The Privatisation of Space: What This Means for NASA

Private companies have always built NASA's hardware. But now NASA is increasingly letting them keep it, risk and all.

NASA is a behemoth. In 2026 its annual budget is $24.4 billion from which it funds its numerous projects. However, nearly three quarters of its budget (73.5% in 2023) actually gets spent procuring services and products from private companies. This perhaps isn't surprising. NASA can't produce everything it needs in house and in many ways private companies are better suited to provide focussed expertise in niche fields. It also enables NASA to support jobs and stimulate local economies within the United States. This, in turn, helps the government justify NASA's funding. But there have been some changes in the way NASA deals with private companies that may have implications for the future of space and who owns what. Could this lead to the privatisation of space?

Before the Privatisation of Space: NASA's Original Monopoly

NASA was founded in 1958 to serve as America's civil space agency. In the early years, the American government effectively controlled access to orbit for anyone wanting to launch. Private companies such as General Dynamics, Martin Marietta and McDonnell Douglas would build rockets under contract for NASA but there was no legal framework by which they could sell to other private entities. Given the rocket technology was derived from ballistic missiles, the American government had strong reason to keep control of who built such devices.

It stayed this way until 1982, when things started to change significantly. Arguably, the biggest change was the arrival of the Space Shuttle. After four test flights, President Reagan declared it operational on the 4th July. This increased NASA's stranglehold of the sector, meaning there was effectively just one way into orbit, at least for the Americans.

This apparent tightening of control was not all it seemed, however. On the very day he declared the Space Shuttle operational, President Reagan also issued NSDD 42, which made it a national goal to expand private-sector involvement in space.

It turned out that a private company was already well on the way to entering the market. Just nine weeks later, on the 9th September, the world's first privately funded rocket to reach space launched from Matagorda Island, Texas. Space Services Inc. of America were the company behind the audacious launch. They used old rocket tech (a Minuteman missile surplus stage), hired a private launch pad (after being refused by the Air Force) and negotiated necessary clearances on a case by case basis, having to deal with eighteen different agencies. They successfully launched Conestoga 1 into suborbital space (313km) with a 500kg dummy cargo before it splashed down in the Gulf of Mexico.

The following year, President Reagan issued a directive (NSDD 94) in May 1983, to facilitate the commercialisation of expendable launch vehicles. The directive became law in October 1984 with the Commercial Space Launch Act. This new law created the legal framework missing when Space Services Inc. of America conducted their launch, but it didn't lead to a surge in private companies reaching space. It would take a far bigger event to change the dynamics further.

Challenger Changes the Calculation

On the 28th of January 1986, the Space Shuttle Challenger exploded 73 seconds after launch. It was a national tragedy, dominating the headlines for weeks. Beyond the obvious grief of losing their colleagues, the decision-makers at NASA realised that they could no longer rely on just one type of vehicle for their launches. The potential solution came with the proposed "mixed-fleet" concept, whereby expendable launch vehicles would share the load with the remaining Space Shuttles. To achieve this, NSDD 254 in December 1986 banned the Space Shuttle from carrying most commercial payloads, finally paving the way for private companies to fully enter the field.

The companies that had been building rockets for NASA in the early years now started to launch their own. Using the Delta rocket, McDonnell Douglas made their first US-licensed commercial orbital launch on 27th August 1989. General Dynamics did the same with the Atlas rocket and in January 1990 Martin Marietta launched Titan III. A relative newcomer was Orbital Sciences Corporation, which was founded in 1982 and flew its Pegasus rocket for the first time in 1990. While there was opportunity, it didn't mean commercial success was a foregone conclusion; Titan III only found two customers before being phased out.

The opportunities for private companies were further enhanced with the Launch Services Purchase Act in 1990 and the Commercial Space Act in 1998. These pieces of legislation increasingly required NASA to buy launch services rather than keeping them in house, with only limited exceptions.

A Second Disaster, a Second Warning

Another Space Shuttle disaster saw the loss of seven lives when Columbia broke apart during re-entry in February 2003. NASA again had to review its operations and the Aldridge Commission in 2004 recommended that the private sector be relied upon even more. It concluded that there was really no such thing as an independent space industry at that point, just government-funded programmes and private sector vendors.

