Casey Dreier • Aug 23, 2019
Is a $2 Billion Prize for Landing on the Moon a Good Idea?
Newt Gringrich caused a minor stir in the space policy world this week after POLITICO reported he and a small group of space advocates were pitching the idea of a $2 billion prize to the first entity to establish human access to the surface of the Moon. Elon Musk tweeted that it was a "great idea," but is it?
Prize incentives are not new. The most famous—and the first to be cited by Gingrich’s plan—is the Ansari XPRIZE: $10 million awarded to any organization who could launch a human into space twice within 2 weeks. Scaled Composites won this competition in 2004 with the dual flights of SpaceShipOne, becoming the first private entity to send a human into space.
Further prize competitions followed, including the Google Lunar XPRIZE, which promised a $30 million award for landing and operating a robotic lunar rover, and numerous competitions from NASA and the Defense Advanced Research Project Agency (DARPA) offering prizes upwards of $10 million.
Advocates for prize incentives argue that they raise awareness, stimulate new ways of thinking, and are cost-effective: the sponsor pays only for success.
But prize incentives are not a silver bullet, and from the standpoint of public policy, they should be used with caution. While they sound promising—why not pay only for success?—they can actually represent a significant gamble, particularly if the sponsoring organization relies upon a successful outcome.
Furthermore, prize competitions represent an effective abdication of public oversight and public policymaking. Instead of doing the hard work to build an enduring political coalition, prize competitions seek to avoid the messy but important role of democratic oversight, turning the public treasury into nothing more than a lottery to be paid out to a select few who can even compete.
Prize Incentives Are Not for Everything
A 2014 Deloitte study on the usefulness of prize competitions makes a distinction between "push" and "pull" incentives. Push mechanisms pay for directed effort; research grants, fixed-cost, and cost-plus contracts are examples of push mechanisms. Prize incentives are an example of the "pull" mechanism, which attracts entities willing to be paid for an outcome and are willing to foot the bill for their effort.
Push mechanisms tend to be used for large, complex problems where the pathway to an outcome is uncertain, expensive, or require significant amounts of upfront capital. Paying for effort ensures a large number of entities can engage in a project without risking bankruptcy or can serve a national need, such as fundamental scientific research. A pull mechanism is, by design, riskier for both the participant and the sponsor: the sponsor gives up control over the process and the participant assumes the financial risk of pursuing it.
This is why the design and application of prize incentives are so important. Since the outcome is inherently uncertain, the competition must be carefully designed to ensure winning entries actually serve the greater problem at hand, and are not narrowly optimized to win the competition. And, of course, failure is always an option. There is no guarantee of success within the constraints of the competition. This is why many prize competitions tend to include general goals such as "raising awareness" of an issue, as opposed to outright solving it.
The Deloitte study offers three recommendations for when a prize should not be used:
When there is a clear, established, effective approach to solve a problem.
When potential participants are unwilling or unable to dedicate time and resources to solve the problem.
When there are only a limited number of participants who can address the problem.
With regards to space exploration, which is infamous for its difficulty and high costs, particularly involving humans, these should jump out as red flags.
The number of potential participants with the technical capability and access to billions of dollars of capital can be counted on one hand.
Gringrich’s plan anticipates this, arguing to the contrary:
"There are a number of billionaires who are prepared to spend their own money (it is estimated Jeff Bezos spends $1 billion or more a year personally on Blue Origin). If there was government encouragement and a government prize, then Elon Musk, Jeff Bezos, Sir Richard Branson, Robert Bigelow, and a host of others might well jump into the competition. The late Paul Allen was busy developing space capabilities and his estate might be willing to continue in his memory....there are a number of private companies with increasingly good records of launches with consistent success."
But we have already seen Paul Allen’s holding company shutting down its space business, Stratolaunch, after a single test flight. And a handful of billionaires—only two of whom have companies theoretically capable of reaching the Moon in the near future—certainly count as a "limited number of participants."
Beyond billionaire-backed ventures, aerospace companies such as Boeing or Lockheed Martin are possible entrants, but would face significant internal headwinds. Not only do they already enjoy the reliability of existing government contracts, but they are publicly-traded companies and unlikely to take on such risk in deference to their shareholders.
The upfront cost, appetite for financial risk, and small pool of companies with the technical ability to truly compete are why push mechanisms dominate the aerospace industry. That is beginning to change, however, though not because of prize competitions. At least, not exactly.
The Hybrid Approach
NASA pioneered a hybrid solution to the problem of breaking the push/pull dichotomy: the commercial cargo program of the late 2000s. In that case, NASA used a hybrid of the 2 to develop ferry services for cargo—and eventually crew—to the International Space Station (ISS). NASA provided funds for development (push), but only after companies in the competition met specific performance milestones. Those who didn’t meet the goals were cut out from further funding, limiting NASA’s financial exposure to failed concepts. There was no cash prize, but there was something to pull in competitors: billions of dollars in future service contracts for the space station.
Unlike a prize competition, NASA maintained regulatory oversight of the effort (though with a lighter touch than in the past) and funded multiple companies to foster competition and redundancy. SpaceX, of course, is the most famous beneficiary of this program and received nearly half a billion dollars of public funds to create the Falcon 9 rocket. Orbital Sciences—now owned by Northrop Grumman—was the other. NASA got two new launch vehicles to service the space station out the deal for far less than it was used to paying.
NASA is using variations of this approach for developing commercial crew services, the Gateway lunar station, and Artemis lunar lander programs. The hybrid approach retains a prize-like incentivization for participants to compete, innovate, and control costs. It also ensures that the public interest is represented during development, with the outcome more likely to address the long-term needs of the space program compared to prize-only incentives.
