I find it amusing that so many of the opponents of Obama’s proposed space plan are so happy with this, when it doesn’t actually resolve most of the things they said were wrong with his policy. To whit:

1. There are no details, plans, or near-term destinations.  Just an unfocused non-plan to build an HLV without really having a plan on how it will be used or when.  So unfocused spending and lack of a plan or near-term destination wasn’t the issue?
2. Even the Moon isn’t outright dismissed, it’s pretty clear the plan is a modified version of flexible path.  Ie this isn’t going to give people that moonbase they craved so soon.  So actually going back to the Moon anytime in the forseeable future wasn’t the issue?
3. Without the shuttle extended, and with commercial crew being delayed (let’s get real folks, moving most of the funding to the out years is a cheap way of defunding a project without actually having to have the huevos to do it honestly), it is now guaranteed that the ISS is going to be accessible only via Russia for most of the rest of this decade.  There will be no way of launching those critical spares that were the reason Jeff Bingham was always giving for a shuttle extension.  So apparently the gap isn’t an issue?
4. The KSC portion of the Shuttle team is going to get decimated next year still, this time with no commercial crew projects ramping up to help soften the blow.  So apparently workforce retention wasn’t really an issue?

As far as I can tell, the only issues people really cared about were not having to compete for a real job if you were a USA/MSFC/JSC shuttle guy, and making sure we get a big HLV as soon as possible, even though we won’t have anything to do with it once we get it.

The good news is that the “dot-product” of NASA’s direction and sanity is a fair deal of money, and it grew quite a bit compared to last year.  At least some elements of useful things survived.  Instead of being 99% orthogonal to the actual development of space, it’s now only 95% orthogonal.  It’s just so frustrating and disgusting when we actually had a chance for something so much better.

Here’s to hoping that now that JSC and MSFC got their rattle back, the creative and useful parts of NASA can be moved to locales better-matched to small development programs.  Even the pittance they’re being given compared to feeding the HLV albatross can go a long way if managed by the right group.

Our current situation is akin to being on a dead end road. Instead of being on a path toward the goal we all seek, i.e. to regain our leadership position in human space exploration, we must recognize that we are (and have been) on a path to nowhere. We are confronted with arguments to ignore the clear signs of this sad situation and even encouraged to accelerate along this futile path.

The alternative to this is support for the President’s proposed plan. It recognizes and eliminates the waste of precious resources in the current program and heads us in a productive direction toward our desired destination. In other words, when you recognize you are on a dead end road, stop, turn around, and head in a direction more useful to your goal.

Are we, in fact, on a dead end road? In answering this critical question you should not overvalue either my opinion or the opinions of my fellow astronauts, but rather focus on the considered and thoughtful, and even hard-nosed, analysis of the panel of experts who dealt explicitly with this, the Augustine Committee on our Human Spaceflight Program.

…

Is this risky? Of course it’s risky. All space activity is risky. But wisely accepting and managing this risk will ultimately lead to a new and exciting US business capability which will be the envy of the world. The alternative is for NASA to continue to divert its precious human and economic capital to a challenging but very well understood transportation service rather than toward pioneering new and more advanced technology.

While admittedly I still am still more personally interested in the Moon than in NEOs and Mars, Rusty made some good arguments. In particular, I really appreciated Rusty’s comments about risk. Anyone who thinks CxP wasn’t risky has their head in the sand. Congressional supporters wouldn’t be needing to slip spending restrictions into emergency military funding bills that have nothing to do with NASA if CxP were a low-risk, well-performing program. The reality is that there are always risks, including the risk that we’ll overspend on what is at best a mediocre program like CxP where success is defined as spending over $100B and 20 years to have what is at best still a joke of a lunar exploration program. Since we really have to take risks any way you slice it, I’d rather make sure we were taking the risks that would actually allow us to start becoming a spacefaring society.

I’m going to dignify this silliness with an attempt at a rebuttal.

First off, where are the Chinese and Russian space programs today, compared with ours?

