The Obama administration proposes to use private contractors to transport crew to LEO, as proposed by the Augustine Commission. This is a good thing. There has been a lot of criticism of the plan, particularly from politicians with a vested interest in keeping money flowing to NASA centers and suppliers of Ares components, but many of the arguments are wrong.
It’s true that inexperienced start-ups like SpaceX may bid for the work, but there will also be veteran companies like ULA, Lockheed-Martin and Boeing who build and launch the Atlas V and Delta IV rockets the government trust to launch billion dollar spysats and planetary spacecraft. Unlike Ares I, these launchers are already in operation, and have a pretty good track record. Atlas V has had 11 consecutive successes out of 21 launches. The one mission failure, a second stage engine that shut down four seconds early in the second burn, would not have threatened a loss of crew on a manned mission to LEO. With a launch abort system Atlas V will almost certainly be at least as safe to ride as the Space Shuttle, even without additional improvements to reliability from further flight experience. There’s every reason to think that the Atlas V 402 can ultimately surpass the reliability of Delta II and Ariane IV, which both had more staging events, engines and motors to go wrong.
Companies like Lockheed-Martin are certainly capable of building a manned spacecraft, and Lockheed-Martin is being trusted to build the Orion spacecraft for NASA today.
Now the "commercial" manned launches proposed by the Augustine Commission are only commercial compared to government owned and operated launchers like the Shuttle or Ares I. The government is going to be the main customer and any non US government passengers will be at best a welcome supplement to the NASA purchased flights. The private/foreign manned market is relatively small at current or reasonably foreseeable prices in the immediate future. A US company might be able to sell seats on a marginal cost basis of $20 million a flight, which is within the range of prices the Russians have offered in the past. At that price they’ve been able to sell up to one a year to private customers.
Norm Augustine has offered the analogy of U.S. air mail contracts for early airlines in the 1920s. The government would be the anchor customer providing most of the funding. This would, however, be a big improvement on the government owning and operating its own unique launcher to get crews to LEO. Aside from avoiding the pathologies that afflict government agencies, more flights shifted to the private launchers will improve their economies of scale.
The one criticism that has merit is that the $6 billion proposed by NASA may not be enough. There is one reason to think it will be: that was about what it cost in today’s dollars to develop Gemini and put it on an existing launcher. But even if twice as much is needed, it will be less than NASA expected to spend for Ares I and Orion.