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WASHINGTON ROUNDTABLE
ON SCIENCE & PUBLIC POLICY
Innovation in Aerospace
with
Chris Kemp, Tim Hughes, Doug Comstock,

Scott Pace and Uyen Dinh
Washington, D.C.
The George C. Marshall Institute
The George C. Marshall Institute, a nonprofit research group founded in 1984, is dedi-
cated to fostering and preserving the integrity of science in the policy process. The In-
stitute conducts technical assessments of scientific developments with a major impact
on public policy and communicates the results of its analyses to the press, Congress
and the public in clear, readily understandable language. The Institute differs from
other think tanks in its exclusive focus on areas of scientific importance, as well as a
Board whose composition reflects a high level of scientific credibility and technical ex-
pertise. Its emphasis is public policy and national security issues primarily involving the
physical sciences, in particular the areas of missile defense and global climate change.
The Washington Roundtable

on Science and Public Policy
The Washington Roundtable on Science and Public policy is a program of the George
C. Marshall Institute. The Roundtable examines scientific questions that have a signifi-
cant impact on public policy and seeks to enhance the quality of the debate on the
growing number of policy decisions that look to science for their resolution.
The opinions expressed during Roundtable discussions do not necessarily represent

those of the Marshall Institute or its Board of Directors.
The George Marshall Institute

1625 K Street, NW Suite 1050
Washington, D.C. 20006
Phone: 202/296-9655
Fax: 202/296-9714
E-mail: info @marshall.org
Website: www.marshall.org
with

The George Marshall Institute

Washington, D.C.
Chris Kemp, Chief Information Officer, NASA Ames Research Center
Tim Hughes, Vice President, SpaceX
Doug Comstock, Director, Innovative Partnerships Program, NASA
Scott Pace, Professor of Practice in International Affairs & Director, Space Policy In-
stitute, George Washington University
Uyen Dinh, Senior Director, Government Affairs, GeoEye

Innovation in Aerospace*
with

June 16, 2009
Jeff Kueter: Good morning. I am Jeff Kueter, the President of the George Marshall
Institute, and it is my pleasure to welcome you to this latest installation of the
Washington Roundtable on Science and Public Policy, which is a continuing series of
the Institute designed to bring the scientific and technical community together with
policymakers and those who influence policymakers to talk about issues of the day.
Space policy, in particular the effect of space on our national security, has been a
longstanding interest of the Marshall Institute and today’s forum extends that topic a bit
farther. As you all know, the ability of American industry, of our scientific and
technical innovative base – our students, our teachers, our educators – to provide the
inputs necessary to design, construct, and deploy the systems that our warfighters use
for national security purposes is just as important as smart thinking about how to use
those systems by a warfighter. Because that aerospace industrial base serves multiple
customers, the commercial and civilian as well as the military, they are undoubtedly
intertwined and interconnected. So the inputs to that industrial base and their health is
a subject of great concern, regardless of your perspective on their end use, be they
military or for the purposes of commercial development or space exploration. So it is
our pleasure today to convene these two panels to discuss innovation in aerospace, a
topic I think is particularly timely given the decisions that will be made soon at NASA
about the future direction of our civil space program, the convening of the Augustine
Commission to review this issue, and general concern about how this industry will grow
and evolve, given the financial circumstances and greater macroeconomic forces of the
day. I doubt that we will answer all of those questions today, but I hope to provide you
with a set of provocative thoughts from an excellent group of panelists brought
together to discuss this issue by my good friend and a Fellow at the Marshall Institute,
Eric Sterner. I am going to turn the program over to him and he will introduce the
panelists.
Eric Sterner: Today’s event is really focused on innovation and how you find that
sweet spot in aerospace that produces new developments, new capabilities, and things
that have a potential to really change the way we do business. We have invited
panelists from several different organizations, NASA, the private sector, the academic
community, who have a wide range of experience and bring that diversity of experience
*
The views expressed by the authors are solely those of the authors and may not represent
those of any institution with which they are affiliated.
1
and knowledge and perspective into that problem of how you promote innovation in
aerospace. Our first panel focuses on corporate culture and organizational culture. I
want to introduce Chris Kemp, who is the Chief Information Officer at the Ames
Research Center. Most of you probably know that Ames is in Silicon Valley and has
over the last few years done some amazing work in building bridges between NASA,
the IT community and the software community that is up there in Northern California,
which is one of the main centers of innovation in the country. Chris can talk a little bit
about that experience. He actually comes from the IT and software industry and has a
background in business development, capital formation, progress development and
marketing. He has done it all, and I think he is one of the most exciting guys that I
have heard speak in a long time. I met him when I was at NASA and was impressed
with his unique perspective. He is a co-founder of Classmates.com among several
other successful websites, so I think NASA was lucky to get him. Tim Hughes is Vice
President and Chief Council at SpaceX, another company that is really out there. It
has a corporate culture that draws heavily from the IT community, having been
founded by an IT entrepreneur; Tim can talk a little bit about that. He has long
experience in law and policy; he was Majority Counsel to the House Science
Committee focusing on space and aeronautics. He did a term in the Counsel’s Office
of the Secret Service and works as a senior associate in telecommunications and
litigation groups of a national law firm. He has done just about everything, seen both
government and private sector experience and we are all familiar with SpaceX and the
progress they have made and the excitement they have generated. We are happy to
have you both and appreciate your coming out this morning.
First Panel
Chris Kemp: Thank you for coming this morning. When Eric asked me to come in
and talk, one of the things that I wanted to do is focus on my experience in the past
couple of years at NASA, my previous experience for about ten years doing small start-
ups and the differences there. We worked with Google to put the agreement in place
to make our data more accessible in some of their products and worked with Microsoft
to make our data more accessible in some of their products. We got to see how those
two cultures interacted with each other, the private and the public, on a very high level
from an executive perspective, but also on a very low level from a project perspective.
I want to share a few stories about that experience with you. I also want to talk about a
few things that I see that are very different in my experience working on small Silicon
Valley startups versus these large companies that we work with at NASA. I want to
talk a little bit about corporate culture and the organization at NASA, about the people
and the differences in the people we have at NASA versus the people in some of the
small companies, about the funding model, how that is different and how that affects
innovation; and about the costs of operating at NASA versus the costs of operating a
business these days.
The George C. Marshall Institute 2

To start with culture, one of the things I took away from the recent economic
challenge that we face is that there are a lot of parallels between the aerospace industry
and what I think happened over the past twenty years in IT and what may be
happening in the automotive industry. Before you scream, I will elaborate on that a
little bit. I think that what we are going to see in the aerospace industry is more
startups and fewer really large corporations. Some of the same underlying organi-
zational dynamics and other drivers are going to start occurring.
When I started working for NASA, I started to really look into how we managed
things and how we developed the processes in use today. You look at some of the
project management processes that we are using to develop Constellation and they
date all the way back to the Apollo program, which was fascinating to me. You don’t
think of an organization that has been around for fifty years as an organization that has
borrowed that much from its past, but in fact they have. There are a lot of differences
between NASA today and NASA fifty years ago. In order to pull off Apollo, we had to
scale the organization from nothing to hundreds of thousands of people. If you think
about the kind of vertical integration challenges that you have developing a spacecraft
with the complexity of Apollo, you have to control everything; you have to make sure
that everything works. This reminds me a lot of the auto industry where every supplier
of every part and everything was owned by the Big Four (now the Big Three or Big
Two – wherever that is going). What they attempted to do was reduce risk by making
sure that they could count on the availability of every part. They did this by acquiring
all the manufacturers in their supply chain. NASA did the same thing. We basically
attempted to control everything by making every single part.
What is happening today is we have this thing called IT. That allows mass
organization without a massive organization. It allows information systems to connect
people and allow people to collaborate around a big project. We see this in IT; we see
large, really complicated projects that are open source. Projects in which thousands or
tens of thousands of people who are distributed around the globe and who have never
met each other or worked together are able to build fantastically complicated pieces of
technology. This is something that did not exist when NASA was born but does exist
today.
The internet allows things to happen that are not as tightly coupled and tightly
integrated. Another thing that has happened is this notion of “best of breed.” NASA
attempts to breed the best. We attempt to develop the skills required for all the
different disciplines required in every aspect of the things that we build and things that
we do, rather than adopting the “best of breed.” There is another analogy here from
Detroit. If you have to always breed the best, that means you have to build everything.
You have to innovate on every front simultaneously within your organization. But if
you build an organization that is more focused on being open and collaborative and
with standards and interfaces where you can really select the “best of breed,” you are
going to have more innovation injected into your organization because you have more

competition for the different parts or the different technologies that are going into what
you are building. You are definitely seeing that. In a lot of the companies that we
work with in Silicon Valley, you innovate through acquisition; they are constantly
acquiring technologies and incorporating and acquiring and incorporating. They are
not attempting to build that from within. They are acknowledging that if we have an
ecosystem of technologies and we have an open, collaborative process of building
applications, then we are going to be more successful. You can look at Apple and
their strategy with their applications versus Microsoft and their strategy with their
applications on the Windows mobile platform. One was very early to the market and
one was radically successful because they reached out and said, “Here is a platform.
Build things on it” and they made it possible to do that.
Another thing I wanted to talk about is people. One of the challenges that we
have is civil servants, to put it bluntly. If you look at startups in Silicon Valley, you will
find that people who start those companies and who stay in those companies, people
who are recruited into those companies, they don’t last long if they are not very good,
yet they are fully empowered to make decisions. In fact, they are encouraged to take
risks to make decisions. If the federal government hires a civil servant and has him
starting to work on some big project, it is very difficult for the federal government to
dis-position that employee. I think there are a lot of cases where this makes sense. If
you are a career scientist, if you have a specialized skill set with propulsion systems, if
you are a rocket scientist and you have spent your career developing a skill set to serve
the government, I think that what we do today with the civil service makes a lot of
sense. I read some demographics that the average 30-year-old has already had fifteen
jobs. The average NASA civil servant has not. I don’t know how many they have had;
they haven’t had that many. So this cross-pollination that occurs – one that happens in
the Valley is that people go from company to company to company. It is very rare for
an individual to stay at one more company for more than five years; it is very rare. It is
very rare for a civil servant to go off and do something else, learn some new tricks and
then bring them back in. Because of the security associated with the civil service
position, it attracts a risk-averse workforce. Whereas that might be great in the science
areas, it is not great in areas where you expect innovation.
Another area is funding. We fund things in very large programs and very large
procurements. I am participating in a procurement where we are taking a number of
different IT contracts and we are rolling them up into massive IT contracts. We do very
few, but very large procurements and we make very large investments in a very small
number of options. In Silicon Valley you have a financial system which has evolved to
make thousands of investments and invest billions of dollars in many companies and
the ones that don’t work out fail quickly. There are vicious venture capitalists that will
come in, expect the world of your company, and if it doesn’t perform, they will take it
and typically not be gentle. That is one take-away. If you look at the aerospace
industry, the projects are so big and the number of organizations working on them is so

