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Industrial Space Facility

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ISF 1988
Rise And Fall Of Commercially Developed Space Facility.
Credit: NASA via Marcus Lindroos

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Status: Study 1982.

ISF would have housed up to 11,000 kg (71 m3) of commercial microgravity and industrial manufacturing experiments in 31 payload racks; twin 140 m2 solar panels would have produced 20 kW of power. But endless political wrangling and NASA policy changes after the Challenger disaster delayed to the next millennium any industrial exploitation of space.

The role of private enterprise in the Space Station project was a contentious issue during most of the 1980s. Many entrepreneurial companies emerged on the space scene in 1979-81, including a number of organizations run by former NASA employees who now were proposing commercial projects for the Space Shuttle. President Reagan also envisioned an important role for free enterprise in the Space Station program, both as a subcontractor and end user.

Space Industries Inc. (SII) was formed in 1982 by former NASA engineer Max Faget and quickly signed a memorandum of understanding with NASA two years later to develop the 'Industrial Space Facility' (ISF), :a 'mini space station' that would fly unmanned most of the time but be serviced regularly by the Space Shuttle. ISF would have housed up to 11,000kg (71 m3) of commercial microgravity and industrial manufacturing experiments in 31 payload racks; twin 140 m2 solar panels would have produced 20 kW of power. Attitude control with minimum disturbance would have been provided by a 30.5 meter long gravity gradient boom. The microgravity level would have been 10-6 to 10-7g, or less than one millionth of the Earth's surface gravity. The ISF would initially have employed a single 10.67 meter long Facility Module, but a second could be attached for expanded operations.

A 1985 Center for Space Policy report estimated space pharmaceutical manufacturing may generate annual revenues of $20 billion plus $5 billion in other materials processing activities by the year 2000 -- over one-third of the total expected revenues from commercial space activities! However, most commercial plans dependent on the Space Shuttle were derailed by the 1986 Challenger accident. President Reagan subsequently banned most commercial payloads from flying on the Shuttle, and the new launch pricing policies would be much less favorable to private companies.

McDonnell-Douglas' highly touted electrophoresis project was cancelled in late 1986 after 3M pulled out as the main customer in March. Part of the problem was McDonnell-Douglas was unable to find support for the project at the same time that new ground-based bioengineering processes appeared to be capable of extracting the same highly purified biological materials at less cost. As a result of these unfavorable developments, SII announced some changes to its Industrial Space Facility platform to increase the flexibility and better co-ordinate operational needs with NASA.

The ISF platform would be placed in a lower 300km orbit, where it could be accessed more easily and frequently by the Shuttle when launching communications satellites. The ISF would also use excess water produced by the Shuttle's fuel cells for propellant. SII claimed NASA had promised to honor a previous agreement for 2.5 dedicated Shuttle flights to deploy two ISFs. The agency would defer payments for the flights until the ISF started generating revenue, but the flights would now be delayed from 1989 to 1992. The company would have preferred a first launch in late 1990, however.

At this point, NASA was still basically positive about using ISF since it regarded the commercial space facility as complementary to the Shuttle and Space Station. NASA's role was to 'facilitate the development and operations of the ISF,' while SII had to develop customer relationships to generate revenues. The Memorandum of Understanding stated that 'NASA is not the guarantor of the ISF's commercial success and will not assume a customer role in the use of ISF except as justified by NASA's own research and development program activities.' The partnership would be limited to a fully reimbursable launch and service arrangement to provide the minimum required support for SII until NASA's own Space Station operations begin. The ISF launch would be billed on a deferred payment basis, and NASA could opt to provide other services to Space Industries Inc..

