and Ariane 4.

194 U.S. Department of Defense, op. cit., footnote 19, p.5. Moreover, these heavy launch vehicles could be made more compatible with

commercial needs if they were used to launch two to three satellites at a time as is the case with Arianespace launchers.
The National Space Transportation Policy: Issues for Congress | 95

overall use of space. Nonetheless, regardless of

launch costs and the pricing policy followed, for

the foreseeable future the government market will

remain important to any private sector investment

decision.

ISSUE 4b: The government-industry

relationship

The NSTP and all the implementation plans

stress the need for closer government-industry

cooperation. Yet questions remain about how a future government-industry relationship can or

should be structured. The NSTP designates the

DOT and DOC to be the advocates of increased

commercial participation, but with little money

for space transportation and small staffs dedicated

to space issues, DOT/DOC are unlikely to have

much real impact. Indeed, although they participate in interagency discussions,195 they are likely

to find it difficult to influence relationships that

NASA and DOD are already negotiating with

their prime contractors.

NASA officials, at least at the highest levels,

appear to support the idea that a strong, internationally competitive commercial space transportation base is essential not only for

development of its future space transportation, but

also to run the United States’ future launch infrastructure. More important, NASA needs substantial private sector investment to build a new RLV

to replace the aging Space Shuttle. The Agency is,

therefore, seeking policies that will provide support for industry and provide incentives for industry to invest.

DOD, on the other hand, appears less concerned about developing a close partnership with

industry than is NASA. To be sure, changes are

occurring in DOD’s relationship with industry as a

result of general DOD acquisition reform, but

these changes are more in line with developing a

more efficient way of doing business than with organizing a development partnership. DOD, in

contrast to NASA, does not have the same perceived need for a new space launch vehicle to perform its missions. Although its current fleet of

ELVs are considered by the Department to be too

costly and inflexible, they still perform well

enough to meet the Department’s fundamental

mission requirements. The EELV program thus

has a limited goal of allowing the Department to

lower costs and gain some increased launch flexibility.

DOD’s recent space launch vehicle industrial

base assessment concluded that the U.S. space

launch industry was reasonably profitable, had adequate production capacity, and was capable of

meeting DOD’s space launch requirements for the

foreseeable future (see box 10).196 The report concluded that:

The U.S. space launch industry remains viable and capable of meeting DOD launch requirements. All three prime contractors

currently supplying ELVs for DOD use are profitable, despite considerable production overcapacity in the large and small vehicle industry

segments. Considerable industry consolidation

is both inevitable and necessary. Overhead costs

will be reduced and the Department, and ultimately the U.S. taxpayer, will benefit.197

Because current ELV production capacity can

meet or exceed current demands (see table 19), the

Department expects to benefit from the anticipated industry consolidation that will reduce overhead costs and prices.198 Thus, while the

Department generally supports enhanced commercial competitiveness in the space transportation industry, it sees no reason to provide specific

financial support to achieve this goal.

195 U.S. Department of Defense, op. cit., footnote 19, p. 6. DOT chairs the Interagency Coordination Committee on Transportation Research

and Development.

196 U.S. Department of Defense, op. cit., footnote 15, pp. ES-8-ES-10.

197 Ibid., p. ES-13.

198 Ibid., p. ES-10.
96 Office of Technology Assessment

DOD recently conducted an assessment of the industrial base that supports space launch vehicles, The

Industrial Assessment for Space Launch Vehicles is one of several defense technology and industrial base

studies designed to provide DOD and Congress better insight into the changes that are occurring in the

defense industry. The studies seek to identify essential capabilities that might be threatened with loss as a

result of Industrial restructuring and provide information for budget and program decisions to preserve

needed capabilities. DOD’s space launch assessment concentrated on domestic capabilities, the portion

of the industry supporting ELV, prime contractors, and upper-tier subcontractors. The assessment also

touched on the Space Shuttle base, space transportation infrastructure, and foreign sources of goods and

services,

The assessment concluded that the industrial base supporting DOD’s space launch needs was adequate to meet the Department’s requirements for the foreseeable future. There is sufficient production capacity to meet DOD’s expected demand for launch vehicles. Indeed, there is overcapacity in SLV and HLV,

as shown in table 19.

DOD also reported that the four major ELV prime contractors (McDonnell Douglas, Lockheed, Martin

Marietta, and Orbital Sciences)1 were all profitable. Under the circumstances, DOD plans to let the base

consolidate and allow the prime and first-tier contractors to ensure the availability of the subtiers since they

“have all demonstrated an ability to manage the risks associated with a changing vendor base.”2

1 Lockheed and Martin Marietta have since merged into one company called Lockheed Martin

2 U S Department of Defense, Off Ice of the Deputy Assistant Secretary of Defense (Industrial Affairs), “lndustrial Assessment for

Space Launch Vehicles,” Washington, DC, January 1995, p ES-10

SOURCE: Office of Technology Assessment, 1995

Industry sources argue, however, that the

DOD’s assessment of the health and profitability

of the industrial sector is based on periods in

which government business dominated and government investment and working capital were

available. In the future, profit margins will have to

be considerably higher for industry to attract substantial investment capital.

While the potential for moderately lowering

launch costs (enough to achieve a positive return

on investment in a reasonable period of time) and

improving access to space might be sufficient to

prompt government expenditures on new launch

capabilities (if funds were available), it is not clear

what levels of launch price reductions might have

to be achieved to convince industry that significant commercial market expansion is likely and

thus entice significant industry investments. An

anticipated threefold reduction in cost has

prompted a $100-million, private sector investment in the X-34. Commercial firms must evaluate their space transportation investment

alternatives not only against alternative launch

systems, but also against alternative investment

opportunities outside the space industry. 199

199 Anthony L. Velocci, Jr., “Augustine Identifies Key Operating Themes,’’ Aviation Week and Space Technology, Feb. 20, 1995, pp. 44-46.