China:

• Has barely started flying its first manned spacecraft in the past five years
• Flies only occasionally, with some years having no flights
• Is five years off from even having the same lift capacity as our EELVs
• Is thinking about launching a small space station sometime this decade
• Is at least semi-competitive on the international launch market, but still not a big player
• Does occasional robotic science missions beyond LEO

Russia:

• Has a good, fairly reliable human launcher they’ve been running for decades
• But can’t afford to fly that vehicle very much except when NASA is footing the bill
• Is operating a portion of a space station that is dependent on NASA for its continued survival
• Is doing fairly well on the international commercial satellite launch market
• Does occasional robotic science missions beyond LEO

USA

• Runs most of the ISS
• Will be funding multiple commercial launch providers, creating an actual manned spaceflight industry
• May see commercial orbital stations in the near future developed by domestic entrepreneurs like Bigelow
• Is investing in technologies and infrastructure like propellant depots that can greatly simplify BEO exploration and even commercial BEO transportation

I could go on.  I just have a hard time seeing how the country that’s actually trying to build up commercial manned spaceflight, and break new ground with technologies like propellant depots is somehow going to get overtaken in space by countries like Russia and China.

Let’s turn to the Augustine Report itself for some information. On pages 83 and 84 they discuss implementing the Program of Record on entirely unconstrained budgets–ie if we gave the program the full funding it needs to execute, and allot it to move at the full pace it can realistically move at, what do we get?

• A $145B pricetag over the 2010-2020 timeframe, which doesn’t even get us to the point of having Ares V and the LSAM ready for operations, much less a moonbase.  This would require almost $5B extra per year–ie a 25% increase in NASA’s topline budget.
• An international space station deorbited within 5 years of its completion, during which time the only method of access would be by paying the Russian government for flights.
• A crew launch vehicle that becomes available two years after its first destination is deorbited, and whose operational costs have to be carried for over half a decade until we have any of the tools that would be necessary to actually use it for anything.  But don’t worry, we can spend $2B+ per year to send even fewer astronauts flying in even more useless circles.
• A seven plus year manned orbital spaceflight gap in the US.
• Almost no investment in long-term technology development (not much more than the current SBIR budget, and entirely focused on short-term Constellation needs, not on making future missions safer, more affordable, and more valuable).
• No stimulation of commercial industry beyond the CRS contracts which wouldn’t be extended since the ISS would be gone by 2016.  No investment or early market for commercial crew delivery
• No money to actually develop hardware for actually doing anything on the Moon, since almost all of the money will go to figuring out how to go there while maximizing employment in Shelbyville.
• No more robotic orbiters or landers for years to follow-up on the work LCROSS did.

But hey, at least if we do it this way, sometime 15+ years from now, we’ll have the ability to send 8 people to the moon every year at the cost of an “exploration” program that costs almost as much per year as NASA’s entire current budget!

If you assume that there are parts of NASA outside of Huntsville that actually matter (ie that NASA != Northern Alabama Space Administration), the situation gets even worse.  In order to fund Constellation at full speed without splashing the space station almost as soon as it’s completed, you would need $159B over that timeframe, which constitutes a $7B per year increase for NASA.  That increase still:

• Gets you a space station you can’t access without the Russians for most of its operational lifetime (why does Congress trust Russian commercial space more than American commercial space, btw?).
• Gets you no real investment in long-term technologies, ensuring that the cost, safety, and efficiency of manned spaceflight will be stagnant for another couple decades.
• Gets you no real investment or encouragement of the commercial industry (in direct contravention of the laws of the land and NASA’s charter I might mention).
• Gets you no more robotic follow-ons for LRO and LCROSS for over 15 years.

Compare this with the Flexible Path option that Mark likes to mock so much.  For less than half as much of an increase per year, you get:

• Robust ISS utilization through 2020, with multiple methods of providing crew and cargo delivery that aren’t all dependent on Russia
• Investments in commercial space that can help keep the US in the forefront of space technology and utilization
• Robust investments in high-payoff medium-term technologies like propellant depots, space radiation, space nuclear power, aerocapture and other EDL techniques, ISRU, and other high-payoff technologies that can vastly lower the cost of future exploration missions, allowing us to accomplish more for less and at lower risk.
• A manned lunar landing program that at most is only 3-4 years behind the current PoR, but when it gets there, it provides a much more affordable, more commercially and internationally interesting program, and has much greater capabilities once you get there.
• A manned spaceflight program that is much more capable of exploring the whole inner solar system, and not just doing a few flags and footprints landing on the Moon.
• A manned spaceflight program that builds on and leverages our impressive achievements in robotic space exploration.
• A program that in spite of doing a lot more looking, also allows a lot more touching of new destinations like NEOs and Phobos/Deimos, all on about the same timeframe that the PoR would at best be going for its first lunar landings.