An Abdication of Public Policymaking
Defining and implementing policy within a democracy requires coalition-building, shared goals, and broad incentives. Democracy—and in particular the democracy as outlined in the U.S. constitution—is designed to be slow and inefficient, providing many avenues for input from various constituencies.
It is no surprise, then, that space exploration as a function of public policy can itself be slow and inefficient. In order to allocate funds for such large spaceflight projects, individuals and constituencies throughout the nation must participate, and many seek immediate benefit. In NASA’s case, that tends to mean that contracts and work are distributed throughout the country, creating jobs and political goodwill in the districts of the elected officials supporting the spending. And because these expenditures come from the public purse, the public’s representatives in government are thus expected to exercise oversight over these efforts, which can slow down, stymie, or otherwise disrupt long-term projects.
In that sense, massive projects like the International Space Station (ISS) are triumphs of agreement. They are the products of years, if not decades, of coalition-building, which, though frustrating to endure, can yield stability over decades. The ISS program, once controversial enough to survive a congressional effort to defund the program by a single vote in 1993, now finds itself with no significant political opposition. The ISS was neither cheap nor fast, but it worked and will endure for decades.
Prize competitions—and in particular the one proposed by Gingrich—are expressly designed to avoid the very coalition-building efforts that consume such time and money. They largely eschew the messy work of democracy, depending instead on the far less democratic—though usually far more nimble—work of hierarchical, unaccountable companies and private entities.
And since prize competitions only define outcomes and generally avoid regulatory control of development, they effectively remove public oversight from the process of using public funds.
As a consequence, the public policy behind such efforts is to have no public policy at all—a fundamental abdication of public oversight.
Therein lies the risk: the outcome of a hands-off competition is indeterminate. Absent some form of oversight and control during the development process, the government assumes significant risk if it intends to rely on the outcome of a competition—such as a human-capable lunar landing architecture—going forward.
Is Human Spaceflight a Priority or Lark?
When you listen to Scott Pace, the executive secretary of the National Space Council, talk about the Space Launch System rocket, you will notice he defines it in terms of a national capability. Much like an aircraft carrier, the SLS is not designed to compete in the commercial sector, but to provide a guaranteed capability to serve the national interest. This is why the U.S. government does not purchase aircraft carrier services from a private market, but instead funds companies (the "push" model) to design and build them to meet specific national security needs. The capability is too important to leave purely to the private sector to develop and maintain.
While you may disagree with this characterization of the SLS, the central idea is worth considering in the realm of human spaceflight at the Moon.
Because prize competitions only set expectations for outcomes, entrants are incentivized to solve for problems that will win them the prize, and not for long-term reliability. The Ansari XPRIZE provides an excellent case study. After winning the $10 million for performing 2 flights into space within 2 weeks in October of 2004, Scaled Composites and Virgin Galactic began working on SpaceShipTwo, promising regular tourist flights within just a few years. 15 years later, Scaled Composites no longer works with Virgin Galactic and SpaceShipTwo not yet carried paying customers. Consider the analogy: if U.S. government awarded a $2 billion "lunar crew prize" which then saw no additional missions for 15 years, the outcome could be considered nothing less than a failure from a policy perspective. In that sense, the $2 billion would have been wasted, despite only paying for the "success" the competition's objectives.
So the question becomes, is human spaceflight to the Moon a matter of national priority? Or is it not? National priorities, by virtue of their importance, demand significant funds and strong political coalitions. Having a democratic consensus, in other words, tends to drive up costs. But if human spaceflight at the Moon is not much of a priority, then more risks can be taken, because a bad outcome is fundamentally acceptable in service of a higher-performing—and less democratic—result.
Again, the Gingrich plan anticipates this risk, stating that the award should exist in augmentation to existing plans. That helps address some of the issues relating to reliability, but not the responsibility of public oversight and the political will to see a program to its fruition.
Politics and Space
In the end, Gringrich’s plan is unlikely to be implemented, not just because of the policy pitfalls outlined above, but because of its intent to avoid the very political system it abhors. Prize competitions obviously have their place and have already done much to inspire and motivate people around, but in the realm of public policy, they must be targeted and modest.
A prize competition at the scale of billions of dollars would divert funds from established programs, avoid oversight and input from Congress, and yield unpredictable political benefits. By its very nature, it provides a weak political motivation to potential supporters while strongly motivating its opponents. By sidestepping the democratic process, it can’t develop the advocates it needs to succeed within it.
It’s important to recall that the hybrid approach was itself initially resisted and its limits are still being tested. Commercial crew, which attempted to shift influence away from established human spaceflight systems and oversight, faced significant opposition in Congress when originally proposed and was underfunded for years. It was only after the indisputable success of SpaceX and other companies that this attitude began to change. NASA is using this hybrid approach for key elements of Artemis and has so far faced little congressional opposition.
That is possible because the classic push method of development is alive and well with the Space Launch System and Orion programs. They are over budget, behind schedule, yet politically durable. Forged through the coalition-building process in Congress, they provide significant funds and support tens of thousands of jobs throughout the country, particularly Alabama, Texas, Florida, and California. This is both a benefit and a burden to the space program, but an inescapable consequence of a political system that allocates money by persuasion and not dictation. NASA is now itself a hybrid of both push and pull. And the advances in efficiency, paying for outcomes and not failures, and expecting results faster are important developments, but can only continue by engaging in the political system, not avoiding it.
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