VICEPRESIDENT'S 

SPACEPOIKYADVISORY BOARD 

FUTUREOF= 

U.S. SPACE 

INDUSTRULBASE 

ATASKGROUPREPORT 

NOVEMBER~W~ 
F 
Foreword 

The United States is facing a broad array of interacting economic, 

geopolitical, and industrial challenges as it approaches the next century. 

Among these is the coincidence of a sluggish economy, large annual 

federal budget deficits, increased international competition, and a 

significant and sustained reduction in defense spending resulting from the 

end of the cold war. The objectives of national defense and civil space 

programs, as well as those of the commercial sector, are dependent on the 

maintenance of a healthy space industrial base. It is clearly in the national 

interest to take those actions which will assure that this base not be 

unnecessarily compromised by near term reactions to current challenges. 

This Task Group of the Vice President’s Space Policy Advisory Board 

was appointed to identify the important issues which will affect the ability 

of our space industrial base to respond to the defense, civil, and 

commercial space objectives, and to recommend government policies and 

actions which will address these matters. We believe the issues which the 

question raises are serious, but that proper government actions can 

mitigate adverse consequences and assure not only an adequate space 

industrial base but one that can grow in support of our nation’s increasing 

space activities and ambitions. 

We feel it important to point out that some of our recommendations 

have appeared in reports by other very able advisory committees which 

addressed various aspects of our national space program. Our repetition 

of them results from less-than-complete responses by the affected 

government agencies and also from the lack of systematic follow-up. We 

strongly recommend a periodic progress review by the National Space 

Council of the imulementation status of the recommendations contained in 

this report. 1 

Daniel J. Fink, Chairman 

Joseph P. Allen 

Robert Anderson 

Philip Culbertson 

Don Fuqua 

Alan M. Lovelace 

Richard J. Messina 

John L. Piotrowski 

Charles R. Trimble 

Executive Summary 

Our space industrial base has given the United States the capability to 

be the world’s leading space-faring nation. We have exploited space to 

greatly advance our national security by using extraordinarily sophisticated 

reconnaissance space systems to guard against military surprise, and other 

spacecraft that support the pinpoint delivery of weapons. We have 

fulfilled the dreams of those visionary national leaders who enacted the 

first National Aeronautics and Space Act by advancing our scientific 

knowledge of the planet we occupy and the universe around us. And the 

advancements in technology engendered by the U.S. space program have 

had world-wide impact in fostering entire new industries. The industrial 

base is broad. It is not merely plant and equipment, but an entire 

infrastructure of skilled scientific and technical manpower backed up by 

superb government, private and academic facilities and institutions. 

We anecdotally understand that this space industrial base is being 

threatened. Not a day goes by when we can’t read about increasing 

defense drawdowns, new layoffs in the aerospace industry, and reduced 

engineering enrollments. But this isn’t the first time that a severe down 

cycle has hit the aerospace world. We experienced it before and bounced 

back to even greater triumphs. The last major cycle occurred in the late 

sixties and early seventies when the Apollo drawdown and some defense 

budget reductions coincided. Between 1965 and 1971 employment on 

NASA programs dropped by over 300,000 people. Between 1970 and 1971, 

nearly 50,000 space-related jobs were eliminated. In the current 

drawdown, defense-related employment (only a portion of which is 
iv Future of the U.S. Space Industrial Base 

space-related) has fallen by over 100,000 jobs per year, and in one month 

(July, 1992) over 17,000 jobs were eliminated. The numbers from the two 

eras are not dissimilar. What then might make it different this time? 

Several factors suggest there could be a significant difference in the 

effects on the space industrial base this time around. In 1971, well into the 

Apollo phase down, the NASA budget was two-thirds of the total U.S. 

space budget, with military space representing the other third. Two 

decades later, the positions are virtually equal, such that the space 

industrial base is more sensitive to the defense cutbacks. In 1971 industry 

was busy downsizing, investment was curtailed, and the immediate future 

was far from rosy. But few aerospace contractors contemplated leaving the 

field or merging, and they carefully held on to their key capabilities and 

facilities. The Soviet Union, with its massive military threat, was still 

present and, to government and industry observers, represented a solid 

“floor” on how low things might get. This time the Soviet “floor” has 

collapsed and no one is confident in predicting the extent of the slide. The 

downsizing is already more severe to most aerospace contractors. Those 

who have the opportunity for “dual use” technologies are avidly seeking 

the non-defense application; and suppliers who have the choice are turning 

elsewhere for their business. Finally, in 1971 the U.S. enjoyed virtual 

monopoly status as the West’s provider of space launch services and 

communications satellites. Today there is intense international competition 

in both the launch vehicle and satellite markets, with non-market 

competition from Russia and China further complicating the scene. There 

is a relatively healthy U.S. commercial space industry with revenues of 

about $5 billion in 1992, a 14% increase over the previous year. It 

represents a growing fraction of the space industrial base. 

Thus, the renewed interest in understanding the threats to this base, 

and in trying to assure that the impact of these threats do not compromise 

our national goals, is well founded. Space systems must continue to play 

an important role in our national security posture. The goals of our civil 

space program, as articulated by the Augustine Committee, are the 

reflection of our uninterrupted national ambition to benefit all through 

advances in science, technology, and exploration. Finally, there is 

increasing recognition that a space program that focuses only on 

government needs without regard to a healthy commercial sector is not 

complete, nor will it be competitive in the international marketplace. -1 

, 

m 
Executive Summary 

Competency to Achieve National Objectives 

V 

The first important judgment this panel had to make is whether, despite 

the challenges to the space industrial base now occurring, the nation can 

maintain a capability to meet our future military, civil and commercial 

objectives. There is no quantitative analysis that we could make to answer 

this question. Our conclusion is based on considerable interaction with 

government and industry personnel tempered by a large dose of our own 

judgment. The panel concludes (with the important exception of 

commercial launch competitiveness discussed below) that the nation urn 

meet present expectations, and with a base that can be sensibly expanded 

to meet stretched goals. This conclusion, however, is fragile in that it 

depends on two key assumptions: that adequate technology R&D is funded 

by the Defense Department and NASA, and that industry downsizing is 

done efficiently enough that key capabilities are not so diffused that they 

cannot be brought to bear on demanding problems. 

The current DOD strategy is to maintain a strong technology base 

(techbase) to continue to have leverage over any potential enemy during 

a period when the procurement and other accounts are being significantly 

curtailed. Even if the DOD succeeds in maintaining its techbase funding, 

the industrial base that supports Defense may lose a considerable amount 

of systems engineering capability as new large programs become rarer. 

Systems engineering cannot be maintained by “make work” projects or 

studies. Maintenance of skills requires real programs. The DOD should 

recognize the potential of NASA programs as an additional base for 

maintaining systems engineering capability. 

While current projections of the NASA budget do not show the 

suggested 10% annual growth of the Augustine Committee, NASA’s 

programs have not been predicated on a Soviet threat since the Apollo era, 

and should be sustainable even through difficult budget years. We should 

not take great comfort, however, even with a maintained budget because 

a large portion is devoted to operations, which do not contribute markedly 

to an industrial base and, as stated by the Augustine Committee, “the 

technology base of NASA has now been starved for well over a decade 

and must be rebuilt...” The investments that the DOD and NASA make 
vi Future of the U.S. Space Industrial Base 

in space technology are vital to maintaining a healthy space industrial 

base. The DOD must succeed in its goal to maintain its techbase, even in 

a drastically reduced defense budget environment, and NASA, which has 

started to respond to the Augustine technology recommendation with its 

Integrated Technology Plan, must be successful in holding down 

operations costs and greatly accelerating technology investment. 

The U.S. aerospace industry understands well the current budget 

environment and the necessity to restructure and downsize. In their 

presentations to us, companies even used the more appropriate word: 

“rightsizing.” In contrast to previous periods they are not waiting for the 

other fellow to go first. They know what they must do to remain 

competitive. Nevertheless, the process is not very efficient and the danger 

is that certain capabilities could be unacceptably reduced, “critical masses” 

dispersed, and capability so diffused that the industrial base would be 

irreparably damaged. The government cannot manage this “rightsizing”; 

it is industry’s job. But many of our laws and regulations were 

promulgated in times of expansion and may seriously inhibit an orderly 

restructuring and downsizing process. For example, the antitrust laws 

designed to protect the public may be counterproductive by preventing 

companies from having sensible discussions on how to maintain national 

technical capabilities by aggregation and specialization. Similarly, various 

allowed tax treatments may slow the downsizing of facilities. There 

should be prompt government review of the legal and regulatory 

impediments to 9ightstig” that would help maintain our space 

industrial base, and actions taken to remove these impediments. 

DOD/NASA Coordination 

There are not two space industrial bases, one for defense and one for 

the civil space program; they both draw from the same well. Certainly the 

missions are different, their management styles are not the same, and 

security classification impinges heavily on much of the DOD program. 

Nevertheless, they largely use the same industry, require virtually identical 

technologies, share the human skills, often use common facilities and 

certainly draw new entrants from the same academic institutions. 

Preserving the base for one helps the other, and vice versa. 
Executive Summary vii 

Despite this commonality of interest, we observe that the two agencies 

look at industrial base issues independently. The DOD has initiated a very 

systematic process for analyzing its industrial base. It looks at all pertinent 

sectors such as shipbuilding, aircraft, missiles, etc. One of these categories 

is space. By a survey process, unique technologies, skills, processes and 

facilities are identified, threatened areas are sought out, and actions are 

presumably recommended to preserve essential elements. The DOD 

appears to ignore NASA and its programs in this evaluation. 

NASA, on the other hand, has no such process. Rather, it concentrates 

on single programs, such as the Space Shuttle, to assure that it has the 

industrial capability to support operations for the system’s projected life. 

Results of the DOD analysis are not yet available. But from industry 

presentations, it appears that certain key technologies may require special 

support, including such areas as large deployable structures (and optics), 

and stabilization and control of agile spacecraft. It is clear to us that 

industrial base issues should be coordinated between the DOD and NASA, 

with any responsibility for supporting critical technologies rationally 

assigned to the appropriate agency. The DOD and NASA should 

address the space industrial base issues in a highly coordinated 

format. This should not be a one-time effort, but kept up to date to 

alert the system to any unacceptable loss in capability. NASA should 

examine the well-defined DOD process for possible adoption, and DOD 

must recognize NASA’s role in supporting the defense industrial base. 

Another area that can best be accomplished jointly deals with the 

nation’s unique space facilities such as large thermal-vacuum chambers 

and acoustic test chambers. We would include both government and 

private facilities in any assessment. At present there is a large amount of 

over capacity and many otherwise useful facilities will be shut down in the 

downsizing process. In the future more sharing of facilities may be 

required. Industry is in no mood to fund new facilities, although new 

programs may require them. Some years ago the DOD and NASA, 

through the auspices of the AACB (Aeronautics and Astronautics 

Coordinating Board), did a long-range plan for aeronautical facilities (wind 

tunnels, etc.) which successfully defined an evolutionary path for such 

facilities. We need such a coordinated long-range plan for the unique 

space facilities that will be required in the new space enviroxunent, 
. . . 

21111 Future of the U.S. Space Industrial Base 

Individual Agency Measures 

The procurement processes the government (both DOD and NASA) uses 

were designed largely during periods of rapid expansion. There was value 

in encouraging competition and increasing the number of organizations 

that could contribute to our nation’s space programs. It should not be 

surprising, therefore, if the process is not optimal when the industrial base 

is shrinking. The procurement process should not encourage 

unwarranted dilution of the space industrial base. This translates to 

higher weightings for such criteria as past performance, current skills and 

facilities, and preservation (not dilution) of critical competencies. 

Many past studies, e.g., several Defense Science Board reports and the 

Augustine Committee, have recommended improvements to the efficiency 

of and value received from DOD and NASA procurements. These include 

minimizing the use of special requirements in order to make greater use 

of commonality (including dual use between the DOD and NASA), greater 

use of commercial components, reliance on performance specifications 

rather than detailed design specifications, and greater use of commercial 

business practices, All of these recommendations help the industrial base 

by less reliance on special items which are expensive and difficult to obtain 

over a long period of time and/or by requiring less oversight and reduced 

paperwork. The latter permits a larger percentage of our financial 

resources to go into the end items, a must if we are serious about 

preserving our industrial base. The procuring agencies generally agree 

with these recommendations, but actions lag the good words. It is time 

to actively implement the many past serious recommendations that 

have been made to increase the value received from 

government-procured goods and services. 