Space Industries Inc.'s plans changed considerably in 1986-87 since private customers were not willing to buy enough payload space on the ISF. Instead, SII was now claiming the Space Industrial Facility would be a valuable test bed for Space Station hardware and operations. NASA's own Space Station had meanwhile been delayed by two years, to 1995, and the Station's unmanned free-flying microgravity platform was also deleted in 1987. This was unacceptable to some politicians and microgravity scientists, who demanded that NASA sign a leasing agreement with SII. In October 1987, Congress warned NASA that the Space Station contracts would be postponed unless the agency support/implement a commercial Industrial Space Facility type platform. NASA promised to assess how it might use the ISF, including alternative long-term agreements with Space Services Inc. for launch, use and servicing of the ISF. However, NASA's position quickly changed in December 1987 after the Space Station's budget again was drastically cut. The agency said it could not afford to pay for both projects unless the space budget were augmented, and that ISF would increase the risk of failure during payload operation while meeting few NASA scientific requirements. Space Industries objected, saying their facility would provide a valuable pre-Space Station learning experience to NASA. The company also countered that contrary to NASA's claims, users such as Boeing and 3M Corp. had indicated they need the ISF. Space Industries believed there would be sufficient commercial demand for ISF by 1991-92.

The conflict escalated in January 1988 when The White House Economic Policy Council ordered NASA to make an immediate commitment to lease the Industrial Space Facility (ISF) platform in 1991. The lease would have cost $140 million annually over five years, for 70% of the first ISF's payload space. The $700 million government lease would not have been sufficient to earn return on investment: the company would be required to develop other commercial markets for that. No federal money would be spent on ISF in 1989 or 1990, but there would have been a binding commitment to spend $700 million in 1991-95. This was to enable SII to raise about $250 million from the private sector to build ISF hardware. NASA objected that no user requirement existed at the time and that it was not legally authorized to enter a sole-source arrangement with Space Industries Inc.

The Council also discussed a proposal to increase the extent of Space Station privatization. Under the proposal, new contract proposals would replace many existing ones, handing out much more responsibility for building, assembling and launching the Station to the private sector. Congress concurred, and decided to withhold $90 million of Space Station funds until NASA agreed to a leasing agreement with Space Services Inc. for the Industrial Space Facility module. The suspension meant NASA would run out of Station hardware funding by the end of February, forcing the agency to cancel the Station's four prime contracts unless it agreed to lease the Industrial Space Platform. NASA's Space Station contractors were already working under temporary letter $7-18 million 'emergency' contracts awarded in December 1987. Some Administration officials now started to push for interagency control of the operational ISF to overcome NASA's opposition.

NASA suddenly reversed its position on the ISF in February 1988 after President Reagan's new Commercial Space Policy called for preparations to competitively lease a space facility 'suitable for research and commercial manufacturing that is financed, constructed and operated by the private sector.' NSP's commercial initiatives would thus end the government's 30-year monopoly on space platforms and services in low Earth orbit. NASA issued a 'Commercially Developed Space Facility' request for proposals while saying the Industrial Space Facility might be useful after all, for man-tended uses rather than free-flying platform missions. Space Industries Inc. were favorites to win the 'Commercially Developed Space Facility' contract since the contract specifications were very similar to the Industrial Space Facility's.

NASA/Marshall's specifications notice called for 56-85 cubic meters of pressurized payload volume (at least 30% of which must be set aside for private users), autonomous free-flying mode operation for 4-6 months providing extremely low gravity levels, a 3-year in-orbit lifetime without servicing or external reboost, plus Shuttle docking compatibility. The private sector would have been responsible for operation costs of the platform. The lease was to be a firm fixed-price five-year contract, but the NASA notice cautioned that 'funds are not currently available for the proposed lease period' that would begin by the end of Fiscal 1993. The actual lease was thus subject to future availability of funding and congressional authorization. Competitors were asked to evaluate what services they could provide for lease payments of $80 million and $140 million annually.

However, a month later Congress unexpectedly ordered a temporary halt to NASA's CDSF plans, saying that the congressional authorization process had been improperly circumvented and that it was unclear the government really needed the service. Congress then asked the Reagan Administration for a full explanation of the leasing agreement before authorizing it. A White House Economic Policy Council official was asked to testify in Congress but refused, leaving NASA officials to defend a Reagan Administration decision they had been fighting only two months earlier...

