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The Almighty Buck The Military Government NASA Space

Air Force Budget Reveals How Much SpaceX Undercuts Launch Prices (arstechnica.com) 97

An anonymous reader quotes a report from Ars Technica: In 2014, the U.S. Government Accountability Office issued a report on cost estimates for the U.S. Air Force's program to launch national security payloads, which at the time consisted of a fleet of rockets maintained and flown entirely by United Launch Alliance (ULA). The report was critical of the non-transparent nature of ULA's launch prices and noted that the government "lacked sufficient knowledge to negotiate fair and reasonable launch prices" with the monopoly. At around the same time, the new space rocket company SpaceX began to aggressively pursue the opportunity to launch national security payloads for the government. SpaceX claimed to offer a substantially lower price for delivering satellites into various orbits around Earth. But because of the lack of transparency, comparing prices was difficult. The Air Force recently released budget estimates for fiscal year 2018, and these include a run out into the early 2020s. For these years, the budget combines the fixed price rocket and ELC contract costs into a single budget line. (See page 109 of this document). They are strikingly high. According to the Air Force estimate, the "unit cost" of a single rocket launch in fiscal year 2020 is $422 million, and $424 million for a year later. SpaceX sells basic commercial launches of its Falcon 9 rocket for about $65 million. But, for military launches, there are additional range costs and service contracts that add tens of millions of dollars to the total price. It therefore seems possible that SpaceX is taking a loss or launching at little or no profit to undercut its rival and gain market share in the high-volume military launch market. Elon Musk retweeted the article, adding "$300M cost diff between SpaceX and Boeing/Lockheed exceeds avg value of satellite, so flying with SpaceX means satellite is basically free."
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Air Force Budget Reveals How Much SpaceX Undercuts Launch Prices

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  • Meh (Score:2, Informative)

    The $422m figure is for a Delta Heavy launch, which makes the comparison with the Falcon 9 laughable - it should be compared with a Falcon Heavy launch, which SpaceX ain't giving launch cost figures for yet.

    Also, Musks quote about the $300m price difference being the cost of the satellite is bang on, for commercial launches - military satellites are often into the billions of dollars, and as such are less price sensitive on the launch and more success sensitive. Delta Iv Heavy is at 8 launches with no fail

    • by Anonymous Coward

      but Musk needs to learn to STFU when it comes to price sensitivity because for some customers thats not the driving factor.

      You do realize the customer in question SHOULD be sensitive to price since it pays with TAXPAYER money, right?
      Oh, you think the military should throw away billions of people's money in the name of "security" (aka pocket lining), do you?

      • Re: (Score:3, Insightful)

        Yup, because lowest bidding contractor has *never* had any downside...

        I'd rather the government went for quality over lowest cost when we are talking about launch a billion dollars of something that you are self insuring. SpaceX is getting there on quality, but this comparison is still ridiculous.

        • Re: Meh (Score:2, Insightful)

          by Anonymous Coward

          The thing is, up until recently there was no lower price contractor. There was a monopoly ane one thing monopolies are good for is sqeezing money out of the government's coffers by the buckets.

          • "The thing is, up until recently there was no lower price contractor..."

            The thing is, he said for satellites that cost billions space x is still too unreliable, so not an option.

            • For a satellite that costs (say) two billion, if you save 300m on a launcher, you can afford to lose it about a sixth of the time.
              F9 is rather more reliable than this, with 33/35 successful launches.

              The other poster said falcon heavy is not priced yet - this is incorrect, it has a modest cost increment over falcon 9 (as all first stages are projected to be recovered).

              • Granted. But cost isn't the only concern. Timeliness is very important too, for example losing a military satellite during its launch implies not only the extra time needed to build another very complex satellite but also the added time before the new satellite becomes operational, a delay which may not be acceptable. In that context, losing 1 in 6 satellites (which could easily imply losing two in a row) is very likely to be unacceptable, especially when compared with the near perfect success rate of the c

        • by Anonymous Coward

          Yup, because lowest bidding contractor has *never* had any downside...

          That's a shitty logical fallacy. Being price conscious does not inherently equate to just going for the lowest bidder and saying "fuck it all" to the quality.

      • you do realize that when you launch a 2 billion dollar satellite you are looking for success rate, not price...right?
        • Re: (Score:2, Insightful)

          you do realize that when you launch a 2 billion dollar satellite you are looking for success rate, not price...right?

          Actually, you are looking at both. . Its called a cost benefit analysis.