As the space program matures, more systems become operational and 

operations take a larger fraction of the budget. For example, it is now 

estimated that space operations take about one-third of the NASA budget. 

Unchecked, these funds, which contribute to a healthy budget but not as 

much to preparing the industrial base for future needs, will crowd out 

programs which do. It is, therefore, necessary that both the DOD and 

NASA minimize the cost of their space operations. Both organizations 
Executive Summary ix 

would like to accomplish this for space launch, and NASA has an 

aggressive program to reduce the cost of Shuttle operations through 

improvements in both the system and operating procedures. New systems 

should have an eye on the health of the future industrial base and be 

designed to minimize operational cost. The Space Station is a case in 

point. Operating cost should be a major design consideration. The system 

should be “technologically transparent” so that it can accept upgraded 

(hopefully commercial) components and subsystems and not be dependent 

on unique contractors for years to come. In summary, operating costs 

should be vigilantly under pressure, and new systems should have 

low operating costs as a major design criterion. 

Finally, as the industrial base is “rightsized” so should be the 

government counterparts. Companies which restructure recognize that the 

corporate staffs who are paid to ask questions of their operating divisions 

not only consume overhead funds, but create overhead in operations. The 

government agencies will have to make some of these same difficult 

decisions in downsizing and restructuring their staffs and the 

associated support contractors. Similarly, they must guard against the 

natural tendency to bring work “in house” because an industry or academic 

institution is forced to relinquish a capability. This is not the way to 

maintain a space industrial base. 

Space Launch 

Advisory groups should be tiring of advising the government on steps 

to take to renew our nation’s space launch capability. The basic facts 

haven’t changed, except perhaps to worsen. We are dependent for the 

launch of our major payloads on the Space Shuttle and the 

ballistic-missile-derived Delta, Atlas and Titan launch vehicles. The latter 

are relatively reliable workhorses and could serve our government launch 

needs into the next century, albeit at increasingly uncompetitive prices, 

because now our international competitors will be improving the operating 

efficiency of their fleets. We will be paying more than we should for our 

own launches and will not be competitive for international commercial 

payloads. Complicating this will be pressure from non-market economy 

(NME) nations such as China and Russia. 
r 

X Future of the U.S. Space Industrial Base 

Our response to this challenge must be threefold. No matter what else 

we do, the current stable of launch vehicles will be with us through this 

decade. We should invest in upgrades to the current vehicles and 

supporting infrastructure to increase reliability and reduce operating 

costs. We should implement a fair trade agreement to provide interim 

insulation of the U.S. commercial launch industry from unrestricted 

access by NMJZs, and define “rules-of-the-road” with other 

governments. Finally, we must develop and make operational a 

modem, low-cost launch system. 

The nation will get three benefits from implementing the last of these 

recommendations: (1) The cost of future government launches will be 

significantly lowered, (2) Our industry will have an internationally 

competitive launch capability, and (3) Lower-cost access to space will 

stimulate the use of space, benefiting all sectors. At the same time, such 

a program will preserve essential elements of the space industrial base. 

Commercial Space 

Today, the estimated $5 billion in commercial space-derived sales 

represents about 14% of U.S. total space expenditures. It could be argued 

that the commercial portion of the space industrial base does not contribute 

that much to the whole. We have already pointed out, however, that 

operations are taking an increasingly larger part of government 

expenditures. Operations play a smaller part in commercial programs. In 

addition, many studies have been done to show that government programs 

cost more than corresponding commercial programs (estimates range from 

30% to factors of 2 to 3 or more). Finally, the government program, led by 

defense, is shrinking while the commercial programs continue to grow. 

Combining all these factors, a growing commercial contribution to our 

space industrial base is more significant than the 14% would imply. 

There are a number of ways the government can help this nascent but 

growing industry. Again, many of these measures have been 

recommended in previous studies and are being implemented to various 

degrees. The government has many opportunities to remove 

impediments and implement policies that promote industry growth. 
Executive Summary xi 

Export restrictions should be reviewed in light of the changed international 

environment. It is difficult to understand why communications satellites 

delivered on orbit are on the U.S. Munitions List. The Export-Import Bank 

should be allowed to provide increased financing support. Market-opening 

measures by the government should be encouraged. The manner in 

which the government buys ik goods and services can have a positive 

effect on the commercial space industry. Examples (all of which have 

been used at some time by the government) include serving as an anchor 

tenant in privately funded projects, procuring data rather than the 

hardware which produces the data, and the funding of risk-shared 

technology demonstration programs. 

Finally, for the same money a number of small programs contribute 

more to the space industrial base than does a single large one. More of the 

funds expended on small programs go into end items since less oversight 

is (or should be) required. Institutions, whether government or private, are 

willing to take more risk on a small program and innovation is 

encouraged. Development cycles are shorter; thus innovation is 

incorporated sooner. Defense conversion through diversification is 

difficult, but conversion from large defense programs to challenging 

smaller space programs is relatively easy and is highly useful in preserving 

the industrial base. The government should recognize the particular 

value of multiple small programs in contributing to the space 

industrial base. 

Engineering Education 

The panel did not have time to address this important issue in any 

depth. We know from past experience that young people react to market 

forces extremely rapidly in choosing their fields of study. The aerospace 

industry does not appear to be in a soon-to-be-reversed trend. The 

reduced supply of engineers applicable to our space industrial base may 

match future demand. It may not. We believe there is sufficient doubt to 

justify that an appropriate group, probably under the National Academies, 

study the issue. Our future capabilities in space will depend heavily on 

the availability of qualified young engineers and scientists. 
* 

* 
Table of Contents 

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

i 

. . . 

Executivesummary...................................... m 

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

The U.S. Space Industrial Base in Transition ................... 5 

U.S. Government Space Budgets ......................... 5 

Aerospace Industry Sales ............................... 9 

Commercial Space Markets ............................. 11 

Employment ......................................... 15 

Engineering Education ................................. 17 

The International Environment ............................ 18 

Findings and Recommendations ............................ 23 

Competency to Achieve National Objectives ................ 23 

DOD/NASA Coordination .............................. 29 

Individual Agency Measures ............................ 31 

SpaceLaunch ........................................ 35 

Commercial Space .................................... 39 

Engineering Education ................................. 42 

Summary of Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 

Appendix I - Task Group Members ........................ I-1 

Appendix II - Task Statement ............................ II-1 

Appendix III - Legal Compliance ......................... III-l 

Appendix IV - Presentations to the Task Group .............. IV-l 
List of Figures 

Figure 1. U.S. Space Budget. .............................. 6 

Figure 2. NASA Budget Predictions ........................ 7 

Figure 3. DOD Budget Authority ........................... 8 

Figure 4. DOD Space Budget Prediction ...................... 9 

Figure 5. Aerospace Products and Services Sales by Customer Type 10 

Figure 6. Space Industry Sales as a Percentage of Total Aerospace 

Industry Sales .................................. 10 

Figure 7. U.S. Space Commerce, 1992 ....................... 11 

Figure 8. Cumulative Communications Satellite Launches since 1980 12 

Figure 9. Commercial Space Launches by Country, 1990-91 ....... 13 

Figure 10. World Communications Satellite Orders .............. 14 

Figure 11. Aerospace Industry Employment ................... 16 

Figure 12. MIT Sophomore Enrollment in Aero/Astro ........... 17 

Figure 13. International Space Program Budgets ................ 19 
Introduction 

The ability of the United States to advance its national interests in space 

- be they military, scientific, or economic - requires an industrial base 

that can translate bold and complex concepts into actual systems and 

services. . The term “industrial base” is a broad one encompassing 

government, university, and private sector facilities, skilled manpower, and 

technical resources which are capable of producing space-related hardware 

and software. Examples of these include propulsion systems, guidance 

systems, complete launch vehicles for both orbital and suborbital flight, 

satellites of all kinds, remote sensing information systems, ground support 

systems, and related command, control, and communications systems. 

The Vice President tasked his Space Policy Advisory Board to assess 

the current strength of the U.S. space industrial base and the outlook for 

its health and vitality over the next decade in light of recent changes in the 

world situation. These changes include the end of the Cold War and new 

prospects for both cooperation and competition in space activities. A panel 

of the Advisory Board was named on July 1, 1992 and charged with 

considering the implications of declining defense spending, the nature and 

scope of international competition, and current and projected national 

security needs. The panel was also to take into account changing trade 

relationships between the U.S. Government, the private sector, and other 

space-faring nations. 
2 Future of the U.S. Space Industrial Base 

While the state of the defense industrial base has often been studied 

and reported on, no comparable level of examination has been done for the 

space industrial base. In part this has been because it is usually assumed 

that the space industrial base is a subset of the defense industrial base. 

Past reviews of space policy, from the 1969 Report of the Space Task 

Group to the 1990 Augustine Committee, did not directly address the 

question of whether the U.S. industrial base was adequate for the space 

tasks considered - partly for the reason that these studies were not 

initiated at a time coincident with a severe aerospace retrenchment.’ 

Today, there is increasing concern that declines in defense-related 

spending and increasing international competition are harming or will 

harm the ability of the United States to maintain an industrial base that is 

capable of meeting U.S. Government requirements and the demands of 

commercial competition. Success in meeting government needs does not 

always translate into commercial success. For example, the United States 

retains the capability to build the world’s best warships, but the lack of an 

internationally competitive shipbuilding industry has resulted in additional 

costs to the government in maintaining that industry. On the other hand, 

the existence of a commercially competitive satellite navigation receiver 

industry meant the United States was able to supply critical civilian 

receivers to U.S. and allied armed forces during the Persian Gulf War, 

when military production lagged behind defense requirements. 

The current situation of declining defense spending and decreasing 

growth in civil space expenditures is not the first time the U.S. space 

industrial base has faced a major decline. Total employment on NASA 

programs declined from a peak of 420,000 in 1965, of whom 33,000 were 

direct NASA employees. By 1971, this total had dropped to 114,000, of 

whom 30,500 were direct NASA employees.2 In one year, from 1970 to 

1971, approximately 16,000 space-related jobs were lost in California; 5,000 

1 “The Post-Apollo Space Program: Directions for the Future,” Space Task 

Group, September 1969, Washington D.C. and “Report of the Advisory 

Committee on the Future of the United States Space Program,” December 1990, 

Washington D.C. 

karterlv, page 404, February 13,197O. 

“Manned Space Projects Recede as Priorities Shift,” Conzressional 
! f 

ICI ,_ - 

IH 

lntrvduction 3 

in Colorado; 7,100 in Louisiana, Mississippi, Alabama, and Texas; 11,000 

in New England; and 5,600 in all other areas.3 

In contrast to the early 197Os, today’s space industrial base faces new 

and unprecedented challenges due to several important changes. The end 

of the Cold War has removed a major driver of defense spending and 

caused a reexamination of national security space needs. Defense-related 

space spending has exceeded civil space spending every year since 1982, 

driven primarily by DOD’S increasing recognition of the force 

multiplication role of space. As a result, cutbacks in defense now have a 

greater effect on the space industrial base than twenty years ago. Finally, 

the increasing global spread of space technologies is eroding the unique 

technical advantages once held by the United States, fostering the entry of 

more competitors into international space markets, and making it more 

difficult for U.S. firms to move into commercial space ventures. 

i 

:; 

After an extensive literature review, the Task Group met in Washington 

to receive briefings from government agencies. It met again in Los 

Angeles to’ receive briefings from industry representatives (see Appendix 

IV for a list of presenters). The group held its final meeting in Washington 

to share what it had learned from government, industry, and its own 

research and to identify principal findings and recommendations. 

This report is divided into two major sections and a summary of 

recommendations. The first is a brief factual overview of the space 

industrial base in regard to measures such as budgets, employment, and 

market shares. The second is a series of six major issue areas and 

associated recommendations that, if implemented, would strengthen the 

space industrial base so as to best serve the national security, scientific, and 

commercial interests of the United States during the remainder of this 

decade and beyond. 

3 ConEressional Quarterly op cit. 
---- ~- ---- 

--- .- 
2 

The U.S. Space Industrial Base in Transition 

The U.S. industrial base as a whole is undergoing a number of changes; 

thus, attempts to characterize the status of the space industrial base are at 

best a snapshot of a moving target. This section is intended to provide a 

brief overview of the U.S. space industrial base using measures such as 

government budgets, economic growth, technical employment and 

education rates, and international competitiveness. 

