For the past few years, NASA has been funding private space companies in the hope that they can build spacecraft that will carry astronauts to orbit. This is a historic change: Until now, every NASA craft has been designed and wholly owned by the agency. Now, industry would build and operate rockets and spacecraft, and it would do it more quickly, cheaply, and flexibly than the government could, opening a new era of spaceflight.

But not so fast.

This month, NASA released the first draft of the document that describes how it plans to ensure the privately built spacecraft they will use will be safe. The document will define America's future in space, because it sets the rules private companies will have to follow, though few seem to have read it. But we read through the dense language of the contract, called the Commercial Crew Integrated Design Contract (CCIDC), and found that it sets terms that keep NASA very much in control of the design and timeline of the next astronaut-carrying spacecraft and launch vehicles.

Space companies are quietly pushing back against parts of the contract. Officials complain that the terms leave open questions over who has final say over the engineering. There are new government review boards that can reject hardware designs. Some insiders complain that this intensive NASA control is tantamount to the FAA certifying the design of airplanes, not just certifying their airworthiness. And the contract stipulates that companies would have to make room for NASA employees in their own offices, who would keep tabs on the companies' projects.

"The devil's in the details of what level NASA wants control," says one Boeing official.

Yet, the contract proposed by NASA is a new approach for the agency, and it does streamline paperwork requirements and ensure that private companies can keep their intellectual property. So for NASA, the CCIDC is cutting edge and innovative. "We are enabling and allowing for contractor-owned and operated systems. That's a big difference," says Phil McAlister, NASA's director of commercial spaceflight. "We want these systems to be available to all range of public and private users. So we're really hoping that this will spur the development of a new industry for the United States." (For a detailed explanation of NASA's contract, and their approach to private space, read our full exclusive Q&A with McAlister.)

So will the new contract secure America's future in space, with nimble companies leading the way into space? Or result in another business-as-usual government program, with typical delays and cost overruns? Industry responses to the plan are due by the end of October, but the negotiations have already begun. Here's a glimpse of what government and industry players are debating behind closed doors.

From Carrying Cargo to Carrying People

Rewind the tape to 2005, when NASA funded Orbital Flight Sciences and Space Exploration Corp. (SpaceX) to develop their own space launch systems. NASA's initial goal in funding private space was not to deliver cargo to the International Space Station, but simply to foster technology. "The cargo program was more of a backup option," McAlister says. "This was not funding a mission, but to stimulate industry. And at the end, if we could deliver cargo to the station, that would be great. And by the time we were halfway through, things were looking good."

Except for the final approach to the space station, NASA was willing to give private space plenty of room to operate the way they wanted to. "We didn't need a lot of insight into its specific technical aspects," McAlister says. "If the mission fails we just lose some water, we lose some food, we lose some clothes, not a big deal. So we're willing to accept a higher level of risk for the cargo systems."

Things still look good for the cargo program—SpaceX has already flown its Dragon capsule in orbit and returned it to Earth. It's on track to berth with ISS in December or January. Orbital is not far behind, with a launch expected within five months. (SpaceX plans to deliver people to space, but Orbital does not.) But it's clear from the new contract that NASA doesn't intend to manage the crew-carrying vessels the same way it managed cargo-carrying ones. Like a baseball player going into the majors, the rules and expectations have changed for private space companies now that they have a big-league mission. Flying astronauts is different than flying water, food, and clothes.

SpaceX declined to comment about the contract, preferring to wait until company owner Elon Musk testifies on the topic before Congress later this month. However, company officials have signaled that they'd prefer a continuation of the more hands-off approach NASA used during the effort to bring cargo to the International Space Station. " It's a delicate balance," Garrett Reisman, the former NASA astronaut who heads the human spaceflight effort for SpaceX, said this month during a panel at Popular Mechanics' 2011 Breakthrough Awards. "NASA provides a strong function in the expertise, and in verifying and certifying that what we're doing the right [things] to be safe. After that it's up to us to implement... If you alter that balance, it won't be successful. As long as we keep doing the partnership that we've done with cargo, and carry that forward [to carrying crew], we see working with NASA forever."

NASA is not going to its old paradigm, which McAlister described as: "We own the design, we make the decisions about the design choices, whether you're going to use a seven amp fuse or a four amp fuse, we make all those decisions and we sign off on all of those." But the lassiez-faire days of the cargo program appear to be gone.

