Is Nasa right to keep outsourcing rocket launches?

MT EXPERT: Despite the explosion this week, Nasa shouldn't jump into bringing them back in-house, says Renaud Durand.

by Renaud Durand
Last Updated: 01 May 2015

Nasa's rocket launch explosion in the US this week is just the latest in a series of similar incidents dating back through aeronautical history. The typical reliability of a launcher is around 95%, which means that on average about one in 20 space missions fail.

Nevertheless, the incident has sparked debate about whether Nasa’s procurement strategy is due a rethink. In 2010, Nasa chose to outsource all its low orbit missions to the private sector to help drive efficiency and optimise federal budget spend. The initiative has had mixed results – SpaceX’s projects (the brainchild of PayPal founder Elon Musk) have been largely successful, whereas those of Orbital Sciences Corp, the company responsible for the Antares rocket launch explosion, have experienced setbacks.

When the decision to outsource those missions was first taken, Nasa was well aware that some failures were likely, but the risks appear to have been managed fairly well to date. No one has been hurt and the cargo services are now continuing.

Before that, Nasa had been doing it all itself, with a focus on making things work, almost regardless of cost. Around $20bn was spent on Apollo missions, for example. But technological advances in the aerospace sector now mean such missions can be carried out by private sector organisations and efficiency has become a growing driver due to pressure on the US government budget.

Nasa’s decision to outsource such missions is a sound one, leaving them to focus on areas which require more specialist skills. A rocket launch carrying a cargo to the International Space Station is a relatively minor undertaking compared with a deep space mission, for example.

It should therefore stick to its guns rather than react in a knee-jerk way to this accident. Having presumably done all the ground work by making sure that the services provided by Orbital Sciences Corp are of a high standard and represent both value and efficiency, Nasa would be foolish to let one failed mission persuade them to turn their back on the supply relationship for good.

Of course, most businesses aren't going to be outsourcing rocket launches, but choosing whether to pay a third-party provider for services still needs careful thought. Here are some points to consider:

1. Suss out the skills

Consider the skills required to provide this service – in other words, you need to weigh up the capability available in the supply chain. If a high level of competency is required, think about keeping that activity in-house, especially if it’s linked to your ability to make profits.

2. Look at liquidity

How liquid is your supply chain? A high level is needed to drive competition between those bidding for your contract, bringing down costs, as well as ensuring there is a focus on continuous improvement from those you’re outsourcing to.

3. Put everything in context

It's risky to start outsourcing any core business activity, so put everything in context – Nasa's space station resupply missions dwarfed by the challenge of deep space exploration, for example. But of course, this means understanding what your core skill and competencies are, without being blurred by emotions, and how these may change in the future.

Dr Renaud Durand is an aerospace and defence senior consultant at Vendigital, a procurement and supply chain consultancy.

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