U.S. Government Space Budgets 

U.S. Government FY 1992 space spending is expected to be over $30 

billion, with $14.6 billion by NASA (over 95% of which is space-related) 

and over $15 billion in defense-related spending! (Figure 1) Space-related 

spending by agencies such as the Departments of Energy, Commerce, and 

Transportation totals a few hundred million dollars. In the first two 

decades of U.S. space activity, NASA spending exceeded DOD spending, 

especially during the ApolIo program. NASA spending declined in the 

197Os, and DOD space spending increased significantly in the 1980s. DOD 

’ Office of the Secretary of Defense Comptroller, September 1992. 
FY93 

DOLLARS 

(Billions) 

Future of the U.S. Space Industrial Base 

20 

15 

10 

5 

OJ:::::::::::::::: :(: :: ii:::: ::::; :’ 

1960 1965 1970 1975 1980 1985 1990 

Years 

Figure 1. U.S. Space Budget 

space spending exceeded NASA spending in 1982 and every year since. 

The 1987 NASA spending spike is due to the one-time cost of buying the 

Space Shuttle Endeavor after the loss of the Chn2Zenger. 

NASA spending in current dollars increased from $6.6 billion in 1985 

to $14.6 billion in 1992, or an average increase of 12% per year. Projections 

of future NASA budgets, however, have been uncertain, with wide 

variations between what is requested and what is actually appropriated by 

the Congress. (Figure 2) In 1987, “Leadership and America’s Future in 

Space” (the Ride Report) outlined a number of space projects which would 

have required increasing NASA’s budget to about $40 billion by the year 

2000, about twice the peak funding of the Apollo program. In 1990, the 

‘Report of the Advisory Committee on the Future of the U.S. Space 

Program” (the Augustine Committee report) suggested that 

accomplishment of its recommended “balanced” space program would 

require about a 10% per year increase in the NASA budget through the 

year 2000, resulting in a budget of about $30 billion. 

Administration budget requests for 1991 and 1992 attempted to follow 

these recommendations, but actual congressional appropriations were for 

much slower growth. In response to fiscal constraints, estimates by the 

Electronic Industries Association project that real NASA budget authority 
The U.S. Space Industdaf Base in Transition 7 

30 

15 

10 

- EM Forecast 

01”“““““““’ 

96 08 90 92 94 96 99 00 02 

Fiil Years 

Figure 2. NASA Budget Predictions 

will grow slowly, if at all, over the next decade. This projection resulted 

from surveys and interviews with about 500 persons in government, 

industry, academia, and the financial community.5 

The DOD budget has decreased in real terms since 1985. Adjusted for 

inflation, the fiscal year 1992 $286.7B defense budget represents a decline 

of more than 5% per year since 1990. The greatest decline has been in 

procurement spending, that is, orders placed with manufacturers. This 

decline is considerably greater than that for operations and maintenance 

(O&M) and personnel costs. Research and development costs are also 

declining, but more slowly. The divergence resulting from reduced 

emphasis on major system acquisitions represents the largest gap between 

procurement/R&D and personnel/O&M accounts since 1945.6 (Figure 3) 

5 “EIA IO-Year Forecast of Defense and NASA Needs,” Electronic Industries 

Association, September 1991, Washington D.C. 

6 “Analysis of DOD Trends by Major Categories,” Aerospace Industries 

Association, August 1992, Washington D.C. 
8 Future of the U.S. Space Industrial Base 

175 

150 

125 

- 0 8 M and Personnel 

- - -- Pmcurement and RDTBE 

Dollars 

(In Billions) 75 

3 

50 

25 

0 

0 

0 

I- / 

4c--- 

--a-- 

0 , I I I I I I I I I I I 1 

40 so 60 70 

Fiscal Years 

60 90 

Figure 3. DOD Budget Authority 

In contrast to almost all other areas, however, DOD space spending has 

increased a steady 2% per year, growing in current dollars from $12.8 

billion in 1985 to $15.0 billion in 1992.’ As a result, space activity is taking 

an increasingly larger share of a shrinking DOD investment budget for 

R&D and procurement. The Senate Armed Services Committee reported 

that “in fiscal year 1993, space investment will exceed 15% of total (DOD) 

investment, a doubling of (its) share since fiscal year 1986.“’ The current 

DOD budget forecast, Figure 4, shows DOD space spending continuing to 

grow in current year dollars. 

’ Office of the Secretary of Defense Comptroller, September 1992. 

’ U.S. Congress, “National Defense Authorization Act for Fiscal Year ‘1993 

Report,” Senate Committee on Armed Services, page 85, July 31,1992. 
The U.S. Space Industrial Base in Transition 9 

20 Y14 -- 

Current 12 -- 

Year 10 . . 

Dollars 

(In Billions) 8 -- 

6 -- 

4 -- 

2 -- 

01 I 

FY92 FY93 FY94 FY95 FY96 FY97 

Fiscal Years 

Figure 4. DOD Space Budget Prediction 

Aerospace Industry Sales 

NASA and DOD expenditures account for the bulk of aerospace product 

and service sales. (Figure 5) Space sales have continued to grow at a 

steady rate, but slower than other aerospace areas largely due to the 

greater dependence of space sales on government budgets. Most of the 

DOD and Non-U.S. Government expenditures are aircraft-related; these 

have shown increasing strength in the past few years. 

In commercial markets, aerospace goods such as aircraft and satellites 

are the leading contributor to the U.S. balance of trade, about $31 billion 

in 1991.9 While this represents a 9% increase over 1990, reflecting strong 

civil exports, imports continued to increase to a record high of $13 billion. 

It is difficult, if not impossible, to separate the space industrial base 

from the U.S. aerospace industry. Nonetheless, space-related sales are 

clearly an increasingly important part of the total aerospace industry. Space 

9 Aerospace Industries Association, 1992, Washington, D.C. 

L 
Future of the U.S. Space industrial Base 

01 

, , , , ( I I I I I , , I I I 

76 n 78 79 90 II 82 83 64 8586 8786 98 90 8192 

FodYun 

n4.9 indudes dtlu us oaHmm( 

Figure 5. Aerospace Products and Services Sales by Customer Type 

24 r 

121 " " ' " " " " " ' " 1 

1974 1976 1976 1980 1662 1884 1666 $666 lm 1992 

Figure 6. Space Industry Sales as a Percentage of Total Aerospace 

Industry Sales 
The US. Space lruiustrial Base in Transition 

Commercial Satellites 

Sl,loo 

Eefthstalions -. --- 

11 

Total Revenue: $5 Biliii 

souroe: U.S. oeparbnentofcommeKs. 

Figure 7. U.S. Space Commerce, 1992 

industry sales now account for 22% of total aerospace industry sales, with 

steady growth since 1980.” (Figure 6) 

Commercial Space Markets 

Commercial space sector revenues are expected to increase by $600 

million to about $5 billion in 1992, for a 14% increase over 1991. (Figure 7) 

Most of these revenues are generated by satellite communications-related 

goods and services. In addition, new technologies are generating economic 

growth in space-based mobile communications, portable satellite navigation 

receivers, and remote sensing data analysis. The United States is 

competitive in commercial space products, with 1991 exports of $240 

million in satellites and $220 million in launch services. 

Since the first fully commercial launches in 1988, U.S. commercial 

launch companies have won many international competitions. But the 

lo ibid. 
12 

loo r 

Future of the U.S. Space industrial Base 

/ - o 

69- 

Jo20- 

1960 1965 1990 1996 2ow 

CkbfbbYoarS 

saKce:s9ma,LmphierhA98odm69 

Figure 8. Cumulative Communications Satellite Launches since 1980 

failure of several launches in 1985 and 1987, and the backlog created by the 

loss of the Challenger in 1986, allowed the European Ariane rocket to gain 

and keep a majority share of the international launch market. In terms of 

cumulative communications satellite launches since 1980, the United States 

has been recently passed by Ariane, in part as a result of the standdown 

by U.S. launchers in the 1980s. (Figure 8) Japan and China have launched 

satellites at a lower rate than the United States or Europe and as a result 

have much less experience. The international commercial market for 

launches of medium and large communications satellites is level and 

roughly split now between the European consortium, Arianespace, and 

U.S. firms. (Figure 9) 

The U.S. commercial launch industry consists of about a half dozen 

companies offering commercial launch services for small (under 1,000 

pounds) to very large (above 10,000 pounds) payloads. While demand for 

traditional communications satellites is expected to remain flat, a potential 

source of new demand is for small payloads launched to low Earth orbit 

(LEO). These payloads are primarily small telecommunications satellites 

in networks that can provide world-wide services. Other examples include 

distributed remote sensing platforms. 
The U.S. Space Industrial Base in Transition 13 

TM33 

-b48dum aed lsrg6 ELVS. nonmlitary. 

soufc!a: U.S. leunoh compmiw;m. 

Figure 9. Commercial Space Launches by Country, 1990-91 

The U.S. Government remains the largest consumer of U.S. launch 

services. NASA, DOD, and the National Oceanic and Atmospheric 

Administration have had a combined requirement for about 15 expendable 

launch vehicles per year, two or three of which are procured commercially, 

plus another three to four small orbital or suborbital launchers. The 

United States is expected to continue the policy of launching civil and 

military spacecraft on U.S. launchers. However, declining defense 

spending has resulted in downward revisions in DOD’S launch plans. 

The United States has fared better in the commercial communications 

satellite market, than in launch services, but is facing growing foreign 

competition. Of commercial communications satellites currently scheduled 

for delivery during 1992-1997,69% will be built by a U.S. prime contractor. 

French companies are second with 13% of the market. (Figure 10) 

Other nations have, however, made significant penetrations into a 

market which used to be a U.S. monopoly. In the 197Os, foreign 

manufacturers built 13% of all civil and commercial communication 
14 Future of the U.S. Space Industrial Base 

U.K 

4u MY 

ex 

othm 

Fmlw 

13% 

U.S. 

69% 

Note: SdcedJed for tlerlmy 1892-97. 

‘Lerpe caphy OeoslaiDnary 9stelliles 

Source: Ccmmmrm Dspsrmsnt. 

Figure 10. World Communications Satellite Orders 

satellites. In the 198Os, market share captured by foreign manufacturers 

increased to 29%. In the 199Os, foreign manufacturers have already won 

contracts for 37% of the satellites to be built with about 29% of the 

contracts still undecided. The non-U.S. content in international satellites 

such as the Intelsat series has also increased, with Japan and Europe 

seeking to contribute more technology to the U.S. firms that have won the 

prime contract position. 

The largest single sector of space commerce consists of satellite ground 

equipment, which generated estimated revenues of $1.7 billion in 1992. 

Asian manufacturers provide stiff competition for U.S. firms in larger, 

Intelsat-compatible, earth stations. They dominate the global market for 

lower-technology Television Receive-Only (TVRO) home dishes. U.S. 

companies, however, hold an estimated 85% world market share for midsized and smaller earth stations, such as Very Small Aperture Terminals 

(VSATs). U.S. techn o 1 ogy is also seen as being at the cutting edge in 

emerging mobile satellite receiver markets. VSAT stations which sold for 

$30,000 in 1988 are now selling for $6,000 and are likely to sell for $2,000 

by 1995. These trends will favor high-productivity, low-cost producers in 

a challenge familiar to other areas of commercial manufacturing. 

- 

m 
The U.S. Space Industrial Base in Transition 15 

Employment 

Defense budget reductions have a strong impact on employment. For 

example, the DOD’S Fiscal Year 1993 Budget Submission projects a 31 

percent decrease in industry employment from 1991 to 1997, dropping 

from 3.3 million to 2.3 million jobs. As defense budget growth slowed in 

the late 198Os, employers continued to hire and retain workers, possibly in 

expectation of new defense spending. Employment at defense contractors 

(defined as firms receiving 50% or more of their revenues from military 

sales) peaked in 1987 at 1.4 million, and declined by only 33,000 over the 

next three years.” With the fall of the Berlin Wall and the collapse of the 

Soviet Union, defense-related employment began falling at more than 

100,000 jobs per year. These losses represent about 15% of total job losses 

since the beginning of the current recession in July 1990. More recently, 

continued defense cutbacks resulted in the elimination of 17,000 jobs in 

July of this year, the largest single-month decline in the past two years.12 

Certain states, such as California and Massachusetts, in which defense 

spending plays a major role, have been particularly hard hit. 

