It starts back in the 1960s with the Apollo program being successful. The way that space used to work back then was that everything was mission-based, so Apollo and the directors of it would say, “hey, we want to try to hit those specs, and we compete on price for who can meet those specs.” Shortly after the Apollo missions, all human-based exploration basically shifted to what is cost-plus, which is how we do a lot of the budgeting in the government today. It significantly slowed down our ability to innovate. We continue to move, but at a very glacial pace.
But it’s interesting when you compare the human-based space exploration — which shifted all to cost-plus — versus at NASA, everything in robotic exploration has always been mission based. So you can see this amazing explosion, we visited Titan, we’ve visited Venus, we’ve done incredible things on the robotics side, and I think most of the reason why is that we stuck with a mission focus. So the way that any robotics mission happens at NASA is that NASA comes up with a spec that like, “hey, we want to send a probe to an extra-planetary body,” and then a bunch of companies come in and bid on it.
That was Delian Asparouhov on a very interesting episode of the Venture Stories podcast. When Delian equates “mission-based” with “specification-based” contracts, I think he is using these terms synonymous with performance-based contracts. These should be distinguished from “technical specification-based” contracts, perhaps.
Separately, there is cost-plus and fixed price contracts. Certainly, cost-plus contracts can be performance-based. Generally, government contracts turn out to be based on the technical specifications detailed to an excruciating level where the end state solution is basically pre-defined. In other words, the contract dictates not just “what” needs to be done, but also “how” it will be done. Then, the cost-plus portion means that government reimburses any expenditures the contractor makes toward that end, regardless of whether it was done effectively or not.
Mission- or performance-based contracts tend to leave the “how” open, so that contractors can come up with better solutions than the government could have guessed through its requirements analysis. Government seems less comfortable with such open-endedness when the scale and risk of a mission increases. So while robotic missions tend to be smaller and less complex — and failure is less disastrous — there is less room for failure in human exploration.
I tend to be a fan of not just mission-based contracting, but mission-based budgeting. Ultimately, the contract has to conform to the parameters set by the budget. So if the budget has to be justified based on a slew of technical details connected to requirements, then there is little room for deviation for the contract. The pre-contract process, including requirements and budgeting, are crucial for understanding the kind of regime employed by the contract itself.
Here is more from Delian:
There is starting to be a shift across the entire government in a variety of ways but more accelerated in space, going back to the original analogy that I gave which is mission-based versus spec-based [did he mean technical spec-based, or cost-plus based?]. And I think SpaceX really helped shift the curve, where it used to be that the government would go to ULA [United Launch Alliance] and was like, “we need to launch a satellite, tell us how much it is going to cost you and we’ll pay 20% above that.” And obviously ULA is incentivized to make their launch cost $1.3 billion.
When SpaceX comes in and says we can launch it for $100 million, well the government is obligated to take a serious look. SpaceX has gone through a lot of lawsuits to get to this point… Now a lot of the human-based exploration, a lot of these big government projects, are starting to be more spec-based. I think there is going to continue to be a trend in that direction.
The discussion was really good, despite the ambiguity in his terminology.
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