small that there are a relatively small number of investments. It doesn’t reward people
who go out and try to start new things. You have entrenched players.
Another area is costs. One thing that I have watched even in the past ten years,
which is my relatively short lifespan here, is the cost of starting a business has gone
down exponentially. If you start a business today, you don’t need infrastructure. You
can use the cloud. You don’t need to stand up email services, calendar services,
collaboration services, servers, or data center infrastructure. Most new companies
today are virtual companies. They leverage collaboration technologies. We did this
seven years ago in my last company and we still bought servers and had a co-located
data center. But today a lot of these companies – Twitter comes to mind – start with a
very small amount of capital investment. That makes it very easy for people to start
new things and that lowers the barrier to entry.
The last thought I want to leave with you is that if you look at the future of the
aerospace industry and what that will look like, I think it will look like what happened in
the IT industry over the last twenty years. Ask yourself how many small aerospace
companies in the last fifty years have become large aerospace companies. I can’t think
of one. Every major large aerospace company today has been around for more than
fifty years. You can’t say that about the IT industry. Look at Google; Google has
emerged just over ten years ago and has half the market capitalization of Microsoft. If
you look at the pace of innovation, if you look back when the IT industry was young,
names like Wang and Deck and Data General come to mind. Where are these
companies today? There is more constant evolution of talent and of organizations and
of ideas and those four areas are primary contributors to that. I will leave it at that.
Tim Hughes: I want to thank Eric and the Marshall Institute for having me here
today. I think it is a natural that SpaceX participate in a roundtable regarding
innovation in space inasmuch as we are hoping to break some of the norms that have
been established in this industry. In fact, we have hoped from Day 1 to become a
disruptive force (for the good) in aerospace. For those of you who know anything
about my company SpaceX and my boss Elon Musk, you know we are incredibly
media-shy! So I thought I would start by telling you a little bit of background on the
company and then move on to focus on some of the attributes that I hope relate to
innovation in aerospace and our experiences with our government partnership, namely
with NASA, which has been incredibly successful by any standard, at this point.

Figure 1
By way of background, in November 2002 Figure 1 represented SpaceX. We

had two employees and an empty warehouse in El Segundo, California.
Figure 2
About six and a half years later we have launch sites at Kwajalein in the Marshall
Islands, Vandenberg Air Force Base and Cape Canaveral. We have about 700
employees total, going on 750. We have a 550,000 square foot manufacturing space
in California, a state-of-the-art propulsion testing space in Texas and a very small
satellite office here in Washington, D.C., where we handle our legal and government
affairs. As we take a trip around Figure 2, which has a few visuals on the progress that
has been made, in the lower right we have our test den down in Texas where we are
currently testing our Falcon 9 and preparing for our maiden launch later on this year.
On the top center is the Merlin 1C engine which is an engine that we built clean-sheet.
This is the first new American engine in the past twenty-five years. In the upper left-
hand corner we have the Falcon 1 poised for launch from our launch site at Kwajalein
in the Marshall Islands. There she is launching successfully for the first time, in
September of last year, becoming the first privately funded liquid fuel rocket ever to
make it to orbit. She will go again on July 13, or at least that is when the window
opens, carrying our first truly commercial payload for a Malaysian entity called ATSB.

Figure 3
Figure 3 shows our three main products, the Falcon 1, the Falcon 9 and the
Dragon spacecraft. The Dragon spacecraft we have built largely on the back of our
partnership with NASA and it will be carried on our second Falcon 9 launch as part of
the Commercial Orbital Transportation Services (COTS) program.
In talking about our business model and mode of operation, I think you will hear
a lot of the same themes that you heard a few moments ago. Critically, we at SpaceX
are seeking to serve genuine markets; we do have a genuine business plan. I think
there is a perception among some in the media that SpaceX may be a vanity project
for Elon Musk or that some of the other aerospace startups that are out there that are
funded by rather wealthy individuals are meant to push the bounds alone and not to
generate true revenues. That may be true for certain other entities, but it certainly is
not true for us. I will talk a little bit about the markets we hope to serve, but there is a
genuine market that Mr. Musk wanted to fill when he founded SpaceX and that is that
he perceived that there was a gap to fill through low-cost launch and that the lack of
low-cost launch was truly the impediment to a greater number of commercial launches,
but also doing bigger things in space. As a company, our ideological goal is to reduce
the cost of access to space. With respect to our interaction with government, we hope
to enable the government to move away from those things that could be done cheaply
by commercial and allow it to do the bigger things, for instance, the moon and Mars,
although we certainly hope to participate in those projects at some point down the line.
We heard the word risk in the last presentation over and over. Risk tolerance, I
think, is one of the core aspects of SpaceX and certainly of any would-be disruptive
force in aerospace. As you may know, we were blessed with an “angel investor” in
Elon Musk, but we also have an angel investor of sorts through NASA in the COTS
program. I will chat a little bit about the NASA COTS program and the way that has
worked in a few moments. The core principle for us at SpaceX is risk big and win big.
We rapidly prototype our launch vehicles and in this scenario we have used the Falcon
1 launch vehicle as a pathfinder for our Falcon 9 launch vehicle. As you may know,

the history of the Falcon 1 was a slow progress towards eventual success. We had
three failed launches followed by a successful launch. But with each one of those
launches, we were willing to take the risk, and in fact, our government partners were
willing to take the risk to allow us to move forward to the next stage and we got the
kinks out. We are hopeful that it is a pathfinder for the Falcon 9 inasmuch as the Fal-
con 1 launch vehicle uses the same core design and the same first stage engine that will
be used on the Falcon 9. We realize that the Falcon 9 with nine clustered engines in
the first stage is a heck of a different thing, but there are many lessons learned that we
could not have learned, had we not followed this iterative process.
In terms of company culture, I think a lot of our culture does derive from the Sili-
con Valley model. That is certainly where Elon Musk was born and raised, in terms of
his business experience. It is, we believe, considerably different from the traditional
aerospace player model. We have an incredibly flat hierarchy and a high engineer to
manager ratio. When I first joined the company, I heard Elon repeatedly say that we
have a high “signal to noise” ratio. He said the “signal” are those who are engineers
and deep thinkers who offer value and “noise” are people like me, the lawyers. That is
not really something you like to hear your boss say, but I think there is something to it.
Even our legal staff is folded into the business development team with the goal of add-
ing value and adding options. We talk every day, even in terms of the group that I run,
about providing people with options to innovate. We never say no; we always say,
“Well, if you do that, there could be problems.” We give risk assessments. So risk is
really folded into every facet of the decisions that we make. Another key attribute is
instant communication. There are very few meetings and limited bureaucracy within
the company. I know that is exactly how NASA runs! That is my only slam.
When I first joined the company, there was an incredibly refreshing email that
was sent around from the top saying, “Please, if you are invited to a meeting and you
don’t think you need to be at that meeting, get up and leave; move on and get to your
work because that is what we need you to be doing. We need to free you up so that
you can make those decisions independently.” Now if you make the wrong decisions
repeatedly over time, that is not going to do well for you, but we hire bright people and
task them with very difficult tasks. One of our catch-phrases is “What we do looks hard
and it is harder than it looks.” We have proven that over time to ourselves. SpaceX
was perhaps a little naïve on the front end, but we have persevered and it is largely on
the basis of freeing up individuals within our company to risk big and to think big.
It even flows down to things like the contracting process within the company.
We have a non-traditional contracting process where engineers at mid-level can make
fairly big contracting decisions for the company and we have a standard set of contracts
that we use to include our launch services agreement, and we don’t deviate from those
much. In fact, one of the goals down the line for our company is to have a standard
launch services agreement at a published, firm, fixed price for our launch vehicles. And
if you want that price, you take that agreement and we are done. We reduce the back-

and-forth and the added costs associated with haggling. Another important aspect of
the company, and I think this is quite critical, is that there is an equity stake in the com-
pany at SpaceX for all employees. When employees become owners, the level of dedi-
cation and pride and vested interest in the outcome becomes evident in their work.
People aspire to do great things for the company, both for the ideological goal that we
have but also for personal goals and personal gains. We certainly want this company
to succeed and that sort of incentive cannot be discounted in any way, shape or form.
Finally, one aspect of SpaceX that I think is critical for us, as we try to reduce
the cost of access to space, is that we try to take things in-house to the greatest degree
possible. When we looked out at the launch services market, we saw that the greatest
driver for high prices appeared to be lack of control over components of the launch
vehicle. By taking as much in-house as possible – we are now over 85 percent of the
Falcon 1 and Falcon 9 and I think a little higher than that for the Dragon spacecraft –
we control our own destiny, we control costs and we control schedule.
Figure 4
I want to show a few photos of our facility in Hawthorne, California because I

think it is indicative of the way that we are trying to approach aerospace. On the bot-
tom of Figure 4 is our shop floor. Our propulsion team is on the left; our structures
team is in the back; our avionics team is on the back right and there is an open floor
with easy ability to cross-pollinate and share ideas. In fact, we now have some trails in
between where people ride bicycles, but about the only impediment to getting around
the building is watching out for bikes. We really feel that when the engineers for differ-
ent disciplines are all together and able to share their ideas, and they do so through a
series of smaller meetings rather than large group meetings, this engenders a quicker
response, a more cost effective response, and results in the launch vehicles that we are
now producing en masse today. In the upper left hand corner is our office space; on
the right hand side is Elon Musk’s cubicle and right behind that is the cubicle of
Gwynne Shotwell, our president. Everyone is on the same tier. Now Elon’s cube is a
little bit bigger than most of the other folks’ but other than that, there is no difference