Norman R. Augustine, Chairman and CEO of Martin Marietta Corp. states the issue of investment alternatives quite clearly: “All of the U.S.

companies that are in the launch vehicle business today have other alternatives other than launch vehicles. At Martin Marietta when we have a

dollar to invest, we can invest it in our crushed rock business or in the business of developing more reliable, more efficient launch vehicles. We

make those decisions in a fairly analytical business-like fashion. If at any point it looks like the launch vehicle business isn’t viable, then we will

invest our money in our highly profitable crushed rock operation.”
The National Space Transportation Policy: lssues for Congress 97

Launch Annual Annual Production Excess

Launch vehicle Annual launch capacity production U.S. over capacity

vehicle class (CCAFS + VAFB)a capacity b

launches ccapacity dfactors

Pegasus Small 1 2 12-50 6 6+ 2x

Taurus Small 3 24 3 2 1 8x

Delta Medium 12 + 6 1 2 1 1 1 Small

Atlas Medium 10 + 4 8 8 0 None

Titan IV Large 3-4 + 3-4 1 0 3 7 3x

a The maximum number of launches possible, given current facilities and personnel at both Cape Canaveral Air Force Station and Vandenberg Air

Force Base, based on IDA analysis.

b

Based on IDA analysis of contractor data. Does not include surge capability.

C Typical annual U.S. launches, 1995-2010. Apportionment of launches to specific vehicles within a launch vehicle class may vary. Includes firm,

probable, potential, and launch-on-need launches. Launches in an individual year may vary.

d “Annual Production Capacity” minus “Annual U.S. Launches.”

e “Annual Production Capacity” divided by “Annual US. Launches.”

SOURCE: U.S. Department of Defense, Office of the Deputy Assistant Secretary of Defense (Industrial Affairs), “Industrial Assessment for Space

Launch Vehicles,” Washington, DC, January 1995, p. ES-10.

Precisely what return on investment a firm

might need in order to conclude that a space transportation investment is appropriate is uncertain.

Estimates discussed with industry during OTA’s

assessment ranged from 20 to 50 percent, depending on the perceived nature of the market risk.

What is clear is that the private sector will need to

be persuaded that there is reasonable potential for

making a profit before firms will make significant

investments. In the absence of the potential for

clearly defined financial returns to industry, a true

government-industry partnership will probably be

elusive and remain a customer-provider relationship.

In an attempt to develop this partnership,

NASA reports that it has significantly modified its

management structure for the RLV program. The

Agency has, for example, centralized the program

management under a small team at its headquarters. Yet critics argue that the current plan signals a

less than radical departure from past NASA R&D

programs, with technologies identified for research, and designated decision points.

Still, observers note that NASA is able to establish this fairly detailed research plan because of

the experience gained earlier during NASP reThe X-34 could ensure the United States’ continued

leadership in the SLV market.

search. Further, these observers argue that NASA

is now using the accumulated knowledge based on

past research in an innovative (for NASA) approach involving greater industry participation

Indeed, NASA has incorporated some changes in

its X-33 and X-34 CANS, allowing for-profit

firms to use independent research and development (IR&D) money as part of their corporate

contributions. The Agency has also announced

that it will apply the approach that DOD used in

the DC-X to its management of the RLV program.
98 Office of Technology Assessment

During development, the DC-X program office consisted of

only 10-12 managers.

NASA, according to these observers, is doing

what it does best-funding research efforts in

areas of particular relevance to a national need (in

the case of the DC-XA, propulsion, vehicle structures, and operations technologies).

Others, however, argue that there is insufficient

change and that continuing to run a research

program in the established way will preclude the

introduction of innovative technologies.200

NASA’s government-industry teams have been

criticized as potentially diffusing responsibility to

such a degree that no one can be held responsible

for development decisions. These teams raise

questions about technical data rights and the ability to diffuse technology that is developed. Finally, some argue that NASA may have too many

programs (including the X-33, the X-34, the DCXA, the Med-Lite ELV, and Shuttle upgrades), for

the money available. Some industry observers argue that current development programs are inadequately funded and will never lead to production

vehicles.

Further, the CSTS notes that launch infrastructure, principal launch assets, and manufacturing

facilities are all currently under U.S. government

control. Any new government-industry relationship, therefore, demands fundamental changes in

ways of designing and operating space launch

vehicles beyond simply modifying program management.

The achievement of large reductions in launch

prices, however, might by itself radically change

the government-industry relationship. The reductions could increase commercial business and result insignificant industry independence from the

government. For example, although advances in

commercial electronics have made more electronics technology available to defense, it has also reduced DOD’s leverage in guiding the direction of

that industry’s R&D and product development efforts. Under similar circumstances, commercial

launcher design and operation might drift away

from currently defined defense requirements. Unless government planners are able and willing to

modify their requirements in concert with these

trends, this reduced leverage might result in greater difficulty in meeting the government’s goal of

maintaining access to space.

200Some in industry complain that NASA will simply reject proposals as “nonresponsive” if they do not conform to NASA’s preconceived

concepts.
The National Space Transportation Policy: Issues for Congress | 99

ISSUE 4c: Risk management—striking the

proper balance

Many in industry argue that an anchor tenancy

arrangement is essential to entice private sector investment in space transportation. By providing a

guaranteed market for a specific period, anchor

tenancy would reduce investment risk for the private sector while commercial markets are being

established. Government purchases of semiconductors and computers played an important role in

the development of these U.S. industries.201 In

some of those cases, however, both development

funding and initial large purchases came from the

government. In general, the U.S. government’s

track record in improving manufacturing competitiveness—as either the first customer for a new

product or an important customer for established

products—is viewed as weak.202

As noted earlier, anchor tenancy is often used to

finance construction of buildings in the private

sector and is sometimes used by the General Services Administration (GSA) for buildings that the

government will subsequently occupy under

lease. Legislation allows the GSA to enter longterm (up to 20 years) lease arrangements and to

score the lease payments against its budget each

year.

