LEO Commercial Solutions LLC

Twenty years ago this month, I was privileged to help start NASA’s Commercial Orbital Transportation Services (COTS) initiative.  It was a huge innovation for NASA to try a commercial approach to meet a mission need.  COTS was successfully used on Commercial Cargo and has been used repeatedly since.   This post gives a brief overview of COTS, its foundations, applications, achievements, and future prospects.

The COTS Model

The “COTS Model” means a two-phase approach to fulfill a government need:

Phase 1 – Investment (financial, technical, or both) to help industry develop capabilities that may furnish services in the future to NASA and others

Phase 2 – If phase 1 is successful, a purchase of services (or data) from industry to meet a NASA mission need.

By using this approach, NASA (or other government agencies) can achieve their mission at potentially much lower cost by sharing that cost with other customers.   This has been proven on Commercial Cargo, where a relatively small investment by NASA in SpaceX development of Falcon 9 and Dragon led to a massive commercial success, enabling further developments to lower cost and increase access to space.  Indeed, NASA’s COTS investment has changed space forever.

When Should the COTS Model be Used?

The COTS Model should be considered by government when 1) there may be other customers for what it needs, and 2) industry could provide the service or data but first needs help developing the capability.

I taught a class at NASA on how to consider the COTS model when developing acquisition strategy.   This summarizes the process:

If NASA needs to collect gravity waves in space, since there is no commercial market, NASA should buy and operate the system.  The COTS model should not be used.

But if NASA needs housing for astronauts on the Moon, it is plausible that others will need it too.  A COTS-like approach may make the most sense in this case.

If NASA chooses to buy the service, but industry isn’t ready to sell it, NASA should help industry develop the capability with a COTS-like partnership.

Early Foundations for COTS

Back in the 1990s, NASA needed ocean surface data but realized that the fisheries industry also needed the data.  There was little development required, just integration of existing sensors, satellite bus, and launch vehicle.  So NASA put out an RFP for the data, not for a satellite system as it would traditionally do.  The result was a successful program called SeaWiFS.

I helped NASA decide to buy a service instead of a system in the 1990s.  The system was the Russian Soyuz and the service was to rescue ISS astronauts if needed.  Arnie Aldrich, NASA’s Associate Administrator for Space System Development, planned to buy Soyuz capsules for this purpose.  I met with him several times to identify other acquisition options.  Aldrich told Space News that NASA was looking at the service option.  The rest is history.  NASA bought the service which it continues to use today to transport some NASA crew to/from ISS and rescue them if needed.

When Has NASA Used the COTS Model?

NASA has used the COTS Model, with variations, multiple times:

Commercial Cargo to LEO – This is where COTS began 20 years ago.  Shuttle was ending and NASA baselined Orion to service ISS.  COTS was a $500M “side bet” (later grew to $800M) to see if commercial companies could carry crew and cargo to ISS.  We created the Funded Space Act Agreement (SAA) to “invest” in development of commercial capabilities and announced that NASA would buy services if available.  COTS phase 1 began with Funded SAA awards to SpaceX and RocketPlane Kistler in 2006.  RpK was later terminated and Orbital Sciences Corp (now Northrop) was selected in 2008.  That same year, NASA began COTS phase 2, the competitive purchase of Cargo Resupply Services from SpaceX and OSC.  I’ll describe more about COTS in a future post, but here is NASA’s final report on COTS for further reading.   

Commercial Crew to LEO — When we started COTS, we were the Commercial Crew and Cargo Program Office (which I named C3PO 😊).  We had an option in the SpaceX SAA for crew transportation which we never exercised, but we made a separate Commercial Crew Development (CCDev) investment in five companies, and started CCDev 2.  Then NASA formed a new Commercial Crew Program.  CCP used a modified COTS approach with more phases and more insight to assure safe crew transport.  Today NASA routinely purchases crew transportation from SpaceX on the Crew Dragon and continues to work with Boeing to mature its Starliner.

Commercial Payloads to the Moon — NASA used Unfunded SAAs to give technical help to companies planning to carry small payloads to the Moon under Lunar CATALYST.  Later NASA purchased Commercial Lunar Payload Services (CLPS) for such payloads, a service continuing today.

Commercial Communications — NASA for decades has owned and operated the Tracking and Data Relay Satellite System (TDRSS).  Now NASA is using the COTS model to transition such services from government to industry.  NASA Glenn is currently supporting Phase 1 winners of the Communication Services Project via Funded SAAs.

Commercial LEO Destinations — My last job at NASA was on Commercial LEO Destinations (CLD).   We used a COTS-type Funded SAA competition in 2021 to select companies for financial and technical support (including Blue Origin and what is now Starlab). I also led an Unfunded SAA competition which selected more (including Vast and SpaceX) in 2023 for technical support on CLDs and related capabilities.  NASA announced earlier this year that there will be a second round of Funded SAAs, and then a competition for CLD service contract(s) to replace ISS.  Such flexibility in the COTS model helps fit constraints and improves probability of success.

Thinking Like an Investor

The first phase of the COTS model is investment, requiring the government to think like an investor.  My first action in C3PO was to hire a venture capitalist to help us do exactly that.  Instead of a massive program office with hundreds of requirements, we had a dozen people and a page of goals.  Instead of seeking massive proposals, we asked for business plans, picked some teams to talk to, and did VC-type due diligence on finalists.  This approach worked amazingly well.

What’s Next for COTS?

I think of space as an ever-expanding frontier.  Beyond the frontier I see mostly government since it involves big risks, exploring, and proving technology.  Behind the frontier is mostly industry like on Earth.   Around the frontier, government and commercial companies work together, transitioning capabilities to the private sector using COTS-type partnerships.  

Today that frontier is moving beyond LEO.  With Commercial Cargo, Crew, and Destinations, NASA is transitioning LEO to a place where it is but one of many customers.  Other markets include R&D in microgravity for industries like bio/pharma. 

In the coming decade, I see COTS-inspired public/private partnerships empowering expansion into cis-lunar space.   Following that I predict partnerships on Mars as the frontier continues its outward journey. 

As space markets and applications accelerate, I’m pleased to see space agencies apply the COTS model when their needs and those of other customers overlap, saving public funds while stimulating economic growth. 

Dennis Stone leads LEO Commercial Solutions LLC, a Houston-based consultancy on growing the space economy. He can be reached at dennis@leocommercial.com.