        • I'd say if you're launching a $2B satellite you're looking at the wrong organisation to build your satellites.
    • Agreed. We're comparing apples and aardvarks. The ULA launches were done as bespoke one-offs (for the DoD, no less) and Musk is (VERY disingenuously) quoting commodity launches at a loss, hoping to make it up on volume.
      • At least the GPS satellite launches were no "one-offs" for sure. Some other sats like the AEHFs are also often built at least in small series.
      • by Anonymous Coward

        Launching things into orbit is a solved problem since the 1960's. It's not like gravity or the size of Earth changes.. it's physics and rocket fuel. There's no reason the "usual contractors" shouldn't have had a fixed rate schedule by orbit and mass now. There's nothing "bespoke" about it.. except gouging the military for money.

        • Re: Meh (Score:4, Funny)

          by Anonymous Coward on Saturday June 17, 2017 @08:39AM (#54638611)

          The problem is we keep launching in north america, where we have to fight gravity and launch upward. If they launched from south of the equator, say, south america... the satellites would just fall downward into space. Why fight physics.

          I am sure i can get some multi billion dollar research grant with that idea.

      • Re:Meh (Score:5, Interesting)

        by cheesybagel ( 670288 ) on Saturday June 17, 2017 @08:36AM (#54638605)

        SpaceX launches are not at a loss. It is just that they perform a lot of the manufacturing in house so they have a lot less overhead than, say, ULA with their network of contractors and subcontractors, etc, piling on extra cost, which ULA is fine with since the government basically pays them on a cost plus basis (i.e. the government pays them for all their expenses + a fixed percentage profit margin). So the more cost there is, the more total profits ULA will have, plus without having in-house employees they need to feed thanks to the subcontractor structure. You get the idea.

        • SpaceX launches are not at a loss..

          Do you have enough info to know for certain? Musk has not been afraid to operate at a loss, that is for certain. I don't assume they are or are not on launches. This article doesn't provide enough info and makes assumptions that frankly are not very insightful, so I certainly don't find it useful in determining the reality of SpaceX finances.

          It is typical of Musk to not include the cost of money when he claims he is making a profit on operations. The answer is in the books, ones that I don't have access

          • Musk has always been honest about this. He claims Tesla is "cash-flow positive" rather than say that the company is profitable. He also claims they earn money with every Tesla sold. The problem is their vast investments on infrastructure like the Gigafactory or the Freemont expansion for Model 3. If there's anything you can accuse him for being less than honest was with the SolarCity acquisition which clearly seems to have been done to bail that company out at the expense of Tesla.

            As for SpaceX it was throu

            • Musk has always been honest about this. He claims Tesla is "cash-flow positive" rather than say that the company is profitable. He also claims they earn money with every Tesla sold. The problem is their vast investments on infrastructure like the Gigafactory or the Freemont expansion for Model 3.

              Tesla has not demonstrated that it is 'cash positive' operationally when you include the cost of money used for the in production infrastructure alone. Not counting the other investments.

              As for profitability, like I said, we don't know their bottom line numbers so your speculation is as good as anybody's. I assume that because it is private they will have a much shorter leash than Tesla when it comes to ROI.

      • 'Quoting commodity launches at a loss' - huh?
        Given that SpaceX has had no significant (in the context of 35 launches) external funding, what do you mean by 'a loss'.
        Plus, reusability significantly reduces cost, which rather changes things.

    • military satellites are often into the billions of dollars, and as such are less price sensitive on the launch and more success sensitive.

      It doesn't make sense to pay 5 times more for a satellite (or launch) in return for a slightly improved chance of success. For less money you could make two satellites and launch them on two rockets, and get a much better improvement.

      • Again, someone ignoring the point that many US government launches include payloads that are north of a billion dollars - even with SpaceX launching for free, saving the government $400m, that isnt going to equate to "less money" using anyones math...

        Or did you miss the part of my post where I said Musk was bang on for *commercial* launches...?

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          That "billion" dollars most likely includes design costs and other one off costs that wouldn't increase if you just make two of the damn thing.
          Like buying equipment, and building the facility to build the first satellite.

          • Disclosure: I work in the space industry.

            The incremental cost of any one-off satellite or probe is tiny compared to the launch price - which usually includes hundreds of prototypes and _at least_ 1 (usually 2) flight spares.

            For every flight spare, there will be a dozen spare subsystems sitting with contractors to test things before going anywhere near the flight spares, etc.