In the commercial world, aircraft firms usually

also look for firm orders before making major investments in new aircraft models. This has recently occurred in commercial space launch, too,

when McDonnell Douglas announced it will develop a new rocket (Delta III) with its own funds,

but based on a firm commitment by the Hughes

Telecommunications and Space Co. for 10

launches. Steven Dorfman, President of Hughes

Telecommunications and Space noted that, “[b]y

being the anchor customer for the Delta III we encourage McDonnell Douglas to make the investment to upgrade its highly reliable Delta to the

Delta III class.”203

But an anchor tenancy arrangement may be

contentious. For example, both congressional and

executive branch agencies with responsibility for

examining the budget process have criticized the

GSA leasing arrangements. They argue that such

leases cost the government more than outright

purchases because the private sector’s cost of capital is always higher than the government’s cost of

capital. Moreover, critics204 point out that showing outlays over time fails to capture the fiscal effect of the government’s commitment, which occurs

in the first year, not over the entire lease period.

In accordance with this view, many believe that

anchor tenancy for space transportation would

have to be considered a “lease-purchase” arrangement under the existing rules developed to record

the effects on the budget of enacted and pending

legislation (“scorekeeping rules”). Such arrangements are recorded in the budget as if the government had purchased the asset outright. The

discounted present value of the expected costs of

space launch services would be recorded as budget authority when the contract was signed. Outlays

would be scored in proportion to construction activity on the launchers as if the government were

201 The government used early commercial computers for the Veteran’s Life Insurance Program. This not only provided a market for the

hardware, but also demonstrated a use that was subsequently adopted by commercial industry. U.S. Department of Commerce, personal communication, April 1995.

202 U.S. Congress, Office of Technology Assessment, op. cit., footnote 169, p. 70.

203 Hughes Space and Communication Co., “Hughes Buys 10 Launches as First Delta Customer,” press release, Los Angeles, CA, May 10,

1995.

204 See James L. Blum, Deputy Director, Congressional Budget Office, “CBO Testimony on the Lease-Purchase Scorekeeping Rule,” testimony presented at hearings before the Subcommittee on Legislation and National Security, Committee on Government Operations, House of

Representatives, U.S. Congress, Washington, DC, Sept. 20, 1994; and Alice Rivlin, Acting Director, Office of Management and Budget, “Testimony on Hearing on H.R. 2680,” testimony presented at hearings before the Subcommittee on Legislation and National Security, Committee on

Government Operations, House of Representatives, U.S. Congress, Sept. 20, 1994.
100 | Office of Technology Assessment

building the system. A forthcoming Congressional Budget Office report examines this financing issue in detail.205 This approach would make the

use of anchor tenancy problematic if the sole objective of seeking private financing was to deal

with current fiscal constraints in the NASA

budget.

Other observers, however, argue that there is a

need for new thinking on the anchor tenancy concept as it applies to high-technology systems.

They note that this is particularly true in a period

in which the government is slated to be less involved in the development of goods and services

that the private sector might reasonably be expected to provide. Furthermore, they view GSA

building lease practices as poor examples for what

might work in space transportation, and argue that

the development of new space transportation systems might be used to test alternative anchor tenancy concepts.

Advocates suggest several criteria for judging

the appropriateness of anchor tenancy. They argue

that anchor tenancy is inappropriate if there is significant technological risk. It should also not be

used if it is simply a way to make a commitment

outside the budget (concern over this is the reason

for viewing anchor tenancy as a lease purchase).

But, they believe that anchor tenancy might be

successfully used if the situation is one in which

there is little technological risk, the contractor is

taking the risk of performance, the contractor is financing the project, and the contractor has design

control. This situation would require competitive

bidding to help determine what the financial markets believe to be an acceptable risk.

The competitive aspects might be handled in a

number of ways. One observer has suggested developing an Access to Space Service Market

(ATSSM) “open to commercial and government

customers, and anchored by U.S. government demand.”206 The ATSSM would coordinate the

needs of space launch users with current and future capabilities of space launch providers. Space

launch contracts might be sold as firm contracts or

convertible options promoting the development

of a robust market for space transportation services. To develop sufficient demand, “the ATSSM

must not be tailored for highly specialized demand such as high security or manned payloads.”207 In the end, however, it is possible that

the investor’s view of the current space transportation market might make it impossible to use anchor tenancy to develop a vehicle that would meet

both unique government requirements and commercial needs.

Whatever type of anchor tenancy arrangement

might be fashioned, it may be difficult to work out

the details rapidly enough to support the government’s current plan for RLV development. Industry analysts argue that the agreement will need to

be executed before April 1996, when industry

must begin to commit significant funds toward the

development of the X-33 technology demonstrator.

Advocates argue that termination liability is essential for reducing the risk to the private sector of

entering into a long-term agreement with the government. They cite the importance of risk reduction in drawing private sector investment.

Skeptics, however, have argued that such arrangements amount to providing a “risk-free” environment for U.S. business. Still, termination liability

is often a part of commercial and government contracts, but the liability usually only provides for

money already spent, not for loss of future revenue, nor the cost of financing. Thus firms continue

to carry some risk even if compensation for some,

or all, of the funds already spent is guaranteed.

Using a large government prize to attract private sector funding of development is one of the

most controversial ideas for financing a future

RLV. Proponents argue that a prize would be a

205U.S. Congress, Congressional Budget Office, The Budgetary Treatment of an Option To Finance the Development of a New Launch

System, forthcoming, May 1995.

206 Charles W. Polk, “Buying Access To Space Rather Than Procuring a Space Transportation System,” information paper, May 15, 1995.

207 Ibid.
The National Space Transportation Policy: Issues for Congress | 101

great stimulus to investment and innovation, with

many potential commercial spinoffs. Further, they

argue that no government money would actually

be spent until success is achieved.208 Critics,

however, argue that the uncertain market for space

transportation, combined with the risk of losing

such a contest, would scare away potential investors. And even if the contest proceeded, there

might not be a winning result, or at least not soon

enough to replace the Space Shuttle. NASA

would have much less insight into the progress of

the contestants, and its ability to meet civil space

goals might be compromised should all fail to

meet the stated objective. A further complication

is determining the size of the prize that might entice bidders to the program without seeming extravagant to taxpayers.209

A space launch corporation is viewed by many

as a potentially good management tool. This type

of organization could deal directly with space

transportation users and operate on business principles. The Moorman report, however, argued that

it was unnecessary at this time unless there is a

major breakthrough in the commercialization of

space.210 Further, DOD officials have expressed

concern that a commercially focused corporation

would concentrate on developments in more commercially useful MLVs and ignore the HLVs that

are currently DOD’s more costly problem.

