Reason Foundation

New at Reason: Review of Federal Privatization Issues in 2011 and Today

Posted on April 23, 2012, 11:59pm | Leonard Gilroy and Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2011 begins today with the release of the Federal Government Privatization section, authored by Reason's Adam Summers and Anthony Randazzo. This section of Reason Foundation's Annual Privatization Report 2011 provides an overview of the latest federal insourcing, housing finance, private spaceflight and other news on privatization and public-private partnerships in the federal government. Topics include:

• The ongoing dispute over what constitutes “inherently governmental” functions continued in 2011, and new Obama administration regulations could undermine federal outsourcing policy standards dating back to 1955.
• Regulators implementing the Dodd-Frank Act are creating significant risk for both mortgage investors and securitizers and appear likely to undercut the private mortgage industry while benefitting government mortgage providers. 
• In 2011, Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) combined to purchase or guarantee 95 percent of all new mortgages in America with some mortgages worth as much as $729,750. Every one of these mortgages is backed by taxpayer money.
• Federal agencies, under the encouragement of President Obama, are expected to generate nearly $13 billion in cost savings from asset divestiture, $9.8 billion of which comes form the Department of Defense’s Base Realignment and Closure (BRAC) efforts.
• The federal government owns approximately 1.2 million properties that cost $20 billion a year to maintain. Recent Congressional efforts to pass a Civil Property Realignment Act could save as much as $15 billion, according to the Office of Management and Budget.

» Annual Privatization Report 2011: Federal Government Privatization [pdf, 1.9 MB]

» Complete Annual Privatization Report 2011

Branson Christens First-Ever Commercial Spaceport in New Mexico

Posted on October 18, 2011, 4:57pm | Harris Kenny

This week Virgin Group media mogul Sir Richard Branson christened the first-ever commercial spaceport in Sierra County, New Mexico. The 110,000-square-foot spaceport cost over $200 million to build (thanks in part to taxpayer-financed support.) 150 attended the ceremony alongside New Mexico Governor Susana Martinez, astronaut Buzz Aldrin, and others. The Associated Press reports that more than 450 people have purchased tickets to fly a two and a half hour suborbital space trip, that includes five minutes of weightlessness, costing $200,000 each. Branson explains in an interview to the Associated Press (below) he plans on sharing the maiden voyage with his children by next Christmas:"

Branson’s space company, Virgin Galactic, has been working towards this day for years, but the christening isn't their only good news. Last week NASA booked the first available flight scheduled to depart from the spaceport in an agreement that includes options for two additional flights worth up to $4.5 million. Darren Quick of Gizmag.com explains, "Although Virgin Galactic is generally known as a space tourism company, it sees research experiemnts as a future mission segment and significant business opportunity." The contract with NASA allows up to 1,300 lbs (590 kg) of scientific experiments per flight.

In other private aerospace news, MF Monitor reports that NASA reached an agreement on the criteria for certification of Evolved Expendable Launch Vehicle (EELV) launches:

The basis of the new strategy is a step further to NASA’s directive for launch vehicle risk mitigation, taking into account mission-unique requirements from each of the three agencies. The latest document provides a common framework to license new launch service providers.

The risk-based certification framework allows the agencies to consider both the cost and risk tolerance of the payload and their confidence in the launch vehicle. For payloads with higher risk tolerance, the agencies may consider use of launch vehicles with a higher risk category rating and provide an opportunity for new commercial providers to gain experience launching government payloads, said NASA in a statement.

Within a given risk category rating, if new entrants have launch vehicles with a demonstrated successful flight history, then the government may require less technical evaluation for non-recurring certification of the new launch system. This new strategy further enables competition from emerging, commercially developed launch capabilities for future Air Force, NASA, and NRO missions.

For more of Reason Foundation’s work on this aerospace policy, see the Space Travel Research Archive.

New at Reason: Review of Federal Privatization Issues in 2010 and Today

Posted on February 16, 2011, 3:04pm | Adam Summers

The rollout of Reason Foundation's Annual Privatization Report 2010 continues today with the release of the Federal Government Privatization section, authored by Reason's Adam Summers and Anthony Randazzo. The document provides a comprehensive overview of the latest in issues such as public sector versus private sector pay and benefits, the failure of federal housing policies and the need to end federal housing subsidies and dissolve Fannie Mae and Freddie Mac, the Obama administration's proposal to privatize portions of the space program, and other news on privatization and public-private partnerships in the federal government. The articles include:

• Public Sector Compensation Far Exceeds Private Sector Compensation,
• Fight over Insourcing Initiative Dominates Federal Contracting Policy,
• Space, the Private Frontier?,
• Policy Spotlight: Privatizing the Housing Finance System,
• Military Housing Privatization Update, and more.