"There would just be too much risk that, at the end, they wouldn't really be able to meet our human rating requirements and we'd have to do an expensive, time-consuming redesign," McAlister says. "Since the crew are going to be on these systems, we want to be—we need to be—much more substantially involved in the development of those systems, understanding the capability, understanding whether they meet the safety requirements or not."

That's where the recently released CCIDC comes in, and where the small and large companies alike are getting a wake up call in the way NASA wants to run the manned spaceflight show.

The Insight/Oversight Model

One way NASA plans to be so substantially involved is called the insight/oversight clause. In it, NASA creates a board that seems to control the approval of contractor hardware. "Approval of their system, in terms of meeting our requirements, will be done by a board, headed by a NASA Commercial Crew Program Manager and co-chaired by someone from industry," says McAlister.

This final say over the design does not sit well with Boeing. "They've got these NASA co-chaired design reviews. We're don't have a real issue with that as long as we with know what that means," says Keith Reiley, Boeing's Commercial Crew Development Program Manager. "From our standpoint, we'd like to be 'in charge' of the design, and NASA's function is to determine if that design meets their requirements. You can have two different types of seats, for example, both of which meet the requirements. For us to proceed in a cost-effective way we think we need control over that choice." Yes, NASA is paying for the job, Reiley says, but there are other opportunities for the agency to prove the final product works as intended. "They are certifying that we have a safe vehicle at the end, so one way or the other we have to show them how we meet their human rating requirements."

Other companies are also confused by how much say NASA will have in the design. "It's not really clear," says Mark Sirangelo, executive chairman of Sierra Nevada Space Systems, which is building a space plane called Dream Chaser under a NASA contract. "Is it intrusive? Perhaps. But I view it as a positive. This program has become a much more needed, mainstream program... It's unrealistic to expect NASA to certify an airframe to fly without direct involvement."

NASA knows this setup could lead to disagreements—such as if a contractor thinks it has fulfilled a safety requirement, but NASA says it needs more testing. McAlister says NASA is minimizing the risk that these fights will cause flight delays by front-loading hot spots for disagreement into the first phase of the contract. (NASA expects to award the first phase of the contract, the Integrated Design Phase, which is worth a total of $1.61 billion, to at least two companies. A second phase, Development Test Evaluation and Certification, will follow.)

"During the early phase there might be a little bit more uncertainty about the requirements and whether they've met them, but we'll have two years to work through that process," McAlister says. "When we really lock them down, we'll be in the (second) DTEC phase. That's a couple of years from now and both us and the contractor will have a much better understanding of the requirements, whether or not they have met them, and what kinds of tests and analysis they're going to have to do. And that's our way to mitigate future contract changes."

Still, if NASA orders further testing, then somebody has to pay for it. NASA officials have a fund so they can issue so-called "task orders" for "special studies, tests and analyses" that the private space company would then be required to perform. McAlister says the impact of the task orders should be minimal. "It's a relatively small amount of money, only $20 million. So it's really just to do...small things like that, to help us and the contractor understand whether or not a requirement has actually been met or not."

To Boeing's Reiley, that's crucial. These NASA contracts are fixed-price contracts, in which a company gets a set fee, and as costs rise, the profit margin shrinks. (The alternative, a cost-plus agreement, pays for all expenses and provides additional funds to guarantee a profit.) Having NASA kick in some funding is "a way to avoid those foodfights, when they can say, 'Hey guys, we're not going to argue about it. We'll pay you extra to go do it,'" Reilly says. "One thing we have to do be careful we don't get stuck in a trap where we are doing extra work because an engineer asked us to. In cost-plus you could do that and it wouldn't be that bad of a thing. In fixed price, it could be disastrous."

CCIDC makes plain that NASA runs the show, when it comes to the test schedule: "In the event of a conflict between the requirement of the task order and the contractor's approved plan, the task order shall prevail." That means the government is able to intervene and order tests that can delay the program. "It could impact the schedule," Reiley says. "But that's not unusual in a fixed-price contract when the customer changes what they want."

NASA Tries to Loosen Up

NASA does make large efforts to shift the creative engineering of space hardware to industry—a very different, hands-off approach. "We're really letting industry, to a large extent, define the content of their proposals," McAlister says. The contract paints a big picture of what it wants, and allows the companies to set their own map of how to get there. "In this case we said, 'Hey, you only have to have four milestones that we are requiring. And any other milestones that you want, you propose them.'"