Finally, some firms will make space transportation investments without any government guarantees. McDonnell Douglas’ investment in the Delta

III is one example. Boeing Corp. has announced it

is joining with a European shipbuilder and two

aerospace firms from the FSU to form SEA

Launch—to launch satellites from a pad in international waters in the Pacific Ocean. And Kistler Aerospace has reported that it is planning to

build a reusable rocket without government

funds.211 Such investments could result in further

investments by competitors. Daniel Tellep, Chairman and CEO of Lockheed Martin Corp., has

stated that the Delta III will cause Lockheed Martin to consider responses in its Atlas program.212

If such commercial activities succeed, they could

well lead to radical changes in government-industry relations.

ISSUE 4d: Launch operations and infrastructure

Many analysts argue that significant launch

cost savings might be realized through changes in

launch operations and infrastructure.213 Efficient

launch operations are key competitive advantages

for both Ariane and Russia, and launch infrastructure design is an additional positive factor for Ariane. But important launch cost reductions214 are

unlikely unless launch operation engineers and fa208 Although the money might not be spent, it would have to be authorized by Congress and become a budget item, possibly appropriated

into an escrow account. A variant that is discussed uses anchor tenancy as the prize.

209 Some proponents of government prizes have suggested a range of about $10 billion to $12 billion for a cheap, reusable demonstrator.

They believe that a large prize would bring new players into the space transportation business.

210 U.S. Department of Defense, op. cit., footnote 19, p. 6.

211 Warren Ferster, “NASA Picks Three Teams for Phase 1 Design,” Space News, Mar. 13, 1995, pp. 4, 36.

212 Daniel Tellep, Chaiman, Lockheed Martin Corp., remarks at the Aerospace and Defense Financial Conference, Lionheart Research,

New York, NY, May 10, 1995.

213 See Bruce D. Berkowitz, “No Free Launch: Updating Space Infrastructure,” Issues in Science and Technology Policy 10(2):76-81, winter 1993.

214 Launch operations can be divided into several overlapping steps, including: processing and integration of the vehicle, processing and

integration of the payload, launch management and control, post launch activities, and logistics. In the past, launch operations have been estimated to account for about 15 percent of Shuttle recurring costs and about 20 percent of Titan IV costs per flight. For an extended discussion of

reducing launch costs through changes in launch operations, and infrastructure investments, see U.S. Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTA-TM-ISC-28 (Washington, DC: U.S. Government Printing

Office, September 1988), pp. 3, 13.
102 Office of Technology Assessment

Modern, automated launch facilities in Kourou, French Guyana are a key factor in the commercial success of Arianespace.

cility managers have a greater role in the design of

future launch systems.

In an attempt to capture some of these potential

savings, the NSTP and the implementation plans

address launch operations, infrastructure, and

ground activities. All the current government

space transportation programs include actions directed at improvements in these areas. The X-34

program, for example, includes vehicle health

monitoring systems and ground operations/rapidturn-around studies. TheX-33 program includes

launch operations as a key element. And the DOD

implementation plan includes a description of

over $1 billion in investments in infrastructure

modernization and upgrades to be completed by

FY 2004. Government seed money has supported

the development of commercial spaceports. Modest government funding at the California Spaceport, for example, was followed by significant

corporate investment by ITT and others.215

How future space transportation systems will

operate, and how such operations will save money

in comparison with current operations, might be

key oversight issues for Congress. While government seed money appears to have been successful

in drawing additional investment, the government

may want to be careful not to create overcapacity

through its use of funds. Facilities that are being

developed will need to be designed to accommodate future space transportation needs.

Space transportation infrastructure includes a

broader range of industries than simply those

directly involved in the physical development,

production, and servicing of vehicles. The availability of insurance at a reasonable and predictable

cost is critical to commercial space ventures. Almost no company is willing to bet that its $200

million spacecraft will be safely placed into the intended orbit and will properly operate once there,

without being protected by insurance. Insurance

rates over the last decade have fluctuated between

6 and 30 percent, depending on the perception of

risk and the availability of funding to support it.

Maximum values capable of being insured have

ranged from $100 million to $410 million,

depending on market conditions. The cost and

volatility of rates can be a barrier to the continued

development of the U.S. commercial space industry.

Some of this volatility might be reduced if the

pool of insured launches were expanded to allow

government launches on commercial vehicles to

215 The Spaceport, located at Vandenberg Air Force Base, CA, expects to be operational in 1996.
The National Space Transportation Policy: Issues for Congress 103

Space Launch Complex 6 at Vandenberg Air Force Base in

California is being converted into a commercial spaceport.

be underwritten by the insurance industry. The

government and public would benefit from a

quantified and limited cost associated with the

risk of physical loss of hardware. The commercial

space industry would benefit from a healthy and

reliable space insurance market. This larger insurance pool could be developed through procurements that require performance requirements for

the operation of a launch vehicle or a satellite in

orbit. Insuring government payloads, however,

would bean added cost to the government, at least

in the near term.

The NASA and DOT/DOC implementation

plans include extensive discussions of the partnership between government and industry to achieve

future goals, yet there is no clear indication that

the government is willing to compromise on its

stated requirements in order to make use of more

commercially responsive systems. Thus, one of

the key questions is the extent to which its space

transportation programs will be driven by rigid

government space launch and payload requirements that provide minimal overlap with commercial space launch competitiveness issues.

For example, despite the rhetoric of government-industry partnership, NASA’s program may

be best structured to produce an RLV that will

serve the U.S. government’s space transportation

needs frost, rather than producing a commercially

viable vehicle that will also meet government

needs. One of the problems noted by industry is

that NASA’s development plans do not incorporate the means for industry to put payloads in

GEO. To deal with this shortcoming, some industry officials have suggested developing, from the

beginning, a medium-lift RLV that is capable of

accommodating strap-on solid rocket motors and

housing larger, heavier payloads in its payload

bay. This option would allow designers to optimize the RLV for commercial use and still meet

the government need to launch large and heavy

payloads and service the International Space

Station.

