There is an emerging truth about NASA's push toward commercial contracts that is increasingly difficult to escape: Companies not named SpaceX are struggling with NASA's approach of awarding firm, fixed-price contracts for space services.

This belief is underscored by the recent award of an $843 million contract to SpaceX for a heavily modified Dragon spacecraft that will be used to deorbit the International Space Station by 2030.

The recently released source selection statement for the "US Deorbit Vehicle" contract, a process led by NASA head of space operations Ken Bowersox, reveals that the competition was a total stomp. SpaceX faced just a single serious competitor in this process, Northrop Grumman. And in all three categories—price, mission suitability, and past performance—SpaceX significantly outclassed Northrop.

Although it's wonderful that NASA has an excellent contractor in SpaceX, it's not healthy in the long term that there are so few credible competitors. Moreover, a careful reading of the source selection statement reveals that NASA had to really work to get a competition at all.

"I was really happy that we got proposals from the companies that we did," Bowersox said during a media teleconference last week. "The companies that sent us proposals are both great companies, and it was awesome to see that interest. I would have expected a few more [proposals], honestly, but I was very happy to get the ones that we got."

Commercial initiatives struggling

NASA's push into "commercial" space began nearly two decades ago with a program to deliver cargo to the International Space Station. The space agency initially selected SpaceX and Rocketplane Kistler to develop rockets and spacecraft to accomplish this, but after Kistler missed milestones, the company was subsequently replaced by Orbital Sciences Corporation. The cargo delivery program was largely successful, resulting in the Cargo Dragon (SpaceX) and Cygnus (Orbital Sciences) spacecraft. It continues to this day.

A commercial approach generally means that NASA pays a "fixed" price for a service rather than paying a contractor's costs plus a fee. It also means that NASA hopes to become one of many customers. The idea is that, as the first mover, NASA is helping to stimulate a market by which its fixed-priced contractors can also sell their services to other entities—both private companies and other space agencies.

NASA has since extended this commercial approach to crew, with SpaceX and Boeing winning large contracts in 2014. However, only SpaceX has flown operational astronaut missions, while Boeing remains in the development and test phase, with its ongoing Crew Flight Test. Whereas SpaceX has sold half a dozen private crewed missions on Dragon, Boeing has yet to announce any.

Such a commercial approach has also been tried with lunar cargo delivery through the "Commercial Lunar Payload Services" program, as well as larger lunar landers (Human Landing System), next-generation spacesuits, and commercial space stations. Each of these programs has a mixed record at best. For example, NASA's inspector general was highly critical of the lunar cargo program in a recent report, and one of the two spacesuit contractors, Collins Aerospace, recently dropped out because it could not execute on its fixed-price contract.

Some of NASA's most important traditional space contractors, including Lockheed Martin, Boeing, and Northrop Grumman, have all said they are reconsidering whether to participate in fixed-price contract competitions in the future. For example, Northrop CEO Kathy Warden said last August, "We are being even more disciplined moving forward in ensuring that we work with the government to have the appropriate use of fixed-price contracts."

So the large traditional space contractors don't like fixed-price contracts, and many new space companies are struggling to survive in this environment.