within the company. There are no barriers to communication, once again. There is
not only a flat hierarchy but a flatness within the company where people are able to
simply lean over and speak to one another and see who is available and move forward.
That is the way we are structured.
We will talk about the genuine markets to serve and we did perceive at SpaceX
that are true markets to serve, underserved markets in many ways. We are going to be
pushing forward with our first commercial satellite launch later this year. We have on
our manifest a great number of commercial satellite launches, and in fact there seems
to be a not-so-quiet desperation for low-cost launch in the commercial world. We an-
ticipate, once our Falcon 9 is fully operational, that we will see a flood of commercial
business towards SpaceX, especially at the prices at which we are offering launch. We
are pursuing, as I am sure you know, work for NASA and military satellite carriage with
our Falcon 1 and Falcon 9. We have our Dragon vehicle, which was built on the back
of the COTS program. However we are going to be offering the Dragon lab, which
will be a launch of the Falcon 9 with Dragon, for microgravity experimentation. We
have a $1.6 billion contract with NASA through 2015 for a Falcon 9 launch vehicle
with Dragon to carry supplies to the International Space Station, and we are certainly
interested in manned missions with our Dragon vehicle to ferry crew to and from the
International Space Station and/or crew to private space stations.
Finally, I’ll have just a quick word about the NASA COTS program and our rela-
tionship with NASA. We must demonstrate launch capability, but what we have seen is
that under the model established by NASA for COTS, you can do great things for a
fairly limited amount of money, but you need to have certain requirements in place.
Our contract with NASA is a milestone-based agreement where we are paid for per-
formance. This is critical and it is part of the risk that we are willing to take as a com-
pany. If we don’t perform, we do not get paid. This is not a novel concept in most
commercial areas, but it certainly is in aerospace. Private financing is required. Absent
NASA’s significant monetary contribution on the back of the milestones that we
achieved, I suspect that additional private financing beyond an “angel investor” like
Elon Musk would be very difficult to acquire. But with the promise of a government
contract and payment for milestones achieved, we have been quite successful in raising
money. NASA has also innovated inasmuch as it has taken the traditional government
launch model and said, “Despite the fact that you are launching for the government,
we are going to require a commercial launch license.” This was wonderful news for
SpaceX because it meant that we could actually know that our vehicle was commer-
cially licensed and ready to roll for commercial customers, in addition to NASA. One
facet of this that remains to this is a reentry license for our Dragon vehicle. It is cer-
tainly an innovative requirement for NASA and SpaceX since no one has ever fully pe-
titioned the FAA for a reentry license, so we have our package in and we are waiting to
hear what they say there. But I think most importantly, with respect to the COTS pro-
gram, is the promise of a true follow-on market. SpaceX’s agreement with NASA for
rapid prototyping and demonstration is fine, but if you don’t have a follow-on market,

whether commercial or government, it may be less likely to inspire additional invest-

ment. With the NASA Commercial Resupply Services agreement that we have now
been awarded, we know that we have a true follow-on market. We believed that we did
and that was the risk that we took. We are hopeful that a similar model could be fol-
lowed for manned carriage by which there would be an innovative COTS-style program
for manned carriage, followed by the promise of a true FAR-based contract.
So we hope that we are the dawn of a new era in space. We are trying to agi-
tate and innovate and disrupt, in that respect, and we are looking forward to the next
year. This will be a very big year for our company with Falcon 1 and Falcon 9
launches and the upcoming Dragon launch as well. So please stay tuned. Thank you.
Eric Sterner: I want to thank you both for coming and for your comments. They are
pretty insightful. Chris, I hope you don’t get a call from PAO when you get back to
your office. We are going to take questions, but I am going to cheat and go first. You
both said that the culture of entrepreneurship involves a risk of failure and its willing-
ness to take that risk to produce that big payoff. One of the things that I have been
wrestling with for a long time is whether the government can accept a risk of failure.
We have arguably tried with “faster, cheaper, better,” which was a model for constella-
tions of satellites, any one of which could fail without losing the constellation, and then
that died when two spacecraft went “kaplooey” at Mars. We were unwilling to accept
that risk in the government. How would you see government evolving and where do
you see the limits in terms of the government’s ability to accept the risk of failure?
Chris Kemp: One of the things that make it difficult to accept that risk is the cost.
One of the things that excites me about some of the commercial launch vehicles that
are being developed is that they are lower cost, and they will certainly be a lot lower
cost if we see a lot more launches. If you look at the IT industry, you see the price of
processors going down and the price of storage going down. We have this thing called
Moore’s Law. I would like to see Moore’s Law in aerospace, because if the price goes
down, the cost of failure goes down and also the number of things you can do goes up.
I think the key to the government being more risk averse is the efficiencies of a larger
marketplace and the opportunities provided by the lower cost.
Tim Hughes: That certainly is taken right from our playbook. That is SpaceX’s goal.
In terms of risk of failure, I think one way to mitigate that is to pursue multiple provid-
ers and that is what we see in the COTS context for cargo carriers to the International
Space Station. Not to harp on that model over and over again, what we saw there was
initially the award of $500 million split largely in half for two providers. One of the
providers was not meeting its milestones and it was terminated. The remaining money
was given to a new provider and the government lost about $35 million in the deal.
However, they had assured two lines going in. I think that terminating that first agree-
ment proved that the system could work. Limited risk, risk which is controlled by con-
tractual mechanisms to pull the plug if things are going south does inoculate the gov-

ernment to some degree. In short, if you have an imminent need, multiple providers
and a way to terminate and re-jigger the process, I think that might be a way to deal
with the risk.
Question: To give you an example of what we have done with our company, we
started out and we only had about a million or two dollars and we leveraged that. We
had to go to Europe because American investment wasn’t interested. We ended up in
Europe with a government public-private partnership with the European Space Agency
and still, even though today we have two signed contracts worth hundreds of millions of
dollars, it is very difficult to raise money for a truly disruptive technology, which in our
case is the orbital life extension of geosynchronous communications satellites. There is
a perception of risk because whenever you go to a VC they will do their due diligence
and when they do their due diligence, they pick up the phone, they will call NASA or
they will call the Aerospace Corps and they say that this doesn’t fit our model so we
can’t give you any advice for it. We think it is too risky, because it doesn’t fit in any of
our models. How do you, in terms of the venture capital, even with companies with
good ideas that have support, that have been able to get to a certain milestone, how do
we change the culture in such a way that these new entities can move beyond this circle
that you end up running in when you are not funded by a very deep-pocketed investor?
Chris Kemp: I think the question is about how do we enable disruptive technologies
in aerospace, brings up The Innovator’s Dilemma, Clayton Christensen’s book, and
the concept of successful enterprises rarely embracing innovation because it threatens
their business models. To liken that to government, I think successful bureaucracies
rarely embrace disruptive innovation because it threatens jobs in their districts. As a
government, we do have jobs to protect. The large companies that dominate this in-
dustry are threatened by disruptive innovation and when new ideas and new ap-
proaches are brought to bear, you are going against that. You are threatening those
business models. In Silicon Valley, it is very cut-throat. Businesses that are less effi-
cient tend to die quickly because they don’t have the support of governments and they
don’t have such a small number of customers. It gets back to the previous point.
What you need is an effective marketplace and what we don’t have is a market-
place. A functioning marketplace has a lot of customers; a lot of customers will make
business decisions about what vendors they choose. This creates more opportunities
for investment because there is a higher probability that there is a market for your
products. You heard that from SpaceX and you would recognize that as well. The
more customers there are, the higher the probability that you will get one. That is why
the government is a terrible customer. It is what we are taught. I have been in these
meetings in Seattle and Silicon Valley where they say that the worst customer is the
government, because it is one huge deal, all your eggs in one basket. There are lot of
things beyond your control that will prevent you from closing that deal with the gov-
ernment, so from a Silicon Valley perspective, the government is a very high-risk cus-

tomer. That is what we are taught. My perspective is that a functioning marketplace

will lower risk and spur innovation.
Question: Who are the customers and where are they coming from? Why aren’t
they here?
Chris Kemp: That is the question. I think we have to develop an ecosystem of de-
mand. There are already commercial communications companies. We saw some large
bets to try to provide a satellite-based internet platform; that didn’t work out. We see
satellite radio, we see GPS. These are just a few things that have been spurred by gov-
ernment investment in the sector. I can’t imagine a world without GPS. The challenge
is, though, that this was not something that the private sector funded so the private
sector isn’t monetizing it so we don’t see it as part of that ecosystem. It is something
that the government provided and now the government continues to need to provide it.
Question: Where are the customers? Where does this industry go if government is a
poor customer, as you said, but SpaceX is telling us that government is a major con-
tractor for them? I infer from the conversation that without them they wouldn’t exist.
Who replaces government if government is a bad customer?
Chris Kemp: If you can get the cost of starting a business down, then businesses that
you never imagined are created. If you get the cost of launch down, then things that
you never expected would launch, launch. Who expected Google or Twitter or Face-
book? These are all companies that emerged because the cost of starting up has got-
ten to the point that literally anyone can do it. I think that is the promise of a more
competitive launch market.
Tim Hughes: We don’t believe the government to be a poor customer, but I abso-
lutely understand your point. By any stretch, absent the government as a core cus-
tomer for SpaceX, we would not be where we are today. There is no doubt about that.
Absent the COTS program, despite the willingness to take risks with an initial lump
sum of money, SpaceX would not be where it is today. The follow-on CRS contract
for $1.6 billion is hardly a poor customer; it is a fantastic customer. But what we are
hoping to do on the back of the government investment through COTS and the exis-
tence of the government as an anchor customer is to continue to reduce the cost of ac-
cess to space, which will enable us to serve markets that have not been able to afford
launch. That is at least our design, and we have seen that so far certainly with our Fal-
con 1, which we offer for under $10 million, firm fixed price. We have tremendous
interest from the commercial market there and we have tremendous interest for our
Falcon 9 as well. But the prices at which we offer things could not be achieved on the
pace and scale in which we have achieved them absent the government as a core cus-
tomer. I think for something like this, where there is a need for massive amounts of
capital, the government is a wonderful customer for launch service providers.