The recent NASA Med-Lite RFP is cited by

some in industry as an example of an inability, or

unwillingness, of the government to accommodate commercial operations. The RFP exceeded

325 pages. Industry argues that reducing government paperwork and unnecessary oversight is a

major challenge that must be overcome if price

competitive launch vehicles are to be developed.

The DOD EELV program is designed so that

the “competition will encourage commercial innovation to expedite development and encourage

cost saving. ”

216 But such savings are focused on

development of a vehicle that will meet DOD requirements, not on a launch vehicle design optimized for commercial use. Further, while the

DOD hopes to reduce space transportation costs

significantly, these savings will probably be concentrated in the HLV range, where the majority of

the DOD’s funds are spent. While this concentration makes sense to DOD, it may do little to increase the ability of the U.S. space transportation

business to compete internationally.

Still, DOD does report that it is applying advanced technology to reduce the size of its payloads and requirements for costly HLVs. It is also

examining ways to reduce the costs associated

216 U.S. Department of Defense, op., cit., footnote 126, p. 6.
104 Office of Technology Assessment

NASA plans on delivering craws and cargo to the International Space Station until, and possibly beyond, 2012.

with launching heavy payloads, which cannot be

reduced to fit on SLVs or MLVs, so that it can leverage the competitive commercial market in order to reduce launch costs.217

As noted earlier, DOD has a detailed set of actions (that it views as useful to industry) to achieve

its objectives. These include: a Than IV program

to ensure heavy launch capability; improving Atlas reliability; and upgrading Delta flight safety

and avionics. ELV infrastructure is also being upgraded.

❚ Additional Issues for Congress

As the previous sections discuss, the NSTP and its

implementation plans cover a wide variety of issues of importance to the long-term health of the

space transportation technology and industrial

base. In this section, OTA identifies two issues of

importance to Congress that were not addressed in

either the policy itself, or the implementation

plans.

 Preservation of Iong-range ballistic

missile capabilities

One critical component of the space transportation industry not addressed in either the policy or

the implementation plans is the long-range ballistic missile segment of the space transportation

technology and industrial base.218 This omission

may demonstrate just how far space launch ve217 U.S. Department of Defense, op., cit., footnote 19, p. II-11. 218 OTA intends to investigate the technological and industrial overlap between ballistic missiles and space transportation systems more.

fully in the main report of this assessment.
The National Space Transportation Policy: issues for Congress 105

hicles have diverged from their ballistic missile

roots, or it may be the result of a narrowly formed

policy. In either case, failure to investigate possible connections between the development of

long-range ballistic missiles and the development

of launch vehicles risks overlooking policy options that could meet both government and commercial needs.

Originally, the military’s requirement for longrange ballistic missiles created the space transportation technology and industrial base. The

modem Atlas and Titan ELVs both evolved from

early ICBMs, while the original Delta ELV used

components from three ballistic missile.219 Over

time, these two segments of the technology and

industrial base diverged, as ballistic missiles were

optimized for round-the-clock readiness and

quick launch which led to the development of solid rocket motors and required precision guidance.

Launch vehicles, on the other hand, were modified to lift ever larger payloads into Earth orbit.

Still, considerable overlap between these two

segments remains, particularly at the lower industrial tiers. For example, the new Lockheed Launch

Vehicle (LLV) takes advantage of Trident II D5

technologies. Both the LLV and OSC’s Taurus use

the Thiokol Castor 120 solid rocket motor, which

is derived from the Peacekeeper ICBM first stage.

As a result of nuclear arms control treaties and

the end of the Cold War, the development and production of long-range ballistic missiles has almost

halted. The Navy’s Trident II D5 missile will continue to be produced into the next century at the

rate of about 12 per year, with all production

scheduled to stop in the year 2005. The Air Force

is not currently producing any new missiles, but

plans to modernize the Minuteman III by producing new motors and upgrading systems and mateProduction of the Trident II D5 missile--the only long-range

ballistic missile in production-is scheduled to stop in 2005.

rials. In addition, the Air Force plans to sustain the

guidance and reentry vehicle industrial base. 220

The requirement to maintain the capability to

design, test, and produce long-range ballistic missiles will continue as long as the United States depends on these missiles for part of its strategic

deterrence. Eventually, the deployed missiles in

the current forces will become obsolete and need

to be replaced. Furthermore, new arms control

treaties may compel the United States to deploy

new single-warhead missiles, just as Russia is currently doing.

Both the Navy and the Air Force recognize the

difficulty of maintaining production capability

without producing anything. In the past, the Navy

often had three ballistic missile programs running

simultaneously. Both the Navy and the Air Force

have instituted a series of programs to maintain

what they consider the most critical elements of

their missiles (e.g., guidance and reentry sys219Eugene M. Emme(ed.), The History of Rocket Technology: Essays on Research, Development, and Utility (Detroit: Wayne State University Press, 1964). 220 William J. Perry, Secretary of Defense, “Annual Report to the President and the Congress,” Washington, DC, February 1995, p. 90.
106 | Office of Technology Assessment

tems). OTA’s past work on preserving industrial

base capabilities, however, suggests that maintaining ballistic missile design and production

teams may require new development and production opportunities.221 Without these opportunities, scientists, engineers, and other workers may

begin to seek challenges in other fields.

