COTS Hits the Big 1-0

Cygnus approaches ISS (Credit: NASA)
Cygnus approaches ISS (Credit: NASA)

WASHINGTON (NASA PR) — Ten years ago, on August 18, 2006, NASA announced agreements with two private companies that dramatically changed the way NASA does business and the landscape for the commercial space industry.

The announcement was rooted in long term trends dating back to the 1980s, but the immediate cause of this change can be traced to the report of the President’s Commission on Implementation of United States Space Exploration Policy. In the wake of the Columbia accident in 2003, and the announcement of the Vision for Space Exploration by President Bush in early 2004, the Commission was tasked with coming up with recommendations about future space policy.

The Commission’s report, entitled “A Journey to Inspire, Innovate, and Discover,” overwhelmingly supported more reliance on the private sector: “The Commission recommends NASA aggressively use its contractual authority to reach broadly into the commercial and nonprofit communities to bring the best ideas, technologies, and management tools into the accomplishment of exploration goals.”

Less than a year later, in April 2005, NASA’s International Space Station (ISS) Commercial Cargo Services (ICCS) Program held an industry day at Johnson Space Center to lay out the general technical requirements to companies interested in supplying cargo delivery service to the ISS. By January 2006, ICCS was expanded and renamed the Commercial Orbital Transportation Services (COTS) Program.

The guiding precepts of the COTS Program were: limited government investment (NASA originally allocated $500 million for the program), the purchase of services (i.e. cargo delivery, not vehicles), and the use of performance-based, fixed-price milestones.

One of the significant innovations that made COTS possible was the use of “Other Transaction Authorities” granted to NASA in the law that created the agency, the National Aeronautics and Space Act of 1958 (more commonly known as the Space Act).  Using Space Act Agreements (SAA), rather than the more typical procurement process, NASA could offer companies a set of milestones with payments that would come only after meeting the milestones.

Dragon berthed at the International Space Station. (Credit: NASA TV)
Dragon berthed at the International Space Station. (Credit: NASA TV)

Companies were expected to invest their own funds (to have some “skin in the game”) and would only get the milestone payments if they achieved the goals on schedule.  Interested companies were instructed to submit proposals that would demonstrate any mix of the following capabilities in low orbit: A) external cargo delivery and disposal, B) internal cargo delivery and disposal, C) Internal cargo delivery, return and recovery, and D) Crew Transportation. Using this process, NASA expected that companies would develop delivery capabilities that could then be purchased under a subsequent contract.

Working at an extraordinary pace, the COTS Program set the deadline for submission of proposals for March 3, 2006.  By that date NASA had received 21 proposals from 20 different companies, from big, familiar aerospace contractors like The Boeing Company to obscure, small startups like PanAreo Inc. The 65-90 page proposals were evaluated by a small Participant Evaluation Panel.

The evaluation panel narrowed down the proposals to 6 finalists, all relatively unknown and without any significant previous government contracting experience.  They were: Andrews Space, Rocketplane Kistler, SpaceDev, Space Exploration Technologies (SpaceX), SpaceHab, and the Transformational Space Corporation (tSpace).  The six finalists were then put through a round of rigorous interviews and meetings in the spring and summer of 2006.

Then, on August 18th, 2006, NASA announced that two companies had been selected for COTS Space Act Agreements: SpaceX and Rocketplane Kistler. The SAAs had a termination clause, which provided for 3 conditions under which NASA could end the agreement. These were: lack of appropriations to NASA to fund the Program, mutual agreement between NASA and commercial partner to end the agreement, and the failure of the commercial partner to meet a milestone.

Unfortunately, this final condition was invoked just a year later, in September 2007, when Rocketplane Kistler failed to raise sufficient private funding by the deadline, missing a set milestone. Rocketplane Kistler’s SAA was terminated and $170 million of the COTS budget was freed to be awarded to another company.

NASA set out a nearly identical announcement for COTS Round 2, and received 13 proposals. Orbital Sciences Corporation was chosen as the winner of Round 2 and, in February 2008, picked up the funding left by the exit of Rocketplane Kistler.

SpaceX went on to complete the COTS milestones with a successful demonstration mission to the ISS in May 2012. Orbital Sciences Corporation completed its demonstration mission to the ISS in October 2013.  In the interim, both companies were awarded more traditional service contracts to deliver cargo to the ISS and commenced those missions shortly after the COTS demonstration flights.

The COTS Program demonstrated that with a limited investment (a total of about $788 million) NASA could encourage the development of non-government cargo delivery services.  The majority of the development funds (approximately $1 billion) were provided by industries that saw a solid market for this new capability in ISS resupply.

In the end, two new launch vehicles, their automated cargo carrier spacecraft, and the ground support systems needed to operate them were developed collaboratively.  An amazing accomplishment in just 10 years.  As noted by NASA Administrator Bolden, “The commercial space industry will be an engine of 21st Century American economic growth and will help us carry out even more ambitious deep space exploration missions.”

For more information on the history of the COTS Program, see: http://www.nasa.gov/sites/default/files/files/SP-2014-617.pdf

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  • P.K. Sink

    Great report, Doug. Thanks.

  • Aerospike

    While I really like the work that Doug is doing, I have to point out that this here is simply a NASA PR piece and not his writing 😉

  • P.K. Sink

    Yeah…I know. But when I get on the computer each morning I always start with the news…and it always bums me out. So here comes Doug with this cheery little piece, and makes me happy. And, if he hadn’t posted it, I might not have known about the anniversary. So thanks again Doug…and Aerospike…have a nice day 🙂

  • therealdmt

    Well I learned something new here — I never knew exactly where the term “Space Act Agreement” came from, but now it all makes sense!:

    “One of the significant innovations that made COTS possible was the use of ‘Other Transaction Authorities’ granted to NASA in the law that created the agency, the National Aeronautics and Space Act of 1958 (more commonly known as the Space Act). Using [such] Space Act Agreements (SAA)…”

  • windbourne

    It is amazing what has come from this.

    1 line was a bust. Basically, Rocketplane Kistler lead to OAtK’s which is really not worth much. Basically, nothing actually came from that. Nothing innovative. Nothing with lower costs.

    Then we have the SpaceX line. That we know has not only lowered the costs of getting to space, but is still working towards cutting it further, as well as increasing the launch numbers to weekly, if not several times a week. It has also lead to pushing other companies, namely ULA, but, I suspect that BO has also gotten a shove from SX.

    And of course, Russia, along with Europe, are in a great panic over SX. To be fair, they should be concerned about BO’s coming. Once they hit in about 3 years with their orbital system, it will be 2 companies with direct competition: BO and SX. At that time, SX will no doubt cut their launch prices even more. At this time, SX is probably pulling in more profits / launch than ANY OTHER launch system. IOW, they have plenty of room to do cuts. I would not be surprised if the 80M can actually go down to 50M on the expendible and still give them 10M profit.

    The real question is where is COTS going? It was supposed to have COTS-D, but the GOP killed that. It took O time to push an alternative to that, which is why we do not have human launch. yet. So CCXDev will finish up and we will have 2 human launch systems (with BO coming around 2020, and HOPEFULLY, SNC as well).
    But where else? IS that the end of it?
    Hopefully, when BFR/MCT is announced next month, we will see CONgress decide that NOW is the time to invest into Space for real, as opposed to CONgress treating NASA as a Jobs Bill. IOW, we will see money towards private space stations, as well as equipment for luna, mars, and NEO and other meteors.

    That would also make a huge difference in the national economy similar to what the internet did.