Eric Sterner: You say that part of the problem of the government as a customer is
that the trend here has been to aggregate demand and consolidate contracts, and the
government arguably is trying to reduce its transaction costs for awarding a contract.
The problem is, you reduce competition because there is one contract and nobody can
afford to stay in the market if they lose that contract. You saw it in airframe manufac-
turers for technical aircraft. It seems that we are headed that way in IT services for
NASA, although they started turning it around a while ago, I think. Is that part of the
problem? That is how you structure demand as opposed to whether or not you are an
obnoxious customer.
Chris Kemp: You can look at the internet. The government made large investments
to build some of the core networks that evolved into a huge commercial platform to-
day. I think having more frequent transactions that are smaller is better for the industry
because each transaction is lower risk. You heard about milestones. You can raise
capital if you demonstrate progress in milestones in business. If you are starting a busi-
ness, it is all about the number of customers you have; it is all about cash flow. If you
have a fairly small number of large transactions, the risk to your cash flow is high. That
is the business construct there, and I think that is the core issue.
Question: I have a question that goes back to risk aversion. The nature of space, and
especially launch, is high-risk. As soon as you hit that launch button, if you are a half
inch off that pad, there is no coming back. The IT industry has a rapid turnover. You
can put something out to be beta-tested and bring it back and debug it. It is hard to
debug when you are on orbit. It is hard to debug when it blows up. How do you rec-
oncile the need for speed in the marketplace yet the nature of launch is inherently risk-
averse, where the slightest mistake is total failure?
Tim Hughes: We certainly struggle with that. As I mentioned, we analogized too

closely early on to IT and space is not IT. With the Falcon 1 vehicle, we are treading
the line between IT and space inasmuch as rapid prototyping, openness of decision-
making and failure analysis allowed us to more quickly iterate on the Falcon 1 launch
vehicle than has been done in space in the past. That said, it is not IT where you de-
bug and move on with your next beta test and I think the analogy fails between IT and
space to some degree. We are trying to tread the line between the two.
Chris Kemp: One other perspective on that is the opportunity to have a certain num-
ber of cycles in your career on projects of this scale becomes a factor. In some of these
projects, they are so large you will dedicate your entire career to executing one. I think
the pendulum needs to swing back the other way, where if we can increase the pace of
development and decrease the cost, we could give a scientist or team working on a
spacecraft five of them in a career, or something of that nature. There is a tradeoff
there. We have people at NASA that are trying to design a system that has to work
right the first time and we have spent a lot of money making sure that it does. We
have impressive processes to ensure that everything is going to work the first time.

Everything has to work the first time if you are spending your career as a scientist build-
ing an instrument or if an entire program depends on the success of that spacecraft the
first time, if billions of dollars are at stake. That is when these programs go over
budget, because it has to be right the first time when you are putting billions of dollars
and that much time. But if we can bring that down to hundreds of millions and bring
that pace from five to ten years to one to five years, then we will get a few cycles
within the career of the average engineer and I think more innovation will happen the
more cycles you have. It gets back to rapid prototyping. I think the cost of failure is
high, which is, unlike Google or Facebook, you are not rolling out new releases every
month or every year, but maybe every three years or every five years you are coming
out with major new versions, so to speak, of systems. I will offer that it is not black and
white; you can’t treat one like the other, but there is a pendulum there and I think the
aerospace industry would benefit from moving in the direction of SpaceX.
Question: You outlined the challenges for NASA. What is your vision for NASA in
ten years?
Chris Kemp: I think there are a lot of opportunities to leverage IT. From an engi-
neering perspective, we can be less vertically integrated, we can be flatter, more trans-
parent with less levels of management between the signal and the noise, so to speak.
Ironically, I technically should be noise, because in order to be a CIO at NASA, you
have to invest your career in it, typically. To be a senior executive in the civil service in
a federal agency often means you have worked your way up for decades. I am a bit of
an anomaly in that only five years ago, I had my hands really dirty in technology. So I
actually have very recent experience with technology. Many of my peers are amazing
people and have a lot of management experience, but it has been a long time since
they have had their hands dirty. As we look at the technology that exists today, they
are somewhat detached it. They haven’t directly managed it; they haven’t directly had
their hands in it for a long time. Things change very quickly in IT. I see a NASA that
is much more open, much more transparent. I see a NASA which has many fewer
meetings, which is using IT to support a much richer ecosystem of manufacturers in
parts. I see a more modular architecture in the future and I see the data that we spend
so much money collecting being much more accessible. I see every spacecraft as a
sensor, either orbiting our planet our out exploring the solar system. Much of that
data, while technically in the public domain, is practically inaccessible. So I see more
public-private partnerships to make more of what we do more publicly accessible. I see
many opportunities to do that.
Sterner: Thank you, gentlemen, for coming.

Second Panel
Eric Sterner: I want to thank our second panel for coming. We have three more
very talented individuals with excellent backgrounds and experiences that give them an-
other set of unique insights and perspectives on the task and the challenge of innova-
tion in aerospace. We will start with Doug Comstock, who is the Director of NASA’s
Innovative Partnerships Program. Doug has really changed IPP in ways that make it a
driver of innovation, something that pulls things out of industry. He has a background
in engineering, aeronautics and policy. Not too long ago he was the NASA comptrol-
ler. He founded NASA’s Strategic Investments Division and was program officer and
examiner at the Office of Management and Budget, so he has seen it from the White
House, from the agency and the private sector, having worked at Futron and General
Dynamics.
Our second speaker is Dr. Scott Pace. He is a Professor of Practice and Direc-
tor of the Space Policy Institute at George Washington University. He has a back-
ground in physics, aeronautics and policy analysis. His most recent gig, if I recall cor-
rectly, was the Associate Administrator for Program Analysis and Evaluation at NASA,
which was a new organization at NASA and one of the smarter things that the Admin-
istrator did in the last few years. I am glad to see that it is continuing. He is a former
Assistant Director for Space and Aeronautics at OSTP, so he has also seen the world
from the White House. He worked at the Rand Corporation in the Science Technol-
ogy Policy Institute supporting OSTP and is a former Deputy Director and Acting Di-
rector of the Commerce Department’s Office of Space Commerce. So he has seen it
all from the government perspective, looking at both civil agencies like NASA and look-
ing at promoting space commercialization.
Our last speaker is Uyen Dinh, the Senior Director for Legislative Affairs at
GeoEye, Inc., which is the largest commercial remote sensing company in the world, I
believe. Uyen has done a huge amount of work with the Department of Defense, the
intelligence community, the Department of Homeland Security. You are probably fa-
miliar with GeoEye from the standpoint of data purchases and the work that they have
been doing, largely with DoD. She has a background in law and information technol-
ogy, with a heavy emphasis on national security and homeland security. She served as
legislative counsel for Rep. Tom Davis out in Fairfax County and as counsel for the
House Committee on Government Reform, which has jurisdiction over procurement
and counsel for the House Armed Service Committee. She was Chief Counsel at the
House Permanent Select Committee on Intelligence. They all have fascinating back-
grounds and we look forward to hearing what you have to say.
Doug Comstock: Thanks, Eric. It is a pleasure to be here this morning to talk about
innovation in aerospace. The topic of our panel is “Public-Private Partnerships.” A
little bit of philosophy on how we view that at NASA: when we are looking for partner-
ships, we are looking for a win-win-win, where it is a win for the private sector and

partnering with NASA, they can have access to government intellectual property, facili-
ties, expertise, resources and so on. The government gains by having access to the
expertise, resources and innovation that we can get from the private sector and the
taxpayers gain by having taxpayer dollars that are leveraged and better government
services and products. NASA is pursuing these public-private partnerships in many ar-
eas.
We heard a great example with SpaceX and the COTS program earlier from
Tim. I think that exemplifies the next point here that we are beginning to see some
shifting in the traditional roles between government and the private sector. The rela-
tionship has typically been a customer-contractor relationship and cost-plus contracts.
We are beginning to see a shifting of risk, so it is shared between government and the
private sector. I think the COTS relationship followed by the CRS contract is really a
huge milestone for NASA in demonstrating this new model, where it is not the cus-
tomer-contractor relationship, but really a partnership where there is shared risk,
shared interests and common areas that are being explored by both the government
and the private sector. What we do in the Innovative Partnerships program is try to
bridge the gap between NASA and other partners and basically match technology
needs with technology capabilities. In essence, we are a technology clearing house
moving technology in two directions, bringing technology through partnerships into
NASA to address the needs that we have and taking the technology that has been de-
veloped for our missions in space and aeronautics and applying those technologies for
other applications within many different industries. We work that in both directions;
we try to match needs and capabilities for technology.
In talking about innovative partnerships, just a little bit on innovation and a little
bit on partnerships, and a little more on the philosophy. We heard about risk tolerance
and risk taking. That is a critical thing for innovation and we have to find ways to do
that. I think one of the ways that we can begin doing that more is to take risks, not so
much in the critical-path, mainline programs but in some of the smaller things where
you can afford to take risks, and if you fail, as Chris was saying, it is not a multi-billion
dollar, decade-long project that fails, but you are failing on smaller increments and be-
ginning to create a culture where that is okay. If you are not failing occasionally, you
are not trying hard enough. Another key thing with innovation is building networks,
making connections between various different organizations that share some common
interests. Innovation is not just about new technology, but also about new ways of ap-
plying existing technology to new processes and business models. We are interested
not just in technology, but these other business models as well.
In partnerships we are seeking out adjacent markets, trying to get economies of

scale. We just had a discussion about if launch costs were lower, how might some of
these opportunities come about and would there be adjacent markets out there, cer-
tainly the commercial market that is existing, the DoD markets, and so on. In other
applications of technology that NASA is interested may have similar economies of scale

if we can find adjacent markets and leverage those opportunities. We are seeing some
of that in technologies that are being developed for other industries where they are
really pushing the advancement of the technology like lithium-ion batteries for cell
phones, and aerospace applications are taking those off the production line and modi-
fying them for aerospace applications.
Seeking out common interests, partnerships that really maximize the mutual
benefit, understanding what the interests are of the partner and maximizing what their
benefits are at minimum cost to you, so if you can both bring lots of benefits to the
other partner to minimum cost to you, you will create a lot of value in a partnership.
We like to look for partners with skin in the game who are bringing resources and we
are doing a lot of things to try to do that, to leverage our resources and looking for
non-traditional partners that can bring fresh perspectives to the things that we are do-
ing. We are looking at the “sweet spot” where we overlap national needs and NASA
needs with the kind of expertise that NASA has.
The kind of things that we are doing in the innovative partnerships program are
these three program elements, technology infusion, innovation incubation and partner-
ship development, and I will just talk briefly about these to give you a sense for some of
the activities we have underway. Small Business Innovation Research and Small Busi-
ness Technology Transfer Research are government-wide programs that set aside a
percentage of extra-mural R&D for all R&D agencies (it is currently 2.5 percent for
SBIR and 0.3 percent for STTR) to bring the innovation from small businesses and ap-
ply that to NASA’s challenges. We have had a lot of success with these firms. I just
visited one in New York City called Honeybee Robotics, which is a small robotics firm
in Manhattan, just down the street from the Empire State Building. But they have
many, many technologies on Mars right now, on both the Rovers and on the Phoenix
lander, doing great things and looking at some really innovative commercial applica-
tions for some of their things like a motor they are developing, also under SBR fund-
ing, for operating on the surface of Venus that can have myriad industrial applications,
o
operating at 500 C. That is one of those cases where if the needs of space exploration
wasn’t pushing that technology, who would be developing a 500oC motor?
Another thing is the IPPC fund where we are bringing together partners who
have common technology interests and leveraging resources and pulling those together
to develop technologies of common interest. We funded about eighty technologies
over the last few years at, on the average, about $1 million each. About a quarter of
that funding has come from the IPP program, about a quarter from other partners
within NASA and about half of that from external partners, such as other government
agencies, small and large businesses, and universities. We have had a lot of good suc-
cess with that and we have had some real interesting projects, like the inflatable habitat
with the National Science Foundation and the ILC Dover that was down in Antarctica
last year.