Aerospace industrial base employment has been strongly affected by 

defense procurement reductions. At the end of 1991, U.S. aerospace 

employment totaled 1.16 million workers, or about 6% of total U.S. 

manufacturing employment. This is a 13% decline since 1989, and another 

7% reduction is expected in 1992, with most of that coming in military 

aerospace work.13 (Figure 11) Increases in government funding for space 

and steady commercial space growth suggests that these cuts have fallen 

mostly on aircraft production workers. In 1990, employment in the 

missiles and space sector of the industry averaged about 186,000 persons.14 

*’ U.S. Department of Labor Bureau of Labor Statistics, August 7,1992, 

Washington D.C. 

l2 ibid. 

I3 Aerospace Industries Association, 1992, Washington, D.C. 

I4 ibid 
16 Future of the U.S. Space Industrial Base 

Thousands 

of 1,000 

Employees 

600 1 t I 

1960 1970 1980 

Calendar Years 

1990 

Source: Aerospace industries Association estimates based on 

” Employment and Earnings,” Bureau of Labor Statistics 

Figure 11. Aerospace Industry Employment 

Overall, the total defense employment of engineers and scientists is 

expected to decline from 379,000 in 1991 to 279,000 in 1997. Aeronautical 

and astronautical engineers, those most directly associated with space 

systems, are expected to decline in defense employment from 29,000 in 

1991 to 20,000 in 1992, or about 30%.” This should be compared with an 

estimated total employment of 73,000 aeronautical and astronautical 

engineers in 1990. Projections of future employment of such engineers 

have very high degrees of uncertainty - plus or minus 27% through 2005, 

according to the Bureau of Labor Statistics.16 

l5 “Projected Defense Purchases Detail by Industry and State CY 1991-1997,” 

Office of the Secretary of Defense, page 14, November 1991, Washington DC. 

l6 ‘Scientific and technical employment, 1990-2005,” Douglas J. Braddock, 

Monthlv Labor Review, page 35, February 1992. 
The U.S. Space lndustd Base in Transition 17 

Figure 12. MIT Sophomore Enrollment in Aero/Astro 

.-- .- Engineering Education 

Current workforce reductions and significantly lower new college 

graduate hiring by aerospace and other engineering intensive industries 

have sent a strong negative signal to potential entrants. Engineering 

enrollment has decreased from 115,000 in 1982 to 93,000 in 1991. While 

total engineering graduates have decreased 7% since a peak in 1986, B.S. 

graduates have decreased 22%, reflecting fewer incoming students to the 

field. At the undergraduate level, the U.S. educational system appears to 

be particularly responsive to market signals. (Figure 12) In the last three 

years, .for example, the number of sophomores choosing to enroll in the 

Aeronautical / Astronautical Engineering Department at the Massachusetts 

Institute of Technology has fallen by more than 50%.17 

l7 Dr. Jack Kerrbrock, Department of Aeronautics and Astronautics, 

Massachusetts Institute of Technology, Cambridge, Mass., September 1992. 
18 

Europe 

Future of the U.S. Space Industrial Base 

The International Environment 

Europe entered the 1990’s as a major, if not the major, competitor to the 

United States in many space sectors such as launch services, 

communications, remote sensing, and microgravity research. The 

European Space Agency (ESA) has funded the European space community 

with a sometimes rigid system of “just return,” assuring contract awards 

to industrial in member states in direct proportion to the contributions of 

member governments. Civil space spending is still largely below that of 

the United States. (Figure 13) At the height of the Apollo program in 1965, 

the United States (essentially NASA) outspent Europe by 35:l. By 1975, 

this ratio had fallen to 4.3:1 as a result of both lower U.S. expenditures and 

increased European attention to building its communications satellite and 

launch vehicle industries.” In 1992, the continuation of these trends has 

resulted in the United States’ outspending Europe by only 3.1:1.19 

Restructuring and consolidation in recent years has resulted in two 

large aerospace groupings in Europe. One consists of Matra Marconi 

Space, which includes Fairchild Space, a U.S. ,firm. The second is an 

alliance of Deutsche Aerospace, Alenia, Aerospatiale, and Alcatel which, 

in turn, owns 49% of Space Systems Loral, another U.S. firm. France is 

currently the leading space power in Europe in the scope and complexity 

of its activities. Germany has restructured its aerospace industry 

(combining Dornier, MBB, and Telefunken) in part to challenge French 

dominance, but the cost of reunification is slowing its space activities and 

its contributions to ESA. This, in turn, has placed greater pressure on the 

other ESA members and has caused a suspension, if not cancellation, of 

several programs such as the Hermes space plane. 

I8 ‘The International Space Market: Increasing Cooperation and a Changing 

U.S. Role,” Henry Hertzfeld, Aerospace Industries Association, 1992. 

l9 Assuming a NASA budget of $14.61 billion, an ESA budget of $3.14 billion, 

and combined non-ESA civil space budgets for France, Germany, and Italy of 

$4.68 billion. 
The U.S. Space industrial Base in Transition 

Japan Germany Canada U.K. kndla 

19 

Source: American lnefitufe of Aeronauf~cs and Mronaufii. 

Figure 13. International Space Program Budgets 

The European aerospace industry operates in a very different financial 

environment compared to U.S. industry. For example, governments, 

banks, and major companies commonly have equity positions in space 

firms. This creates a stable, lower-cost source of capital for new ventures, 

and currency mixes can be altered to enhance pricing flexibility. On the 

other hand, new ventures can sometimes suffer as a result of protection 

from competition, leading to rigidity in responding to new technologies 

and market opportunities. 
20 Future of the U.S. Space Industrial Base 

Japan 

Japanese firms also operate in a very different financial environment 

from U.S. space industry. Their keirefsu structures involve long-term close 

relationships between the suppliers and vendors for a major firm, which, 

in turn, takes a large degree of responsibility for their health. Perhaps 

more importantly, the Japanese government plays a leading role in 

promoting new technologies and industry ventures. The Ministry of 

Industry and Trade (MITI) established a space industry division in 1987 

and has created at least 7 space consortia with a total of over 150 

companies. They are exploring areas such as the commercialization of 

Japan’s H-II rocket, remote sensing technology for oil and mineral 

exploration, and microgravity research. One statement from MITI 

highlights how Japan intends to focus its space efforts: “Our ministry is 

trying to promote the types of commercial space activity that will not 

entirely depend on the government’s budget. If Japanese space efforts are 

limited to those supported by government spending, growth of the total 

industry will be slight.” 

The Former Soviet Union 

The former Soviet Union (FSU) has considerable overcapacity in its 

defense industrial base as a whole, and specifically in its space industrial * base. In 1991, open source estimates placed the size of the Soviet space 

effort at approximately 800,000 to 900,000 people. This included what 

might be called civil, scientific, and military activities, although the 

distinction is difficult to make. Most space activities were concentrated in 

Russia and Ukraine, with major launch operations at Tyuratam in 

Kazakhstan. With the current economic turmoil and withdrawal of 

government supports, some observers estimate that the Russian space 

effort may contract to only 100,000 - 200,000 persons in the next five to ten 

years. 

The republics of the FSU, especially Russia and Ukraine, are making 

strong efforts to enter international markets and earn hard currency. 

Unfortunately, they are not yet bringing any new demand to the market 

(e.g., allowing Western firms to compete for launches of Russian payloads), 

but are seeking to take market share from existing competitors. Aside 

from launch services, Russian industrial organizations are engaging in joint 
The U.S. Space Industrial Base in Transition 21 

ventures to sell communications satellites as part of complete service 

networks. Other joint ventures are seeking to find Western buyers for 

aerospace components such as high-precision turbine wheels which could 

be used in jet engines and rocket engine turbopumps?’ Low-price, 

satisfactory quality Russian parts could represent a severe challenge to the 

commercial competitiveness of some U.S. component suppliers. 

Recently, the United States and Russia have entered negotiations 

toward an agreement that would allow for entry of Russian launch services 

without market disruption. Preventing market disruption is both 

particularly important and difficult in the case of non-market economies 

such as Russia and China, as resource costs are typically unknown and 

pricing can be arbitrary. As a result of concerns with Chinese entry to the 

international market, the United States concluded a six-year agreement 

with the People’s Republic of China to limit its participation in the 

international launch market to nine launches over the period of the 

agreement and to price its launch services fairly. 

In summary, foreign governments have targeted space as a strategic 

industry with potentially high economic and national security leverage. 

This, in turn, has resulted in foreign aerospace companies enjoying 

substantial government support in addition to official budget expenditures. 

Europe is the current major competitor, possessing space technology on a 

par with that of the United States in many areas. Japanese industry is 

becoming increasingly capable, and Israel, Korea, and India are looming 

as potential future independent competitors. Future roles for non-market 

economies such as Russia, Ukraine, and China are unclear due to concerns 

about the stability of their space organizations and their current lack of 

market-oriented structures and business practices. 

2o “Recession Taking Toll on Sub-Tier Companies,” Aviation Week and Snace 

Technolo~v, page 91, September 7, 1992. 

Findings and Recommendations 

The Task Group identified six key areas relating to the health of the 

U.S. space industrial base now and over the next decade. These are: 

l Competency to Achieve National Objectives 

l DOD/NASA Coordination 

l Individual Agency Measures 

l Space Launch 

l Commercial Space 

l Engineering Education 

Where appropriate, we offer recommendations on actions that should 

be taken to ensure that the United States continues to have the industrial 

base to fulfill its goals in space. 

Competency to Achieve National Objectives 

Uncertainties in All Areas of the Space Industry 

Today, a unique combination of circumstances is adversely affecting the 

U.S. space industrial base. The collapse of the Soviet Union and the end 

of the Cold War have led to an extensive reexamination of our national 

security needs and a corresponding decline in projections of future defense 
24 Future of the U.S. Space Industrial Base 

spending requirements. The DOD plays a much larger role in space today 

than it did twenty years ago and, hence, the space industrial base is 

affected almost equally by both NASA and DOD actions. Finally, over the 

past decade, commercial opportunities in space have grown along with 

increasing pressure from international competitors. The space industrial 

base is thus faced with major uncertainties from each of three business 

areas: military space, civil space, and commercial space. 

Space-related spending has not been affected as much as other areas of 

the defense budget, as the United States continues to require access to 

space and space systems to support world-wide military and national 

security objectives. Nonetheless, the decline in defense spending means 

that the United States has industrial overcapacities in some areas and that 

it may lose some critical capabilities in other areas unless special actions 

are taken. The DOD strategy is to maintain its industrial base through a 

strong research and development effort and limited prototyping work, 

while delaying or foregoing some full-scale production efforts. Military 

space may fare better than other defense sectors since many of the systems 

in production (e.g., global positioning, meteorology, and communications 

satellites) are directed to world-wide national security objectives and their 

requirements are not dominated by the past Soviet threat. 

Civil space spending has not been as greatly affected as defense 

spending by the end of the Cold War, and, in fact, new opportunities for 

international cooperation have been opened. Fiscal realities are such, 

however, that sustaining strong, continued budget growth will be very 

difficult. A large portion of NASA’s budget is devoted to operations 

(about one third), and this portion undoubtedly will grow with the 

deployment and operation of Space Station Freedom. A flat budget and 

growing operational commitments mean that NASA will be hard-pressed 

to undertake the new initiatives in technology or space systems that are the 

major contributors to the competency of the space industrial base. 

The commercial space sector - consisting largely of launch vehicles, 

communications satellites, satellite services, ground equipment, and remote 

sensing activities - has been growing rapidly in recent years. This growth 

has helped generate new sources of non-government revenues for the 

space industry and sharpen its technical capabilities through commercial 

competition (e.g., in communications services and satellite-based 
Findings and Recommendations 25 

navigation). At the same time, U.S. firms are facing aggressive 

international competition that is either partially or fully 

government-supported. The United States continues to be a world leader, 

but it no longer has a monopoly on space technology. 

The Industrial Base is Capable, but Fragile 

The space industry has certain unique characteristics that set it apart 

from other areas of manufacturing. The production of spacecraft and 

launchers has historically involved low production quantities and a high 

degree of specialization of payloads, interfaces, and ground equipment. 

The successful design, manufacture, and operation of space systems have 

been heavily dependent on uniquely qualified systems engineers and 

skilled technicians. There is clear interdependence between the three 

sectors of the nation’s space program. For example, if the military and/or 

civilian space budgets are cut significantly below current projections, the 

commercial sector will be impacted by the attendant reduction in the 

I intellectual and industrial bases of the supporting industry. 

Many aerospace prime contractors are concerned that cutbacks in 

government procurements or declines in export orders will quickly 

eliminate unique capabilities provided by second- and third-tier 

contractors, create foreign source dependencies, or even lead to production 

gaps (“dark factories”) that can only be bridged at much greater expense 

than that associated with maintaining capabilities. In the space field, some 

important components such as solar cells, nickel cadmium batteries, and 

control moment gyros have only a few domestic sources. 

