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Date: Fri, 28 Jun 91 02:38:16 -0400 (EDT)
Subject: SPACE Digest V13 #731

SPACE Digest                                     Volume 13 : Issue 731

Today's Topics:
		       Commercial Space News 8

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Date: 11 Jun 91 05:04:03 GMT
From: ucivax!dhw68k!ofa123!Wales.Larrison@ucbvax.Berkeley.EDU  (Wales Larrison)
Subject: Commercial Space News 8

This is the eighth in an irregular series on developments in 
commercial space ventures.  The commentaries included are my 
thoughts on these developments.  

1- NASA TO STUDY CIVIL APPLICATIONS OF SSTO 
2- ATLAS CENTAUR FAILURE SERIOUSLY DAMAGES JAPANESE TV BROADCAST 
   VENTURE 
3- TELESAT CANADA PREPARES TO FILE FOR LOSS ON ANIK-E2 SATELLITE 
4- SPACE INSURANCE SUFFERING THROUGH ANOTHER YEAR OF MAJOR LOSSES 
5- ORBITAL SCIENCE's PEGASUS WINS AIR FORCE LAUNCH CONTRACT 
6- GD WINS COMMERCIAL LAUNCH SERVICES CONTRACT FROM NASA 
7- COMMERCIAL REMOTE SENSING SATELLITE WITH RESOLUTION OF 2 METERS? 
8- FY92 NASA APPROPRIATION WILL AFFECT FUTURE COMMERCIAL VENTURES 
9- OSC FILES FOR PREFERENTIAL TREATMENT FROM FCC ON ORBITCOMM 
10- COURT CHALLENGE TO GOVERNMENT PROCESS FOR MAJOR SYSTEMS 
    DEVELOPMENT 
11- EDITORIAL MATTERS 

NASA TO STUDY CIVIL APPLICATIONS OF SSTO 
  [I've been asked by a couple of folks why I don't track the SSTO 
program in this forum.  The SSTO program as it currently stands, is 
run under current government procurement regulations for a 
government agency, looking at government applications.  This article 
is the first commercial crack in the effort.] 
   The House Science, Space and Technology Committee has directed 
NASA in FY 1992 to study SSTO and report on possible civil 
applications of SSTO technology, particularly in the commercial 
arena.  If this recommended language survives the rest of the 
budgetary cycle, it may provide some insight into potential 
commercial applications of this new technology 
  The Single Stage to Orbit (SSTO) project being run by the 
Strategic Defense Initiative Organization (SDIO) is looking at 
conceptual designs for a SSTO vehicle based upon recent advances in 
materials and propulsion.  The SSTO system is being designed for a 
20,000 payload capability, and has the design goals of long life, 
full reusability, and very short (less than 1 week) turnaround.  The 
current Phase 1 study contracts, held by McDonnell-Douglas, General 
Dynamics, Boeing, and Rockwell are terminating in this year in Phase 
2 proposals, which were requested by the SDIO about 1 June.  If 
funded, the Phase 2 effort will carry 1 or 2 of the contractors into 
development of prototype hardware and initial component testing.  
The goal of the program is to allow the early flight test of a 
launch vehicle prototype by 1996.  Boeing is reportedly proposing a 
horizontal takeoff/horizontal landing vehicle, Rockwell is proposing 
a vertical takeoff/horizontal landing vehicle, and MDC and GD are 
proposing vertical takeoff/vertical landing systems.  
  [Commentary:  I can hear it now - "Why have those (deleted) 
(deleted) at NASA look at anything commercial?  Give it to the 
commercial sector!"  In general I agree with this, but the 
technology involved in the SSTO is still to speculative to get 
commercial companies to do it entirely on their own, and the 
existing market is still 90% governmental.  If we look at the 
industrial participants in the Phase 1 contract - all have very deep 
interests in high speed transportation, ranging from NASP or NASP-
type vehicles, to high speed commercial aircraft, or to commercial 
space launch vehicles.  I have seen and heard of very serious work 
on potential commercial applications of NASP and SSTO vehicles by 
these contractors, most of which are part of analyses being done 
within them to determine if they want to stay in the SSTO game, or 
to help sell funding for the program through Congress.  One firm has 
even taken their SSTO concept and applications to VP Qualye. 
   The Congressional direction for NASA should be seen in the light 
of SDIO facing severe funding problems over the next several years.  
They cannot continue the SSTO program to a flying prototype (costing 
at least hundreds of millions) when their core programs of strategic 
defense systems are being drastically cut.  A major sponsor of the 
SSTO technology development program must be found - probably the DoD 
or NASA - to continue funding and develop the test vehicle.  The 
Congressional direction is primarily intended to force NASA to look 
at the SSTO, possibly develop some interest within NASA for it, and 
see if they can justify back to Congress a continuation of the 
program under NASA's budget. 
   NASA has been looking at similar vehicles for years - the Langley 
Research Center work for "Shuttle II" and on another set of SSTO 
concepts immediately jump into mind.  And NASA does have a fairly 
good record of moving technology into commercial world (look at the 
aircraft side of the house).  The Congressional direction, while not 
perfect, is probably a good thing. It's definitely better than doing 
nothing.  It would have been nicer, however, if it was accompanied 
by funding for contract studies to commercial entities to continue 
and expand commercial applications studies and build a bigger 
constituency within private industry.] 


