United States. Congress. House. Committee on Scien.

NASA procurement in the Earth-space economy : hearing before the Committee on Science, U.S. House of Representatives, One Hundred Fourth Congress, first session, November 8, 1995 online

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NASA PROCUREMENT IN THE EARTH-SPACE
ECONOMY



Y 4. SCI 2; 104/33

KASfi Procurenent in the Earth-Space.



HEARING

BEFORE THE

COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION



NOVEMBER 8, 1995



[No. 33]



Printed for the use of the Committee on Science




MM 6 ISSS



^^■R e .



U.S. GOVERNMENT PRINTING OFFICE
22-267CC WASHINGTON : 1996



For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office. Washington, DC 20402

ISBN 0-16-052423-7



NASA PROCUREMENT IN THE EARTH-SPACE
ECONOMY

Y 4. SCI 2: 104/33 ^^^^^^^^^



HftSft Procurenent in the Eirth-Space.



HEARING

BEFORE THE

COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION



NOVEMBER 8, 1995



[No. 33]



Printed for the use of the Committee on Science




U.S. GOVERNMENT PRINTING OFFICE
22-267CC WASHINGTON : 1996



For sale by the U.S. Government Printing Office

Superintendent of Documents. Congressional Sales Office. Washington, DC 20402

ISBN 0-16-052423-7



COMMITTEE ON SCIENCE



ROBERT S. WALKER,
F. JAMES SENSENBRENNER, Jr.,

Wisconsin
SHERWOOD L. BOEHLERT, New York
HARRIS W. FAWELL, Illinois
CONSTANCE A. MORELLA, Maryland
CURT WELDON, Pennsylvania
DANA ROHRABACHER, California
STEVEN H. SCHIFF, New Mexico
JOE BARTON, Texas
KEN CALVERT, California
BILL BAKER, California
ROSCOE G. BARTLETT, Maryland
VERNON J. EHLERS, Michigan**
ZACH WAMP, Tennessee
DAVE WELDON, Florida
LINDSEY 0. GRAHAM, South Carolina
MATT SALMON, Arizona
THOMAS M. DAVIS, Virginia
STEVE STOCKMAN, Texas
GIL GUTKNECHT, Minnesota
ANDREA H. SEASTRAND, CaUfomia
TODD TIAHRT, Kansas
STEVE LARGENT, Oklahoma
VAN HILLEARY, Tennessee
BARBARA CUBIN, Wyoming
MARK ADAM FOLEY, Florida
SUE MYRICK, North Carolina



Pennsylvania, Chairman
GEORGE E. BROWN, Jr., California RMM*
RALPH M. HALL, Texas
JAMES A. TRAFICANT, Jr., Ohio
JAMES A. HAYES, Louisiana
JOHN S. TANNER, Tennessee
PETE GEREN, Texas
TIM ROEMER, Indiana
ROBERT E. (Bud) CRAMER, Jr., Alabama
JAMES A. BARCIA, Michigan
PAUL McHALE, Pennsylvania
JANE HARMAN, California
EDDIE BERNICE JOHNSON, Texas
DAVID MENGE, Minnesota
JOHN W. OLVER, Massachusetts
ALCEE L. HASTINGS, Florida
LYNN N. RIVERS, Michigan
KAREN McCarthy, Missouri
MIKE WARD, Kentucky
ZOE LOFGREN, Cahfomia
LLOYD DOGGETT, Texas
MICHAEL F. DOYLE, Pennsylvania
SHEILA JACKSON LEE, Texas
WILLIAM P. LUTHER, Minnesota



David D. Clement, Chief of Staff and Chief Counsel

Barry Beringer, General Counsel

TiSH Schwartz, Chief Clerk and Administrator

Robert E. Palmer, Democratic Staff Director



*Ranking Minority Member
••Vice Chairman



(H)



CONTENTS



WITNESSES

Page
November 8, 1995:

Ms. Deidre Lee, Associate Administrator for Procurement, National Aero-
nautics and Space Administration, Washington, DC 10

Mr. Rick Dunn, Advanced Research Projects Agency, Arlington, VA 23

Mr. John Muratore, Lyndon B. Johnson Space Center, Houston, TX 40

Mr. Dennis Burnett, Counsel, on behalf of Mr. John Cassanto, President,
Instrumentation Technology Associates, Inc., Ezton, PA 47

Mr. David Rossi, Senior Vice President for Business Development,
Spacehab, Inc., Arlington, VA 73

Mr. James Frelk, Vice President for Government Operations, Earthwatch,
Inc., Longmont, CO 80

Mr. Tom Ragers, Advisor to the Space Frontier Foundation, President,
The Sophron Foundation, McLean, VA 89

Appendix

Responses of Mr. Rick Dunn to post-hearing questions of Hon. Robert S.

