Whatever happened to competition in space agency procurement? The case of NASA

Whatever Happened to Competition in Space Agency Procurement? 235

policy terms, the diminishing of rent-control mechanisms can have substantial
implications for the industry. On the one hand, it is possible that coupled with
increased consolidation and the exploitation of economies of scale, efficiency
gains can be enhanced by increasing investment in R&D and lower program costs.
Commercial markets can also benefit from economies of scope and dual-use
technologies and R&D. On the other hand, this procurement pattern can have a
negative effect on the competitiveness of the US space industry in commercial
markets. The reason for this is that the US space industry has no incentive to
improve its competitiveness in commercial space markets, given the high rents it
enjoys in the domestic US public market. This can potentially lead to a moral
hazard situation, where the US space industry has an incentive to under-perform
in commercial space markets. The impact of NASA procurement policy (as seen
developed post-mid 1990s) on the efficiency and competitiveness of the US space
industry is ambiguous and an important research area for the future.

V. Conclusions

This paper examined NASA’s behaviour with regards to its procurement policies.
The analysis shows that the consolidation of the US space industry (with two
major integrators Lockheed Martin and Boeing) combined with absence of overseas
competition results in a high proportion of non-competitive contracts awarded to
the space industry. In addition, the examination of the behaviour of contract types
awarded indicates the absence of a rent-controlling mechanism to compensate for
the shrinking of competitive tendering contracts. The potential emergence of
powerful producer groups and their role needs to be further examined with respect
to their impact on the procurement process of NASA and other space agencies.
This will assist to understand better the costs incurred by the public sectors in
their efforts to improve industrial efficiency and the competitiveness of the domestic
industries in commercial markets.

References

Boeing Company (1998), Annual Report, Washington, DC, United States Securities and Exchange
Commission (Form K-11 available by SEC EDGAR database at http//sec.gov/archives/
edgar/data).

Commission on the Future of the United States Aerospace Industry (2002), Final Report,
Arlington, VA.

Coren, Michael (2004), “Private craft soars into space, history”, Monday, June 21^st, CNN news
(Online at http://www.cnn.com/2004/TECH/space/06/21/suborbital.test/).

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