Air Force and Commerce Dept. officials also testified. The CDSF could only accommodate five of the USAF's 100 currently proposed Space Test Program experiments, but the Air Force and Strategic Defense Initiative Organization still felt some uses may develop as the facility becomes better defined. NASA's Associate Administrator Dale Myers said the space facility may provide better microgravity conditions than the Space Station. Space Industry's own lobbyists argued that the platform must be provided first on a 'blind faith' basis, or the market will never develop.

Another controversial point concerned possible preferential treatment of Space Services Inc. and whether the Administration's support represented a direct subsidy. The Reagan Administration's own ground rules forbade this as well as loan guarantees, but government purchase guarantees for services were deemed acceptable. However, Space Industries had called for government-guaranteed loans, noting that the private sector was assuming a large degree of risk. Other officials were now criticizing SII for being little more than a government project, since the commercial market highly touted by company founder Max Faget a few years ago never materialized. 'Originally, Max came in with a commercial venture...a man-in-the-can with wings...NASA said it would give him a free launch. He would pay us back later with his profits. He went out and could not find any customers...He could not raise any money, so he came back to NASA and asked for money or a guarantee to raise money. When NASA didn't jump at it, SII went through the political process' instead, NASA Space Station Administrator Andrew Stofan said.

NASA was now forced to announce the Request for Proposals would be delayed until the platform lease conflict with Congress has been resolved. About 45 companies had already expressed interest in competing, according to the agency. Money already provided to begin the leasing agreement should be taken back, according to a proposal by Rep. Ed Boland (D-Mass.) who was among the leading commercial space platform supporters in Congress. NASA had proposed an escrow account (holding the lease payments after ISF becomes operational) be set up with the $25 million Congress provided for leasing the ISF in FY 1988. But Space Industries still scored an important victory when the Office of Management and Budget decided to charge only $110 million (=the same marginal cost per flight as in 1982 after inflation) for private use of the Space Shuttle to deploy their space facility. The full cost (i.e. annual program cost divided by the expected number of Shuttle missions) would have been $245 million and all government agencies apart from NASA had argued that full cost recovery would have been more appropriate.

The House of Representatives subcommittee on space science and applications raised other questions about NASA's revised plans for leasing commercial space platforms in April 1988. The agency was proposing to spend 'new funds' which could be appropriated now to lease the platform, but outlays would not be needed until the mid-1990s. The 'buy now pay later' agreement would have contained several clauses to protect the private investor's money. The government would be relieved of its payments only if the space platform owner failed to deliver on time. If Congress terminated the lease 'for convenience', it would still have been forced to repay the investors. The facility owners would have been responsible for transportation costs (launch+resupply) and subsequent housekeeping supplies, so that NASA only had to pay its own way for other transportation to the facility.

Many Representatives were highly critical of the plan, in particular the idea that NASA's budget suddenly would increase by $700 million to pay for the platform at the same time as the Space Station budget was starting to climb. NASA's ability to serve two Spacehab and ISF-type commercial platforms and the Space Station at the same time was also questioned by the subcommittee. Leasing payments would have to start on the agreed date even if the Shuttle was not available, as long as the space platform was available in the specified condition. NASA assured it would find room on the Shuttle for the new commercial payloads. However, Spacehab Inc. complained that ISF would unfairly edge out their own commercial project. Spacehab feared nobody would want to invest in them as it became obvious that NASA likely would use the competing ISF's capabilities before purchasing any from Spacehab. Consequently, Congress decided to rescind the $25 million allocated for leasing the Commercially Developed Space Facility since it had never authorized the project in the first case... The setback meant NASA was not allowed to award a lease agreement for at least another year, following the completion of several congressionally mandated studies and a competition involving at least three 'good faith' bids from private industry.