Where I come from, we tend to think that getting a heck of a lot less while paying a heck of a lot more is usually the sign of a sucker.  I just wish that a few space pundits and public figures didn’t keep enabling Senator Shelby and his ilk from hijacking NASA’s budget to enrich his campaign contributors at the rest of our expense.

[Note: As an aside, am I the only one who finds Shelby's latest childish tantrum accusing the Augustine Committee of being compromised by biased by evil commercial lobbyists to be richly and hilariously ironic?  When it comes to lecturing people about the evils of lobbyists corrupting the political process for their own personal gain, Senator Shelby has about as much moral standing as Tiger Woods does when it comes to lecturing people about marital fidelity.]

Anyhow, Jeff managed in 25 minutes to address human rating, depots, whether or not we need heavy lift, technology maturation and R&T investment, and the need for NASA to find new ways to interact with business. I don’t think he could have hit more of my hot-button issues in 25 minutes if he had tried.

Anyhow, I hear that the HSF committee will have video of today’s proceedings up online soon (possibly tonight) for those who didn’t get up at 5:30am PDT to watch. I’ll comment more later.

Whew! I haven’t had this much hope for this nation’s space program in years!

[Update:  Here's the link to the subgroup's presentation (warning, it's a 14MB powerpoint presentation).  All of it is interesting, but Jeff's part starts on page 76 and goes through page 89.  Chris Chyba's section was the last three pages.]

One of the most common criticisms I hear of propellant depots is that we can’t “put unproven technology on the critical path to our return to the Moon.” The idea being that doing something like that would be too risky, and should only be done after we have a basic approach that can do the job. The ironic thing is that had this mentality prevailed during Apollo, we probably wouldn’t be talking about “returning” to the moon, because there’s a good chance that we wouldn’t have made it there in the first place.

In the early days of Apollo, the mission mode had to be selected. The choice was between the massive “direct ascent” method, which while more technically conservative would’ve required a gargantuan (even compared to Saturn V) launcher, and the two approaches that traded riskier new maneuvers (orbital rendezvous) for much smaller launchers.

This debate came to a head in 1962, resulting in picking what was probably the “riskiest” of the three approaches, Lunar Orbit Rendezvous. It’s worth thinking about the context of when this decision was made. This was only five years after the first artificial satellite, Sputnik, had been put in orbit. It was only barely a year after the first US manned spaceflight, Mercury 6. The decision to bet the nation’s moon program on a risky architecture that required orbital rendezvous and docking–in lunar orbit no less–was made 4 years before anyone had actually demonstrated orbital rendezvous and docking. In fact, the spacecraft used for that demo, Gemini, had barely started development the year earlier, and wouldn’t have it’s first manned flight for another two years after the decision was made.

Had the Apollo team decided to take the “low technological risk” approach, and stuck with Direct Ascent and the enormous Nova vehicle, there’s a real chance that the program would’ve been canceled before they had ever even tried to make their first lunar attempt. Given enough time and money, Nova probably could’ve landed people on the Moon–it wasn’t technically impossible. But in the end, there probably wasn’t anywhere near enough time or money to make such a grandiose scheme work. Not only that, but even if it had been forced to work, it would’ve been even less sustainable than the chosen approach.

Now, it isn’t always a good choice to take risky bets by putting unproven technologies on your critical path. Doing so can sometimes be a mistake. But it’s important to realize that in a program like this, risk can’t entirely be avoided. At best risk can be managed, but if you delude yourself into thinking you can avoid technical risk, it often crops up in other forms instead.

I think that in many ways, the decision to make depots a larger part of the NASA lunar architecture going forward is actually less risky than the choice of Lunar Orbit Rendezvous back in 1962. The storage, handling, and transfer of cryogenic propellants on orbit is a lot more mature than the technology for orbital rendezvous and docking was at the point the mission mode decision had to be made in ‘62. We have literally decades of launching and flying cryogenic stages in orbit. Hundreds of flights between Centaur, Saturn SIVB, and now the Delta-IV upper stage have demonstrated settled cryogenic handling, pressure control, mass gauging, and even fluid transfer. Projects such as Orbital Express, XSS-11, and others have increased our ability to do tugs, autonomous rendezvous and docking, and have even demonstrated transferring fluids from one spacecraft to another. Most of the pieces needed to make a small, first-generation propellant depot (one big enough to support manned lunar exploration missions) are either proven technologies, or at least well on their way to technical maturation.