ATLAS CENTAUR FAILURE SERIOUSLY DAMAGES JAPANESE TV BROADCAST 
VENTURE 
  [This article is a little dated, but the impacts linger on....] 
  The recent failure of a RL10 cryogenic engines in the Centaur 
upper stage of a General Dynamics Atlas-Centaur booster has 
seriously damaged a Japanese venture to provide direct satellite 
broadcast of TV signals to homes in Japan.  When one of the two RL10 
engines made by Pratt & Whitney (a division of UTC) failed to start 
on the Centaur the upper stage and payload tumbled out of control, 
until the stage and payload was destroyed by the range safety 
officer.  An insurance package of $112 M was carried by GE on the 
launch to cover the launch and satellite. 
  This was the first failure of a RL10 since 1963, and books a 
failure against the second General Dynamics commercial launch. 
  The satellite, the BS-3H, satellite was lost in the accident.  
Built by General Electric's Astro-Space division, the BS-3H was 
intended to shore up a Japanese satellite broadcasting program that 
has been the victim of a chain of major problems since the 
beginnings of this year.  The BS-2X satellite was lost last February 
when an Ariane 44L booster failed, the first of the year.  An 
existing satellite on orbit, the Yuri 3a, had been providing some 
broadcast capability, but a recent solar flare event in April 
damaged the satellite's solar panels, which required the shutdown of 
one of the three television broadcast channels as not enough power 
was being produced by the satellite. 
  [Commentary: Japan has been in the forefront of demonstrating both 
direct broadcast satellites and High Definition TV (HDTV) using 
their satellite system.  This series of failures is a serious blow 
to Japanese attempts to demonstrate and install an initial HDTV 
direct broadcast system in Japan to shortcircuit US and European 
HDTV and direct broadcast ventures.  Very much is riding on the 
first launch of the H-2(?) rocket, which is planned to launch a 
third replacement satellite using Japanese technology. 
  Unfortunately, this series of failures has also fanned the 
activities of "Buy Japanese" proponents in Japan.  The dependence of 
Japanese space ventures upon other nation's technologies has been a 
sore spot in some political circles in Japan, and this string of 
failures has added fuel to the on-going movement to bring more space 
technology under Japanese control.] 

TELESAT CANADA PREPARES TO FILE FOR LOSS ON ANIK-E2 SATELLITE 
  Telesat Canada is in the process of preparing a final filing for 
insurance payment on its Anik-E2 communications satellite.  After a 
successful launch last month into GEO, the satellite could not 
deploy it's main broadcast antenna.  Without this main antenna, the 
Anik satellite will not be able to carry out it's primary mission of 
transmitting television signals to Canada.  After a month of trying 
alternative methods of deploying the antenna without success, 
preliminary information is that Telesat is preparing to file for 
about $217M of the satellite's $260M cost from its insurers.  The 
filing is expected by the end of this month, if last-ditch efforts 
to free the antenna don't succeed. 
  [Telesat really got skunked on this one.  They've tried every 
trick in the book, including some at the end which had a very real 
possibility of damaging the satellite to deploy that antenna.  But 
no success.  And the insurance business takes another loss....] 