Under current designs, the U.S. long-range ballistic missile fleet depends on the production of

solid rocket motors. A liquid-fueled EELV family

and RLV follow-on to the X-33 could greatly reduce the demand for solid rocket motors, as could

replacing the Shuttle’s SRBs with liquid-fueled

boosters. In that case, active production related to

long-range ballistic missiles might be limited to

the currently low-volume Taurus and LLV, as well

as a few solid-rocket strap-on boosters, tactical

missiles, or perhaps antiballistic missile interceptors.222

ISSUE 6: The invisible lower industrial tiers

Current policy and implementation plans appear to be principally directed at, and influenced

by, the large prime contractors (e.g., Lockheed

Martin, McDonnell Douglas, Rockwell International, and Orbital Sciences), yet there is far more

to the industry than just those firms. The U.S.

space transportation industry also includes the

providers of components subsystems, such as

Rocketdyne, Aerojet, and UTC-P&W for liquidfueled engines; Thiokol, Hercules, UTC-CSD,

and Aerojet for solid rocket motors; and hundreds

of other lower-tier providers of goods and services. In fact, for each dollar spent on the procurement of space transportation services, roughly

half flows down to second and lower tiers.223

An OTA workshop focused on activity in the

space launch industry’s lower tiers found great

skepticism among many firms about the current

government space transportation R&D programs.

Participants from a wide spectrum of supporting

industries reported that they: 1) doubt the government’s commitment to build new space transportation systems (they believe the programs are

too seriously underfunded to produce a vehicle),

and 2) doubt that much of the R&D money will filter past the prime contractor level. Lower-tier

firms that are highly dependent on space launch

business are pessimistic about their survival.

Those that are less dependent on the space transportation business plan to devote little effort to the

current programs because few returns are anticipated.

Some representatives of the large, prime assemblers believe that the subcontractors will be

there if the business is there. This may or may not

be the case. If little or no money is available for the

lower-tier firms in future development, those

firms might shift their business elsewhere or cease

to exist. Congress may wish to consider the possibility that key elements of the space transportation

industrial base might be lost, just as other industrial sectors have lost important elements in the

past (e.g., large diesel engines in the shipbuilding

industry).

221 U.S. Congress, Office of Technology Assessment, Redesigning Defense: Planning the Transition to the Future U.S. Defense Industrial

Base, OTA-ISC-500 (Washington, DC: U.S. Government Printing Office, July 1991); U.S. Congress, Office of Technology Assessment, Building Future Security: Strategies for Restructuring the Defense Technology and Industrial Base, OTA-ISC-530 (Washington, DC: U.S. Government Printing Office, June 1992); and U.S. Congress, Office of Technology Assessment, Assessing the Potential for Civil-Military Integration:

Technologies, Processes, and Practices, OTA-ISS-611 (Washington, DC: U.S. Government Printing Office, September 1994).

222 OTA will examine both the preservation of long-range ballistic missile capabilities and the invisible lower tiers as part of its on-going

assessment of the space transportation technology and industrial base.

223 OTA analysis of the most recent (1987) unpublished U.S. Bureau of Economic Analysis input-output table.
Appendix:

Clinton Administration

 Policy Statement

 and Fact Sheet

THE WHITE HOUSE

Office of Science and Technology Policy

For Immediate Release August 5, 1994

STATEMENT ON

NATIONAL SPACE TRANSPORTATION POLICY

The White House today released a new National Space Transportation Policy document, as developed by the National Science and Technology Council and approved by President Clinton. The

policy sets a clear course for the nation’s space program, providing a coherent strategy for supporting

and strengthening U.S. space launch capability to meet the growing needs of the civilian, national

security and commercial sectors.

The policy commits the nation to a two-track strategy of: (1) maintaining and improving the current

fleet of expendable launch vehicles as necessary to meet civil, commercial, and national security

requirements; and (2) investing R&D resources in developing and demonstrating next generation

reusable space transportation systems with the potential to greatly reduce the cost of access to space.

The new policy accomplishes four fundamental objectives:

1) Establishes new national policy for federal space transportation spending, consistent with

current budget constraints and the opportunities presented by emerging technologies. Under

the new policy, DoD will assume the lead responsibility for modernization of the current

expendable launch vehicle fleet. NASA will assume the lead responsibility for research and

development of next generation reusable systems. NASA will focus their investments on

technologies to support a decision no later than December 1996 on whether to proceed with

a flight demonstration program. This program would, in turn, provide the basis for deciding

by the end of the decade whether to proceed with a new launch system to replace the aging

Shuttle fleet. | 107
108 | Appendix Clinton Administration Policy Statement and Fact Sheet

2) Establishes policy on federal agencies’ use of foreign launch systems and components. With

the end of the Cold War, it is important for the U.S. to be in a position to capitalize on

foreign technologies — including Russian technologies — without, at the same time,

becoming dependent on them. The policy allows the use of foreign components, technologies and (under certain conditions) foreign launch services, consistent with U.S. national

security, foreign policy, and commercial space guidelines in the policy.

3) Establishes policy on federal agencies’ use of excess U.S. ballistic missile assets for space

launch, to prevent adverse impacts on the U.S. commercial space launch industry. Under

START, these assets may be used in certain circumstances for civilian space launch. A

serious concern in developing the policy was the possible impact that widespread government use of these assets could have on U.S. commercial launch companies. The policy

obliges the government to fully consider commercial services as part of the decision making

process and imposes specific criteria on the use of excess assets to avoid “flooding” the

commercial market.

4) Provides for an expanded private sector role in the federal space transportation R&D

decision making processes. In contrast with previous national policy on space transportation,

this policy specifically directs the Departments of Transportation and Commerce to identify

opportunities for government-industry cooperation and to factor these into NASA’s and

DoD’s implementation plans.

These steps will help keep America at the forefront of space transportation technology, while

ensuring that we have a robust and reliable expendable launch vehicle fleet.