I think that when looked at in the context of the decision to go with LOR, the decision whether or not to baseline propellant depots in NASA’s space transportation architecture is even more of a no-brainer. It may not be free of risk, but biting the bullet and aggressively pursuing the development of propellant depots as a vital part of NASA’s continuing human spaceflight activities is just the right thing to do.

Once people are back on the Moon, then there will be a good, core market for private enterprise, Lunar explorers will need all kinds of support that a lunar COTS program could readily provide.

Now, to be clear, I’m not saying that I don’t think NASA should use commercial vendors for lunar resupply. Or that having the government help invest some money into developing commercial systems to do so doesn’t have merit. My beef is with this idea that we should first allow NASA to build its lunar base the way it wants to, and only then start working with commercial industry for resupply.

I think this flawed line of thinking is based on the fallacy that COTS is only now possible because the ISS is almost finished, and without ISS being completed there wouldn’t be a market for COTS cargo and crew deliveries. To me, this line of argument misses one key point–COTS would’ve been useful almost from the beginning of ISS construction. Depending on how you count things, of the so far ~29 ISS Shuttle flights, it looks to me like 10 of them have been primarily for the purpose of delivering supplies. Had something like COTS been done in the late 90s (instead of take your pick of X-33, X-34, X-37, or X-38), it would have been a huge boon to ISS construction. If those shuttle logistics flights could have been instead dedicated to flying actual station hardware, ISS would probably be complete by now.

Not to mention that as was discussed a few months ago regarding the “COTS D-” concept, a vehicle capable of returning living cargo from the station is only a few steps away from an emergency crew return vehicle. Depending on the approach, from there it may only be a launch escape system and some emergency detection hardware standing in the way of launching crews commercially as well. If there had been one or two companies offering commercial cargo up- and down-mass when Columbia crashed, upgrading those systems for crew launch would’ve been a backup option at that point. Even without the ability to launch crews, just having a US source for emergency crew return might have allowed the move to six permanent crew-members to have taken place a lot sooner.

You could go even further than this, but the basic point was that the right time to do COTS would’ve been earlier, when you could have saved a lot of money compared to using the Shuttle for everything. The same applies for Lunar COTS. The right time to start involving commercial providers is today, not 15-20 years from now. Of all the flights necessary to put together a lunar base, a decent chunk of those flights will likely be delivering supplies, just like ISS. How much quicker could a lunar base be put together if there were commercial cargo resupply capabilities right from the start? Base resupply during construction is just as real of a market as supplying cargo after the base is in place.

Sure, right now commercial industry is no more capable of delivering cargo all the way to the moon than NASA or anyone else is. But commercial industry has been capable of, for over a decade now, delivering cargo and propellants to low earth orbit, and may soon be capable of flying people as well. If NASA actually cared about efficiency, promoting commercial industry, and delivering the most benefit per dollar, they’d be using an architecture that actually leveraged commercial industry from the start, instead of it being punted into the distant future.

The fact is, Constellation doesn’t field any infrastructure or develop any technologies that would make the lunar surface any more commercially accessible in 2025 than it is today. A lunar COTS program would be starting from that point not much further along than where it is today. A lunar COTS program undertaken after a lunar base was put in place using the CxP approach would require funding the development of pretty much the full commercial transportation system. But if that’s ok to spend all that money then, why isn’t it ok to fund that in the beginning, when you can maximize the benefit of having such a capability? If commercial industry isn’t going to be capable of delivering cargo to the Moon without NASA providing support in the form of a COTS-like project, then that lack of capability today is no argument against starting on a lunar COTS program immediately.

Lastly, once NASA has so many billions of dollars per year tied up in two standing armies for Ares-I and V, and marginal costs for the two launch systems, where are they going to get money for lunar COTS? Once KSC and JSC, and MSFC are getting that much money for flying the lunar base construction flights, do you really think that the Senators associated with those centers are going to be fine with having that money go to commercial providers at the cost of workforce within their districts? It’s not like Ares I and V are going to be retired as soon as the lunar base is fielded. No, NASA is going to be working on their next big mission. Do you really think in that kind of a funding environment that NASA is going to have a bunch of money sitting around available for funding a lunar COTS effort? No. The same Senators today who are trying to suck all the air out of the room to pack their centers with engineers for Ares-I and V at the expense of COTS will be at it in 2025 as well.