SPACE INSURANCE SUFFERING THROUGH ANOTHER YEAR OF MAJOR LOSSES 
   The space insurance business is looking at another year of major 
losses as they have to absorb several serious spacecraft failures.  
These include:  the Japanese B3-3H lost in launch, the Canadian Anik 
GEO comsat which could not deploy its primary antenna on orbit, a 
U.S. GEO comsat which lost power on much of its broadcast beams, the 
BS-2 lost in launch, and the another broadcast satellite which had a 
solar panel short out on orbit. 
   Insurance rates had peaked at about 25-30% of the cost of the 
satellite and launch in the mid-1980s when all three U.S. launch 
firms and Arianespace encountered a string of launch failures, and 
eight satellites were lost during launch or on-orbit commissioning.  
Rates dropped back to about 18% in 1989, but after the Ariane launch 
failure in February, they climbed back to at least 20%.  
   The General Dynamics failure plus February's Ariane failure 
leaves only McDonnell Douglas without a recent failure on their 
launcher.  Before the Atlas failure, the three big U.S. launch firms 
had success rates ranging from 95% to 98%.  Arianespace's rate 
hovers around the mid-80s, although insurers look more closely at 
recent launches rather than the overall rate.  
   [Commentary: It should also be noted that the overall launch 
premium is based also upon the frequency and size of recent payouts 
in the insurance industry, as well as the reliability of an 
individual launch vehicle.  If the financial coffers of the insurers 
have been drained to pay for a string of recent failures, they will 
charge a higher rate until they can recover from these losses, and 
re-establish a pool of funds from which to pay future launches. 
   Insurers of space systems have consistently shown a loss in 
insuring them.  This has driven several firms out of the business, 
and has severely restricted expansion in the space insurance area.  
    Space businesses must compete in the commercial market with 
terrestrial business ventures when it comes to obtaining finances.  
Since the risks of space ventures (technical, political, and market 
risks) are perceived as somewhat higher than other business areas, 
it is very important that insurance is available for such ventures.  
Without the insurance, most commercial investors will shy away from 
space investments.  Another year of insurance losses on space 
ventures can only be seen as a bad omen for the near-term financing 
of commercial space ventures.] 

ORBITAL SCIENCE's PEGASUS WINS AIR FORCE LAUNCH CONTRACT 
   [Another dated article, but of some importance to OSC...] 
   It was announced last month by OSC that the USAF had selected the 
Pegasus air-launched space launch system to perform the initial 
launch in the Air Force Small Launch Vehicle (AFSLV) program. This 
single launch carries with it a contracted option for up to 39 
additional launches, making it a potential plum contract for the 
firm. 
   However, final announcement and award of the contract by the USAF 
is dependent upon the results of a formal bid protest filed by 
Israel Aircraft Industries.  OSC claimed the protest should be 
resolved by the end of May.  If the final award is made, the first 
AFSLV launch is planned for late 1992. 
   [Commentary:  This award to OSC is not unexpected - and pretty 
much wipes Lockheed's small ELV business out.  However, the funds 
for future launches is still in question, but it is a reasonable 
guess that there will be at least several future launches under this 
contract.]           

GD WINS COMMERCIAL LAUNCH SERVICES CONTRACT FROM NASA 
   General Dynamics Commercial Launch Services Company has won a 
NASA commercial launch services contract for the Solar and 
Heliospheric Observatory (SOHO) mission.  The contract, valued at 
$112 M over 4 years, is planned to result in a July 1995 launch of 
the satellite in July 1995.  The SOHO satellite will observe the 
physical processes that form and heat the solar corona, and will 
study the sun's interior structure. 
   [Commentary:  No real surprises here - and while there was 
Japanese and European participation in SOHO, it was not expected 
that the satellite would go to Ariane, since NASA was footing the 
majority of the launch services bill and is constrained by a "Buy 
American" clause in their regulations.  GD's Atlas was the prime 
candidate for the launch, due to the size of the satellite.] 