The Commercially Developed/Industrial Space Facility project finally died in April 1989 after two government reports advised NASA against signing a lease agreement. The National Research Council's 'Report of the Committee of a Commercially Developed Space Facility' claimed the CDSF/ISF was not required for early microgravity use. Microgravity remained an immature science with virtually all experiments receiving NASA support and there was no indication, according to the report, that the research would lead to substantial space manufacturing in 5-10 years. The ISF might provide higher power and better microgravity conditions, but nearly all experiments (including tests of early Space Station hardware) could still be flown on long-duration Space Shuttle flights instead. The report regarded the $700 million, 5-year lease as too expensive since that amount would equal the total funding for microgravity research over the same period.

However, the report also said NASA should re-examine the proposal if the Space Station were delayed by more than 1-2 years (=to 1996-97), but in that case a more modest facility than the Space Industries Inc. proposal would be more appropriate. The National Academy of Public Administration also released a second report on the CDSF/ISF's cost to the government. The study found a commercially developed space facility would cost $2.05 billion over four years, including a contractor's fee and civil service staffing. In contrast, NASA could build and own the facility for $2.34 billion, also over four years. Annual operating costs (including two Shuttle resupply missions) would account for another $200 million. The report advised NASA to proceed with a commercial lease plan if it really needed the facility and wanted to promote commercial space. If the module was needed only for research, however, NASA should purchase the platform rather than lease it.

The 1989 National Research Council and National Academy of Public Administration reports turned out to be the final blow to the Industrial Space Facility. Space Industries Inc. complained that the committees were composed of fundamental scientists, instead of having a commercial inclination. The company also claimed crew disturbances frequently ruin sensitive microgravity experiments and that foreign countries would have microgravity platforms long before the US (those plans were dropped a few years later, however). Other officials felt the panels based too many conclusions on NASA's statements and viewpoints, e.g. by only considering existing microgravity experiments that were designed for the Shuttle. SII was forced to concentrate on less expensive projects such as microgravity experiments on sub-orbital sounding rocket flights while the Industrial Space Facility was postponed indefinitely.

In the end, Space Industries Inc. may have been a victim of bad luck and poor timing. NASA was unable to launch the Space Shuttle on a frequent and reliable basis, and most commercial experiments were bumped from the manifest to accommodate US Air Force payloads. The near term demand for commercial microgravity research in space also evaporated after the 1986 Shuttle accident, and NASA's Space Station budget was cut at the same time. NASA and its industrial contractors (who had spent considerable sums of their own money during the definition phase in the hope of receiving production contracts) felt all resources had to be devoted to the Station, and that the agency did not have the resources to pay for the Industrial Space Facility. But the battle lines were highly complex. Some members of Congress simply supported SII because they regarded it as the lesser of two evils, while the Department of Commerce had ideological reasons for wanting a commercially developed space facility. Some NASA scientists also preferred the ISF.

Space Industries also claimed it was a victim of poorly conceived and inconsistent commercial space policies. In March 1989, SII vice president Joe Allen remarked that the 'problem is there are too many cooks in the commercial space policy stew - the recipe never quite gets finished.' ... 'We have become increasingly sensitive and nervous about policy that has no implementation plan behind it. Even now the Administration is promoting some commercial projects with very little thought on how they are to be implemented.' Allen mentioned the Space Station's Flight Telerobotic Servicer as a prime example. 'When proposals like that go to Capitol Hill they give space commercialization a bad name. Such proposals come from the same bureaucratic network that tried to commercialize the tracking and data relay satellite system and Landsat.'

Commercial developed space facility platforms may yet emerge in the 21st century since the political and economic climate is more favorable than it was back in the 1980s. Space Industries' rival, Spacehab Inc., successfully managed to develop its Space Shuttle cargo module and the company is now considering new expansion modules for the International Space Station as well.

Article by Marcus Lindroos

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