Attachment:

National Space Transportation Policy fact sheet.
The National Space Transportation Policy: Issues for Congress | 109

THE WHITE HOUSE

Office of Science and Technology Policy

For Immediate Release August 5, 1994

FACT SHEET

NATIONAL SPACE TRANSPORTATION POLICY

Introduction

The United States space program is critical to achieving U.S. national security, scientific, technical,

commercial, and foreign policy goals. Assuring reliable and affordable access to space through U.S.

space transportation capabilities is a fundamental goal of the U.S. space program. In support of this

goal, the U.S. Government will:

(1) Balance efforts to sustain and modernize existing space transportation capabilities

with the need to invest in the development of improved future capabilities;

(2) Maintain a strong space transportation capability and technology base, including

launch systems, infrastructure, and support facilities, to meet the national needs for

space transport of personnel and payloads;

(3) Promote the reduction in the cost of current space transportation systems while

improving their reliability, operability, responsiveness, and safety;

(4) Foster technology development and demonstration to support future decisions on the

development of next generation reusable space transportation systems that greatly

reduce the cost of access to space;

(5) Encourage the cost-effective use of commercially provided U.S. products and

services, to the fullest extent feasible, that meet mission requirements; and

(6) Foster the international competitiveness of the U.S. commercial space transportation

industry, actively considering commercial needs and factoring them into decisions

on improvements in launch facilities and launch vehicles.

This policy will be implemented within the overall resource and policy guidance provided by the

President.

I. Implementation Guidelines

To ensure successful implementation of this policy, U.S. Government agencies will cooperate to take

advantage of the unique capabilities and resources of each agency.

This policy shall be implemented as follows:

(1) The Department of Defense (DoD) will be the lead agency for improvement and

evolution of the current U.S. expendable launch vehicle (ELV) fleet, including

appropriate technology development.

(2) The National Aeronautics and Space Administration (NASA) will provide for the

improvement of the Space Shuttle system, focusing on reliability, safety, and

cost-effectiveness.
110 | Appendix Clinton Administration Policy Statement and Fact Sheet

(3) The National Aeronautics and Space Administration will be the lead agency for

technology development and demonstration for next generation reusable space

transportation systems, such as the single-stage-to-orbit concept.

(4) The Departments of Transportation and Commerce will be responsible for identifying and promoting innovative types of arrangements between the U.S. Government

and the private sector, as well as State and local governments, that may be used to

implement applicable portions of this policy. U.S. Government agencies will

consider, where appropriate, commitments to the private sector, such as anchor

tenancy or termination liability, commensurate with the benefits of such arrangements.

(5) The Department of Defense and the National Aeronautics and Space Administration

will plan for the transition between space programs and future launch systems in a

manner that ensures continuity of mission capability and accommodates transition

costs.

(6) The Department of Defense and the National Aeronautics and Space Administration

will combine their expendable launch service requirements into single procurements

when such procurements would result in cost savings or are otherwise advantageous

to the Government. A Memorandum of Agreement will be developed by the

Agencies to carry out this policy.

II. National Security Space Transportation Guidelines

(1) The Department of Defense will be the launch agent for the national security sector

and will maintain the capability to evolve and operate those space transportation

systems, infrastructure, and support activities necessary to meet national security

requirements.

(2) The Department of Defense will be the lead agency for improvement and evolution

of the current expendable launch vehicle fleet, including appropriate technology

development. All significant ELV technology-related development associated with

medium and heavy-lift ELVs will be accomplished through the DoD. In coordination

with the DoD, NASA will continue to be responsible for implementing changes

necessary to meet its mission-unique requirements.

(3) The objective of DoD’s effort to improve and evolve current ELVs is to reduce costs

while improving reliability, operability, responsiveness, and safety. Consistent with

mission requirements, the DoD, in cooperation with the civil and commercial sector,

should evolve satellite, payload, and launch vehicle designs to achieve the most

cost-effective and affordable integrated satellite, payload, and launch vehicle

combination.

(a) ELV improvements and evolution plans will be implemented in cooperation

with the Intelligence Community, the National Aeronautics and Space

Administration and the Departments of Transportation and Commerce,

taking into account, as appropriate, the needs of the commercial space

launch sector.

(b) The Department of Defense will maintain the Titan IV launch system until a

replacement is available.
The National Space Transportation Policy: Issues for Congress | 111

(4) The Department of Defense, in cooperation with NASA, may use the Space Shuttle

to meet national security needs. Launch priority will be provided for national

security missions as governed by appropriate NASA/DoD agreements. Launches

necessary to preserve and protect human life in space shall have the highest priority

except in times of national emergency.

(5) Protection of space transportation capabilities employed for national security

purposes will be pursued commensurate with their planned use in crisis and conflict

and the threat. Civil and commercial space transportation capabilities identified as

critical to national security may be modified at the expense of the requesting agency

or department. To the maximum extent possible, these systems, when modified,

should retain their normal operational utility.

III. Civil Space Transportation Guidelines

(1) The National Aeronautics and Space Administration will conduct human space flight

to exploit the unique capabilities and attributes of human access to space. NASA

will continue to maintain the capability to operate the Space Shuttle fleet and

associated facilities.

(a) The Space Shuttle will be used only for missions that requires human

presence or other unique Shuttle capabilities, or where use of the Shuttle is

determined to be important for national security, foreign policy or other

compelling purposes.

(b) The National Aeronautics and Space Administration will maintain the Space

Shuttle system until a replacement is available.

(c) As future development of a new reusable launch system is anticipated,

procurement of additional Space Shuttle orbiters is not planned at this time.

(2) The National Aeronautics and Space Administration will be the lead agency for

technology development and demonstration of next generation reusable space

transportation systems.

(a) The objective of NASA’s technology development and demonstration effort

is to support government and private sector decisions by the end of this

decade on development of an operational next-generation reusable launch

system.

(b) Research shall be focused on technologies to support a decision no later than

December 1996 to proceed with a sub-scale flight demonstration which

would prove the concept of single-stage-to-orbit.

(c) Technology development and demonstration, including operational

concepts, will be implemented in cooperation with related activities in the

Department of Defense.

(d) It is envisioned that the private sector could have a significant role in

managing the development and operation of a new reusable space transportation system. In anticipation of this role, NASA shall actively involve

the private sector in planning and evaluating its launch technology activities.
112 | Appendix Clinton Administration Policy Statement and Fact Sheet

IV. Commercial Space Transportation Guidelines

(1) The United States Government is committed to encouraging a viable commercial

U.S. space transportation industry.

(a) The Departments of Transportation and Commerce will be responsible for

identifying and promoting innovative types of arrangements between the

U.S. Government and the private sector, as well as State and local governments, that may be used to implement applicable portions of this policy.