There is at least one key technical skill that is particularly difficult to 

maintain in isolation from actual hardware development programs - 

systems engineering. Systems engineering involves steering an 

organization to respond to broad mission needs by specifying, designing, 

and integrating a complex set of hardware and software subsystems to 

provide cost-effective solutions. The necessary blending of many technical 

disciplines is a very difficult skill to maintain in academic or research 

environments due to the demands of specialization. Systems engineering 

skills are typically honed on actual flight projects, with younger engineers 

working under more experienced managers; and paper studies do not 

provide sufficient “real world” pressure. 
26 Future of the U.S. Space Zndustrial Base 

Given the uncertainties facing the industrial base, our first judgment 

had to be whether we felt that the nation would be able to maintain 

capabilities sufficient to meet future national security, civil, and commercial 

objectives in space. Given continuing debate over the proper level and 

emphasis of space activity, it is difficult to quantify such an answer. From 

meetings with knowledgeable representatives of industry and government 

agencies and a review of materials provided to the Task Group, and 

combined with our own experiences, we concluded that the United States 

would be able to meet current expectations - with the important 

exception of competitiveness in commercial launch services (to be 

discussed in a later section). If expectations were to increase - for 

example, to support an accelerated effort to return humans to the Moon 

and journey to Mars - the industrial base would be able to respond given 

sufficient lead time. In the national security field, where warning may not 

always be available, certain critical technologies and capabilities will 

require special efforts to sustain. 

Increasing Confidence in the Future Space Industrial Base 

Our confidence in this conclusion on the adequacy of the space 

industrial base is fragile, however, as it depends on two key assumptions: 

(1) that adequate technology R&D is funded by the Defense Department 

and NASA, and (2) that industry downsizing is done efficiently enough 

that key capabilities are not so diffused that they cannot be brought to bear 

on demanding problems. 

As part of its revised acquisition strategy, the DOD intends to maintain 

a strong technology base for continued leverage against potential enemies. 

From the standpoint of the space industrial base, it is important that DOD 

succeeds. Technology development will allow the retention of many 

crucial skills. Technology development also provides a hedge against 

uncertainty in the future direction of U.S. space activity, while avoiding the 

cost of major programs which may lack public support. If large flight 

projects in the DOD become rarer, NASA could play an important role in 

continuing to maintain a talented cadre of systems engineers through its 

contracts and possibly help retain other skilled personnel as well. 

- 

cc 
Findings and Recommendations 27 

Current projections of the NASA budget do not show the 10% annual 

real growth suggested by the Augustine Committee. Unlike defense space 

spending, however, the current NASA projections do not show a decline 

and NASA should be able to maintain a diverse range of efforts in science, 

technology, and applications research. Unfortunately, as the Augustine 

Committee pointed out, “the technology base of NASA has now been 

starved for well over a decade and must be rebuilt.” NASA has taken 

some useful steps in response to recommendations for increasing userfocused space technology research, notably their Integrated Technology 

Plan, but follow-through support and funding (to two or three times 

current levels) has lagged. Support for these efforts needs to be 

established now, or expected operational cost pressures (partly resulting 

from past underinvestment in lower-cost technologies) will make future 

remedies even more difficult. 

b 

1. i 

In securing public support for technology development, it is in NASA’s 

interest to help U.S. firms become and stay world-class competitors. In 

particular, NASA should give greater weight to commercial space needs, 

particularly in launch vehicles, in analogy to its successful aeronautics 

program that it (and earlier, its predecessor agency NACA) has carried out 

for many decades. The focus should be on high-risk R&D applied to 

commercially-important problems identified with industry and on rapid 

technology transfer. 

Recommendation 1: To achieve the greatest leverage in 

maintaining the U.S. space industrial base, the DOD must be 

successful in implementing its policy to strongly support research and 

advanced technology; NASA should increase its efforts in space 

technology and work more closely with industry on technology 

transfer. 

In response to budgetary realities, the U.S. aerospace industry well 

understands the need to downsize. The most appropriate path will vary 

from firm to firm, with some selling divisions or merging, while others 

diversify to serve new customers. Many firms will shrink, while others 

might grow, hence industry often uses the term “rightsizing” to describe 

adjustments to the new realities of space business. Such changes take 

place all the time in the market, but the space industry is unusual in that 

the government plays multiple roles as both a customer and a regulator. 
28 Future of the U.S. Space industrial Base 

Thus, the adjustment process is not very efficient and there is the danger 

that important capabilities could be unacceptably reduced, “critical masses” 

dispersed, and the industrial base damaged in its abilities to meet 

government needs. 

The government cannot, and should not, manage “rightsizing” - that 

is industry’s job to do in light of domestic and international opportunities. 

Our review confirmed that most aerospace companies have been 

performing continuing, intensive reviews of their government and 

commercial business bases, and many have already taken dramatic actions 

to refocus their efforts. U.S. laws and regulations may, however, seriously 

inhibit an orderly process of industry restructuring and adjustment. 

Probably the greatest obstacles are antitrust regulations, which prevent 

discussion and voluntary collaboration on corporate downsizing and 

specialization decisions that affect technologies and competencies 

important to the space industrial base. These rules should be amended to 

encourage the formation of closer relationships between suppliers and 

producers and the establishment of joint production (as well as R&D) 

ventures that can become successful world-class competitors. 

Another set of obstacles to efficient industry restructuring are excess, 

underutilized production and test facilities. These facilities require 

maintenance, increase corporate overhead rates, and inhibit the redirection 

of corporate efforts to other lines of work. In the past, the government 

created second sources to foster competition even though one firm alone 

may have had sufficient capacity to meet government needs. In a period 

of retrenchment, the government should consider allowing accelerated 

depreciation or credits for the carrying costs of excess facilities and 

equipment created at government direction. Favorable tax treatment 

would speed up industry restructuring and help reduce overhead costs. 

Agreement on what facilities and equipment are legitimate excess should 

be coordinated between NASA and the DOD. 

Recommendation 2: The government should promptly re-exunhe 

those laws and regulations that can inhibit efficient industry 

restructuring and “righkizing” including areas such as antitrust 

regulations and tax treatment of excess facilities. 
Findings and Recommendations 

DOD/NASA Coordination 

29 

The space-related activities of NASA and the DOD have much in 

common. They require many of the same core competencies in science and 

engineering, and they draw new entrants from the same academic 

institutions. Certainly the missions are different, their management styles 

are not the same, and security classifications place additional burdens on 

most DOD programs. Nevertheless, they depend upon essentially the same 

industrial base for both technological expertise and production capabilities. 

Decreasing funding for defense has spurred DOD to conduct a very 

systematic process to analyze its industrial base. This process encompasses 

all DOD activities, grouped into major categories such as shipbuilding, 

aircraft, missiles, and space. The DOD surveys itself and its contractors to 

identify unique technologies, skills, processes and facilities; to focus in on 

threatened areas; and presumably to recommend actions to preserve 

essential elements. At times, the DOD will coordinate its efforts with the 

Department of Commerce, which also monitors the defense industrial base, 

deals with foreign availability questions, and manages dual-use export 

controls. Thus far, the process has been focused on DOD needs, and NASA 

has not participated in the review of space-related industrial base issues, 

although some NASA contractors certainly have. While results of the DOD 

analysis are not yet available, from industry presentations it appears that 

certain key technologies may require special support. These technologies 

include large deployable structures (and optics), as well as the stabilization 

and control of agile spacecraft. 

In contrast to the DOD, NASA does not track industrial base concerns 

in a broad, systematic manner across the agency. Rather, it has focused on 

solving individual problems such as parts availability and qualifying 

suppliers within specific programs. This approach may be satisfactory in 

periods of general expansion or when programs have relatively limited 

lifespans. It is not likely to remain so during periods when second- and 

third-tier suppliers are leaving the market and programs are expected to 

be operating over decades, as has been the case for the Space Shuttle and 

will be the case for Space Station Freedom. 

We recognize, of course, that the national security and civil space 

communities have very different purposes and distinct institutional 
30 Future of the U.S. Space Industrial Base 

identities, and we are not suggesting role or structural changes of any sort. 

But in a period of declining budgets and rapidly-changing technology, 

closer cooperation between the two communities can provide useful 

opportunities to avoid redundant technology developments, maintain 

crucial skills, and ensure that unique space industrial facilities are available 

to the nation. In addition, it will be important that essential technologies, 

processes, or components that can only be procured through foreign 

sources (or whose domestic sources are at risk) are flagged by prime 

contractors or procuring agencies. 

The lack of inclusion of NASA in the DOD process and the lack of a 

systematic overview of industrial base issues within NASA are of concern 

to the Task Group. It seems clear to us that key space technologies 

requiring special support should be coordinated between the DOD and 

NASA, with rational assignments of lead responsibilities to the appropriate 

agency. NASA should examine the well-defined DOD process for possible 

adoption, and the DOD must recognize the important role that NASA plays 

in supporting a portion of the industrial base of interest to defense. 

Recominendation 3: The DOD and NASA should address space 

industrial base issues in a closely coordinated format. This should be 

a continuing effort to enable appropriate government action when 

critical capabilities are threatened. 

NASA and DOD often have incompatible technical specifications, 

standards, and procurement practices for space components and 

subsystems. Such incompatibilities foster redundant industrial capacities 

and additional “transaction costs” for cooperative programs. NASA and 

DOD should work with industry to minimize government-unique technical 

specifications and qualification procedures that create incompatibilities in 

the design, production, and operation of civil and national security space 

systems. Current initiatives under way at the working levels of NASA 

and DOD to define common technical standards for electronic components 

and interoperable communications systems are a step in the right direction. 

Unique national space facilities - such as large thermal-vacuum 

chambers, rocket engine test ranges, and anechoic chambers - have been 

constructed by industry and government to support U.S. space efforts. 

During periods of expansion, it was not unusual for the government to 
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Findings and Recommendations 31 

encourage duplicate facilities that would serve the time-urgent needs of 

specific programs. With exceptions in a few specialized areas, the United 

States will have an overcapacity of facilities for the next decade. As a 

result, government agencies and private industry will be hard-pressed to 

maintain these facilities in optimal working condition. Accordingly, a 

broad review of the need for and capabilities of national space facilities is 

in order. Certain DOE facilities have space-related applications; these 

should also be included in any assessment as well. The review should 

explicitly consider options such as joint ownership by the government and 

company consortia of facilities deemed vital, but for which the cost of 

ownership is too great for a single entity to bear. In the past, NASA and 

the DOD used the auspices of the Aeronautics and Astronautics 

Coordinating Board (AACB) to provide a framework and plans for 

aeronautical facilities that withstood the test of many years. We need such 

coordinated long-range plans for unique space facilities that will be 

required in the decades to come. 

Recommendation 4: The DOD and NASA should jointly review 

the availability and capabilities of unique government and private 

space test facilities with the objective of developing a management 

plan for the rational “righMzing” of the facility base consistent with 

projected needs. A revitalized AACB would be an appropriate vehicle 

for such an effort, 

Individual Agency Measures 

The forces affecting the space industrial base today and for the 

remainder of this decade are very different from those of the 1980s. The 

overall aerospace industry has slowed, some areas are suffering severe 

contractions, and there have been substantial layoffs at virtually all of the 

major aerospace firms. Many thousands of smaller suppliers have either 

left the defense business or closed their doors over the last few years.2l 

Second, commercial markets are playing an increasingly important role in 

driving advances in important technologies such as computers, 

21 The Aerosp ace Industries Association estimates that approximately 78,000 

second and third tier suppliers have left the defense business since 1985. 
32 Future of the U.S. Space Industrial Base 

telecommunications, and flexible manufacturing, to cite only a few areas. 

It is increasingly apparent that government systems are no longer 

synonymous across-the-board with state-of-the-art technology. Since 

commercial development times are short compared to government 

programs - allowing the rapid incorporation of state-of-the-art technology 

- and since their production volumes are large, commercial items today 

can often provide higher performance at lower cost than those developed 

specifically for defense or civil space applications. 

Government agencies should incorporate the new realities of lower 

defense spending and stronger commercial forces into procurement 

decision-making. It should not be surprising that procurement strategies 

designed for periods of rapid expansion are not optimal for a period of 

shrinkage. Where once the order of the day was to encourage duplication 

of facilities and production lines as a means of keeping costs down 

through competition, today’s focus must be on preserving vital capabilities 

within a smaller base. Where once there was greater assurance of 

suppliers which allowed the specification of unique components, today 

supplies of needed elements can be more reliably and cost-effectively 

assured by using commercial capabilities. 

