NASA sets a model using high-level requirements and letting private companies innovate

The cost-saving success of @Commercial_Crew is based on @NASA establishing high-level requirements and letting private companies innovate. For the Artemis Moon base, NASA will establish a cost per ton delivered and once again let private companies innovate. pic.twitter.com/KFhlI9KzHU

— Jim Bridenstine (@JimBridenstine) June 8, 2020

Thankfully, NASA wasn’t incorporated into the Department of Defense under the guise of efficiency and consolidation. Otherwise, we wouldn’t have such excellent examples of how expensive and complex systems can be acquired by a government agency. We should hope that the DoD takes NASA’s commercial successes seriously and also moves toward competition, high-level output oriented requirements, and fixed-price contracts.

Many in the DoD like to think cost-plus is still required for full-scale development because of boondoggles like the V-22 in the 1980s an more recently the KC-46A (which just has operational testing extended for another 3 years into 2023!). But a fixed-price incentive contract that is sole-source with detailed specifications that forces a multi-year waterfall process isn’t conducive to success. Moreover, the “incentive” part of fixed-price still requires the same old cost-accounting systems to verify the costs and the profit payments.

A better approach is how NASA used payable fixed-price milestones under Other Transactions to induce performance for SpaceX. Here is Rick Dunn from the Strategic Institute:

Here is more from Rick on payable milestones. And here is Elon Musk commenting on Jim Bridenstine’s tweet:

Outcome-based contracting with multiple competitors is vastly better than cost-plus (especially if sole-sourced), as the former rewards results & latter rewards waste. Outcome contracting should be applied broadly within government. The difference in results will be incredible.