OTAs in Space: Excerpts from FAST SPACE – Air University white paper

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Simply having technology first does not ensure an enduring lead. While the United States was first to develop the airplane, only a year after the Wright Brothers demonstrated flight in Paris, the French ran away with the military application to such a degree that American Airmen went to war in British and French aircraft. America had to spend great blood and treasure to achieve the high ground and kick off the aviation revolution of the 20th century. In a world of fast moving technological innovation, Airmen would be wise to remember this historical footnote.” – Steven L. Kwast, Lt Gen, USAF

The Other Transaction Authority (OTA) vehicle has proven effective to build partnerships with industry that break traditional cost curves. It allows the government to structure partnerships with private industry that look more like traditional commercial methods. Successful private companies who dread the burdensome requirements of the traditional Federal Acquisition Regulation (FAR) directly expressed strong interest in doing business with government through OTAs. Similarly, government agencies have used OTAs to align incentives and share risk with industry partners; doing so has enabled major acquisitions at much lower price points. In short, we now have more compelling proof that OTAs with commercial partnerships can break traditional cost equations.

SUMMARY: The United States Government’s (USG) traditional acquisition methods are unlikely to achieve ultra low cost access to space (ULCATS). Non-traditional partnerships using OTAs have a much higher chance of success. The USAF has the existing authorities it needs for non-traditional partnerships to jump start the virtuous cycle with commercial firms.

FINDING [F.1.20]: OTA-based commercial risk-sharing partnerships are proving successful: The USG has repeatedly used OTA agreements to create unique commercially-led public-private partnerships (PPPs) to spur the development of new space capabilities such as DOD’s EELV program and NASA’s Commercial Orbital Transportation Services (COTS) program. In fact, OTA-based partnerships are the only acquisition methods that have successfully developed a new US operational launch vehicle since the Space Shuttle program nearly 40 years ago. Beyond the development of launch vehicles, the DOD has used OTAs successfully to rapidly develop initial prototypes at low-cost; examples include the Arsenal Ship, Advanced Short Take-off Vertical Landing, Joint Unmanned Combat Air Systems, and Global Hawk. While some of these systems — such as EELVs and Global Hawk — became significantly more expensive over time, their cost growth was driven by traditional FAR-based approaches, imposition of additional requirements, and a lack of commercial markets to share costs and to create competitive pricing pressure.

FINDING [F.1.21]: Commercial OTA partnerships are much lower cost than traditional FAR-based methods: The NASA COTS program demonstrated a factor of 8x reduction in the development cost of the Falcon 9 launch vehicle between the actual costs and what had been estimated with NASA Air Force Cost Model (NAFCOM). An order of magnitude cost reduction — from the $40 Billion previously estimated by the NASA and the USAF — is achievable for development of ULCATS systems.

FINDING [F.1.22]: The DOD has the OTA Authority (10 USC 2371b) it needs for ULCATS partnerships: The DOD has a long history of using its existing OTA authority well beyond the development of the Atlas V and Delta IV in the EELV program. The DOD’s prototype OT authority is particularly well suited to accelerate the development and demonstration of commercial space systems. This authority has special provisions that allow follow-on production contracts or transactions, a key element in an effective partnership strategy.

FINDING [F.1.23]: A portfolio approach to commercial partnerships, on both demand and supply sides, will lower overall strategic program risk and has the highest likelihood of success: The results of a detailed analysis in this study indicate that a commercial development strategy — modeled after the lessons learned from NASA’s COTS program, and the DOD’s commercial OTAs to develop the EELVs — is well positioned as the catalyst needed to provide transformational breakthroughs in significantly lowering the cost of access to space. The cost reductions available from commercial partnership methods make it possible to afford a portfolio of partnerships. Further, industry firms clearly communicated that early purchases of services by the USG would significantly reduce industry’s perceived investment risk and would increase the likelihood and size of investment. For these reasons, a portfolio of multiple commercial partnerships with commercial-style action on both demand and supply sides has the highest likelihood of success.

For the full white paper: Fast Space: Leveraging Ultra Low-Cost Space Access for 21st Century Challenges (interesting read)