COMMERCIAL REMOTE SENSING SATELLITE WITH RESOLUTION OF 2 METERS? 
   The Institute for Technology Development Space Remote Sensing 
Center (one of the NASA Centers for the Commercial Development of 
Space (CCDS)) is examining market approaches for a new commercial 
remote sensing satellite with potential resolution as precise as 2 
meters. The CCDS is completing a market survey which is indicating 
there is a much larger market to sell such data than previous 
projections. 
    This venture is still in the very embryonic stage, but the 
approach being examined would be a similar venture to the COMET 
program and would involve significant commercial money at risk to 
develop the technology and satellite.  NASA would provide "seed 
money" by acting as an anchor tenant (in this case for buying the 
data), but the commercial firms would be expected to recoup their 
investment through commercial sales- not via selling exclusively to 
NASA. 
  [Commentary.  In general, a good thing for the CCDS to look at.  
Such a venture follows the SEAWIFS and COMET projects, and is a very 
appropriate use of government money as "seed" capital to allow firms 
to enter this market area.  There have been considerations of small 
remote sensing satellites for the past decade, but they have all 
died due to the high up-front capital costs and the lack of a up-
front identified market.  NASA can help overcome these market 
barriers by acting as an anchor tenant and signing long-term 
contracts for data.  And they have very properly written themselves 
out of the business of operating the system or for fully controlling 
the system and market. 
  However, there should be a consideration of how this system will 
affect the Landsat project, and EOS.  Landsat probably won't be 
harmed by this, since much of the current discussions are focusing 
on very specific market niches which are not currently served by 
Landsat.  EOS may benefit from this effort if they would buy 
commercial resources observation data to extend their data base. 
  It is also interesting to note the CCDS is looking at possibly 
providing data with resolution well beyond any currently available 
commercial system.  The Landsat and Spot systems typically only 
provide data with 60-100m resolution, while the Soviets will sell 
selected data with a resolution of up to 15m.  The Soviet data 
caused a minor flap, since such high resolution data had distinct 
military uses, and there had been some discussions of limiting the 
resolution of space data to avoid complications with military 
applications.  In particular, this was focused on less developed 
countries (such as Iraqi) which could use commercially available 
data to plan and monitor future military operations.  2m resolution 
data, depending upon its spectral band, could have significant 
military uses, as well as commercial applications. ] 
  
FY92 NASA APPROPRIATION WILL AFFECT FUTURE COMMERCIAL VENTURES 
  [Commentary:  This language has snuck almost unnoticed through the 
FY92 budgetary battles.] 
  As part of the House bill which came to a vote last week on the 
NASA funding for FY92, there was language included which would give 
the House or Senate Appropriations committee veto power over any 
future NASA purchases of commercial space services.     
   "This action is recommended in order to protect the 
constitutional prerogative of the committee and the Congress in 
approving the commitment of funds prior to contracts being awarded 
for such services," the committee stated. "...In effect, these 
'service contracts' commit NASA and the federal government to pay 
for services over future years without initial approval in the 
appropriations process."  SpaceHab and COMET commercial ventures 
were specifically mentioned. 
  [Commentary:  With all of the attention focused onto the funding 
battles for Space Station Freedom in the budget, this part of the 
bill was not really noticed.  The concern expressed here by the 
Congress is a very valid concern - commercial space services 
contracts typically are multi-year in nature, and require payments 
by the government over several years.  Since the Congress typically 
only authorizes NASA (or any other government agency) to spend 
dollars during a single year, specific multi-year funding provisions 
must be made before NASA can enter into a multi-year commercial 
contract.  Congress's objections center on the concern that such 
contracts obligate future Congresses to spend money - and this 
dilutes the authority of future, yet un-elected Congresses.  And 
such practices, if taken to an extreme, can be used as a means by a 
Federal agency to obligate future Congresses for their budget 
outside of the Constitutionally-mandated budgetary process. 
   However, this "veto" power given to Congress forces yet another 
hurdle onto any commercial providers of space services - they not 
only have to convince NASA to buy some commercial service, get 
approval from a NASA field center and from NASA Headquarters, but 
now they also have to sell both the House and Senate on buying this 
service.  Furthermore, this may have to be done annually is multi-
year funding is not approved by Congress for their project.  This 
will require more time and effort by the commercial firm, and will 
add yet another element of uncertainty into the venture. 
  One way around this is to put multi-year funding of specific 
projects into the NASA budget.  For example, SEAWIFS or COMET 
funding could be approved as "X dollars over Y years", and then the 
contracting officer would be responsible for ensuring the commercial 
contract would be negotiated to and performed within this period.  
This does require a larger up-front commitment of NASA funds within 
the NASA budget, and would require a set-aside of dollars as 
commercial procurements.  This will have to be discussed in the next 
budget cycle.] 

OSC FILES FOR PREFERENTIAL TREATMENT FROM FCC ON ORBITCOMM 
   OSC's Orbital Communications Corp. subsidiary has filed with the 
FCC to obtain "pioneer's preference" for their OrbitComm system.  
Under a new FCC policy which became effective on 13 May, the first 
filer for a new communications service or technology could obtain an 
accelerated approval and allocation of frequencies and bandwidth.  
   [Commentary:  OSC is aggressively pushing this venture - and is 
taking advantage of the appropriate federal regulations.  This is a 
smart competitive move, and I am surprised that Motorola did not 
file first with their Iridium system in this category.  I would 
expect them to do so any day now. 
   It is also good to note that this Federal policy is designed to 
encourage investments in new technologies and to provide new 
services.  This may give an boost to new commercial space 
communications ventures.]          