            What that means is: Take that billion dollar price tag with a large dose of salt. If it gets lost in a launch incident there's a spare

        • someone ignoring the point that many US government launches include payloads that are north of a billion dollars

          You seem to be having trouble reading. I was talking about the payloads.

      • by AHuxley ( 892839 )
        The US does not have two satellites to risk. So it pays for one bespoke hand crafted satellite to be launched when needed without needing a lot of time to get things ready.
        The USA is paying to keep its industrial methods ready every year for decades.
        • The US does not have two satellites to risk.

          Why not ? If you can make one satellite, you can make two for less than double the price.

          • by AHuxley ( 892839 )
            Each generation of spy satellite is created for its own mission.
            As every other nation learns what existing US spy satellite can do, the next US generation of spy satellites is hand crafted with much better tech.
            Always better, always newer.
            Some are difficult to see from earth, some are smaller, some are big and can move around a lot more than expected.
            • Re:Meh (Score:4, Insightful)

              by MightyYar ( 622222 ) on Saturday June 17, 2017 @09:50AM (#54638765)

              One sat
              Two sats
              Red sats
              Blue sats.
              Black sats
              Blue sats
              Old sats
              New sats.
              This one has a little star.
              This one has a little car.
              Say! What a lot
              Of sats there are.
              Yes. Some are red. And some are blue.
              Some are old. And some are new.
              Some are sad.
              And some are glad.
              And some are very, very bad.
              Why are they
              Sad and glad and bad?
              I do not know.
              Go ask your dad.
              Some are thin.
              And some are fat.
              The fat one has
              A yellow hat.
              From there to here, from here to there,
              Funny things
              Are everywhere.

    • Delta IV Heavy's eight launches are one of the reasons why the JWST flies on Ariane 5.
    • Re: (Score:2, Informative)

      by Anonymous Coward

      The $422m figure is for a Delta Heavy launch, which makes the comparison with the Falcon 9 laughable - it should be compared with a Falcon Heavy launch, which SpaceX ain't giving launch cost figures for yet.

      No, its the average launch cost for all types of launchers. There isn't a break down of how many of each type so you can't get a completely fair comparison but if you take into account that in a typical year there is only 1 delta heavy launcher used you can get a pretty comparison.

    • Re:Meh (Score:5, Interesting)

      by EnsilZah ( 575600 ) <EnsilZah AT Gmail DOT com> on Saturday June 17, 2017 @07:15AM (#54638469)

      According to the author of the article, the $422m figure is the average estimated cost per launch, figuring all the cost-plus, launch-readiness extra costs, with one Delta Heavy and several Atlas Vs.
      https://www.reddit.com/r/space... [reddit.com]

      Also, SpaceX are giving launch cost figures for the Falcon Heavy, which are listed on the site as $90m for 8mT to GTO.
      Of course it hasn't launched yet so things may change, but you can't say they're not giving these figures.

      Of course for a one-off satellite that costs several billion some extra margin of safety might be worth the cost, but when we're talking about something multiple identical units like GPS, it might be cost effective to just build a few extra ones.

    • SpaceX are getting there with reliability, but Musk needs to learn to STFU when it comes to price sensitivity because for some customers thats not the driving factor.

      Thats certainly the case with the Federal Govt. They don't care about prices. There's no profit motive for them, so they don't "lose" anything for bloated budgets. And after all, it's not their money....

      • They also can't reduce quality of service to skim a profit of the top (for profit)...
        • They can (and do) produce overly complex, marginally operable, and bloated frankensteins with unnecessary out-of-scope bells and whistles that are entirely outside what is necessary to complete the originally intended goal of the mission. They do so to pad political allies' pockets and to placate idiot Congressman with pet projects and asinine desires who would otherwise refuse to pass funding for the endeavor.

          You, as the consumer, end up paying for Mercedes sports cars when in fact what was really neede
    • by bgarcia ( 33222 )

      The $422m figure is for a Delta Heavy launch, which makes the comparison with the Falcon 9 laughable

      It's actually a valid comparison. The latest versions of the Falcon 9 (full-thrust) can deliver 50,300 lb to LEO and 18,300 lb to GTO (ref [wikipedia.org])
      The Delta IV Heavy can deliver 63,470 lb to LEO and 31,350 lb to GTO (ref [wikipedia.org]).

      - it should be compared with a Falcon Heavy launch, which SpaceX ain't giving launch cost figures for yet.

      The Falcon Heavy is going to be in a much higher league - 140,700 lb to LEO and 58,900 lb to GTO (ref [wikipedia.org]). And SpaceX has been providing launch costs [spacex.com] for the Falcon Heavy for a quite a while ($90M). Falcon Heavy is going steal the little bit of market that remains for the Delta IV Heavy.

