OSC Could Lose Seat on Virginia Commercial Space Flight Authority Board

Launch facilities on Wallops Island, Virginia

Virginia should invest in making the Mid-Atlantic Regional Spaceport (MARS) on Wallops Island into a multi-use launch facility capable of handling missions for more than just Orbital Sciences Corporation’s (OSC) new Taurus II rocket, according to a new consulting report.

The review by KPMG includes a recommendations on further developing the commercial launch base and restructuring the Virginia Commercial Space Flight Authority (VCSFA), the state-funded organization which oversees MARS. One controversial recommendation is to strip OSC of its guaranteed seat on VCSFA’s Board of Directors, which KPMG calls a disincentive for other companies that want to use the spaceport.

MARS, which is co-located with NASA’s Wallops Flight Facility, has traditionally focused on launching suborbital payloads. With the addition of OSC’s Taurus II, it is evolving to capture more of the small- and medium-lift orbital market. The Taurus II will deliver cargo to the International Space Station beginning next year and is also competing for satellite launches.

“The infrastructure developed under the Orbital Sciences Corporation MOU is geared towards Taurus II and some similar launch vehicles, but it is not clear how those infrastructure modifications will assist other potential customers,” the report states.

Broadening that base would require additional infrastructure investments by Virginia. However, the report notes the uncertainty over how fast the demand for additional commercial launch services will grow.

“Present and projected launch site capabilities in the US appear to be adequate to meet the projected demand,” the report concludes. “Although historically projected demand has been far in excess of actual demand leading to substantial overcapacity at launch sites and suppliers.”

Despite the uncertainties, Virginia needs to make some decisions now about how to proceed with MARS development:

It is time for MARS to evaluate options and choose its strategic direction

Based on the market, competitors, and length of time to implement site improvements, MARS appears to be at a decision point and should evaluate their choices and pick their future strategy (probably bounded by #1 and # 2 below):

  1. Status quo: Stay with historical launch strengths and a low capital investment.
  2. Full speed ahead: Step up investments to participate in the “new big commercial space” and incur the potential payoffs/associated risks of a new market.
  3. Opportunistic midcourse: Between # 1 and # 2 above, by being prepared to make some investments quickly while waiting to see how the commercial space market matures and other states react by supplying capacity.

The report recommends a series of organizational changes to make VCSFA more effective. KPMG found that the authority’s “current organization structure is not conducive for recruitment of qualified personnel, business continuity, and marketing the Authority’s services.  Florida has dedicated resources (approximately $1.9m in FY10) for marketing and development.”

KPMG also found that VCSFA’s 13-member Board of Directors is too large and ineffective. The current board has a difficult time getting full participation at its meetings, is largely reactive to events, and has little input on policy, goals, marketing, growth strategy and other strategic areas. The board’s membership has many space advocates but few representatives of Virginia’s executive branch or from the operational, financial and business communities, the report states.

KPMG recommends that VCSFA’s board be shrunk from 13 to between seven and nine members. Directors would be selected using a broader criteria so the board would have more expertise in general business, finance, marketing, operations, research and development, and legal issues.

The study recommends ending OSC’s seat on the board, which was guaranteed in the agreement under which the company and Virginia jointly funded MARS infrastructure development for the Taurus II program. Under the deal, OSC committed to making a capital investment of at least $45 million through the end of 2011. The state also committed tens of millions of dollars.

“Orbital Sciences Corporation’s Board of Directors representation is perceived as a conflict of interest by potential customers/potential competitors,” the report states.

Instead, OSC should have representation on a separate, non-voting advisory board that would work closely with the Board of Directors.

“[Advisory board] Members should be comprised of industry, education and local government representatives to leverage synergies and support VCSFA’s objectives,” the report reads. “The Board of Directors should have an extensive working session with their advisory committee and the VCSFA Executive Director to establish short- and long-term, measurable goals, target customers and strategy. Once established, quarterly Board of Directors meetings should have a recurring agenda item to assess the Authority’s progress.”

KPMG also recommends that a2004 agreement between Virginia and Maryland be updated to facilitate more involvement by Maryland in MARS. The two states are partners in developing and operating the spaceport.

Read the full report at:  http://www.transportation.virginia.gov/docs/vcsfa_report.pdf