(b) The Department of Transportation will license, facilitate, and promote

commercial launch operations as set forth in the Commercial Space Launch

Act, as amended, and Executive Order 12465. The Department of Transportation will coordinate with the Department of Commerce where

appropriate.

(c) U.S. Government agencies shall purchase commercially available U.S. space

transportation products and services to the fullest extent feasible that meet

mission requirements and shall not conduct activities with commercial

application that preclude or deter commercial space activities, except for

national security or public safety reasons.

(d) The U.S. Government will provide for the timely transfer to the private

sector of unclassified Government-developed space transportation technologies in such a manner as to protect their commercial value.

(e) The U.S. Government will make all reasonable efforts to provide stable and

predictable access to appropriate space transportation-related hardware,

facilities, and services; these will be on a reimbursable basis. The U.S.

Government reserves the right to use such facilities and services on a

priority basis to meet national security and critical civil sector mission

requirements.

(f) U.S. Government agencies shall work with the U.S. commercial space sector

to promote the establishment of technical standards for commercial space

products and services.

(2) U.S. Government agencies, in acquiring space launch-related capabilities, will, to

the extent feasible and consistent with mission requirements:

(a) Involve the private sector in the design and development of space transportation capabilities and encourage private sector financing, as appropriate.

(b) Emphasize procurement strategies that are based on the use of commercial

U.S. space transportation products and services.

(c) Provide for private sector retention of technical data rights, limited only to

the extent necessary to meet government needs.

(d) Encourage private sector and State and local government investment and

participation in the development and improvement of U.S. launch systems

and infrastructure.
The National Space Transportation Policy: Issues for Congress | 113

V. Trade in Commercial Space Launch Service

(1) A long term goal of the United States is to achieve free and fair trade. In pursuit of

this goal, the U.S. Government will seek to negotiate and implement agreements

with other nations that define principles of free and fair trade for commercial space

launch services, limit certain government supports and unfair practices in the

international market, and establish criteria regarding participation by space launch

industries in countries in transition from a non-market to a market economy.

(a) International space launch trade agreements in which the U.S. is a party

must allow for effective means of enforcement. The range of options

available to the U.S. must be sufficient to deter and, if necessary, respond to

non-compliance and provide effective relief to the U.S. commercial space

launch industry. Agreements must not constrain the ability of the United

States to take any action consistent with U.S. laws and regulations.

(b) International space launch trade agreements in which the U.S. is party must

be in conformity with U.S. obligations under arms control agreements, U.S.

nonproliferation policies, U.S. technology transfer policies, and U.S.

policies regarding observance of the Guidelines and Annex of the Missile

Technology Control Regime (MTCR).

VI. Use of Foreign Launch Vehicles, Components, and Technologies

(1) For the foreseeable future, the United States Government payloads will be launched

on space launch vehicles manufactured in the United States, unless exempted by the

President or his designated representative.

(a) This policy does not apply to use of foreign launch vehicles on a no-exchange-of-funds basis to support the following: flight of scientific instruments on foreign spacecraft, international scientific programs, or other

cooperative government-to-government programs. Such use will be subject

to interagency coordination procedures.

(2) The U.S. Government will seek to take advantage of foreign components or

technologies in upgrading U.S. space transportation systems or developing next

generation space transportation systems. Such activities will be consistent with U.S.

nonproliferation, national security, and foreign policy goals and commitments as

well as the commercial sector guidelines contained in this policy. They will also be

conducted in a manner consistent with U.S. obligations under the MTCR and with

due consideration given to dependence on foreign sources and national security.

VII. Use of U.S. Excess Ballistic Missile Assets

(1) U.S. excess ballistic missile assets that will be eliminated under the START

agreements shall either be retained for government use or be destroyed. These assets

may be used within the U.S. Government in accordance with established DoD

procedures, for any purpose except to launch payloads into orbit. Requests from

with the Department of Defense or from other U.S. Government agencies to use

these assets for launching payloads into orbit will be considered by DoD on a

case-by-case basis and require approval by the Secretary of Defense.
114 | Appendix Clinton Administration Policy Statement and Fact Sheet

Mindful of the policy’s guidance that U.S. Government agencies shall purchase

commercially available U.S. Space transportation products and services to the fullest

extent feasible, use of excess ballistic missile assets may be permitted for launching

payloads into orbit when the following condition are met:

(a) The payload supports the sponsoring agency’s mission.

(b) The use of excess ballistic missile assets is consistent with international

obligations, including the MTCR guidelines and the START agreements.

(c) The sponsoring agency must certify the use of excess ballistic missile assets

results in a cost savings to the U.S. Government relative to the use of

available commercial launch services that would also meet mission

requirements, including performance, schedule, and risk.

VIII. Implementing Actions

(1) Within 90 days of approval of this directive, United States Government agencies are

directed to prepare the following for submission to the Assistant to the President for

Science and Technology and the Assistant to the President for National Security

Affairs:

(a) The Secretaries of Defense, Commerce, Transportation, and the Administrator of the National Aeronautics and Space Administration, with appropriate

input from the Director of Central Intelligence, will provide a report that

will include a common set of requirements and a coordinated technology

plan that addresses the needs of the national security, civilian, and commercial space launch sectors.

(b) The Secretary of Defense, with the support of other agencies as required,

will provide an implementation plan that includes schedule and funding for

improvement and evolution of the current U.S. ELV fleet.

(c) The Administrator of the National Aeronautics and Space Administration,

with the support of other agencies as required, will provide an implementation plan that includes schedule and funding for improvements of the Space

Shuttle system and technology development and demonstration for next

generation reusable space transportation systems.

(d) The Secretaries of Transportation and Commerce, with the support of other

agencies as required and U.S. industry, will provide an implementation plan

that will focus on measures to foster an internationally competitive U.S.

launch capability. In addition, the Secretaries will provide recommendations

to the Department of Defense and the National Aeronautics and Space

Administration that promote the full involvement of the commercial sector

in the NASA and DoD plans.