Commercialization and Competitive Outsourcing
Confusion over definitions often led to chaos at management meetings. The following definitions were used during the Space Operations Management Office Commercialization program and are still useful today:
· Institutionalization means implementing a public sector service function in public sector institution chartered and suited for providing services to the public. By way of example, consider Government Corporations. Moving TDRSS from NASA to the DOD is another example of institutionalizing the TDRSS Space Communications fleet of spacecraft, facilities and equipments to the agency that benefits most from TDRSS operations. Institutionalization does not necessarily require a reduction in the total cost of ownership to the government, but provides a more efficient means for service delivery and provides mechanisms for more cost effective operations. Moving TDRSS to the DOD does not necessarily mean moving the ground based TDRSS infrastructure but transferring it to the benefiting organization for the sake of efficiencies and effectiveness.
· Privatization means moving a public function from the public sector of the economy to private sector of the economy. Examples: AMTRAK and BOAC were both government provided transportation services that were originally moved to firms in the private sector. Privatization does mean that the facilities and equipment used by the Government to provide the service to its customers are transferred to the private sector firm.
· Commercialization means procuring services from a firm where the fixed costs are shared with other customers. The commercialization of the polar network of earth stations is an example. In this cases, the government still retains the responsibility for the function of providing services to its customers but does so by employing firms in the private sector that are willing to reduce the cost to the government by sharing the development, operations and maintenance costs of providing the service. In these cases the government procures the services from the firm and does not pay for the initial capitalization, development, operations and maintenance of the service.
By its nature, Commercialization purchases a service that is commercially ongoing and viable. Commercialization is based on the notion that there are commercial service providers that exist and have a broad user customer base. As a result, the development, obsolescence, and operations costs are allocated across a broader base and the net price to the customer reflects a reduced cost. (Note the difference between service price and cost).
In another context, Commercialization means blending private sector resources with public sector resources to finance a public function owned by an agency.
In the case of commercializing the Polar Network, the government assets for space communications were assigned to the commercial firms as GFE. By their nature, commercial ventures are more efficient in contrast to Government initiatives that are more effective.
· Outsourcing means finding another entity to implement the public function. The entity can be either a public or private entity. This term can be applied to Institutionalization, privatization or commercialization. In the broadest sense, outsourcing can include dual-use and funding of NASA’s infrastructure.
· Competitive Sourcing is different than government contracting. Government Contracting means procuring products and services from a commercial firm where the government funds the entire product and or service and is the firm’s sole customer. The procurements are held on a competitive basis. In this arrangement the Government is the firm’s sole customer for the products and services and the Government funds the entire initiative.
Other commercialization initiatives can be explored by considering the broad range of Competitive outsourcing options. Competitive sourcing is the Overarching Term for initiatives that involve a blend of public and private funds to implement government functions is Competitive Sourcing (CS) See the Figure below. CS includes Commercialization, Privatization and Institutionalization. All three deal with finding ways to fund public initiatives in creative ways.
Typically CS is associated with creative financing in the public sector. The downside of CS initiatives they usually take a long time to implement.
Jon M Smith
NASA SES retired
www.jonmsmithandassociates.com
409-370-8685