Walker, Chairman of the Science Committee 175

Responses of Mr. James Frelk to post-hearing questions of Hon. Robert S.

Walker, Chairman of the Science Committee 185

Responses of Mr. Tom Rogers to post-hearing questions of Hon. Robert S.

Walker, Chairman of the Science Committee 189

Responses of Mr. David Rossi to post-hearing questions of Hon. Robert S.

Walker, Chairman of the Science Committee 215

(III)



NASA PROCUREMENT IN THE EARTH-SPACE

ECONOMY



WEDNESDAY, NOVEMBER 8, 1995

U.S. House of Representatives,

Committee on Science

Washington, DC.

The committee met at 11:05 a.m. in Room 2318 of the Raybum
House Office Building, the Honorable Robert S. Walker, chairman
of the committee, presiding.

The Chairman. The hearing will come to order.

Let me begin first by apologizing to our witnesses and to those
of you in attendance in the audience for any inconvenience caused
by the rescheduling of our hearing this morning. At the last mo-
ment, a meeting of the Republican Members of the House was
scheduled at 10:00 to discuss a vote on a possible commitment of
American troops to peacekeeping in Bosnia. So we thought that we
ought to be sensitive to that. That's a very important decision
that's going to affect a lot of people, and we decided to postpone
the meeting so some of us, at least, could be in attendance at that
conference for a period of time.

Let me talk a little bit about today's hearing, NASA Purchasing
in the Earth-Space Economy, That will mean different things to
different people.

To some people, this is an opportunity for small space technology
firms to complain about how NASA policies have edged them out
of realizing their vision to commercialize a space project.

For others, this is an opportunity for Congress to contemplate
what policies should govern the transactions between Earth-based
businesses and the International Space Station.

To others, this is a hearing about changing NASA's culture and
mindset to encourage space entrepreneurship.

To others, this is a hearing about changing NASA's procurement
policies so that some of the world's best technology companies
would be willing at last to apply their brilliance to the conquest of
space.

To others, this is a hearing about how best to preserve the stra-
tegic edge provided by the American aerospace industrial base by
making them seek profits, not just government contracts, in a post-
Cold War era.

In short, we have a lot of loose ends to tie up, all of which relate
to each other, and which must ultimately be addressed before
America has the transactions and interactions in space that she is
truly capable of.

(1)



Let there be no doubt, the economic forces of the future that will
lift huge constellations of satellites are the same as those which
will lift our spirits in the human exploration of space. It will be,
as someone put it, Adam Smith's "invisible hand" that will do the
heavy lifting of carrying space infrastructure into space, and not
the heavy hand of the government. Adam Smith, not Uncle Sam,
will shortly become the nation's preeminent space architect.

Everywhere you look, space budgets are increasing in private
hands and decreasing in public hands. If NASA is to achieve the
institutional security it needs during this era of global government
downsizing, it must plug itself into the renewable space program
growing all around NASA, and I suspect we will hear today, grow-
ing in many cases in spite of NASA.

As we look toward the operation of the International Space Sta-
tion, it's important that we have the right attitude now, so that
when the space station is built, it doesn't become the last socialist
republic in the galaxy. Every republic on Earth, at least, is in the
global movement toward reduced government control over econom-
ics. It's fundamental that the International Space Station use mar-
kets to decide who does what, instead of issuing government de-
crees and dividing work between the space bureaucracies.

Well, as you see, we're not only talking about a new way of busi-
ness, but really a new way of thinking. We have a long way to go
yet, to be sure. But let's at least agree that there is a great risk
from failing to change. If the American government can't buy the
very best space program in the world by working in partnership
with the very best technology companies in America, other govern-
ments can and will.

During the Apollo era, NASA was the unquestioned cutting edge
technology force of the United States and America clearly led the
world. NASA even taught businesses how to manage the modem
technology enterprise. Now the tables have turned, yet NASA fails
to see private enterprise as a source of strength; instead, NASA
sees private space entrepreneurs as competing with them.