In our innovation incubator, we are trying some new ways to seek partnerships.
Centennial Challenges is our program of prize competitions for the citizen inventor.
Kim Davidian, who is here, had a great role in getting that program started at NASA
and we have seven competitions, six that are currently underway. We have had some
real interesting technologies come out of that and a lot of excitement spurred in the
public. We are trying to engage more with universities and throughout the innovations
that come from unexpected places. That is one of the things that history has taught us
about prizes; often the unusual suspects are the ones who come forward with the inno-
vations. FAST is a program where we are trying to demonstrate technology to get it to
a higher maturity level so that more technology will be used in NASA’s missions and
we are buying commercially available services to do that, initially with the Zero-G Cor-
poration and then we will also buy services from Suborbital Commercial Flight compa-
nies when they are available.
Innovation transfusion, we are reaching out to outside sources of innovation and

trying to bring those back in to NASA. One of the elements of that is innovation am-
bassadors where we have an agency-wide competition and select civil servants to go
out and spend a detail of up to a year in an innovation organization outside NASA and
then bring some of those innovative ideas back into the agency. Innovative technology
is a new thing that was in the President’s Fiscal Year 2010 budget to try to fund some
revolutionary or game-changing technology early on in the process that could then be
picked up by other funding mechanisms. Partnership Development is where we are
doing all sorts of partnerships, but a focus there is on technology transfer and manag-
ing NASA’s intellectual property, moving innovations that have come in our need to
meet the requirements of our missions and applying those for other applications.
Spinoff is a publication that we do that documents each year about fifty of the
top commercialization successes that we have had. There are many industries that
benefit from this, medicine, transportation, public safety and so on. The public benefits
from these NASA-derived technologies in many areas in economic growth and in qual-
ity of life. Through our Spinoff publication, we have documented over 1,700 of these
cases where technology that was developed for our missions in space and aeronautics
has been applied for other applications that benefit the taxpayer and provide returns
for the public. There is an interesting web feature called NASA at Home and NASA
City. It is on the NASA homepage at www.nasa.gov/city. It gives you some examples
of how ubiquitous space technology is. You can look in your home and see it in the
kitchen, the bathroom and the bedroom, or go to the city and it is in the fire station,
the marina, the grocery store and the sports arena and see the kinds of impacts that
some of these technologies have had. So I think there are important opportunities for
innovation to help address NASA’s needs, but also apply the kinds of things that we
are learning and developing to meet our mission’s further applications in society. That
is the conclusion of my remarks and I would be happy to take questions later.

Dr. Scott Pace: I would like to show you a couple of quick charts to provide a back-
ground context for some of these discussions of innovation. First of all, trends in fed-
eral R&D money (Figure 5), since we are talking about aerospace and innovation, and
of course, the federal government is a large part of the aerospace market space. Over-
all trends of federal R&D have been going down for a period of time. Fairly constant
investment in facilities, research going up and down, developmental costs and expenses
also going down somewhat. And of course, as overall GDP has been slowing, these
percentages have less robust growth rate than they might have in the past.
Figure 5
Now in terms of what that money goes to, the most striking thing that you see,
of course, is that it is not going into space. In FY 1964, 1.1 percent of the GDP was
spent on space, roughly 4 percent or so of the federal budget. Of course, this was
done when we were putting into simultaneous development of tons of programs; we
were building Kennedy Space Center, we were building what became the Johnson
Space Center, and so forth. So when people ask, “How come you went to the moon
in ten years last time and now you are taking thirty, if ever, this time? Have you just
gotten dumber?” the answer is no. We are not spending 1 percent of the GDP to put
in simultaneous development a whole bunch of programs; now we have to do things in
sequence. If you look at where the money is going, and this is again not surprising
when you look at the opportunities that are available and the political benefits as well
as market benefits of N.I.H. funding, everybody else has been stable. Now this has
caused some discussion on the Hill, saying, “Gee, maybe we are underfunding in other
areas of R&D, in physical sciences and so forth,” because things like CAT scanners
and MRIs came out of investments in the physical sciences, not out of straight bio-tech
work. There is sort of an ecosystem in R&D investments, so when people talk about

balanced investments, yes, on some hand that is code for “give more money to me and
not to the other person.” But it is also a recognition of the fact that we don’t know
where innovation is going to happen; we don’t know where something is going to flow
back. A classic example at NASA is the image correction methodologies used on the
Hubble space telescope. You can then use those techniques for better detection of
breast cancer. Who knew? If you look at investments in, say, fuel cell technology, who
is working in that space? Yes, you will find NASA working in there; yes, you will find
the military working in there, because carrying batteries is heavy, but you also find NIH
working in that space, because small micro-fuel cells can be put in an artificial heart.
So where you are looking for new innovations, you are looking for where are people
working in high-stress, complicated environments, where you have an incentive to go
beyond what any normal person might do. Space is classically a place for that because
everything in space is usually trying to kill you or your spacecraft. In order to survive
there and accomplish something there, you have to bring together multidisciplinary ca-
pabilities.
I think you can make an argument that in rebalancing the trends in federal re-
search, we also ought to be looking at how space can contribute to problems in other
areas. Now space in absolute spending terms is still fairly large, but again not up there
with health and certainly not always connected with general science expenses. The
problem, as I have said, with this kind of balancing is that you don’t really know where
future innovations are going to be coming from. In particular, if innovations are occur-
ring in commercial and international networks that the government is not a part of, you
are also not going to know where those innovations are happening, smaller entrepre-
neurs, smaller vendors, people working in fields that don’t show up in government con-
tracts.
A colleague of mine at George Washington University, Caroline Wagner, wrote

a book called The New Invisible College where she talks about networks of S&T inno-
vation. As new developing countries come in, looking to innovate, they are not neces-
sarily building up giant research establishments; they are not necessarily replicating the
capital expenditures or rebuilding M.I.T. or Stanford or something like that. They are
using the internet to link up their researchers in areas that have relatively lower barriers
to entry: biotech, nanotech, information technologies. They are getting themselves
linked into research networks, so you start mapping where are people doing work.
Not surprisingly you find multiple networks and not surprisingly, the U.S. is still at the
center of many of those networks, which is a good thing, but at the same time it means
that people don’t necessarily have to come here to be part of that. In 2005, I was in
Hanoi talking at the Vietnamese Institute of Physics. It was a symposium on Einstein’s
classic 1905 papers and I was talking about why GPS was an example of the practical
use of general relativity, because you have to make general relativistic corrections in
order for the GPS to work. So it is a daily example, day in and day out, of where gen-
eral relativity is actually practical. It affects position figures by a few meters. What I
was struck with by many of the students there is just how engaged and knowledgeable

they were, even though they were in these terrible Stalinist-era crumbling buildings.
But they were connected into the internet; they were knowledgeable about the cutting
edges of IT; they had a hunger to be engaged. They were part of that new invisible
college building around the world. They didn’t necessarily have to come to the U.S.,
although obviously if they did, that would help with their connections.
The reason why I tell that story relates to what Doug is trying to do with the in-
novative partnership programs, which is taking government bureaucracy, which has its
own interface mechanisms, its own difficulties in dealing with alien entities, and trying
for its own self-interest to connect to that wider international and commercial world
where the interfaces are different. If you are a small entrepreneurial company, you are
just not going to want to put up with the kind of transaction costs that sometimes come
with a government contract. So the government needs to, in some ways, look like or
mimic things that are more familiar in the international or commercial world. The In-
novative Partnership Programs are part of that. Another effort that we tried was the
creation of a venture capital fund. Some of you may have heard of that effort. It is
another long, sad story and I can tell you the story in another venue. But it is, I think,
also going to come back.
In-Q-tel was created by the intelligence community, not because there was some
sort of critical shortage of venture capital around, but because it was in the CIA’s self-
interest to get into the deal flow, understand what was going on there, and have an un-
derstanding of what was happening in areas that were in their adjacent markets. In
many areas, NASA has similar adjacent market interests – I again mention biotech,
nanotech, IT, materials – where there are large capital flows. Now there aren’t large
capital flows like that in, say, pressure suits. There may or may not be large capital
flows in high temperature motors. But there are areas where the innovation is being
driven by capital and markets far in excess of what the government can support. The
trick is, how do you find those areas, leverage them, have an influence on them, bene-
fit from them, penetrate those networks, understand and bring them back in, while at
the same time conserving your resources for those things which really only the gov-
ernment is going to buy and pay for. A nuclear power source sitting on the moon, for
example, is not something I imagine there will be a large commercial market for in the
near term. Maybe later. That is an area where NASA should be spending its R&D ef-
forts or maybe working with international partners in cooperation for things that will
not be created by the private sector.
Now one of the challenges for NASA to be able to do this is not just a matter of
bureaucracy and setting up some nice networking mechanisms, but it is also making
sure there is a reception end inside of the agency. That is, what is the intellectual capi-
tal of the receiving end of this information that comes in? It doesn’t do you any good
to get the most brilliant innovator in the world coming in and talking at you if all you
hear is a sound like in the teacher talking in a Charlie Brown cartoon: “wa-wa-wa-wa
innovation wa-wa-wa-wa nanotech.” What do you do with that information? The way