You might think that all these legal changes would have led to a thriving, open marketplace. Unfortunately, it didn't quite turn out that way, as exemplified in the Air Force's Evolved Expendable Launch Vehicle programme. Boeing's Delta and Lockheed Martin's Atlas were both chosen to launch US military and intelligence satellites, as a way of keeping a degree of competition in the process. But both companies felt that competing against each other was actually making it unprofitable for them. Subsequently, in 2005, they announced that they would combine their launch businesses into a joint venture called United Launch Alliance. This process was completed the following year. The Pentagon gave approval citing annual savings of $100-150m and improved reliability. But, by doing so, the American authorities had reintroduced the type of monopoly that they had wanted to end with the EELV programme.

The fledgling company SpaceX now gets involved in the story, launching an antitrust challenge in October 2005. While it was unsuccessful, it put SpaceX on the record as a company willing to challenge the establishment, credibility that would matter further down the line.

Constellation: The Old Model's Last Stand

Constellation was announced in 2005 to replace the retiring Space Shuttle. It would consist of four main parts: a crew capsule called Orion, the Ares I rocket, the Ares V (a larger rocket for cargo and lunar hardware) and Altair, the moon lander. This new mission would have to be funded from a NASA budget that was less than half of what it had been at its peak during the Apollo era. It was cut further in 2007. Despite the Aldridge Commission's call for private industry to take the lead, the Orion contract was awarded on the same cost-plus basis NASA had always used.

Under a cost-plus contract, NASA bears the bulk of the financial risk when costs rise. But, as mentioned earlier, its budget had been slashed so drastically from historic highs that it couldn't do that anymore. This led to a stuttering project that had to be funded on a year-to-year basis.

After a spend of $9 billion and one rocket launch, another commission, this time led by Norman Augustine, investigated the programme. It found that the programme was not affordable in its current form and recommended that routine crew transport should be handled by the private sector.

It was finally cancelled in February 2010, to be replaced by a new programme, Commercial Crew. Now, NASA would purchase seats on private capsules for its crew. Then, in April of that same year, President Obama announced $6 billion additional funding over five years during his Kennedy Space Center speech.

Commercial Crew Delivers, Unevenly

Fast forward four years to 2014 and NASA awards its first firm-fixed-price contracts for crewed spaceflight to Boeing ($4.2bn, for its CST-100 Starliner) and SpaceX ($2.6bn, for Crew Dragon). The companies also retained ownership and control of their spacecraft designs, something NASA hadn't allowed before. Seats on the capsules would then be purchased on an as-needed basis.

It would be a further six years until SpaceX's first crewed flight. Boeing's wasn't until 2024. In the meantime, NASA had to rely on Russia's Soyuz to transport astronauts into space, at a cost of $55.4 million per seat on average. In 2020 the price was a substantial $86 million.

So, Is This the Privatisation of Space?

Currently, NASA operates a mixture of its old way of operating and the newer private contracts. Orion and Space Launch System fly on the old cost-plus framework, while Commercial Crew exemplifies the newer fixed-price approach.

The private companies involved have had mixed fortunes. SpaceX has thrived, going from strength to strength, yet Boeing has not: its 2024 crewed test flight had major thruster problems, leading to Butch Wilmore and Suni Williams remaining on the ISS until March 2025, nine months longer than intended. They would be returned home on SpaceX's Dragon.

Having explored the history of NASA's workings with private companies, I don't think we're looking at a significant privatisation of space at this point, at least in the sense a British person might look at it. I would consider privatisation to be NASA leaving the sector entirely, with a private company or companies doing everything. We've experienced that in the form of rail travel in Britain via two periods of private ownership and now a second period of nationalisation. There are pros and cons to both models but neither provides a service people are totally happy with.

NASA isn't going to be privatised like that. But, if we take the American sense of the word, i.e. the outsourcing of government services to private companies, then yes, space is definitely being privatised.

Private companies such as SpaceX and Boeing increasingly own both the hardware (which was funded by NASA) and the intellectual property. This allows them to sell flights to other customers without any reference to NASA, something that hasn't been possible before. SpaceX has already flown fully private crewed missions: Inspiration4 in 2021 and Polaris Dawn in 2024.

In the coming years, we'll likely see Low Earth Orbit increasingly dominated by private companies, with cargo, crew and future space stations run by and for the benefit of commercial enterprises.

Probably, NASA's future will be more focussed on space further afield. Mars is the obvious target and other missions will aim to explore the gas giants and their moons, and the outer solar system beyond them. Any mission that isn't commercially viable may increasingly become NASA's domain.

The question that remains is whether that is enough of a reason for the American public to continue paying the vast sums to fund NASA.

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