Special or unique requirements for low-volume programs result in 

spares and logistics problems over a program’s lifetime. As mentioned 

previously, NASA and DOD should increase system and component 

commonality across programs. Where components are applicable to 

several programs, their specifications and supply sources could be the 

same. The result would be lower overhead, more economical production 

runs, and a more economical and reliable spares and logistics program. 

Many.past studies, e.g., several Defense Science Board reports and the 

Augustine Committee report, have made recommendations to improve the 

value received from and efficiency of NASA and DOD procurements. 

These include minimizing agency-unique contract requirements to allow 

greater commonality between civil, military, and commercial suppliers, 

increased use of commercial components, reliance on performance 

specifications rather than detailed design specifications, and greater use of 

commercial business practices. These recommendations help the industrial 

base in several ways: by decreasing reliance on special items which are 

expensive and difficult to obtain over a long period of time, by using 
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Findings and Recommendations 33 

components and systems which require less oversight and documentation, 

and by permitting a larger percentage of financial resources to go into end 

items rather than overhead. The procuring agencies generally agree with 

these recommendations and they are reflected to one degree or another in 

statements of national space policy. Unfortunately, full implementation of 

these policy statements and recommendations has been very slow. 

As a general approach, the government should take greater advantage 

of industrys capabilities by better defining its needs and then procuring 

services to meet those needs, as opposed to merely securing engineering 

talent to execute its hardware designs. This means specifying performance 

criteria rather than detailed design specifications, and defining data needs 

rather than specific spacecraft hardware. 

Recommendation 5: The DOD and NASA should accelerate their 

adoption of the many past recommendations that have been made to 

increase the value received from contracted efforts. These should 

include minkkin g unique requirements, using performance rather 

than design specifications, and greater use of commercial business 

practices and components. 

Space-related procurements indirectly consider the health of the 

industrial base when they assess competitive factors such as a firm’s past 

performance, facilities, skills base, and the like. But award criteria could 

be extended to directly address the preservation of critical industrial base 

competencies and the potential industry resizing/restructuring that could 

result from a given award. In addition, for situations where a prime 

contractor can locate only foreign sources for an essential capability, the 

prime should notify the procuring agency. Agencies should be able to 

make explicit decisions on whether to allow the use of foreign capabilities 

on an ongoing basis or to develop and sustain domestic sources. 

Recommendation 6: The decision criteria for contract awards 

should give higher weighting to the preservation of critical 

capabilities through measures such as evaluation of past performance, 

available facilities and skills, and the potential industry restructuring 

that could result from the award. 
34 Future of the U.S. Space Industrial Base 

As space systems become more operations-oriented, operating costs will 

represent a greater fraction of total life-cycle costs. But expenditures for 

operations contribute less to renewing the space industrial base than new 

research, development, and production. The major NASA effort to reduce 

the cost of Space Shuttle operations, through such activities as simplifying 

procedures and introducing system changes to improve operability, is 

essential. A program to manage operating costs will be even more 

important for the Space Station. Systems and subsystems to the maximum 

extent possible’should be designed to be “technology transparent,” allowing 

the incorporation of upgraded components over time to improve capability, 

reliability, and operability. Reducing the uniqueness of Station elements 

by employing commercially available components could result in lower 

costs and easier operations support, while at the same time making use of 

technology advances driven and supported by the commercial marketplace. 

Recommendation 7: Greater emphasis should be given to 

managing and reducing the operating costs of space systems. 

. . . . Muunuzmg such costs should be a major design criterion for new 

systems. 

The final area that must be discussed is the division of labor between 

industry (and appropriate academic institutions), government agencies, and 

their support contractors. What changes, if any, should occur during a 

period of industrial base downsizing? The Augustine Committee 

considered these division-of-labor issues for NASA and its contractors and 

concluded that the appropriate in-house “hands-on” role should be focused 

on frontier areas unique to NASA’s mission, but not duplicating functions 

which could and are being performed elsewhere. The Committee also 

recognized the important role of contract monitoring by “professional 

systems managers with appropriate experience” but believed the numbers 

of persons involved in the process could be considerably reduced. 

We not only strongly support these conclusions but believe they must 

be accented in the current environment. The downsizing of government 

and its support service contractors is necessary if overhead costs are not 

to consume a disproportionate share of already scarce funds. Furthermore, 

the government will require fewer oversight personnel as it implements the 

recommendations of this section. Agencies should resist the inclination to 

bring critical competencies in-house as industry rightsizes. Through its 
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Findings and Recommendations 35 

funding contracts and other relationships, government should position 

itself as a partner with industry and universities to preserve the industrial 

base. Government competition with industry further weakens the 

industrial base government requires and should be attempting to preserve. 

Recommendation 8: 

the comm 

Government agencies should promptly assess 

ensurate downsizing of the in-house and support contractor 

base in the light of industry restructuring and the efficiencies that can 

be achieved by the adoption of more commercial procurement 

practices. 

Space Launch 

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Space launch vehicles bring together technical skills that cut across the 

entire space industrial base. Launch vehicles utilize advanced materials, 

computer-aided design and manufacturing processes, sophisticated 

avionics and guidance systems, thermal controls, and systems integration 

skills that are found in few other places. At the heart of current launch 

vehicles are rocket propulsion technologies, which continue to be the key 

to space access. While it is hoped that programs such as the National 

Aerospace Plane will provide attractive future alternatives, U.S. access to 

space for at least the next decade and even beyond will depend on rockets. 

Not surprisingly, other space-faring nations such as France, Japan, India, 

Russia, and China have placed much of their space efforts on mastering 

rocket technologies. 

The US. commercial space launch industry has been a significant 

success after initially having to compete with the Space Shuttle for 

payloads and close the lead established by the European launcher, Ariane. 

While competition from Europe remains the most immediate threat to U.S. 

commercial launch sales, the industry is also under tremendous pressure 

due to declining government orders at the same time that non-market 

competitors are arriving. Like other areas of international arms trade, 

non-market economies (NMEs) such as China and Russia are seeking to 

gain hard currency by offering advanced weapons and technologies to 

nations around the world in fierce export competitions. Unlike other areas 

of advanced military technology, however, launch services require less 
36 Future of the U.S. Space industrial Base 

aftermarket support, and this already thin market (10 to 14 transactions per 

year) is more vulnerable to disruption by aggressive and/or arbitrary 

pricing and inducements to make sales. Also unlike other countries, NMEs 

usually do not (or cannot) distinguish between public and private sector 

activities, and they have little knowledge of actual resource costs. 

If it was a poor idea for U.S. firms to have to compete against the U.S. 

Government in the case of the Space Shuttle, it is a poor idea for those 

same firms to have to compete against the Russian and Chinese 

governments. The ceiling set in the U.S.-PRC Launch Service Agreement 

should be considered the ceiling used for the total of &l NME launchers 

(e.g., Russia, Ukraine, and China) until these countries make the transition 

to market economies with appropriate limits on government supports and 

involvement. A “rules-of-the-road’ agreement with Europe on acceptable 

business practices could be a useful international standard for the entry of 

future market-driven competitors. 

Recommendation 9: The United States should implement a 

fair-trade agreement to provide interim insulation of the U.S. 

commercial launch industry from unrestricted market access by NME% 

and define a “rules-of-the-road” agreement with other governments. 

Uncertainty over the international trade environment for launch services 

is an important issue; but lower-cost technologies are vital for the 

long-term health of the U.S. launch industry. The Space Shuttle constitutes 

the sole means of U.S. manned access to space, and the associated 

industrial base is sophisticated and costly. Our current Atlas, Delta, and 

Titan launch vehicles, while proven and reliable, are dated and costly. 

These later vehicles trace their design heritage to the initial generation of 

intercontinental ballistic missiles. Over the years, numerous modifications 

and upgrades have been made, but the basic designs make launch 

processing cumbersome, and little has been done to reduce the time it 

takes to stack the vehicle, mate the spacecraft to the vehicle, check out the 

spacecraft and payload, and prepare the combination for launch. In effect, 

each launch involves unique hardware and is processed uniquely, 

requiring an army of government and contractor personnel. As a result, 

the cost of placing a payload in orbit with these old boosters may be 

almost as much as the cost of the satellite itself, putting these vehicles at 

a cost and schedule disadvantage compared with newer designs such as 
Findings and Recommendations 37 

the Ariane. Further, as the production and launch rates of these families 

of expendable boosters slow, experience suggests that launch reliability will 

also decline, as skills are lost and institutional memory fades. 

While our old workhorse launchers may never achieve a cost advantage 

over a new design Iike that of the Ariane, there is much that can and 

should be done to reduce costs and improve operability. For example, 

laser-fired pyrotechnics decrease costs through simplicity, and they 

improve safety as well. The most immediate concerns seem to center on 

the need for infrastructure improvements at Cape Canaveral. U.S. and 

foreign satellite makers have all commented on the poor condition of 

facilities there and the preference of their technical personnel for many of 

the resources available at the Ariane site in South America. It is a sad 

commentary that French Guinea can be a more attractive working 

environment than one a few miles from Orlando, Florida. Increased efforts 

to improve the competitiveness, operability, and reliability of the existing 

i family of expendable launch vehicles should be a coordinated NASA and 

t; . DOD effort, building on current initiatives, and designed to complement 

and augment improvement programs of the vehicle manufacturers 

themselves. New U.S. launch-system concepts are still in the early phases 

and as a result, no matter what else we do, current launch vehicles and 

infrastructure will be with us for the remainder of this decade. 

Recommendation 10: Through a coordinated NASA and DOD 

effort, the United States should improve existing launch vehicles and 

upgrade the operating infrastructure in order to drive launch costs 

down with improved reliability. 

While improvements to existing launch systems are very much needed, 

they are ultimately limited in their potential for large operating cost 

reductions. The achievement of significantly lower launch costs will 

require a new vehicle. In hindsight, it would have been helpful if the 

technologies being pursued by the National Launch System (NLS) had 

been developed several years ago. The NLS held promise for creating a 

significant technological lead over existing Ariane vehicles (especially in 

manufacturing). Unfortunately, the NLS has received insufficient support 

to move forward. In part, this has been due to an overemphasis on 

government missions rather than on the expected private sector benefits 

from a more competitive launch industry. 
38 Future of the U.S. Space industrial Base 

Regardless of the vehicle design the United States chooses to develop, 

the urgent need is to develop and make operational a modern low-cost 

launch system. This includes not only the vehicle, but ground-support 

equipment and other supporting infrastructure for a stronger industrial 

base. Unlike today’s vehicles, the system should be designed and built for 

routine operability and low cost. Such a system would serve several 

purposes. First, it would reduce the cost to the government of launching 

its national security and civil space missions. Second, it would provide the 

nation with a highly competitive commercial launch capability. Third, it 

would stimulate the increased use of space by lowering the cost of access. 

The effort applied to developing the new system would also greatly 

advance the space industrial base in key areas such as rocket propulsion, 

avionics and guidance, and advanced manufacturing techniques. 

Recommendation 11: The United States must develop and make 

operational a modern low-cost launch system in order to reduce the 

cost of government space missions, provide the nation with a highly 

competitive commercial launch capability, and stimulate the increased 

use of space by lowering the cost of access. 

If demand for space transportation does not increase, the United States 

cannot tolerate further erosion in its market share, or even continuation at 

current levels, and have a competitive industry without increased 

government financial involvement. Put simply, the decision is whether to 

pursue an offensive or defensive strategy to maintain a viable industrial 

base in space launchers. A defensive approach would protect domestic 

markets and make incremental, budget-limited improvements in the 

current fleet through government programs. Instead, we favor an offensive 

strategy that improves U.S. launch infrastructure and the operability of 

current vehicles, establishes fair trade rules for international commercial 

launch services, and makes an orderly transition to a new era of low-cost, 

high reliability access to space. The President’s Commercial Space Launch 

Strategy already reflects these key ideas, but the U.S. Government has 

failed to aggressively implement them for a variety of fiscal and 

bureaucratic reasons. Advisory groups such as ours can only do so much. 

The nation must act on these and similar past recommendations or risk the 

continued decline of its space launch industrial base. 