The problem is, given the globalization of the economy and the
availability of risk capital to perform tasks that used to be the sole
province of government, NASA is going to lose if it competes with
industry. In the end, NASA has but one choice: join up with the
entrepreneurs, or be left in the technological dust.

Nations that choose to buy space technology smartly £uid quickly
will get smart technology faster. If not, America will lose its strate-
gic edge, not because the strategic technologies do not exist or are
not for sale, but because they can't be bought at any price through
the government's procurement system.

The NASA procurement system requires too much paperwork for
small companies to aftbrd dealing with NASA, and requires surren-
dering too much intellectual property for smart companies to want
to deal with NASA. If small, smart companies can't be a part of the
NASA network, just who does that leave us with?

In fairness, NASA has worked to reform the procurement process
and make it more user-ftiendly and less onerous. We applaud those
efforts. We applaud the process of reinvention. But systemic
changes are needed as well.



I believe we are at a crisis point when the only way to assure
small commercial companies have access to the Shuttle is for Con-
gress to complain about it.

I believe we are at a crisis point when NASA refuses to do busi-
ness with commercial space firms because their own civil servants
would lose control over an activity.

I believe we are at a crisis point when NASA hides behind the
procurement laws instead of standing behind the Space Act.

The impression given by all of this is that government's procure-
ment process is little more sophisticated than dividing up money
and giving it to the same traditional space companies.

Sadly, the mountains of paperwork facing small, competitive
companies, and other hazards that scare away the best technology
companies from even wanting to deal with NASA, more closely re-
semble a protection racket for the big, traditional NASA contrac-
tors than it does achieving value for the American taxpayer.

Finally, our nation fully funded and won the Cold War in large
part because we were able to harvest superior technology and
maintain a strategic edge against our potential enemies. That
didn't happen because we had a bigger government than the Soviet
Union. No, it happened because we had a better system, a free
market, that demands more from people's abilities than govern-
ments do. We owe our technological edge to private inventiveness
and ingenuity, the ability to make decisions quickly and to take
risks. These are the qualities which even the most traditional aero-
space companies must value in order to survive in a new era.

NASA must value these qualities, too, or it won't survive. The
problem now is that people are demanding to go to space and won-
dering why their government can't get them there. If we can make
NASA an integral part of the Earth-space economy by reforming
NASA's procurements to take advantage of the nation's total eco-
nomic ability to be a spacefaring nation, there won't just be a will.
There will also be a way.

I thank you, and I would turn to Mr. Hall for any opening state-
ment that he might have.

Mr. Hall. Thank you very much, Mr. Chairman.

I certainly look forward to toda/s hearing. It was an opportunity
to get an update on the progress of NASA's procurement reforms.

I think it's a subject that obviously I've had a very keen interest
in for a long, long time, and we need to know and make sure that
NASA's spending the American taxpayer's money efficiently as it
carries out its missions. I think it's hard to talk about the tax-
payer's money, though, without tipping my hat to the NASA ad-
ministrator and those around him who have helped guide the space
agency through cuts in funding plans of more than 30 percent the
last three years. I don't know of any other entity that's done that,
and done it with the class that NASA has done it.

I think NASA has absolutely been a model for the rest of the
Federal Government in its willingness to step up to that challenge.
Because we called so many times and asked them to show us
where they could cut, because we didn't really want to hurt the
program. We wanted to help the program. But not having the so-
phistication nor the background nor the scientific bedrock that you
folks have, we didn't really know how to intelligently really just



force a cut. We could do it with a baseball bat, but obviously it's
better if it could be done with a surgeon's knife, and that's the way
it's been.

And I'm very grateful for that, and grateful for the time and the
hours that people like you, and of course Dan Goldin and others,
have put in.

It's been said that NASA's procurement system is where the rub-
ber meets the road, and that's very true. Because in obtaining the
goods and services needed by the civil space program, you've had
to be realistic, and you have been realistic, and I'm grateful for it.

I think it's the system that has to be working effectively if we're
going to avoid waste, and that's what we want to do. I think it al-
most goes without sa3dng that NASA's procurement system has to
work hand in hand with the administrator's efforts to manage
NASA under the very severe budgetary constraints that we're all
facing up here now. The/re a fact of life.

