Quora Question: What is the Relationship Between NASA and Private Space Operators Like SpaceX?

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A remodeled version of the SpaceX Falcon 9 rocket lifts off at the Cape Canaveral Air Force Station on the launcher’s first mission since a June failure in Cape Canaveral, Florida, December 21. Joe Skipper/Reuters

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Answer from Robert Frost, Instructor and Flight Controller at NASA:

During World War I, an aviation manufacturing industry was created in the United States, but at the end of the war, the Defense Department canceled about $100 million worth of aviation contracts. There was concern within the industry that it would collapse—there just wasn't an established market that could support the costs of development. One of the saviors of the aviation manufacturing industry was the U.S. Postal Service, but it didn't really help develop the commercial aviation industry until the Air Mail Act of 1925 (aka, the Kelly Act). Whereas previously the U.S. Postal Service bought the hardware and then used it itself, the Kelly Act authorized the postmaster general to contract for domestic airmail service with commercial air carriers. This encouraged private companies to start up air freight businesses and compete for contracts. These mail-carrying flights became regular and scheduled, and bright, enterprising entrepreneurs came up with the idea of selling tickets for passengers to ride on these aircraft along with the mail. Airplanes became larger, and as the industry became established and efficient, the market grew. People became more trusting and tickets became cheaper, making passenger aviation a normal way to travel. Soon, the air carriers were making enough profit from the passengers that they didn't really need to carry the mail to stay in business.

Ninety years later, we are in a similar position with commercial space transportation. For years, the government has bought launch vehicles and spacecraft from commercial companies, but there hasn't been a lot of commercial companies operating these vehicles and creating their own business models.
Although the first commercial satellites launched in 1962, it was another two decades until the law provided for commercial launches, in the Commercial Space Launch Act 1984. That law allowed private entities to launch their own rockets from United States soil. Since NASA is not a regulatory agency, the regulation of those launches was put under the auspices of the Federal Aviation Administration (FAA). Today, that authority is executed out of an FAA office called Commercial Space Transportation (AST).
The next evolution was to update that law to allow commercial launching of people. That update was the Commercial Space Launch Amendments Act of 2004.
NASA's current role in this effort is to stimulate the commercial space industry via the C3PO (Commercial Crew and Cargo Program Office). The idea is that if NASA's responsibility is to push the frontier, then once a capability is understood, NASA should move its resources to the next level and allow commercial entities to fulfill that understood capability.
The International Space Station (ISS) is used by NASA to develop our understanding of long-duration flight and as a technology testbed for later missions that will go beyond Earth's orbit. NASA has a lot of its resources taken up in developing the MPCV (Multi-Purpose Crew Vehicle) Orion. The decision was made to shift the responsibility of transporting cargo and crew to and from the ISS to commercial entities.
That is being done via two efforts, Commercial Orbital Transportation Services (COTS) and Commercial Crew Program (CCP). Over the last couple of years, COTS has provided funds to Orbital Sciences and SpaceX in exchange for them ferrying cargo to the ISS. SpaceX recently launched such a vehicle, its Dragon, to the ISS.
The hope is that through these contracts, the U.S. government will stimulate private space industry so that it can develop to a point at which it will be economically self-sufficient without government involvement.
There are other companies involved in private spaceflight. NASA is working with Bigelow Aerospace on a project called BEAM (Bigelow Expandable Activity Module). BEAM will be an inflatable module that will attach to ISS as a technology testbed. Bigelow's long-term goal is to develop a commercial space station.
Companies like Virgin Galactic are developing space tourism technologies. Their Spaceshiptwo vehicle will carry tourists on a suborbital flight for an initial price of $250,000 per head. But the thought is that as the technology matures, those suborbital flights will get less expensive and the vehicle capabilities will expand so that those tourists could be carried to space hotels, like Bigelow's station.
Other companies involved in private spaceflight development include Sierra-Nevada, Blue Origin, Scaled Composites, and XCOR Aerospace.

From my perspective, the relationship between NASA and the commercial companies is quite good. They are providing us with an essential service and I believe they, in return, are learning essential skills that they will need in the future.

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