COURT CHALLENGE TO GOVERNMENT PROCESS FOR MAJOR SYSTEMS DEVELOPMENT 
  [Some folks might think this is a little off track, but it might 
have a significant impact on how the U.S. government develops and 
buys major new systems.] 
  General Dynamics Corp. (GDC) and McDonell Douglas Corp (MDC) have 
filed a law suit directly challenging how the U.S. government, 
particularly the Department of Defense (DoD), buys major new 
systems. The two companies filed a complaint in U.S. Claims Court in 
Washington last Friday which directly attacks several long-standing 
development procedures used by the government. The suit is a fallout 
of the cancellation of the US Navy's A-12 attack aircraft program in 
January after the companies fell far behind schedule and projected 
large cost overruns in the development effort.    
  The suit asserts the DoD knew the A-12 specifications were 
"unattainable" but ordered the contractor team to proceed.  It 
alleges the Navy gave every assurance that where the companies 
failed to meet certain specifications (including delivery dates and 
aircraft weight) the requirements would be revised as long as the 
Navy's operational needs were met.  The budget provided to the 
project was well under what the government and the contractors 
projected what it would take to develop the system, according to the 
suit.   
  It alleges the government's decision to proceed with a fixed-price 
development contract forced the contractor to commit to its costs 
long before it knew what it would take to build a complex piece of 
hardware.  In the case of the A-12 the government instituted a 
"demonstration and validation" program to help identify and 
eliminate some of the risks, bu the suit alleges the Navy reduced 
the scope of the effort by 80% over that originally proposed by the 
contractors.  [Although not stated, the implication is that this 
reduction is due to budgetary pressures to get this project funded 
by Congress.]  As a result the contractors were not able to 
realistically forecast the costs of the development program, the 
suit claims, yet were held to their original cost estimates.  
  [Commentary:  Boy doesn't this sound familiar.  Since both the DoD 
and NASA follow the OMB A-109 procurement process for major systems 
developments, this suit has ramifications for both organizations 
which contract for major new space systems.  
  Beginning a risky development program for a major piece of 
aerospace hardware must be based upon a firm understanding of the 
probable costs and risks associated with the effort.  In this case, 
the A-12, there was a large amount of technical risk in the project 
to meet the technical specifications - yet the government issued 
this as a "fixed price" contract.  If the suit is correct (and this 
has to be decided by the courts), cutting the dem/val test program 
to explore the technical risks and their impacts on the program 
while holding the contractors to their original cost estimates is 
not proper. 
  On the other hand, if a contractor ethically enters into a fixed 
cost contract, then they should be willing to be held to such a 
contract, unless the contracting agency significantly changes the 
requirements upon them.  Here, the suit claims there was significant 
pressure on them to adhere in form to the "fixed price" contract, 
but with the hidden understanding they would not be held to their 
specified requirements. 
   This pressure, driven from the intensive political and budgetary 
pressures of the government funding cycle is true of any future 
governmental space development program.  We, as space activists, 
have to be aware that these pressures may influence a contractor (or 
contracting agency) to low-ball a bid, in expectation that some way 
of covering future cost increases will be found.  Compare this 
process to the Hubble Space Telescope, Space Shuttle, Space Station, 
Titan-IV, and the NLS. Think of what it might mean to SEI.... 
   The results of this lawsuit may have very, very significant 
ripples in future space systems development.  I know this isn't 
really "commercial space news" but I believe significant changes in 
how the government procures major new development projects will have 
significant effects on the commercial space market - particularly as 
we strive to convert more of the current 90% governmental market 
into commercial services.  This suit indicates a major need for a 
better means for handling the acceptance and consideration of 
significant risks in new space systems developments, and how they 
are funded from private or public coffers.]           

EDITORIAL MATTERS 
  Sorry about being so late in getting this one out, folks.  Things 
at work got very hectic very suddenly, and my time to put this 
together was cut very short.  There was a lot of stuff I left out - 
a new stock offering, a new entry in the commercial launch services 
arena, several other very interesting developments in several on-
going commercial competitions, and a couple of potential changes in 
the export control laws governing satellites.  Maybe next time I'll 
have time to include them ... 

-------------------------------------------------------------------
Wales Larrison                            Space Technology Investor 
"Business: The art of extracting money from another man's pocket 
without resorting to violence." (Max Amsterdam) 
 

--  
Wales Larrison
Internet: Wales.Larrison@ofa123.fidonet.org
Compuserve: >internet:Wales.Larrison@ofa123.fidonet.org
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End of SPACE Digest V13 #731
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