For NASA, space is open for business

NASA's hiring of Boeing (BA) and Elon Musk's Space Exploration Technologies to build "space taxis" sends an important signal to private companies eying the final frontier as a commercial opportunity.

"If the government hadn't given anything to SpaceX or any of the other entrepreneurial entries, I think a lot of people would have gotten discouraged," said Lewis Mandell, a financial economist, professor emeritus and former dean at SUNY Buffalo's school of management. "They would have said, 'The government is giving another contract to another government contractor.' But the fact that they're willing to take a chance with SpaceX, to me, is a very positive indication. It indicates that they're willing to be open-minded, and see if SpaceX can deliver."

NASA said Tuesday that it has awarded contracts to Boeing and SpaceX to develop new craft to fly astronauts to and from the International Space Station starting in 2017. The two companies will share a $6.8 billion agency contract to build the commercial space vehicles, with Boeing receiving $4.2 billion and Space Exploration Technologies getting $2.6 billion.

Although other new commercial space ventures were shut out of the NASA contract, Mandell expects groups like Jeff Bezos' Blue Origin to be in the running for future work. "This particular business is likely to be a large business and accommodate a variety of low-cost competitors."

For NASA, the move kills two birds with one stone. First, it ends America's years of reliance on Russia for transportation to the International Space Station following the end of the U.S. Space Shuttle program in 2011. That also serves the Obama administration as political tensions rise between Moscow and Washington.

Second, the announcement could encourage more private companies to focus on space vehicle launches and low-earth orbits, which NASA says will allow the space agency to direct its limited funding toward research, spacecraft technology and future deep-space voyages.

NASA is also clearly hedging its bets in awarding the new project to a large defense contractor with deep ties to the government and an upstart space exploration company. Boeing has nearly a century of history as a pioneer in flight engineering, with decades of government contracts under its belt.

Yet Elon Musk, who also founded Tesla (TSLA), is a regarded as a proven technological visionary with a successful record of getting new businesses off the ground. SpaceX also has a $1.6 billion contract delivering cargo to the International Space Station using the company's unmanned Dragon vehicles.

Given those dynamics, Mandell believes increased competition between Boeing and SpaceX will encourage new research and development, while ultimately lowering prices for NASA. He's also happy to see a relatively new company like SpaceX awarded part of the space vehicle project.

NASA's announcement might appear to have little impact outside of the aerospace industry. But Mandell said it could signal the start of an exciting new era -- one he puts on a par with President John F. Kennedy's announcement in 1961 to begin a project to put a man on the moon. He also thinks the ongoing push to open up space also could boost the U.S. economy and help create jobs in the years to come.

"We seem to be in an entrepreneurial age right now, encouraging folks who do things in new ways."