This Committee and this Chairman, and the Subcommittee on
Space in particular, have held a lot of hearings on NASA's procure-
ment practices over the last several years, and I think NASA's
made significant progress during that period. And I believe that
the testimony of Mrs. Lee, who's head of— NASA's Associate Ad-
ministrator for Procurement — is going to reflect that, and I look
forward to it.

Finally, I thank the Chairman, and I'd like to welcome the other
witnesses who'll be offering testimony here today. I thank you for
your time, not just the time it took to travel here, but the backup
time; maybe even the time you put at the university to bring your-
self to the position where you have these gifts to give to your coun-
try. But I thank you personally for these days that you've put in,
and that you're here today. You play such an important role in re-
alizing the practical benefits that space exploration offers to our
citizens, and I look forward to your testimony.

We seem to need — I need, and I find a lot of times that I need —
a card that sets out the benefits of the exploration, not just the
MRI and the CAT scan and all these other things. But some time,
I'd like to have time and have a panel of people who would go back
to the splitting of the atom and see really how many gifts and how
many projects that we've received because of your pursuit.

Mr. Chairman, I yield back my time.

The Chairman. Thank you, Mr. Hall.

Are there any other members that wish to make opening state-
ments?

Mrs. MORELLA. Mr. Chairman.

The Chairman. Mrs. Morella.

Mrs. MORELLA. Thank you.

I'd like to ask unanimous consent that an opening statement in
its entirety be included in the record.

The Chairman. Without objection.

Mrs. Morella. I want to thank you for calling this hearing,
which I think is critically important as we discuss NASA's procure-
ment processes, its ability to reduce costs by acting as a normal
commercial customer in the high-technology marketplace, and its
ability to meet our national goals to promote space commercializa-
tion as a routine part of NASA's operations.



The commercial space industry is in a very delicate state of de-
velopment, and our hearing today should really help us to under-
stand the rise of this commercial space industry, and the roles that
NASA plays in helping it. NASA is first and foremost the largest
consumer of civil space technology in the country, if not the world,
and yet its procurement practices suffer from all the problems we
find in the world of defense procurement and which the Depart-
ment of Defense is trying to fix with its National Security Science
and Technology Strategy.

Better procurement practices that enable NASA to act as a nor-
mal commercial customer in the high-tech marketplace will help
promote commercial development and lower NASA's costs. Still, we
need to consider new approaches to NASA's work with the private
sector. The agency is used to working with large aerospace compa-
nies who traditionally define profit in terms of their ability to win
government contracts. And yet, the new commercial space compa-
nies will earn their profit by providing goods and services to the
private sector.

Thus, they have different needs from government. And the tradi-
tional government contractor-procurement relationship will not

apply-
So I think, Mr. Chairman, our witnesses today will help us de-
fine these new relationships in order to bring the Earth-space econ-
omy to fi*uition. And I thank you.

I 5deld back the balance of my time.

The Chairman. Thank you, Mrs. Morella.

Are there any other members?

Mr. Hall. Mr. Chairman, I ask unanimous consent to put Minor-
ity Leader George Brown's statement in the record.

The Chairman. Without objection.

[The prepared statements of Mrs. Morella and Mr. Brown follow:]



Loi^^^^*^



^ttSi Opening Statement
The Honorable Connie Morella
House Committee on Science

Hearing: NASA Purchasing in the Earth-Space Economy
November 8, 1995 . '

1t!~'' Tin~ *'x^ '-0"" *''"'irn nnrt wrlrn — *" *'"'" *• r "^'^■" " — " Q

C8mmitt»»io4«iaaaat We are meeting today to discuss NASA procurement
processes, its ability to reduce costs by acting as a normal commercial customer in the
high technology marketplace, and its ability to meet our national goals to promote
space commercialization as a routine part of NASA's operations.



Originally created to help us win the poUtical competition with the Soviet Union,
NASA faces new challenges in the post Cold War world. We can expect NASA's
record of accomplishments in basic science and technology to continue to reward the
United States.

Fortunately, we have also arrived at a period in time when the long-promise of
commercial space development is finally beginning to become reality. The space
communications business has long been a shining star in successful space
commercialization, but it was lonely star for a very long time.

Now, the private sector is beginning to demonstrate that it has the technical expertise,
the management experience, and the private financing needed to create space
infrastructure and capabilities on its own. Soon, several companies will launch
constellations of low-earth orbit satellites for mobile communications around the
world. Next year, the first privately financed and developed remote sensing satellite
will be launched to collect data about the earth. Other companies are spending their
own money to develop new space launch vehicles.

