The Perils of Outsourcing Space Exploration

If you didn’t think space exploration was dangerous enough, here’s something else to worry about. NASA has been looking into outsourcing parts of the space exploration program to outside suppliers, reasoning that this is the best way to speed up rocket development and to save money. They reasoned that private contractors would be able to provide the rockets that would carry astronauts into space much more efficiently and cost-effectively. A recent Wall Street Journal article reports that the Aerospace Safety Advisory Panel, an outside safety watchdog for NASA, has cautioned against this approach. They questioned the safety of this approach, especially the technical challenges that private firms would have to overcome. Many of the potential suppliers have rockets that are unproven and still on the drawing boards. So the advisory panel has recommended that  NASA stick with government-run rather than privately operated manned ventures.

Space contractors Boeing and Lockheed Martin are lobbying NASA not to outsource more of the space program. Interesting that Boeing in particular, which has a huge self-interest in keeping its share of space contracts, is playing the “don’t outsource” card. Boeing’s own outsourcing missteps with the Dreamliner are testimony to the issues inherent in outsourcing a complex system, although I’m sure that Boeing is not  going to emphasize their own supplier management challenges in relation to the the NASA outsourcing issue.

What are some of the important factors in making a decision such as this one?

  • Outsourcing does not reduce the responsibility for managing the process or the outcomes. There is still a mangement and coordination function that would need to be performed. NASA would need to make certain that its subcontractors’ product development and other key business processes are robust and can produce the required outcomes.  NASA would need to be able to orchestrate supplier schedules and input so that the project comes together as planned. According to the WSJ, the advisory panel members have expressed concern about NASA’s “hand-off approach” in allowing development of private cargo spaceships. Outsourcing does not mean hands off. Successful outsourcing, especially in real mission-critical products, must be decidedly hands on.
  • Contracting in this environment would be extremely complex. Liabilities seem problemmatic. Who is responsible if a rocket blows up and kills people? But on the other hand, if the private contractor is not liable, can NASA take on the liabilities for unproven technologies and unknown supplier performance to contract?
  • Sole source issues. What are the incentives to a private firm to invest in technologies so specific to NASA that they might be totally captive to it and might be driven out of business by changing political winds (if the program is reduced or disbanded) or by having no other customers of its products. Or, if NASA finds a subcontractor incompetent or not meeting expectations, how can they fire them? What would be the alternatives?
  • Protection of intellectual property. How can NASA be certain of not losing any of the intellectual property and technological capabilities to entities outside the U.S.?

Whether or not NASA outsources, the buck still stops with them. They still need the skills to manage the development of complex technologies, either internally or externally. It just seems that the risks are higher if these activities are external. The public sector has always held the private sector as the role model to be emulated when running a business. Recent events in the financial sector have again proven that idea a myth. Boeing’s challenges in managing its suppliers in a technologically complex product design, development and manufacturing scenario should provide a cautionary tale to NASA and the government about taking on such technologically challenging and complex outsourcing.

Sherry R. Gordon

This entry was posted in procurement, Supply Management, supply risk and tagged . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*