I could go on, but while a lunar COTS program is a good idea, the time for it is now, not after Constellation has locked us in to another couple decades of space transportation stagnation.

The three big pieces of new information (in addition to NASA not getting the large budget increases the past few years that it had been expecting) are:

• The push to extend the shuttle past 2010, at least until ISS is complete and possibly until Ares-I/Orion is flying
• The story that NASA’s plan for flying Orion for the first time in 2015 is supposedly at a 0% confidence level, and that their 65% confidence level is now sliding to sometime in 2017
• The story that the ISS partners may keep ISS flying through 2020, instead of retiring it in 2016 as had been originally been counted on in the Constellation budgetting

As I previously mentioned in a post about Constellation, one of the problems with megaprojects like this is that a lot of the money is tied up in payroll, not in bending actual hardware.  Most of the cost is the burdened rate of engineers butts in seats spending all day chasing mice around desks in Houston, Huntsville, and other locales.  What that means is that getting less than planned will actually stretch the timeline out further than you would think just from looking at the total cost.

For instance, say Ares-I and Orion together are supposed to cost $30B between 2005 and first flight in say 2015.  Say $20B of that is payroll, and $10B is actual hardware.  That comes out on average to $3B per year over a decade.  Now, what happens if NASA only gets $2.5B per year?  Naively you could say “well $2.5B is 5/6ths of the ammount they had been hoping for, so it ought to take 6/5ths as long, or ~12 years”.  But in reality, unless NASA can reduce payroll expenses (by firing people, laying them off, reassigning them to other tasks under other budget categories, etc), it could actually stretch the date out a lot longer.  Possibly as long as ten years longer in the hypothetical case I mentioned above, if the budget, payroll burn rate per year and total hardware needed for completion stay constant. In fact, in such a case, if the funding dropped too far, you could basically reach a point where things grind almost completely to a halt.

This is for instance a large part of why MSL’s budget went over so much.  They missed their launch window, and they need certain people around when it does launch, so they have to pay them for an extra ~2yrs so they don’t lose the talent.

Now in reality, there are things that can be done to mitigate some of this.  NASA can cut back somewhat on its workforce.  It can assign some of the people to start early design work on later products like Ares V or Altair.  It can pull more of the fabrication of prototypes and such in house.  I can try moving stuff around and playing budgetary shell games.  If the shuttle gets extended, at least some of the “keeping the team around” dead-weight expenses can be covered in the Shuttle program budget.

But at the end of the day, a manpower intensive project (especially one that is by design little more than a jobs program intended to keep as many cafeterias in Huntsville, Houston, and Brevard County full as possible) like this one is particularly susceptible to budgetting issues.  If NASA’s topline budget isn’t bumped up to pay for keeping the shuttle flying or keeping ISS operating, there are going to be serious delays in the Constellation program.  Between those two items, you’re talking almost $2B a year that Don Miguel de Grifo had been planning on spending on Constellation not being available.  Right now, even if that extra $2B per year was added in, we’re already looking at ~2017 to get Ares-I and Orion flying.  I notice that NASA almost never speaks of a date for their first planned lunar landing anymore.  Especially not with any sort of confidence level quoted.  My guess is that we’re probably talking 2023-2024 even if Congress provides NASA with extra funds for keeping Shuttle and ISS going.  If NASA doesn’t get extra funding to keep Shuttle and ISS operating, you could be looking at no manned lunar missions for another 20 years.

Now maybe someone with more access to the numbers will prove that this is all wet, but especially if pushers of the status quo get their way, I don’t see any way that NASA’s bloated Moon program is ever going to get off the ground.  And that’s assuming no more technical problems with Ares-I or Orion.  I’m just wondering how long before someone pulls the plug on this zombie program.

[Update: Senator Shelby apparently agrees that keeping Shuttle flying past 2010 and keeping ISS flying through 2020 are not compatible with Ares-I without large budget increases.  It's interesting to note that it appears that Sen Nelson's parochial interests (keeping as many cafeterias in Brevard county full) and Sen Shelby's parochial interests (keeping as many cafeterias in Huntsville full) seem to be somewhat in conflict here.  It'll be interesting to see what happens.]

