How does the Commercial Crew Program differ from the way NASA's previous crewed systems were developed and operated?

Question

This overview of the Commercial Crew Program on NASA's site describes the difference between Commercial Crew and previous systems (I have numbered the original bullet points for easier reference):

How NASA’s Commercial Crew Program is Different

(1) NASA's Prior Approach for Obtaining Crew Transportation Systems:

• (1.1) NASA devised requirements for a crew transportation system that would carry astronauts into orbit, then the agency's engineers and specialists oversaw every development aspect of the spacecraft, its support systems and operations plans.

• (1.2) An aerospace contractor was hired to build the crew transportation system to the design criteria and the standards NASA furnished.

• (1.3) NASA personnel were deeply involved in the processing, testing, launching and operation of the crew transportation system to ensure safety and reliability. The space agency owned the spacecraft and its operating infrastructure.

• (1.4) Every spacecraft built for humans, from Mercury to Gemini and Apollo to the space shuttle and American section of the International Space Station, was built and operated using this model.

(2) Commercial Crew's Approach for Obtaining Crew Transportation Systems:

• (2.1) NASA's engineers and aerospace specialists work closely with companies to develop crew transportation systems that can safely, reliably and cost-effectively carry humans to low-Earth orbit, including the International Space Station, and return safely to Earth.
• (2.2) Interested companies are free to design the transportation system they think is best. For the contracts phase of development and certification, each company must meet NASA’s pre-determined set of requirements.
• (2.3) The companies are encouraged to apply their most efficient and effective manufacturing and business operating techniques throughout the process.
• (2.4) The companies own and operate their own spacecraft and infrastructure.
• (2.5) The partnership approach allows NASA engineers insight into a company’s development process while the agency’s technical expertise and resources are accessible to a company.

According to 1.1 and 1.2, for past programs, NASA came up with a set of requirements and hired a contractor to build a system meeting those requirements. Meanwhile, 2.2 seems to say that NASA awards contracts to companies with proposals that meet their requirements for Commercial Crew. However, these processes don't sound so different, and apparently past programs involved proposals from different companies too; for example, the Wikipedia article Space Shuttle design process states that "Lockheed Aircraft, McDonnell Douglas, Grumman, and North American Rockwell submitted proposals to build the shuttle" (citing The Space Shuttle Decision). So how does the development of Commercial Crew systems for NASA differ from how things were done in the past?

A more significant difference seems to be described in 1.3 ("The space agency owned the spacecraft and its operating infrastructure") and 2.4 ("The companies own and operate their own spacecraft and infrastructure"). But what does that difference in ownership mean in practice?

What other differences are there between Commercial Crew and previous NASA programs?

Answer 1

One large difference that was not mentioned in the two lists is the contracting mechanisms NASA has used for its previous development processes versus those it uses for its Commercial Cargo and Commercial Crew Programs. Up until those commercial systems, NASA tended to use cost-plus contracting mechanisms (cost plus fixed fee, cost plus an award fee, or cost plus an incentive fee). The contractor is paid for the costs of their services, plus some other amount for profit. This type of contract means the contractor cannot lose money. Moreover, the "plus" in cost-plus can have deleterious effects such as incentivizing contractors to find ways to increase the cost.

The commercial cargo and commercial crew systems use a rather different contracting mechanism, firm fixed price. Firm fixed price contracts put some of the financial risk on contractor. (There is also a risk to the government as the price quoted by the contractor must account for uncertainties to avoid having cost increases due to those uncertainties driving the contractor into bankruptcy.)

Which is better for the government, firm fixed price versus cost-plus, depends on many things. These include

• Who owns the design, the government or the contractor, and how solid is that design? A government-owned design that is anything but rock solid more or less mandates a cost-plus arrangement. Bidders on cost-plus contracts often intentionally low-ball their initial bid so as to win the contract, with the expectation that the government will inevitably change the design / requirements at some time after contract award. A firm fixed price contract with a contractor-owned design puts the burden of design change costs on the contractor.
• Associated with the above, how much research is needed? A firm fixed price contract to only perform research is essentially a cost-plus contract in disguise. The contractor is contracting to perform research rather to create a product or provide a service. Whether the research results in something useful is secondary.

NASA had been launching people into low Earth orbit using conventional mechanisms for almost half a century at the time that the Commercial Cargo and Crew Programs were conceived. This suggested that cost-plus contracts, with their almost guaranteed ballooning costs, might no longer be the best contracting mechanisms for putting cargo and crew into space. Switching to a firm fixed price mechanism however meant that NASA had to relinquish ownership of and control over the design.

The switch also mandated a marked change in NASA's requirements process. Requirements are somewhat easy when the design is known: "Build this!". The Commercial Cargo and Commercial Crew Programs still have requirements, but they are requirements on what end goals need to be accomplished (e.g., safely deliver stuff / people to the ISS) rather than how those end goals are to be achieved.