    • Re:Meh (Score:5, Interesting)

      by cheesybagel ( 670288 ) on Saturday June 17, 2017 @08:21AM (#54638571)

      The $422m figure is for a Delta Heavy launch, which makes the comparison with the Falcon 9 laughable - it should be compared with a Falcon Heavy launch, which SpaceX ain't giving launch cost figures for yet.

      Actually, no. Those $422m are the average cost for a launch. Most launches are done with Atlas Vs. The current Falcon 9 FT can launch up to 8.3t to GTO while an Atlas V can launch 8.9t. Once Falcon 9 Block 5 comes out later this year then Falcon 9 will have even more payload to GTO.

      Most satellites launched are actually not one of a kind. At the very least there will be 2-3 similar satellites and in the case of GPS satellites, which are a significant amount of the launches, even more than that. You just need to think this over. If you want to have global coverage, which is most often the case, even with a polar orbit satellite network you'll need at least 2 satellites to have global coverage. Possibly more with on-orbit spares. If it's a global network of low orbit satellites, like GPS, then you'll need dozens of satellites.

      You also ignore that a large amount of the cost in developing a new type of satellite is the R&D for the specific satellite. Building an extra similar copy of the same design in comparison is quite inexpensive at a fraction of the cost.

      So no it doesn't make sense to use a flight service that costs twice as much in this case. What you are paying extra is basically the monopoly price of having a single vendor like ULA.

      • Atlas V is about $109 million (used to be about $180 million before competition) [wikipedia.org].

        Delta IV Heavy is about $435 million [nss.org]. USAF contract of $1.74 billion for 4 launches.

        What may be skewing your analysis is that although there are about 2x as many Atlas V launches as Delta IV, because we're using a mean price, it's the higher cost rocket which affects the mean more, not the rocket with more launches (4x the cost @ half the number = 2x the effect on the mean). The one with more launches affects the median
        • My understanding (you know what that means) is that without forming ULA, Boeing was going to quit building Deltas of any type and exit the launcher market because the Delta couldn't compete with the Atlas. And there wasn't enough business to keep two healthy competitors in business so the Feds allowed the joint project. This combined with DoD's insistence that they have at least two options for launchers for "assured access to space" (even that wasn't enough after the Titan and the Space Shuttle were both

    • Re:Meh (Score:4, Insightful)

      by rocket rancher ( 447670 ) <themovingfinger@gmail.com> on Saturday June 17, 2017 @08:33AM (#54638597)

      SpaceX are getting there with reliability, but Musk needs to learn to STFU when it comes to price sensitivity because for some customers thats not the driving factor.

      Hi -- taxpayer here. You can STFU about price sensitivity, now, because the only people whose sensitivity to price matters are the people who are paying for the goddamn launches -- the US taxpayer. Cost is the driving factor for us, period. Every dollar not spent sending military or intelligence hardware into orbit is a dollar that can be spent elsewhere (like on our crumbling infrastructure, or our decimated social safety net.)

      • let me know how you feel when we jump to SpaceX too soon and we loose 10 billion on a few failures.
        • Falcon 9 has had 2 failures out of 35 launches. Even if you assume they're not still improving those odds, when it's $300M cheaper every launch, the $9.9 billion saved on the 33 successful flights would be many times the cost of two lost satellites.

      • Not how government budgeting works though.

        You get x amount of dollars to do a task and it's imperative that you use x+10% or you will lose budget next year.

        If you do not use a budget, the money does not go to another project, it simply sits there as a contingent or rolls over to next budget years because you cannot reappropriate a budget that has been assigned to a certain cause. You will use your budget until it's gone, even if that means having to pay an accountant for counting it.

      • Or, who knows, left in our tax-paying pockets, unmolested?
    • "SpaceX are getting there with reliability, but Musk needs to learn to STFU when it comes to price sensitivity because for some customers thats not the driving factor."

      You mean the military, who doesn't use their own money but yours, the taxpayers?

    • The Falcon Heavy is $90 million, they've given cost figures for quite some time now. And Musk points out that the $300 million difference exceeds the average cost of the satellites. Some are more expensive, but many others are cheaper, even government satellites.

      And SpaceX already has a backlog of more than 50 payloads waiting to launch over the next several years, including over a dozen government launches. Musk might just have some idea what his customers want.