1. Overemphasis on Unmanned Cargo: I’ve previously discussed on this blog what I think is one of the key deficiencies of the current COTS approach–the focus on cargo delivery to ISS while ignoring the crew delivery issue.  The problem with a focus on just cargo delivery to ISS is that a cargo delivery capability doesn’t really open up many other markets.  Sure, there may be a few flights here and there for DragonLab, but the reality is that without a passenger delivery capability, there just isn’t much need for such capabilities, outside of NASA’s ISS needs.  Bigelow, for instance isn’t going to be providing much demand for cargo flights if he can’t get people to his station.  The ability to safely fly people to orbit, and to be able to deliver them to/retreive them from space stations is a lot more useful.  Not only would NASA be a potential customer, but also Bigelow, and even free-flights.  And once you start getting more demand for people flying to space, demand for cargo will increase as well.  Basically, by only funding the unmanned part of COTS, NASA is forcing those COTS competitors into markets for which there is little other non-NASA demand.Of course, NASA has lots of reasons for wanting to do things this way. NASA as an institution wants to build and fly its own rockets, and being able to continually point at a US manned spaceflight “gap”, and being able to point at other nation’s anemic manned spaceflight programs as threats, makes it that much easier to continue getting funding for their anachronistic manned spaceflight projects. Think about it. If there were one or two US commercial options for getting people to the space station, do you really think there would be as much urgency for continuing to throw good money after bad on Ares-I? Most congresspeople don’t have much of a vested interest in keeping the Shuttle Workforce humming along sucking up taxpayer dollars. But the idea of there being a “gap” in US manned spaceflight, and US access to the ISS resonates more. Especially when there is no non-NASA alternative. Take that unifying threat away, and all of the sudden convincing Congresspeople in states other than Alabama, Texas, and Florida that it’s a national priority to keep throwing billions of dollars a year keeping people in their district employed, doing something that the market is already providing, is going to be come a lot trickier.
2. The “Skin-In-The-Game” Provision: One of the defining features of NASA’s implementation of COTS under Mike Griffin’s tenure was the requirement that COTS companies match NASA funding, to “put some skin in the game”.  Jorge Frank (whose opinions I normally agree with) really liked this provision, calling it one of the best things about COTS, and stated that “It limits the field to serious providers that are confident that they have a business case for their spacecraft beyond selling rides to NASA.”  The problem is, that speaking from the record, this hasn’t been the case at all.  Look at Orbital Sciences.  They have pretty much stated that they don’t think that there’s any market for Cygnus other than ISS resupply.  SpaceX is trying to do Dragon-Labs, but even then it isn’t a big demand driver.  In both cases, they’re not expecting to make money selling their cargo delivery services to anyone else, but are expecting to make most of their money off of the new launch vehicle that will be developed in order to lift the capsule. Orbital wants to go after the Delta II market, and SpaceX wants to edge-in on the EELV market. But let me come back to that point in a second.Basically, when you combine these first two points, you can see all sorts of perverse incentives created. In order to raise a large amount of cash, you need to have a large and solid market to justify it to investors. But as I mentioned before, there’s not a big non-NASA market for cargo deliveries to LEO stations, and even the NASA market isn’t really that big, all things told. And more importantly, at the time the COTS contracts were handed out, it wasn’t obvious if a COTS competitor would actually get any of that follow-on demand, even if they delivered. Without having a realistic non-NASA source of demand for the capsule part of the equation, the skin-in-the-game requirements pretty much killed the case for anyone trying to propose doing a capsule on an existing launch vehicle. Without developing a passenger delivery capability, the only market that could justify the kind of skin NASA wanted in the game was possibly a launch vehicle market. Which is a good part of why all three of the COTS winners (SpaceX, RpK, and then OSC when RpK couldn’t raise money) were basing their actual market case on developing new launch vehicles.So, not only did the skin-in-the-game requirement make it really hard for entities that didn’t have billionaire backing (or large existing lines of business) to compete, but it also drove the technical and execution risk for the program up by biasing selection towards companies that had to develop both a launch vehicle and a prox-ops spacecraft. Low-technical risk approaches that used existing launch vehicles wouldn’t actually develop hardware that would provide enough non-NASA business to justify enough outside investment to meet NASA’s skin-in-the-game requirements.  Quite frankly, if COTS fails to deliver, there’s a high probability that it will be due to the fact that both COTS competitors need to develop both a launch vehicle and a capsule.
3. Payment for “Soft” Milestones: One of the other distinguishing features of COTS is that it is a firm, fixed-price contract, where payment is only given on achievement of specific milestones.  The idea being that in theory this gives the company a lot more flexibility on how to achieve its goals, while the government only has to pay for actual results, not just for effort.  Unfortunately, this is also a nice theory that got watered down in practice.  If you look at both company’s COTS contracts, you’ll notice that both of them make the vast majority of their money off of meeting “soft” milestones, such as performing design reviews, raising money, etc.  By the time you get to most of the hardware milestones, the government has already paid out most of the value of the contract–which greatly reduces the benefit of this approach.   In fact, if I read SpaceX’s contract information correctly, they get paid for the first two of three COTS demo flights for just getting the flight off the ground–even if it fails.  They don’t have to actually have a succesful COTS mission to collect any but the last payment.One of the key tenets of the original proto-COTS concept Gary Hudson had pitched to O’Keefe’s NASA was that other than an initial pump-priming kickoff payment, all other payments would be for hard technical milestones.  That would’ve reduced the government’s risk a lot, since until technical milestones start being achieved, it only has the kickoff capital at risk.  Second off, it would emphasize rewarding actual successful development of hardware, not just paying for paper analysis like it has always done in the past.There’s actually a fair deal of danger here for COTS and future COTS follow-ons. The worst thing that could happen would be for OSC and SpaceX to collect most of their money, and then have some high profile failures right at the end. The government would see it as having spent lots of money on small space firms, and then losing their shirt. Something like COTS wouldn’t happen again for a long time. Had they stuck to Gary’s suggestion, technical milestones would’ve been earlier in the program, and therefore, if there was a failure, it would’ve been a lot less costly to the government.

