By Michael Urban

NASA is the only government agency exempt from the Federal Acquisition Regulations (FAR).

This exemption is allowing NASA to conduct activities that suppress development of the US commercial space industry. They enter into contracting arrangements that prevent open competition in the commercial space industry. This has been a continuous problem for commercial space ventures.

A search of the on-line FAR document on the word "NASA" produces 21 references that specifically exclude NASA from regulations that apply to all other agencies. These exemptions allow practices that create commercial monopolies, eliminate competition, and obscure responsibilities. No other government agency has specific exemptions from FAR. Initially, NASA made the case that their procurement process was so technical that they needed to create a unique procedure. However, other organizations, like the National Science Foundation, have conducted commercial activities that are just as technically and scientifically complex as NASA, and they manage to do so without special benefits. And if national security is the issue, then maybe NASA should consolidate with the Department of Defense. Then they would comply with the formal defense acquisition regulations.

The current practice of allowing NASA exemptions is damaging to the commercial sector and wasteful for the government. These special exemptions have allowed NASA to exert a damaging influence on the development of the commercial space industry. They have suppressed the development of competing organizations.

A clear example of this problem is Beal Aerospace. In his testimony before Congress (May 20, 1999, to the subcommittee on Science, Technology, and Space of the Senate Committee on Commerce, Science, and Transportation), Andrew Beal (CEO) clearly identified the problems this causes for commercial space ventures. "Government actions might improperly tilt the playing field by rewarding or penalizing various competitors, essentially predetermining the winners and losers." Later, after the demise of Beal Aerospace, Beal was quoted as saying, "When Congress and NASA targeted $10 billion to fund competing launch systems, we threw in the towel. We simply could not compete with such government funded boondoggles." This type of intervention in the private sector is causing serious damage to the free enterprise system.

The only possible solution to this problem is to eliminate these exemptions, which were developed at a time when NASA had a different mission and goals, when there was no commercial space industry that could be damaged. But times have changed. The future of the US commercial space industry is dependent upon the elimination of these anti-competitive practices by NASA. The Commission should make every effort to recommend that these exemptions be eliminated so that NASA complies with the same FAR directives that apply to all other government agencies.

Please include this issue in your final recommendations on changes that would benefit the US commercial space industry. I would be happy to provide more details on this issue if necessary. Feel free to contact me at any time at Mru3@hotmail.com