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Findings and Recommendations 39 

Commercial Space 

In the United States, commercial space revenues are estimated to be $5 

billion in 1992. Compared to over $30 billion of government expenditures, 

commercial revenues are only about 14% of total U.S. space-related 

spending. As such, it could be argued that commercial activities represent 

a small contribution to the nation’s space industrial base. We have pointed 

out earlier, however, that space operations are taking a large and 

increasing portion of the government’s space expenditures and that 

operations do less to sustain the industrial base than R&D or 

procurements. Operational costs, so far, take up a much smaller part of 

commercial programs. Many studies have been done to show that 

government programs often cost more than corresponding commercial 

programs, with estimates ranging from 30% to factors of 2 to 3 or more. 

Perhaps most importantly, commercial programs are continuing to grow, 

while defense programs and civil spending are, at best, staying flat. 

Combining all these factors, one can surmise that a healthy commercial 

sector is and will be more important to the industrial base than the current 

14% share would imply. 

World leadership in space endeavors cannot be built solely on 

govenunen t programs. Ultimately, it must include leadership in 

commercial space activities, which help generate a more balanced and 

efficient industrial base. Even today, commercial forces are dominant in 

spurring the development of numerous space-related technologies, such as 

mobile satellite communications, geographic information systems using 

remote-sensing data, and satellite navigation receivers. Growing 

commercial activities can counteract some of the decline in government 

spending over the next several years. More importantly, if strong growth 

is fueled by new investments in infrastructure and lower-cost access to 

space resulting from a new launch system, commercial activities could be 

comparable to those of the government within a decade. 

There are a number of ways the government can promote commercial 

space activities without direct subsidies. Many of these measures have 

been recommended in previous studies and are being implemented to 

various degrees. The U.S. should accelerate its review of restrictions on 

exports in light of the changing international climate. For example, civil 

communications and remote-sensing satellites should be immediately 
40 Future of the U.S. Space Industrial Base 

removed from the State Department’s U.S. Munitions List (USML) and 

controlled through the Commerce Department’s Commerce Control List 

(CCL). This would create greater consistency between U.S. export controls 

and those of other COCOM members and speed the license review process. 

The Export-Import Bank should be allowed to provide financing when U.S. 

launch firms are competing against foreign launchers for U.S.-built 

satellites. Currently, foreign governments can provide export financing 

assistance but the U.S. government cannot. The U.S. Trade Representative, 

in cooperation with other agencies, should accelerate market-opening 

measures to provide greater export opportunities for U.S. firms in 

telecommunications and launch services, civilian satellites, and ground 

equipment. Proposals for international cooperation should be reviewed 

with the goal of increasing the reciprocal flow of technology to the United 

States and guarding against the activities of foreign government-sponsored 

or owned competitors. 

Recommendation 12: The government should take action to 

remove impediments and implement policies in areas such as export 

regulations, trade financing, and market-opening measures in order 

to improve the competitiveness of U.S. firms. 

Since the government remains the largest customer of U.S. space goods 

and services, what and how the government buys from private industry 

is very important to the health of the U.S. space industry. Government 

agencies should seek procurement opportunities that promote the 

development of a robust commercial space industry. If the government 

can utilize commercial items, that provides economies of scale to industry. 

If the government buys items - commercial or government-unique - 

with commercial business practices, that lowers paperwork requirements 

and avoids the cost of overhead for separate government and commercial 

accounts. For example, the government should consider being an “anchor 

tenant” in privately-funded projects that have future commercial potential, 

rather than managing the development of new space infrastructure 

directly. It should seek to procure services and data (e.g., communications 

services and remote-sensing data) rather than the hardware (e.g., satellites 

and ground stations) which produce the data. Technology demonstration 

programs, involving some risk-sharing with industry, can be a useful 

stimulus to industry-led R&D, which strengthens the industrial base and 

trains new generations of technical talent. Such actions will require 
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Findings and Recommendations 

congressional understanding and cooperation 

enabling budgetary stability. 

Recommendation 13: Government agencies should seek 

41 

to provide and assure the 

procurement opportunities that promote the development of a robust 

commercial space industry through anchor tenancy, buying services 

and data rather than hardware, and using risk-shared technology 

demonstration programs. 

In preserving the national capability represented by the space industrial 

base, investment in new knowledge is more valuable than expenditures for 

operations or oversight. Scientific and technical challenges addressed 

through small projects often generate more technological innovation per 

dollar than is the case for large projects. Since there is less downside to 

risk-taking, small projects tend to be more innovative. Due to their limited 

scope, they also have shorter lifetimes, which means that recent technology 

developments are more promptly incorporated. In our view, agency 

funding of such projects is an extremely attractive and productive 

approach for preserving the space industrial base and encouraging 

conversion from national security to commercially valuable activities as 

well. 

Recommendation 14: Government agencies should encourage 

multiple, small programs in developing space technology and systems 

in order to encourage innovation and accelerate the translation of 

ideas into useful products. 

Humanity’s future in space is greater than what can be accomplished 

by any one agency or group of agencies. Indeed, it is larger than what can 

be achieved by one government or any group of governments. Expansion 

into the solar system, and the strong industrial base that will enable and 

support that expansion will require governments and the private sector to 

play different but complementary roles. We need to take steps today to 

ensure that U.S. commercial industry is prepared to assume a leadership 

position in developing the economic benefits of the space frontier. 
42 Future of the U.S. Space Industrial Base 

Engineering Education 

The Task Group would like to express its concern regarding one aspect 

of the national infrastructure that will be affected by the shrinking of the 

aerospace industry - namely, the education of future engineers and 

scientists. In addition to training new technical and managerial talent, 

universities have other important roles in the nation’s space industrial base. 

Universities can help maintain crucial, but specialized, skills and lines of 

research that may not be maintained by industry or government during 

restructuring. Universities can also provide a flexible mechanism for 

international cooperation and sharing of capabilities and facilities that are 

difficult to sustain by any one country. 

Perhaps the most immediate questions concern the causes and 

significance of recent declines in undergraduate enrollment in aerospace 

engineering - similar to the declines of the early 1970s. While defense 

downsizing would appear to be a contributing factor to declining 

I engineering enrollment at universities, many other factors seem to be at 

work as well. And even if the required quantity of engineering talent for 

space activities is lower over the next few years, ensuring high quality will 

be essential for meeting national goals. 

Our group did not have the time to review these issues in detail. Given 

its importance, we believe that this area should be addressed by a qualified 

panel that includes members of the university community as well as 

representatives from industry and government. The National Research 

Council seems the most appropriate location for an independent review. 

Recommendation 15: The government should initiate a study by 

the National Research Council to assess the effect of the current 

defense drawdown on the selection by undergraduates of future 

technical career paths and the impact on our future ability to 

accomplish national objectives in space. 
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Summary of Recommendations 

Competency to Achieve National Objectives 

Recommendation 1: To achieve the greatest leverage in maintaining 

the U.S. space industrial base, the DOD must be successful in implementing 

its policy to strongly support research and advanced technology; NASA 

should increase its efforts in space technology and work more closely with 

industry on technology transfer. 

Recommendation 2: The government should promptly re-examine 

those laws and regulations that can inhibit efficient industry restructuring 

and “rightsizing” including areas such as antitrust regulations and tax 

treatment of excess facilities. 

DOD/NASA Coordination 

Recommendation 3: The DOD and NASA should address space 

industrial base issues in a closely coordinated format. This should be a 

continuing effort to enable appropriate government action when critical 

capabilities are threatened. 

Recommendation 4: The DOD and NASA should jointly review the 

availability and capabilities of unique government and private space test 

facilities with the objective of developing a management plan for the 

rational “rightsizing” of the facility base consistent with projected needs. 

A revitalized AACB would be an appropriate vehicle for such an effort. 
. 

44 Future of the U.S. Space Industrial Base 

Individual Agency Measures 

Recommendation 5: The DOD and NASA should accelerate their 

adoption of the many past recommendations that have been made to 

increase the value received from contracted efforts. These should include 

minimizing unique requirements, using performance rather than design 

specifications, and greater use of commercial business practices and 

components. 

Recommendation 6: The decision criteria for contract awards should 

give higher weighting to the preservation of critical capabilities through 

measures such as evaluation of past performance, available facilities and 

skills, and the potential industry restructuring that could result from the 

award. 

Recommendation 7: Greater emphasis should be given to managing 

and reducing the operating costs of space systems. Minimizing such costs 

should be a major design criterion for new systems. 

Recommendation 8: Government agencies should promptly assess 

the commensurate downsizing of the in-house and support contractor base 

in light of industry restructuring and the efficiencies that can be achieved 

by the adoption of more commercial procurement practices. 

Space Launch 

Recommendation 9: The United States should implement a fair-trade 

agreement to provide interim insulation of the U.S. commercial launch 

industry from unrestricted market access by NMEs and define a 

“rules-of-the-road” agreement with other governments. 

Recommendation 10: Through a coordinated NASA and DOD effort, 

the United States should improve existing launch vehicles and upgrade the 

operating infrastructure in order to drive launch costs down with 

improved reliability. 

Recommendation 11: The United States must develop and make 

operational a modem low-cost launch system in order to reduce the cost 

of government space missions, provide the nation with a highly 

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Summa y of Recommendations 45 

competitive commercial launch capability, and stimulate the increased use 

of space by lowering the cost of access. 

Commercial Space 

Recommendation 12: The government should take action to remove 

impediments and implement policies in areas such as export regulations, 

trade financing, and market-opening measures in order to improve the 

competitiveness of U.S. firms. 

Recommendation 13: Government agencies should seek procurement 

opportunities that promote the development of a robust commercial space 

industry through anchor tenancy, buying services and data rather than 

hardware, and using risk-shared technology demonstration programs. 

Recommendation 14: Government agencies should encourage 

multiple, small programs in developing space technology and systems in 

order to encourage innovation and accelerate the translation of ideas into 

useful products. 

Engineering Education 

Recommendation 15: The government should initiate a study by the 

National Research Council to assess the effect of the current defense 

drawdown on the selection by undergraduates of future technical career 

paths and the impact on our future ability to accomplish national objectives 

in space. 

Appendix I 

Task Group Members 

Daniel J. Fink is President of D. J. Fink Associates, Inc., which provides 

management consulting to technology based industries. His over 40 years 

in aerospace engineering and management include service in the DOD as 

Deputy Director, Defense Research & Engineering, Strategic & Space 

Systems. Following his government service he joined the General Electric 

Company in 1968. He was Vice President of that company where he first 

led GE’s Space Division, then its Aerospace Group, and later was Senior 

Vice President Corporate Development and Planning. Mr. Fink served on 

the Defense Science Board and is a former Chairman of the NASA 

Advisory Council. He is a Member of the National Academy of 

Engineering and was Chairman of the NRC Space Applications board and 

its Board on Telecommunications and Computer Applications. His honors 

and awards include the DOD Distinguished Service Award, the NASA 

Distinguished Public Service Medal and the Collier Trophy (for his work 

on Landsat). He is an Honorary Fellow of the American Institute of 

Aeronautics & Astronautics and a former President. He received his B.S. 

and MS. in aeronautical engineering from the Massachusetts Institute of 

Technology. 

Joseph P. Allen is President and Chief Executive Officer, Space Industries, 

Inc., in Houston, Texas. From 1967 until 1988, Dr. Allen served as an 

astronaut with NASA. His management duties involved astronaut 

candidate selection and training and he additionally served as a ground 
z-2 Future of the U.S. Space Industrial Base 

support crewman and CAPCOM for Apollo 15, Apollo 17 and STS-1. He 

flew as a prime crew member on STS-5, the first Shuttle flight to deploy 

cargo in space, and on STS 51-A, the first space flight to salvage equipment 

from space. Dr. Allen also served at NASA Headquarters as Assistant 

Administrator for Legislative Affairs from 1975-1978. He is the author of 

“Entering Space”, a personal account of the space flight experience, and has 

published widely in the fields of science education and nuclear physics 

research. Dr. Allen received an undergraduate degree in mathematics and 

physics from DePauw University and holds Masters and Doctorate degrees 

in physics from Yale University. 

. 

Robert Anderson is chairman emeritus of Rockwell International 

Corporation. He served nine years as Rockwell’s chairman and 14 years 

as its chief executive officer before retiring from these posts in February 

1988. Prior to being named chairman, Anderson served nine years as the 

corporation’s president. He joined Rockwell in 1968 as corporate vice 

president and president of the company’s Commercial Products Group. 