you are able to deal with it, as Chris has said, is you have to have people who have got-
ten their hands dirty at some point. Technology management and innovation man-
agement is a hands-on sport; it is not something you can just take a course in, get a
certificate and say you are qualified innovator. You have to have hands-on experience
– where are you going to get that? I think if you look at some of the difficulties in the
space acquisition and space innovation community, you can trace it to the lack of
hands-on experience inside of the government. We attempted to outsource many of
our capabilities, whereas we thought, wearing my old government hat, that it was pos-
sible to pay someone else to have your interests at their heart. No, you have to have
somebody who actually knows what they are looking at, because it becomes a vicious
cycle otherwise. If you have a smart person there on the government side, the industry
sends their smart person. If you have a person who is not so smart, if you are an in-
dustry guy, why would you send the smartest person in your shop? You don’t need to,
because the guy you are talking to doesn’t know that much. But if the guy you are talk-
ing to knows a lot about it, it raises your game. As for the areas that NASA was rela-
tively better at in the last several years, they have places like JPL, Goddard, I would
even say – and this is ironic for people who know me – Marshall, in building flight
hardware. Marshall has retained some flight hardware experience in house: every ET
tank that flew, every SRB that flew. There were people who had that experience,
whereas places that just do research or places that do just operations have a disadvan-
tage. It is not the same as development.
Development work is the hardest, most difficult thing you can do. You never
have enough time, you never have enough money, and you don’t know where all the
risks are. You have to make almost artistic judgments as to where to place your next
bet in dealing with innovation and risk. Certainly I think some of our SpaceX col-
leagues can comment on that. That is not something you can take a course in, so you
have a process or place where people get that hands-on experience. It doesn’t mean
that government needs to build everything in house; it means it has to have a small
number of people who actually have that hands-on experience. Therefore I am some-
one who thinks that the revolving door between government and industry is actually too
sticky and too slow. The current ethics rules and discussions that have been going
around this town are limiting that revolving door flow, which I don’t think is necessarily
in the best interests of this nation. There are persons and talents in this nation that we
should be drawing into government service and not turning them away. Maybe there
are people in the government who should be finding opportunities to excel elsewhere.
But the revolving door should flow both ways. It is best for the country and I think that
we don’t do enough of it.
The final thing I will conclude with is I really enjoyed several of the conversations
that went on in the previous panel. I also noticed a sense of deja-vu because in listen-
ing to talk about how new entrepreneurial companies are doing things differently, being
lean and so forth, I am flashing back to the 1970s, when I first heard of some of those
arguments. I was making a list just now and this is the fourth generation of entrepre-

neurs that I have seen, which means I am old: Orbital Sciences, American Rocket
Company, Conestoga, SSI? Now the news about all that is not that people have been
doing this a long time and gee, we tried that and it has gone away. It is that with each
one of these generations that has come forward and died, the one that has come after
that has been stronger, better financed, more intelligent, and has made greater pro-
gress. So when SpaceX, for example, had its difficulty on its third flight, none of the
people I knew within NASA was smiling or saying “I told you so.” The thing that was
most impressive, and I want to commend SpaceX for this, is they rapidly got out an
email about what was happening, what they thought was going on, what they were in-
vestigating and what the problem was and that they were fixing it. Yes, they had a fail-
ure, but they were looking at it, getting that feedback loop, moving faster to correct it.
For me personally, I think that was an example of increasing trust and confidence in an
organization that brings its failures forward, fixes those problems fast, puts them out
there, moves on to the next thing.
That is the kind of spirit that we need to see in a lot our activities: go to test,
don’t just write a bunch of view graphs, but let’s have a flight test. If the flight test is
successful, you can remove the other flight tests that you don’t need. This is a lesson
from both Apollo and robotic missions. Test as you fly, fly as you test, trust nothing,
because you don’t know what is going to be going wrong. That is one of the ways
where you take the spirit of innovation and fast correction from the IT world, but you
apply it to the difficult, high-capital-cost, risky, binary-failure world of the aerospace
community. With that, I look forward to the discussion.
Uyen Dinh: Good morning, ladies and gentlemen. One of my former bosses on
Capitol Hill used to say, “Blessed are those who are brief, for they will be reelected.”
Since I am no longer in politics, I will change it to “Blessed are those who are brief, for
they will be reinvited.” Eric, thanks for putting this together. I am glad to see there is
life beyond the Armed Services Committee for both of us. Good morning, and I wel-
come the opportunity to share some thoughts with you about how a public-private
partnership created the world’s highest resolution commercial imagery satellite, which
serves both the United States government and the business world.
Figure 6

First of all, what is GeoEye, and what does it have to do with innovation in the
aerospace industry? GeoEye is the leading provider of geospatial information, imagery
and solutions for the national security community, strategic partners, and commercial
customers. We help them to better map, measure, and monitor the world. We own
and operate a constellation of three earth-imaging satellites and two mapping aircraft
with a fourth earth-imaging satellite potentially under construction this summer. Our
constellation includes the 1-meter resolution IKONOS satellite and our newest satellite,
GeoEye-1, launched last September. GeoEye-1 is the world’s highest resolution and
most accurate commercial imagery satellite, imaging the earth with ground resolution
of 0.41 meters (about 16 inches.). In addition, we have an international network of
ground stations, a robust imagery archive, and advanced geospatial imagery processing
capabilities. GeoEye 1 with 0.51 meter resolution and provides images for the com-
mercial sector. For those of you who may not remember, GeoEye is an acquisition by
Orbimage buying Space Imaging’s assets back in 2005 when Space Imaging filed for
bankruptcy. Staring in September 2006, GeoEye has been trading on the NASDAQ
under GEOY.
So how did we get here? In 2003, the United States government and in par-
ticular the National Imagery and Mapping Agency (NIMA), which is now the National
Geospatial Intelligence Agency (NGA), initiated the NextView program as a partnership
with the U.S. commercial remote sensing industry to ensure that the government would
have access to commercial imagery in support of national security. The NextView pro-
gram was considered forward-leaning, even transformational at that time. This was the
first time that the U.S. government contracted with two private firms to build satellites
at a firm, fixed price to provide it with commercial imagery. The program was de-
signed to have two commercial suppliers, in order to facilitate competition and also to
buy down risk. NextView was awarded to Digital Globe, our competitor, in 2003 and
to GeoEye in 2004. The key to the NextView contract was very simple. Essentially
these long-term purchase agreements made the U.S. government “anchor tenants” in a
new class of remote sensing satellites, and provided the initial funding for both compa-
nies to build and operate our satellites. So GeoEye won the $500 million NextView
contract in September 2004 and was able to build and launch GeoEye-1 within four
years of the contract award with no cost overruns. The prime contractor who built the
bus for us was General Dynamics Advanced Information Systems, and the satellite’s
imaging system was built by ITT Corporation. NGA paid GeoEye approximately $237
million over the course of four years to build GeoEye-1 while we raised the other $300
million on Wall Street. The total cost of the satellite, launch, and insurance (which
GeoEye paid) was about $537 million. It launched out of Vandenberg on September
6, 2008. GeoEye is currently in full operational capacity and delivers 0.41 meter reso-
lution to NGA for government purposes and to other commercial and foreign entities
at 0.51 meters, due to licensing restrictions.
I want to back up a second. The background is that prior to the Next View con-
tract, NGA had this thing called ClearView. I won’t bore you with the details, but es-

sentially it was a set system of payments spread over two years that allowed GeoEye to
collect, process, archive, and distribute high-resolution hand-chromatic and multi-
spectral – that is black and white for those of us who are liberal arts majors – imagery
and products to support NGA’s mission to provide up-to-date geospatial intelligence to
DoD and the intelligence community. The ClearView contract was significant because
it signaled the government’s commitment to a long-term relationship with the U.S.
commercial remote sensing industry.
NextView became the next step in our evolving relationship, no pun intended.
NextView moved beyond the commodities-based approach of commercial imagery ac-
quisition and sought to assure access, priority rights tasking, volume (area coverage),
and broad licensing terms from the next series of high-resolution U.S. commercial sat-
ellites. Prior to the NextView program, NGA purchased commercial imagery in cum-
bersome multi-tiered licensing structures. One former NGA employee told me that
each order was individually faxed in to the companies, and that there were rooms full
of filing cabinets at NGA and at the companies filled with order sheets. Of course, the
fax machines were constantly jammed or needed new toner. I don’t know about you,
but to me this didn’t seem like a very efficient way to run a business.
So with the NextView contract, NGA started to move toward a service-oriented

imagery purchase approach that is more consistent with the way we actually do busi-
ness with our larger external customer base including: Google and Microsoft Virtual
Earth, as well as several hundred re-sellers and the foreign companies and entities. In
this model, a schedule is established for acquiring imagery that is stable over the long
term, and this approach allows us to optimize our imagery collection and production
processes for standard commercial practices.
In January of this year, NGA completed the renegotiation of the NextView ser-
vice imagery acquisition contract from a pay-per-order structure to a service level
agreement (SLA) with a single monthly fee, more flexible rights, classification produc-
tion, and increased imagery volumes. The value of the SLA is $12.5 million per
month for a period of one year, to us and also $12.5 million to our competitors. We
will provide satellite imagery products to NGA under this agreement to include new
commercial data purchases, archive imagery, and other GeoEye products. The licens-
ing structure has also evolved over time. The NextView data license agreement allows
for all branches, departments, agencies, and offices within the U.S. government to
share imagery with state, local and foreign governments, intergovernmental organiza-
tions as well as non-government organizations (NGOs) and other non-profits. The
NextView license is designed for more efficient and effective sharing of data.
On to the policy part of it: current U.S. policy actually is very helpful because it
encourages a robust commercial imagery segment, global leadership, and reliance on
commercial imagery services, while discouraging government competition with the pri-
vate sector. The commercial remote sensing industry fulfills DoD and the intelligence

community’s mapping, charting, and geodesy requirements at a fraction of the cost of