» APR 2010: Federal Government Privatization [pdf, 800 kB]
» Complete Annual Privatization Report 2010

NASA to Offer Kennedy Space Center Facilities to Private Aerospace Companies

Posted on February 6, 2011, 11:58pm | Adam Summers

In 2009, the Obama administration announced that it intended to outsource the transportation of astronauts and supplies to and from the International Space Station to private companies (see here and here). The space shuttle fleet is about to be retired and some are wondering what will become of the Kennedy Space Center, which is geared mostly to support the shuttle program. To fill the gap left by the retiring shuttle fleet, NASA is offering private aerospace companies the opportunity to use some of the Kennedy Space Center's facilities.

"Kennedy has been working for some time to enable commercial space activities at the center that are in line with NASA's mission," Kennedy Center Director Bob Cabana said in a statement, reported in the National Journal. "Partnering with the commercial space industry will help NASA meet its goals and help sustain facility assets to support our nation's space objectives."

The statement also noted: "The facilities that may become available are well-suited for entities operating or directly supporting government or commercial launches or space user services." NASA has already received some interest in the Kennedy Center facilities from private aerospace companies, and would reserve the right to take back the facilities if it should determine that it needs them.

This would not be the first instance of privatization at the Kennedy Space Center. As my colleague, Len Gilroy, has observed, the Kennedy Space Center Visitor Complex has been run by a private company for over 15 years. In fact, the privatization of the Visitor Complex improved the quality of the facilities and allowed the Center to tap millions of dollars of private capital for upgrades to what had been deteriorating facilities, upgrades that would not have been possible in times of tight budgets if the Complex had had to continue to rely on taxpayer funding. The privatization has been so successful—and the contractor, Delaware North, has continually received solid performance marks in its regular contract reviews—that last year NASA renewed the company's contract for an additional 10-20 years.

If the government can privatize so much of the space program, once thought beyond the scope of private commercial activity, just think how much else it could privatize if it had the will.

Future of Space Program May Depend on Private Space Transportation

Posted on July 31, 2009, 10:37pm | Adam Summers

Members of a subcommittee of the Review of U.S. Human Space Flight Plans Committee, an independent, blue-ribbon committee formed to analyze the U.S. space program, have recommended that the National Aeronautics and Space Administration (NASA) utilize private companies to transport cargo and people to and from the International Space Station. Relying on private firms for transportation services would free up NASA resources for more ambitious ventures, such as human missions to the moon or Mars.

"I think you will find out there are a lot of people who will rise and compete," former Boeing executive Bohdan "Bo" Bejmuk told the panel. "Some of them will fail, some of them will succeed, but you will have essentially created a new industry."

Private space companies like Space Exploration Technologies Corporation, commonly known as SpaceX, and Orbital Sciences Corporation have already made great strides in developing rockets and launching satellites and space probes. SpaceX won a $278 million government contract in 2006 as part of NASA's Commercial Orbital Transportation Services projects. In 2007, Orbital Sciences took over a contract worth $170 million for its Taurus 2 launcher and Cygnus capsule combination after underfunded venture Rocketplane Kistler failed to deliver on its financial objectives.

The potential cost-saving privatization recommendation comes as questions are arising about the accuracy of NASA's budget and the future of the space program. Current plans call for seven more shuttle flights through September 30, 2010, after which the shuttle fleet is to be decommissioned and new space vehicles are designed and built. The new vehicles are not expected to be completed for some time, however, leading to a "launch gap" of five to seven years. But according to human space flight review panel member Sally Ride, former astronaut and the first American woman in space, NASA's budget--which totals $18 billion for the current fiscal year--is unlikely to even meet current goals. "We have come to believe very firmly that it's important to have a realistic view of what the existing program as it will realistically unfold most likely will cost and not put any smoke and mirrors to the budget to make it look like it will fit under the budget profile," Ride said during a public meeting earlier this week. In addition, panel members noted that NASA was unlikely to complete work on the space station and retire the shuttle fleet before March 2011, which would require additional funding. "But, of course, there is no funding for that possibility," Ride noted. "That's setting you up right away for a budget problem."