This is a remarkable development that will gready benefit the country. First, it helps
create national space cq)abihties without new government expenditures. Second, it



creates private space infrastructure that will help lower the cost of government space
missions. Third, it promotes a healthy space industrial base that can also lower the
cost of government space missions. Finally, it creates new, high-tech jobs in the
aerospace industry that are immune to the vagaries of the U.S. budget cycle.

Despite all these benefits, the commercial space industry is at a very delicate stage of
development. Government policies that create an unfriendly business environment or
misguided policies that do not take the private sector's needs into account could
strangle the industry before it has a chance to flourish. In that case, we will not enjoy
the benefits of new privately financed space capabilities and we will not make a
successful transition to an earth-space economy. NASA has a crucial role to play in
helping create this new industry. It also has the power to inadvertently destroy it by
treating new commercial space businesses as traditional government contractors.

Today's hearing will help us understand the rise of this commercial space industry and
the roles NASA plays in helping it. NASA is, first and foremost, the largest
consumer of civil space technology in the country, if not the world. Yet, its
procurement practices suffer from all the problems we find in the world of defense
procurement, and which the Department of Defense is trying to fix with its National
Security Science and Technology Strategy . Better procurement practices that enable
NASA to act as a normal commercial customer in the high-tech marketplace will help
promote commercial development and lower NASA's costs. StiU, we need to consider
new approaches to NASA's work with the private sector. The agency is used to
working with large aerospace companies who traditionally define profit in terms of
their ability to win government contracts. Yet, the new commercial space companies
will earn their profit by providing goods and services to the private sector. Thus, they
have different needs from government and the traditional government-contractor
procurement relationship will not apply. Our witnesses today will help us define the
new relationships that we need in order to bring the earth-space economy to fiiiition.



i> ;^.f^^ 77/



OPENING STATEMENT

by

HON. GEORGE E. BROWN, JR.
November 8, 1995



Good morning. As many of my colleagues are aware, the Science
Committee has long promoted the commercial use of space whenever possible
and appropriate. In addition, for those activities that are carried out by
government, this Committee has sought to ensure that NASA's procurement
system is both efficient and fair. I hope that today's hearing will provide some
additional insights on both of those topics.

I have been encouraged by the efforts made by NASA over the last
several years to strengthen its procurement system. While discussions of
procurement often are dry and colorless, procurement represents the
indispensable step that transforms visions of future systems and capabilities into
realities. It also is the step at which the taxpayers' dollars can be spent wisely
and efficiently, or at times, unwisely and inefficiently. An important part of
this Conunittee's oversight responsibility is to ensure that NASA remains an
effective steward of the public's ftinds.

Conunercial space activities, on the other hand, are those activities for
which the private sector puts its own funds at risk. Government can play a
constructive role in promoting space commercialization, and perhaps today's
hearing will shed some additional light on which governmental approaches can
help the process and which may hinder it.

Nonetheless, I believe that there will continue to be an important role for
government to play in the exploration of space and the acquisition of new
knowledge. Certainly it is important to leverage the contributions that can be
made by the private sector in meeting common public-private goals. However,
as testimony at last week's hearing on the Reusable Launch Vehicle program
demonstrated, the private sector may be unable or unwilling to assume the
entire task of providing the capabilities required by the Nation's civil space
program.

Finally, as I have reviewed our experience with space commercialization.



it has become clear to me that the private sector pays a great deal of attention
to the stability of the government's commitment (or lack thereof) to the space
program. A wavering commitment on the government's part does not create an
environment conducive to companies putting significant private capital at risk.
If we are really serious about encouraging the commercial development of
space, I think that the current effort to significantly and continually cut the
NASA budget over the coming five years is exactly the wrong signal to be
sending to the private sector. As I have said before and will say again,
NASA's activities represent an important national investment~we should be
protecting that investment, not cutting it in a counterproductive approach to
deficit reduction.

Thank you.



10

The Chairman. We will now go to our witnesses, and I think
what we will have is the people from the agencies testify first, be-


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Online LibraryUnited States. Congress. House. Committee on ScienNASA procurement in the Earth-space economy : hearing before the Committee on Science, U.S. House of Representatives, One Hundred Fourth Congress, first session, November 8, 1995 → online text (page 1 of 21)