HELPING SMALL BUSINESSES THRIVE IN SPACE
August 4, 2022
Introduction
Small businesses play a crucial role in growing and strengthening the space sector. As a complex industry, space thrives with the help of small businesses’ creativity and unique solutions. One of the ways in which small businesses help the space industry is with the production of niche goods that often only smaller enterprises can produce. Complex systems such as launch vehicles and spacecraft are made up of thousands of parts, many of which are supplied by small businesses working on specific technologies. Keeping access to the unique parts that conform space systems depends on maintaining the health of smaller enterprises. Small businesses across America have been pioneers of technologies such as environmental control and life support systems, which are at the heart of human spaceflight. The technologies developed for space by small enterprises have ultimately been used in Earth applications as well, such as in advanced suits for divers working in extreme conditions.(1)
Crucial contributions of small businesses also include their local presence, their role in assuring equity and inclusion in hiring, and their participation in a larger network of industries. Small businesses are a critical part of animating local economies and providing knowledge of space programs around the nation, where bigger firms may not have a presence. As small businesses are often minority- and veteran-owned companies, fostering their success has an effect in the effort to help aerospace become a more equitable and inclusive industry. Finally, small businesses in the space industry are also part of helping to secure the sustainability of other industries that share similar technologies, such as defense and aviation.
For all their critical contributions to society and the space industry, small businesses are facing challenges that threaten their ability to thrive. Three issues facing small businesses that need policy action in order to secure their health include barriers to government procurement opportunities, uncertainties surrounding the Small Business Innovation Research (SBIR) program reauthorization, and workforce shortage and skill mix challenges. The range of issues that small businesses face will require thoughtful and creative policy decisions that look beyond a one-size fits all approach.
Procurement
One important component in helping small businesses succeed is to ensure access to capital. One of the ways to secure that access is government procurement.
Increasingly, NASA is increasingly using its “Other Transaction Authority” through Space Act Agreements(2) (SAA), and fixed-price contracts to obtain products and services from industry. Within these contracts, the private partner assumes more financial risk than in other approaches, such as with cost-plus contracts. NASA cites “savings to the taxpayer”(3) and the development of capabilities that “meet NASA human space exploration objectives while also supporting industry commercialization plans”(4) as reasons for making use of contracting mechanisms where the private sector takes more financial risk. In general, fixed-price contracts should be used when project requirements are well defined and no significant changes to the scope are expected. (5)
The risks associated with a contract in which the government does not assume financial responsibility can be unfavorable to small businesses, which often have smaller margins and resources than larger corporations. One aspect that might need to be analyzed when it comes to contracts that shift heavy financial responsibility to small companies is the issue of supply chain, as usually small businesses lack the financial margins necessary to support fluctuations in the market. The same issue applies to inflation, where a small company might not be able to absorb changes in the economy and might need a type of contract that offers more flexibility. Regarding Space Act Agreements, when NASA uses such procurement mechanism to acquire a product or service, the contracted company is not required to meet small business goals.
Considering these issues, we recommend that, as NASA looks to diversify its contracting instruments, the agency should adopt a balanced approach that analyzes its contracting situation on a case-by-case basis and work to avoid financial harm to small businesses. Additionally, as NASA enters into contracts that allow companies to be more independent in their development process, the agency should include mechanisms to actively protect the intellectual property rights of small businesses that might be part of the supply chain in the project. When choosing to use fixed-priced contracts, NASA should ensure that the requirements for the contract are well known and the scope will not change, as small companies may have difficulties supporting a great number of variations. One of the roles of the government is to help advance technology and small businesses. An approach in which the needs of small businesses are analyzed, instead of a one-size fits all method to procurement, should be used.
SBIR
The Small Business Innovation Research program seeks to help small businesses conduct research and development through contracts or grants. As part of the SBIR program, NASA provides early-stage funding of up to $1 million for R&D, and $3 million or more through other stages of the program.(6) NASA funding through SBIR has yielded technologies that are important to human spaceflight and other endeavors. For example, it was with the aid of NASA through the SBIR program that a small business developed technologies for the Roll-Out Solar Arrays (ROSA) being installed on the International Space Station to provide additional power to the orbital laboratory, as well as the solar arrays that will power the Gateway.(7) Besides NASA, other government agencies participating in the SBIR program include the Department of Defense and the National Science Foundation. The SBIR program contains a sunset provision, which means that the original legislation that put the program in place needs to be reauthorized to take effect. The program was last authorized in 2016 and is set to expire on September 30, 2022.(8)
To ensure that small businesses have an opportunity to develop technologies that contribute to the space sector, the SBIR program must be reauthorized by Congress as soon as possible. Without knowing what the future holds for the program, officers in different agencies can’t plan for future grants and contracts, ultimately diminishing opportunities for small businesses to develop new technologies.
Workforce
Small businesses in the space industry are experiencing a shortage of workers. This comes from a combination of factors from reduced interest in manufacturing jobs and competition in a growing industry, to pandemic-related issues such as early retirements. While the industry overall is facing similar problems, in the case of small businesses the issue is often-times aggravated by fewer resources, which may be less of a problem for bigger companies.
Small businesses need assistance delivering their message to institutions that can help, such as high schools and community colleges. Data suggest that a negative perception of “blue collar” jobs and a fear of mathematics and science are some of the elements deterring young people from going into the jobs needed in space.(9) Offering economic incentives to small businesses specifically to bring new talent and be able to compete in the larger employer arena can be a welcome solution. Attention from government organizations such as the National Space Council and the Department of Labor to issues that are specific to small businesses could be helpful. With focused attention from government institutions, small businesses can concretize their ideas and solutions.
- https://www.nasa.gov/sites/default/files/atoms/files/sls_orion_spinoffs.pdf
- https://makerfairerome.eu/en/nasa-to-offer-funding-for-initial-studies-of-commercial-space-stations/
- https://www.nasa.gov/feature/artemis-generation-moonwalkers-space-station-to-use-spacewalk-services-developed-through
- https://www.nasa.gov/content/nextstep-overview
- PMBOK Guide, sixth edition.
- https://sbir.nasa.gov
- https://www.nasa.gov/directorates/spacetech/Rolling_Out_a_Path_to_Future_Space_Travel
- https://www.sbir.gov/tutorials/program-basics/tutorial-5#
- Space Foundation. The Space Report.
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POC
For further information on this topic or other Coalition for Deep Space Exploration policy briefs, please contact: Jamil Castillo – Manager, Space Policy Coalition for Deep Space Exploration
jamil.castillo@spacecoalition.com
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