the national systems. I won’t go into the national systems. Does anybody remember
FIA? The first three letters of fiasco! We believe that the industry provides the best
value for the government’s broad area mission, while meeting the needs of the user
community. The U.S. Commercial Remote Sensing Policy of 2003 and the U.S. Na-
tional Space Policy of 2006 are both very clear and excellent examples of where pol-
icy, practicality, and national security all meet.
Figure 7
In conclusion, GeoEye imaging products serve the growing national and interna-
tional demand for highly detailed imagery in applications such as mapping, national se-
curity, homeland defense, emergency preparedness, environmental monitoring, urban
planning, fires, resource managing and commercial fishery. GeoEye is a world-wide
leader in advanced imagery processing and photogrammetry. We produce a broad
spectrum of imagery products from a wide variety of satellite and airborne sensors. We
also create fused images, digital elevation models and land use classification maps, and
other imagery-derived products that enable our clients to incorporate imagery into vir-
tually any geospatial applications. I don’t need to tell you that the commercial demand
for unclassified commercial imagery is growing rapidly, as consumers discovered on the
internet, with its multifaceted uses, as well as the growing demand from our tactical
warfighters on the front line as we gear up for a fight in Afghanistan. All this together,
GeoEye has already started long-lead items. We have already contracted ITT to start
grinding glass for us on GeoEye-2, and we are looking at a 2012 launch. GeoEye-2
will probably have better resolution and some other specs that I can’t speak to at the
moment, but it will be unclassified.
We believe that both the commercial and government markets will continue to
expand, and we want to be able to service these requirements. By supporting the U.S.
commercial remote sensing industry, the government is actually receiving multiple
benefits. Our technology helps protect American security, and the technology used to
build our satellites cannot be exported. When the government buys imagery products
and services from us, it is also protecting the American industrial base. Reliance on the
commercial remote sensing industry also frees up the government to do more impor-

tant tasks, such as the “exquisite mission,” which we can’t talk about here. In short, by
doing business with us, the government protects American jobs and American security
at something like fifty cents on the dollar. It is through this partnership that the U.S.
retains technical leadership and excellence which results in our allies seeking our assis-
tance instead of developing their own competing capabilities. Thank you for your time
and I look forward to your questions.
Sterner: Thank you, I think there is a lot to digest; there is a lot out there and quite a
bit to think about in terms of how to move government forward in terms of promoting
innovation. We can take a few questions; I have a few of my own.
Questions and answers.
Question: I have a question I’d like to ask Scott. You seemed to be engaged in a
Sisyphean task, where every time you roll the rock up a hill, it comes crashing down
the other side because the government just does that. Is it reasonable to expect that
the government could ever be as nimble or light-footed as the private sector could be?
Is this an improbable task or something that has a chance of success?
Scott Pace: The short answer is yes, and as Doug was talking, I was thinking that it is
actually quite instructive that both Doug and myself, although we came out of and spent
a lot of time in the very boring and sometimes difficult issues of budget planning and
making trade-off decisions at senior levels, that both of us have been for a long time
and still are advocates of commercial innovation and commercial involvement. The
reason is that we see the benefits to the government of having these outside forces,
these outside prods, these other alternatives. Policy innovative ideas don’t necessarily
come from inside the government; they come from outside the government. Commer-
cial innovation ideas don’t necessarily come from inside the government; they come
from outside the government. So if you are dedicated to the public mission that you
think needs to be accomplished, science, exploration, national security, whatever is the
public mission that you want to have happen, and you are interested in that mission’s
success, you should be interested in where you can go get innovative ideas and where
you can go to give yourself the best chance of succeeding in your mission. I think that
the choices comes from a judicious involvement of the private sector and innovation.
Would I ever expect the government to be as innovative as the private sector? Abso-
lutely not, because the government has a different mission. As a good academic, I re-
fer you to a paper I wrote on merchants and guardians. The guardians are different
from the merchants and you want them to be different. You don’t want the govern-
ment to be like industry or a commercial company, just as you don’t want commercial
companies trying to be governments. They have different roles. But can they learn
from each other? Can each play a particular role? Yes, they can. I don’t see things
like the Innovative Partnership Program as being some sort of charity or some sort of
ideological hobbyhorse. I see it as a cold-eyed mission-success-focused effort to recog-
nize the limitations of government, recognize the responsibilities and the public mission

that the government has and then go out and tap commercial innovative forces to the
best it can to bring them into the government to do the mission. What Doug and the
IPP program should be doing is advancing the mission of the agency, not necessarily
doing something fun or following an ideological agenda or trying to prove something
about organizational theory. It is to do the mission. When it does that, that is when it
earns its keep.
Doug Comstock: I think we are trying to do just that and to answer your question,
am I insane, no. But innovation is hard and I wouldn’t be honest if I didn’t say that
every day there are bureaucratic obstacles in the way and it would be very easy to just
throw up your hands and say I give up. But you have to keep moving forward and
pressing and keep your eye on what is out there in the future and what Scott was talk-
ing about and how these things will apply to the mission, how they will benefit the
agency down the road, how they are going to benefit the taxpayer, and keep your eye
on those longer-term things and keep working through the difficulties and bring the bu-
reaucracy along with you. Bureaucracy is like a battleship; it is slow to move and has a
lot of momentum, but over time and with persistence you can begin to make changes
and re-vector some of the directions.
Question: I have a question for Uyen, which may be awkward, so I apologize. I

would also be interested to hear what Scott and Doug have to say. Anchor tenancy is
an old construct and to be blunt, it hasn’t worked very well at NASA, which is loath to
try it. DoD tried it and it has been a success. They have gotten more capability for
fifty cents on the dollar. That is largely because industry has succeeded in fulfilling its
end of the bargain. Let me ask a different question: what happens when industry can’t
honor its end? I’ve got the money, I’ve built my satellite, it didn’t work. The taxpayer
is left holding the bag. How do you manage those kinds of risks?
Uyen Dinh: I can’t speak for those companies because they are not sitting at the ta-
ble. But the reality is that we, as taxpayers, get shafted all the time on programs that
are in the “black” world that we don’t even know about, that cost billions of dollars with
cost overruns. Who is doing the GAO accounting? Not a whole lot of folks. The
NextView program was a success because it called for exactly two satellites, one for
GeoEye and one for Digital Globe. Digital Globe already launched, and then we
launched last year, with a firm, fixed price, on time, and any cost overruns were ab-
sorbed by the contractors, us and GD. General Dynamics did not make any money on
it, and we did not make the kind of money we thought we would. I can’t speak for
Digital Globe. There has to be contractual specifications that lays out “If you can’t ful-
fill X, you are not going to get a milestone payment.” I could run you a list of DoD
programs that probably have gone over budget, over schedule, and they are still going
strong, but that isn’t my problem any more.
Question: Scott, could you talk about the limits of anchor tenancy and how you do
the trade-offs?

Scott Pace: One of the limitations of anchor tenancy is the anti-deficiency act and the
Appropriations Committees. Back in the Bush 41 administration and the Space
Council, we worked pretty hard with NASA and the comptroller looking at how we
could do some sort of anchor tenancy. The best we could come up with that would not
involve one Congress committing a future Congress (which is something they will not
do, whereas companies can) was a form of predetermined termination liability sched-
ule. That is, if the government backs out or terminates for convenience at some point,
there is a predetermined schedule of payments and those schedules can be competi-
tively determined in a procurement process.
The problem is that the government wants to have choices; it wants to have op-
tions to be able to back out at a certain point and terminated for convenience. It
doesn’t necessarily want to commit to a longer-term arrangement. A company going
into a shopping mall can make more of a long-term commitment to that shopping mall
than the government can, and therefore it is not surprising that you will raise different
amounts of money in capital markets as a result. That is something that at its philoso-
phical base is inherent in democracy. We don’t want one Congress to commit another
one; we want that accountability each year. Now you can work around it in a couple of
different ways. You can work around it with service-based contracts, you can work it
with termination-liability contracts, you can work it with different kinds of milestone-
structured agreements. You can also do it by paying all up front. After the Challenger
accident, when the shuttle was replaced, it was $2.1 billion that the Congress appro-
priated all in one lump sum. That enabled the contractor, Rockwell, to go and make
arrangements with all of its subcontractors right then and there. That was a case
where the vehicle was delivered not only on time but under budget and meeting all per-
formance requirements. That is because you had a defined set of requirements, the
money was there and the supplier relationships were set. All of those conditions tend
to be missing in the programs that we have mentioned. That is why relations are not
there, the requirements are not stable, the money is not in there, so we should not be
surprised at some of the results that we have been getting.
Uyen Dinh: I will add that I think the NextView program worked also because the
government – I don’t want to use the term anchor tenant since now it has this negative
connotation – thinks of it as a lease. If you lease a car just for yourself, that can be
pricy. But if you lease one vehicle for yourself, but your wife or husband drives it, your
two teenage kids can drive it, your mother-in-law can drive it, your next-door neighbor
and your cousins can drive it, that is a pretty darn good deal for that lease. That is es-
sentially what we have in the service-level agreements today with NGA. You are not
buying a something, you are buying a service. So whether they want archived imagery,
they want new imagery, they want point-target, they want to know what is going on
over in North Korea or Syria, pick an Axis of Evil, we will do it. We allow the govern-
ment to access all of our archived holdings and for us to map the world at 0.41 meters.
It also spreads the risk because we have Google, we have Microsoft Virtual Earth and
Yahoo, which are all our customers, and a plethora of other smaller resellers and stra-