He was named a corporate executive vice president in 1969, and elected 

the chief operating officer in 1970. Prior to joining Rockwell, Mr. Anderson 

spent 22 years with the Chrysler Corporation. He began in 1946 as a 

graduate student in the Chrysler Institute of Engineering and earned a 

master’s degree in automotive engineering two years later. After holding 

several engineering positions with Chrysler, he was named chief engineer 

of the Plymouth Division in 1953 and served in that capacity until 1957, 

when he was appointed executive engineer for chassis. He became 

Chryslers’ director of Product and Cost Estimating 1958, vice president 

Planning in 1961, and group vice president of Corporate Automotive 

manufacturing in 1964. He was named vice president and general 

manager of the Chrysler-Plymouth Division in 1965. 

Philip Culberton is an Aerospace Consultant. From 1965 to 1988 he held 

a variety of positions with the National Aeronautics and Space 

Administration (NASA), including General Manager, Associate Deputy 

Administrator, Associate Administrator for Space Station, and Deputy 

Associate Administrator for Space Transportation Systems. He served as 

Staff Director of the President’s Committee on Science and Technology 

and, while assigned by NASA to the Department of State, served as a 

member of the U.S. team negotiating an anti-satellite weapons treaty with 

the Soviet Union. Prior to joining NASA he was with the General 

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Task Group Members 1-3 

Dynamics Corporation. Mr. Culbertson is a former National Executive 

Vice President of the American Astronautical Society and is a member of 

the International Academy of Aeronautics. He received a B.S. in 

Aeronautical Engineering from the Georgia Institute of Technology and an 

M.S. in Aeronautical Engineering from the University of Michigan. 

Don Fuqua is President and General Manager of the Aerospace Industries 

Association and serves as a leading spokesperson for the U.S. aerospace 

industry. Before joining AIA, Mr. Fuqua served 12 terms as a U.S. 

Congressman, representing Florida’s Second Congressional District. He 

was elected Chairman of the House Science and Technology Committee in 

1979 after serving on the Committee since joining Congress in 1963. He is 

a member of the National Aeronautics and Space Administration’s 

Advisory Council and is a founding member of the Challenger Center for 

Space Science Education. Mr. Fuqua has received numerous awards 

including the Rotary National Award for Space Achievement in 1988, and 

the National Aeronautics and Space Administration Distinguished Public 

Service Medal and the National Science Foundation Distinguished Public 

Service Award, both in 1986. Mr. Fuqua graduated from the University of 

Florida with a degree in agriculture economics. He also has honorary 

doctorate degrees from the University of Notre Dame, Florida Institute of 

Technology, Florida State University, Florida A&M University, and the 

University of Florida. 

Alan M. Lovelace is Corporate Vice President, General Dynamics 

Corporation and Chairman, Commercial Launch Services, Inc. a subsidiary 

of General Dynamics Corporation. Prior to that he was corporate vice 

president and general manager of Space Systems Division, General 

Dynamics Corporation. Dr. Lovelace joined General Dynamics in July 1981 

after serving as acting administrator of the National Aeronautics and Space 

Administration since January of 1981. Dr. Lovelace joined NASA in 1974 

as associate administrator for the Office of Aeronautics and Space 

Technology. He was named deputy administrator in June 1976. Since 

entering Federal service with the U.S. Air Force in 1954, he has held many 

research management positions. He served at the Air Force Materials 

Laboratory, Wright-Patterson Air Force Base, Ohio from 1954 through 1972, 

having been named Director in 1967. From 1972 to 1973, he served as 

Director of Science and Technology with the Air Force Systems Command. 

From 1973 to 1974, Dr. Lovelace was Principal Deputy Assistant Secretary 
z-4 Future of the U.S. Space Industrial Base 

of the Air Force for Research and Development. Dr. Dr. Lovelace received 

bachelor’s, master’s, and doctoral degrees in chemistry from the University 

of Florida. He is a fellow and past president of American Institute of 

Aeronautics and Astronautics and is a member of the National Academy 

of Engineering, the International Academy of Astronautics, the Air Force 

Association, Sigma Xi, and Phi Beta Kappa. 

Richard J. Messina is president of the management consulting firm of 

Messina & Graham, which provides advice to technology-oriented 

enterprises on strategy formulation, organization design, and operations 

improvement. A consultant for fifteen years - eight of them with 

McKinsey & Company - he has served the senior executives of major 

corporations in such industries as aerospace, electric utilities, financial 

services, health care, and telecommunications. Dr. Messina has had 

extensive experience in designing organizations for meeting new strategic 

challenges efficiently and effectively. This included working with NASA’s 

Johnson Space Center in a year-long study to plan the organizational 

transition from the era of Space Shuttle design and development to that of 

Shuttle operations. A graduate of the Amos Tuck School of Business 

Administration at Darmouth College, Dr. Messina was an Edward Tuck 

Scholar (the highest academic distinction awarded a Tuck student prior to 

graduation.) Before entering Tuck, he received his Ph.D. in astrophysics, 

from Darmouth, specializing in the observation of the optical counterparts 

of celestial X-ray sources. He graduated from Boston College with majors 

in physics and philosophy. 

John L. Piotrowski, USAF (Ret.), began his Air Force Career as a enlisted 

man studying basic electronics and ground radar. He was accepted into the 

aviation cadet program and was commissioned a Second Lieutenant in 

1954. General Piotrowski was a project officer on the electro-optical 

Walleye missile program, after which he introduced the weapon into 

combat in Southeast Asia. He also was instrumental in establishing the E3A Sentry as an operational Air Force weapon system. He is a command 

pilot with more than 5,000 flying hours, including 100 combat missions, 

and he attained the rank of General in 1985. Major positions held include: 

Commander, 552nd Airborne Warning and Control Wing Vice 

Commander, Tactical Air Command; Commander, 9th Air Force; Vice 

Chief of Staff, U.S. Air Force; and in 1987 until his retirement in 1990, 

Commander-in-Chief, United States Space Command and North American 
Task Group Members z-5 

Aerospace Defense Command. Mr. Piotrowski now works as an 

independent consultant. 

Charles R. Trimble, President of Trimble Navigation, Ltd., was one of the 

company’s four founders in 1978. From Trimble Navigation’s early 

position as a manufacturer of high-end marine LORAN C radio-navigation 

systems, the company expanded to its current industry position in the 

manufacturing and application of the Navstar Global Positioning System 

(GPS). He received his B.S. degree in Engineering (Physics), with honors, 

in 1963, and his M.S. degree in Electrical Engineering in 1964 from the 

California Institute of Technology. Mr. Trimble holds four patents in 

signal processing and one in GE!% His expertise is in entrepreneurial 

management and innovation in high technology and he lectures at Stanford 

University on the Management of Innovation. He has published numerous 

articles in the fields of signal processing, electronics, and GES, and has 

been featured in articles about entrepreneurs in high technology. He 

chaired the IEEE Electrics Group Seminar on “Large Scale Integration; 

Approaches and Techniques.” 

Committee Support 

Dr. L.V. (Joe> Scifers, National Space Council 

Mr. Courtney Stadd, National Space Council 

Dr. Scott Pace, Department of Commerce 

Dr. Eva Czajkowski, ANSER Corporation 

Mr. Stephen Hopkins, ANSER Corporation 

Ms. Kip Stacy, ANSER Corporation 

Appendix II 

Task Statement 

A panel of the Vice President’s Space Policy Advisory Board will assess 

the current strength of the U.S. space-related industrial base and prospects 

for its health and vitality over the next decade. In conducting this 

assessment, the panel should consider the implications of declining defense 

spending, the nature and scope of international competition, and current 

and projected national security needs. The panel should take into account 

the changing trade relationship between the U.S. public and private sectors 

and the government and industries of the former Soviet Union. The panel 

should also consider the emerging and long-term market and industrial 

base implications of the entry of other space industry nations such as 

China, Japan, and members of the European Space Agency. 

The panel should not focus on specific companies, but rather should 

look across a broad range of industries. Issues to be addressed should, at 

a minimum, include: 

- The effects of defense budget reductions on U.S. space related 

industries including: 

- The magnitude of job losses and the potential for loss of 

critical skills within the American workforce. 
11-2 Future of the U.S. Space Industrial Base 

- The potential for loss of industrial capacity and the 

implications for the maintenance of a domestic 

competitive base for future government acquisitions. 

- The identification of industry sectors where the U.S. risks 

loss of an indigenous capability and potential reliance on 

foreign sources for the acquisition, operation, or 

maintenance of critical space program elements. 

- The implications of defense cutbacks for sustaining the 

cutting edge technology base needed to maintain space 

leadership well into the 21st century. 

-- The implications of expanded international trade enabled by the end 

of the Cold War, the proliferation of space technology, and the 

growing interest in international space programs. 

-- Impediments to expanded trade, if any, resulting either from current 

government regulations or from uncertainties associated with 

federal government policy. 

-- Long-term prospects in terms of maintaining U.S. aerospace 

industrial leadership and worldwide competitiveness. 

The panel should provide information and advice on whether actions 

by the federal government are necessary or should be considered to 

strengthen the U.S. space industry as a whole. A brief written report and 

a briefing on the findings are desired by approximately October 1, 1992. 
Appendix III 

Legal Compliance 

Some members of the Task Group, through their private employment, 

have interests in the aerospace community and consequently, the space 

industrial base. This factor was taken into serious consideration when they 

were appointed to the Task Group and pursuant to applicable laws, it was 

determined that the need for the individuals’ services outweighed the 

potential for a conflict of interest. It was the further determination of the 

Vice President and the National Space Council that the private interests of 

the individuals appointed to the Task Group were not so paramount as to 

impede their objectivity or integrity as members of the Task Group. These 

determinations were made after coordinating with the Office of 

Government Ethics to ensure full compliance with existing laws and 

regulations regarding the avoidance of conflicts of interest. 

In addition, the members of the Task Group, recognizing there was an 

important concern as to avoiding even the mere appearance of a conflict 

of interest, endeavored throughout their Task Group activities to minimize, 

wherever possible, any such possible appearance. 

Appendix IV 

Presentations to the Task Group 

August f&7,1992 

Federal Advisory Committee Act Lew Fischer 

Dep. Counsel to the Vice President 

Historical Perspective Dr. Robert Smith 

National Air and Space Museum 

Defense Perspective Nick Torelli 

DASD, Production Resources 

Office of the Secretary of Defense 

NASA Perspective Aaron Cohen 

Acting Deputy Administrator 

NASA 

Commerce Perspective 

Labor Perspective 

Dr. Scott Pace 

Office of Space Commerce 

Department of Commerce 

Charles Bofferding, Vice President 

Harold Ammond, Legislative Dir. 

Council of Engineers and Scientists 

Organization 
IV-2 

Treasury Perspective 

Defense Industry Perspective 

Wall Street Perspective 

Future of the U.S. Space Industrial Base 

Edward Murphy 

Department of Treasury 

Jacques Gansler 

TASC Corp. 

Wolfgang Demish 

UBS Securities 

International Perspective Steve Berner 

Bemer, Lanphier and Assoc. 

Professional Association Perspective Cort Durocher 

Executive Director, AIAA 

Academia Perspective 

Industrial Base Review 

August 26-27, 1992 

Rockwell International Perspective 

Hughes Aircraft Perspective 

Martin Marietta Perspective 

Ron Kutscher 

Bureau of Labor Statistics 

Dr. George Hazelrigg 

National Science Foundation 

Matt Jones 

ANSER Corporation 

Mr. Sam F. Iacobellis 

Executive Vice President and COO 

Mr. Donald L. Cromer 

Group Vice President, Space and 

Communications Group 

Dr. J. Koehler, Vice President, 

Telecommunications and Space 

Mr. K. M. (Mike) Henshaw 

VP., Business Development 
Presentations to the Task Group 

McDonnell Douglas Perspective 

Lockheed Perspective 

Orbital Sciences Perspective 

General Dynamics Perspective 

TRW Perspective 

Thiokol Perspective 

Engine Consortium Perspective 

American Rocket Perspective 

General Electric Perspective 

Congressional Perspective 

Space Systems/Loral Perspective 

IV-3 

Mr. Dave Wensley 

Vice President of Advanced 

Product Development and 

Technology 

Mr. George Cline 

Vice President, Business and 

Support Operations 

Mr. David Thompson 

President and CEO 

Mr. Carey J. Riley 

VP., Business Development 

General Dynamics Space Systems 

Mr. Gordon Williams 

VP., General Manager 

TRW Space and Technology Group 

Mr. Ed Garrison 

Chairman and CEO 

Mr. Marc Constantine 

Program Manager, STME Program 

Dr. Paul N. Estey 

President and COO 

Dr. Albert W. Weinrich 

Congressman Bob Lagomarsino 

Mr. Robert Berry 

President, Space Systems/Loral