Now, I’m not saying that COTS is doomed to failure or anything like that.  I’m hoping and praying that SpaceX and OSC are able to turn this into a success.  I am suggesting though that in the future, for COTS-like programs, that it would be a good idea to make sure that “skin-in-the-game” requirements are better matched with realistic expectations on the size of non-NASA markets, that we be more careful not to bias incentives in a way that encourages larger technical risks than ought to be taken, and that rewards actual hardware success instead of paying a lot for paperwork.

[Additional Thoughts: After getting a good night's sleep, I had a few additional thoughts I wanted to tack on.  First, I wanted to point out what I think is one of the best things about the whole COTS approach--the fact that the government is giving the COTS contractors a lot freer hand in how they go about their development projects.  When you compare this to how NASA's running Constellation, you can see how big of a difference this is we're talking about.  Also, by having fixed-price payments based on technical milestones, it removes the need for anywhere near as much direct oversight, both on company accounting (a big headache for cost-plus contracts), and on the technical side.  If the company doesn't take advantage of specialized NASA resources, and ends up botching a technical milestone, they don't get paid.  The incentives all point in a lot closer to the right direction.

One other comment on the skin-in-the-game question, is to remember the X-33 debacle.  One of the main reasons why LM was given the award (instead of the DC-X team) was that they were willing to put a lot more skin-in-the-game.  The problem is, the willingness to put in money doesn't necessarily correlate with mission success, competence, or even a desire to see the project succeed!  At least one anecdote said that LM put the money in more to prevent the competition from getting something to work than because they really believed on a corporate level that X-33 was going to lead to Venturestar.  On the other hand, I am somewhat wary of giving the whole contract with no skin-in-the-game requirements, and no actual requirements to commercialize things.  While using the other useful features of COTS (firm milestone based payments, less direct overhead/interference) is better than nothing, a good part of the point of COTS was as a pump-priming exercise.  Without incentives clearly placed pushing the COTS winners towards developing these services for commercial applications, a lot of the benefit is wasted.

Lastly, the basic concepts of COTS (fixed-cost milestone-based payments, focusing on areas with a potential for non-NASA customers, etc) could actually be a decent fit for developing other pieces of space infrastructure such as depot, tugs, etc.]

[Update: And here's the second paper of the two.]