    • Falcon 9 can now carry loads originally manifested for Falcon 9 Heavy, albeit in expendable mode. It is competitive with Delta for many of the same missions.
    • - military satellites are often into the billions of dollars, and as such are less price sensitive on the launch and more success sensitive.

      If they are overpaying 6x for launches is it possible they are also overpaying 6x for the hardware they are putting into orbit? Just asking.

  • He believes that ULA should be given corporate welfare indefinitely.

  • A. The Air Force will value safety over money by a much wider margin and B. The Air Force and NASA both are socialist programs meant to keep folks employed.
    • Then how do you explain the Air Force launching their recent NROL-76 satellite with SpaceX?

      When you're saving that much money every successful launch (enough to cover the whole cost of the average satellite if Musk is right), you can easily afford a 5.7% loss rate. And replacing a satellite means more jobs, right?

  • Author is biased (Score:5, Insightful)

    by gurps_npc ( 621217 ) on Saturday June 17, 2017 @09:53AM (#54638773) Homepage

    Facts in the summary:

    A) Company 1 (United Launch Alliance) refuses to lists net prices in a transparent way.

    B) net costs seem to imply that SpaceX is about 7 times cheaper.

    Then it states that SpaceX must be taking a loss.

    BULL.

    The company that refuses to lists net prices in a transparent way are the people that you should suspect of shenanigans. In this case, the evidence implies they are overcharging.

    But I suspect that the comparison is not as bad as it looks. SpaceX may be launching only tiny payloads into low earth orbit while ULA may be launching huge payloads into high orbit.

    • The launch types and weights are comparable, and the comparison only gets worse when the capability of F9 heavy is counted.

    • Re: (Score:3, Informative)

      by Anonymous Coward

      Actually, the ULA does list prices for the Atlas V launches,

      go to https://www.rocketbuilder.com/start/configure and you can spec out an Atlas V for a given weight to orbit and compare it to what a Falcon 9 is listed at.

      Just ignore the 'funny money' "ULA added value" "discount" they list.

      An Atlas V starts at $109M for 21700 lbs to LEO (~$5K/lb) and goes up to $157M for 41476 lbs to LEO (~3.5K/lb)

      meanwhile a Falcon 9 is listed at $62m for 50,265 lbs to LEO ($1.2K/lb) and the Falcon Heavy $90m for 140,660 lbs

    • Everyone's comparing apples to oranges here.

      For the ULA price quoted, we're talking about a cost estimate done by the Air Force for national security launches in 2020. And apparently, that's an estimate of the maximum price, not the average. ULA has since published more information [nasaspaceflight.com]:

      Launch cost over the whole ELC duration of 78 missions averages to $225M a pop with Delta IV Heavy at ~$400M and Atlas starting at ~$164M.

      SpaceX have published a price of $65M for a basic commercial launch. That's a much lower price than e.g. NASA is paying for its Commercial Resupply missions to the ISS: the CRS-1 missions cost around $180M each [planetary.org]. That does include

  • by Anonymous Coward

    then buy insurance. The DoD can insure their payload and factor that into the prices from both rocket company.

    • The US government self-insures for space launches and satellites. They fly enough of them in total that it is not worth paying a third party to reduce risk.

    • Uh, what? Insurance?

            You guys are looking strictly at the financials. If a national priority payload is lost, recovering the cost is close to irrelevant. It might be super-swell to get the money back but the national security issues are what drives the system.

      That's why the commercial world and the national defense world are apples and oranges.

      • If the payload is so critical they can't afford to lose it, they'd better build a backup.
        Just because you launch 100 times without a problem doesn't guarantee the 101st will be a success.

        Now, to some extent SpaceX is the insurance because there is a requirement of having two launch providers for assured access to space.
        Up until now ULA provided both rocket families, but with Delta IV headed for retirement and Atlas V planned to be replaced by Vulcan, the Falcon family may very well be the safer choice with

    • Who needs insurance??? If you can launch a rocket for 1/7 the cost, and you lose one, so what, just launch a second one. Now you're paying 2/7 of the cost!

  • Billions for a military satellite? Sounds like a new market for MuskX to get into. They could basically just launch the guts of one of the Tesla cars into orbit. It would probably be more advanced and effective than anything the military has designed.
  • It therefore seems possible that SpaceX is taking a loss or launching at little or no profit to undercut its rival and gain market share in the high-volume military launch market.

    Or perhaps - because even if they triple their price it's still going to cost less than half of ULA's price - SpaceX is just better at rockets and space than the other folks?

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