There are other major hat-tips to private space. One is waiving some of the paperwork required, like the reams of certified pricing data that state exactly how much everything will cost. Instead, the CCIDC asks for realistic estimates that do not have to be vetted by certified accountants. For a Boeing or Lockheed Martin, which have large staffs of accountants, this paperwork is a standard headache. For small firms, that kind of requirement would have driven up costs and created unwanted bureaucracy. In another big step for NASA, McAlister says, gone are the days of they agency verifying 10,000 individual requirements for the space shuttle. For commercial crew, the requirements will be more on the order of 600 or so. "They've done their best to make the requirements for the contractor as streamlined as possible," Boeing's Reiley says.

NASA also redefined the clause for intellectual property so that the contractors can retain the rights the maximum amount of it. "Since they're going to own these systems and sell them commercially, that's pretty much something that industry said was a must-have for them," McAlister says.

But though NASA appears to be streamlining its oversight, industry players still worry that NASA's verification process will slow the pace of development. "We don't have an issue going through that process, as long as it's timely. That's always the issue working with a large, technical oversight organization," Reiley says. "That's what we've been stressing. When NASA has to make a decision, we want to time-limit that so it doesn't drag out."

Sierra Nevada also asked for guarantees for speedy choices from NASA. "When they have to make decisions critical to the timeline, we want a clear path so it doesn't linger for months," Sirangelo says. (The secretive start-up space company Blue Origin, true to form, did not respond to questions for this article.)

There's already been one collateral casualty. NASA's CCIDC timeline places craft on launch pads in 2017, three years longer than some private space companies' internal estimates. The delay prompted Bigelow Aerospace to lay off 40 of its staff of 90 last month. That company wasn't in the running for CCIDC, but it was depending on that hardware to ferry people to the space hotels it is designing. Bigelow hoped the taxis to their space station would be ready by 2015. Now that the spacecraft are on track for 2016, the company is slowing down its plans.

NASA Moves In—Literally

The contract includes the never-before-seen addition of full-time NASA employees to the operations of private space companies. The Government Insight/Oversight clause requires the private companies to accommodate as many as 20 full- or part-time NASA employees called Partner Integration Teams assigned to each space company. "The contractor shall provide office space and services, including security badges, furniture, telephones, and use of easily accessible fax and copy machines, for full-time and temporary government insight and support services contractor personnel," the contract says.

"Those 20 or so people, they are just there to gain insight," says McAlister. "They don't tell the contractor what to do, but they allow NASA to understand the true nature of the system better than we would otherwise have."

Sirangelo says these PIT members are welcome, as long as the number remains limited and the team members remain the same. "The concept works," he says, citing earlier NASA involvement in the Dream Chaser program. "We did ask for an assigned team to be limited. And we don't have time to go back an educate a new person each week."

But these are federal employees that can tell the company what to do and back it up with force. Federal contracts have Contracting Officers that serve as the main point of contact and representative to whatever agency is footing the bill. The CCIDC's Contracting Officer wields a lot of power—he or she receives reports of accidents and mishaps, and could even carry the power to shut down a program if a company doesn't follow a "corrective action." (McAlister points out that the Contracting Officer is not the final authority on what flies; that figure is just the appendage of the NASA co-chaired supervisory board.)

Buy American?

There is another bit of the contract inspiring grumbling: a so-called "buy American" clause that does not allow space industry to purchase parts from overseas, unless there is no domestic vendor. That increases the likelihood that parts will cost more. Besides, Sirangelo says, NASA astronauts fly in a foreign spacecraft that has not been rated for human spaceflight by NASA—the Russian Soyuz. "Why is it that we can't have foreign components when we rent an entire system from the Russians?" he says.

That opens up another thorny question: The Soyuz contract runs out in 2016, about the same time as the U.S. private space companies will be fighting for the ISS delivery contract. Will the Soyuz be held to the same standards, as a fellow competitor? "Why should we spend our money to meet NASA requirements when the Soyuz does not?, " Sirangelo says. "It ought to be a level playing field."

He also notes that NASA has not yet issued a service contract that would state that these vehicles would have the job or resupplying ISS, or set a date on when one will be released. "If there's no service contract at the end of the day, we'll have a shiny vehicle that has no where to go," Sirangelo says. "Then what is it that we just worked on?"

Industry responses are coming in now, and the final version of NASA's contract will probably come out in December, McAlister says. Until then, keep watching the skies—but more importantly, keep watching the paperwork.

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