tegic partners and foreign governments and foreign entities. Again, you are spreading
that risk so the government is not paying 100 cents on the dollar (or in the case of an
agency out in Chantilly, paying 200 cents on the dollar), you are paying 50 cents be-
cause now those costs have been spread through other parties.
Question: Could you see any role for government in acting more like a venture capi-
tal firm in the aerospace industry?
Scott Pace: One of the criticisms of the government being in the venture capital
(VC) community is displacement, that is, you have public monies that are now displac-
ing private VC monies. At the relative scale that government is involved with, I don’t
really find that a credible argument. The amounts are so relatively tiny that it is not the
problem. I think a more serious argument is can the government really act like a VC
firm? A VC firm is actually a rather vicious creature. It will move people, it will close
things down, and the government’s primary interest is not necessarily making money.
It needs to make some money and replace it, but its interest is in other values. It is in
intelligence, it is being in deal flows, understanding what is going on. I think the most
serious argument against a VC-type construct is that if the government can’t act like a
full VC entity, it wouldn’t have access to the deal flows and therefore you will have ac-
cess to the secondary ones, the ones that are not that interesting, not that good, not
that attractive.
The government then has to say how much can we act like one of these vicious
creatures and to the extent that we can’t, are we still getting value out of it? I think that
for In-Q-Tel, the intelligence community decided they have gotten value out of it. Red
Planet Capital was an experiment to see whether or not NASA would get value out of
that kind of venture, because you are talking about accessing people in places that you
ordinarily wouldn’t see. They are not your main government contractors; you are talk-
ing about going into a new space, literally. I think that is why it is an experiment that
has to be run. If I were to advise the current government in looking at this, I would say
there ought to be some thinking about government-wide policy on venture capital
funds. If NASA does it, do I want the Navy to do it? Do I want the Department of Ag-
riculture to do it? What is the public purpose for which you up these funds? In-Q-Tel
is established for a particular case in the national security and intelligence world.
Clearly there is value there. Fine, done, Congress has supported that. I think it needs
to be looked at for other entities. But the fundamental reason to do it is because you
get to see people you wouldn’t see. The fundamental reason not to do it is you may
not be able to act enough like a VC company to be fully successful. That is the debate.
Doug Comstock: If I could just add one comment to that, I think something the
government can bring in their role is something different from one of the standard VC
partners in a syndicate, but it is also as a potential customer of the technology. So I
think that is a big draw that the government would have in participating and one of the
purposes is to vector the technology in a direction that would be relevant and of use to

the government. In addition to bringing money to help mature the technology, it is

also creating the potential market out there, which could be beneficial to everybody.
Scott Pace: Yes, that is not something that normal VCs can do; VCs themselves are
not markets. If the government says, “There is a new thing here and if it actually
works, we might be a first customer,” that is a very powerful market signal, in some
ways as powerful if not more so than the raw investment dollars themselves might be.
Question: Do the appropriators and budgeteers tolerate the low level of success that
accompanies a portfolio?
Doug Comstock: My past experience is yes. They want to make sure that the gov-
ernment isn’t going into debt; they want to make sure the down-side risks are covered.
If by some accident you made a ridiculous amount of money and actually looked like a
real VC firm, there would be an issue of where that money goes. Does it just go back
into the Treasury? The appropriations committees, in my view, would be most con-
cerned that the agency not be able to become self-financing and therefore independent
of Congressional oversight. That is an issue with user fees and other things that are
often discussed. One of the issues if it is too successful, then the issue of democratic
accountability back to the Congress goes away. So you have to deal with both ends;
you have to deal with the possibility of a complete failure and what happens if it is a
roaring success. You need to have answers for both. But in general, I think the Con-
gress has been very open to innovation and thought on this.
Uyen Dinh: I had a sarcastic response: it depends on whether the member company
is in their boss’s district. I would have to say that during my time on the few commit-
tees that I served, any time a program, no matter where it actually came from, was do-
ing some good, the toughest problem was getting it into a program of record, then get-
ting DoD or one of the intelligence community agencies to say that is a really good
idea: let’s scale it up or let’s take that, prototype it, and move it to a TRL 6 maturity
level and let’s field it at some date. Instead, we have things that are going backward.
We have a program called Future Combat System – a $4 billion request every year. It
has been broken up, and the thing has 185 complementary systems. My point is there
are all sorts of challenges, but I don’t think that Congress is the bad guy, as most peo-
ple like to think. The staffers work day and night to vet those programs.
Sterner: I think what you find with what Congress has done in the case of at least
user fees, with which I have some experience, is the money would go back into a gen-
eral fund subject to re-appropriation. Basically Congress would keep a tally of how
much money an agency earned and then have to re-appropriate it. More often than
not they would just reduce a request by the amount of the money that you earned, so
Congress doesn’t lose control and there is no incentive to be successful, which may be
appropriate for a democracy and accountable government. It is about finding a bal-
ance as to where you want those incentives.

Question: Considering the level of overruns and problems that the Defense Depart-
ment is having in its spacecraft programs, do you think that it has reached a point
where desperation may help foster innovation in terms of how the government does
these types of programs and open the doors to different ways of doing business?
Uyen Dinh: That is our general hope, but hope is not an acquisition strategy either.
The Air Force has had several programs either restructured or just canceled. The NRO
has had acquisition authority taken away and partially restored. People ask if the NRO
has outlived its purpose. What is the Air Force doing in space? The other services all
want to get a piece of space. Twenty years ago, I think the Navy thought it was just a
five-letter word, but now they want a piece of space. I don’t know. With the new ad-
ministration, we are still waiting to see how some of these new appointments are going
to take shape.
Question: This is a question for all three panelists. The resolution of other countries’
imagery is rapidly improving and their costs are coming down, following Moore’s law.
It is a different world with global competition. How do you deal with that?
Scott Pace: I will have the academic response, since I not am responsible for any of
this stuff. I was in Vienna last week in a committee on the peaceful uses of outer space
meeting and I was sitting in the back listening to the Italian delegate give a briefing on
the Cosmos Skymed, a four-constellation radar system launched by Delta 2 rockets out
of Vandenberg Air Force Base. They are all going strong. Other countries are pushing
ahead we should be part of what they’re doing. Become part of the network, be able
to go out and share information and be inter-operable and pass this around because
you are going to able to cooperate and interchange. Not necessarily rely on somebody
else, but make sure your standards and interfaces, both diplomatic and technical, are all
there so you can swap information around. You are then part of the network. There
is an old joke: one fax machine is useless, two fax machines may be okay, but a million
fax machines is really great. The same thing for the internet. There is a network scale
that is beneficial for all these resources and you can use it as an opportunity. The op-
posite side of that you have to have your own capability to be in the game. The reason
that other countries are getting in the game and spending a lot of their taxpayers’
money, doing things that do not make immediate commercial sense, is so they can be
in the game. They have the intellectual capability to then come and link with us. So
my concern is not that those other people are out there, for exploration as well as sci-
ence and national security. It is not that other people are out there; it is that we may
not be there. In this situation, it is important to spur commercialization and all that, but
we should be paying attention to our own capabilities and simultaneously networking
with everyone else’s to be in that game.
Doug Comstock: I think it is important to look at what others are doing and learn
from that and apply it to yourself. I was in an innovation conference recently in New
York and one of the comments that was talked about there was getting past the “not

invented here syndrome” and moving on to the “proudly found elsewhere.” If there is
something else better out there, embrace it and use that as an innovation for your own
interests.
Uyen Dinh: In the next few years, the Republic of Korea, the Indians, French, Ger-
man, and Canadians are all going to launch their sophisticated geo satellites. What is
the U.S. going to do about it? The marketplace is local now, so how do you stop that
kind of innovation and invention? What the U.S. government ought to do is take page
out of our own history in the 1990s with the synthetic aperture radar. The govern-
ment made it so difficult that essentially no U.S. firms entered into the marketplace.
So this means that this year we are going to start buying data from the Germans. How
sad is that? Are we going to ask the Chinese in twenty years, “Can we have a shot of
what you did over there by that mountain?” I don’t think so. Right now GeoEye-1 is
at 0.41 meters for the government, and we are pushing that limit to 0.25. That is
great for the government, but what about for everybody else? I’m sorry, the cat’s out
of the bag so how do you go back and say, “No, you are going to get 3-meter resolu-
tion?” The foreigners are nipping at our heels, and it will be only a matter of time that
they reach that 0.5 meters, if not better. They are doing it with the advocacy and the
financial support of their own governments. It comes down to the fact that the U.S.
government has to lead or get out of the way and let industry come up with solutions or
else our national security and our industrial base will suffer.
Eric Sterner: I would like to thank all the panelists for their participation and our au-
dience for coming.
* * *

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WASHINGTON ROUNDTABLE

ON SCIENCE & PUBLIC POLICY

Chris Kemp, Tim Hughes, Doug Comstock,

The Washington Roundtable

The opinions expressed during Roundtable discussions do not necessarily represent

The George Marshall Institute

Chris Kemp, Tim Hughes, Doug Comstock,

The George Marshall Institute

Tim Hughes, Vice President, SpaceX

Doug Comstock, Director, Innovative Partnerships Program, NASA

Uyen Dinh, Senior Director, Government Affairs, GeoEye

Chris Kemp, Tim Hughes, Doug Comstock,

June 16, 2009

The George C. Marshall Institute 2

The George C. Marshall Institute 3

The George C. Marshall Institute 4

The George C. Marshall Institute 5

By way of background, in November 2002 Figure 1 represented SpaceX. We

The George C. Marshall Institute 6

The George C. Marshall Institute 7

The George C. Marshall Institute 8

I want to show a few photos of our facility in Hawthorne, California because I

The George C. Marshall Institute 9

The George C. Marshall Institute 10

whether commercial or government, it may be less likely to inspire additional invest-

The George C. Marshall Institute 11

The George C. Marshall Institute 12

tomer. That is what we are taught. My perspective is that a functioning marketplace

The George C. Marshall Institute 13

Tim Hughes: We certainly struggle with that. As I mentioned, we analogized too

The George C. Marshall Institute 14

Sterner: Thank you, gentlemen, for coming.

The George C. Marshall Institute 15

The George C. Marshall Institute 16

In partnerships we are seeking out adjacent markets, trying to get economies of

The George C. Marshall Institute 17

The George C. Marshall Institute 18

Innovation transfusion, we are reaching out to outside sources of innovation and

The George C. Marshall Institute 19

The George C. Marshall Institute 20

A colleague of mine at George Washington University, Caroline Wagner, wrote

The George C. Marshall Institute 21

The George C. Marshall Institute 22

The George C. Marshall Institute 23

The George C. Marshall Institute 24

The George C. Marshall Institute 25

So with the NextView contract, NGA started to move toward a service-oriented

The George C. Marshall Institute 26

community’s mapping, charting, and geodesy requirements at a fraction of the cost of

The George C. Marshall Institute 27

Questions and answers.

The George C. Marshall Institute 28

Question: I have a question for Uyen, which may be awkward, so I apologize. I

The George C. Marshall Institute 29

The George C. Marshall Institute 30

The George C. Marshall Institute 31

the government. In addition to bringing money to help mature the technology, it is

The George C. Marshall Institute 32

The George C. Marshall Institute 33

The George C. Marshall Institute 34

Assessing the Economic Consequences of Cap-and-Trade Proposals to Regulate

Assessing Low Carbon Fuel Standards: Implications of New Congressional and

Boost-Phase Missile Defense: Present Challenges, Future Prospects – Robert