William Watson, executive director of the Space Frontier Foundation, which promotes commercial space activities, welcomes private-sector involvement in, and competition for, space transportation services. "Let's have an American competition in space--to create good jobs, fuel innovation and close the [launch] gap more quickly," Watson was quoted as saying in a May 2009 FoxNews.com article. "With private funds matching government investment, we can dramatically leverage taxpayer dollars to produce breakthroughs in a new American industry-commercial orbital human spaceflight."

Aerospace consultant and retired NASA aerospace engineer Don A. Nelson similarly sees privatization as a way to stem rapidly rising costs, address the anticipated launch gap, and allow NASA to refocus on its core mission. As Nelson wrote on the nasaproblems.com blog earlier this year,

NASA is struggling with developing the Orion [space shuttle replacement] vehicles . . .  one for space station crew rotation and another for the lunar mission. It is the Orion space station crew rotation vehicle problems that is causing the launch gap. Privatization of the shuttle fleet solves these problems and allows NASA the time, resources, and budget to restructure the Constellation Program (CxP) for their primary goal of returning humans to the moon and beyond. Privatization of the fleet avoids the costly and embarrassing space gap, saves critical space jobs, and insures the operation of the space station. Privatization provides avenues to regain a share in the commercial launch market, crew escape pods, and the foundation for a 21^st century reusable space based transportation system.

The government is increasingly coming to the conclusion that a successful space program will depend on a partnership with private-sector ventures. Utilizing these resources will help contain costs, leverage taxpayer dollars, take advantage of the innovation and expertise of those employed by private firms, and free up NASA to focus on its core mission.

Privatization at NASA: The End of Government's Monopoly on Space Exploration?

Posted on May 10, 2009, 8:18am | Leonard Gilroy

FoxNews.com reports some big news on the commercial space flight front—NASA has announced a major privatization initiative involving procurement of rockets and crew capsules for manned flight missions:

NASA's critics have long asked: Why does the space agency need to design and build its own rockets and spacecraft? [...] NASA's beginning to agree. For the first time, after nearly a half century of building its own rockets and orbiters, it has approved the outsourcing of some of the equipment that enables its manned space missions to private contractors.

Last week, acting NASA Administrator Chris Scolese told a congressional subcommittee that the agency plans to give $150 million in stimulus-package money to private companies that design, build and service their own rockets and crew capsules — spacecraft that could put astronauts in orbit while NASA finishes building the space shuttle's replacements.

On Thursday, the White House ordered a top-to-bottom review of the entire manned space program, one that will be led by former Lockheed Martin CEO Norman Augustine, long considered a friend of private space ventures. Both developments show that the once-reluctant space agency and the Obama administration are ready to support commercial human spaceflight. [...]

"Our government space program has become over-burdened with too many objectives, and not enough cash," says William Watson, executive director of the Space Frontier Foundation, a Houston-based group promoting commercial space activities. Watson said that allowing private companies to handle routine orbital duties could free up NASA to focus on returning to the moon and going to Mars. [...]

Scolese said that $80 million of the stimulus money will be awarded to the company that demonstrates the best "crewed launch demo" — a prototype, based on existing cargo-capsule designs, modified for humans. The agency was careful to note that the competition will be an open one. [...]

The two leading contractors are building their launch vehicles from scratch. Their designs emphasize very efficient business models and low manufacturing costs. And they operate with at most a few dozen employees at their launch sites, as opposed to the space shuttle program's standing army of almost 15,000 workers. [...]

In late 2005, then-agency Administrator Michael Griffin announced that NASA was considering buying crew and cargo transportation services to the [International Space Station] from private industry. "We believe," he said, "that when we engage the engine of competition, these services will be provided in a more cost-effective fashion than when the government has to do it," Griffin said. "Let's have an American competition in space — to create good jobs, fuel innovation and close the [spaceflight] gap more quickly," he said. "With private funds matching government investment, we can dramatically leverage taxpayer dollars to produce breakthroughs in a new American industry — commercial orbital human spaceflight."

Read the whole article for a good chronology of NASA's gradual shift to privatization (something my colleague Ted Balaker reported on here and here).

Kudos to the Obama administration for laying the groundwork for what may produce a dramatic transformation in space flight. As Ted wrote back in 2005, "It's time to move past the era when governments monopolized space and celebrate the entrepreneur's return to the sky." Indeed.

Reason's full archive of space-related research and commentary is here.