SpaceX Rocket Failure Cost NASA $110 Million

An anonymous reader writes: On June 28th, a SpaceX Falcon 9 rocket exploded just over two minutes into its attempt to reach the International Space Station. It was a contracted mission from NASA to resupply the astronauts living there. Today, NASA associate administrator William Gerstenmaier said the price tag to taxpayers for that failed launch is $110 million. SpaceX is leading the investigation into the cause of the failure, and NASA officials faced tough questions about whether private companies should be allowed to direct investigations into their own failed launches. A similar inquiry is underway at Orbital ATK. NASA inspector general Paul Martin said his office is looking into the matter. Gerstenmaier added that NASA is thinking about making these companies take out insurance policies that would cover the cost to taxpayers in the event of another failure.

Comments

as always....

[Anonymous Coward]

"Privatize the profits, socialize the risks."

That's how big business works in the USA.

Re:as always....

[NoNonAlphaCharsHere]

Nonsense. Utter bullshit. Blaming "big government: we need to cut it back" is exactly what got us into this mess. Ronald Reagan is the FATHER of the disaster that confronts us

Big businesses have no way of socializing risk by themselves.

Go tell that to the belching smokestacks, the carcinogen-laced groundwater, the deteriorating climate, the poisoned oceans. Tell it to the minimum wage workers who have to go on food stamps, the students with crushing loans and no job prospects, the retirees who've lost their savings to yet another bankster stock swindle. Tell it to the vanishing middle class, whose wages have been flat for forty years while productivity and the wealth of the 0.01% has soared.

Big businesses can socialize risk only in collusion with big government.

If you mean by corrupting government to avoid regulation of evil behavior, then I agree with you completely.

"Privatize the profits, socialize the risks."
That's how big government works in the USA and elsewhere.
(emphasis mine)

I would be FASCINATED to hear your logic as to why government would seek to privatize (i.e. lose money) profits in order to socialize (i.e. lose money) the risks.

And the solution to this problem isn't to regulate big businesses more (that only makes the problem worse) but to cut back the culprit, big and powerful government.

So you're saying the solution to this problem is to allow MORE of this kind of behavior.

My god, you are so utterly delusional, there are no words to describe it. You would have more intellectual integrity if you posted in rabid favor of aroma therapy and woodland elves.

Re:as always....

[rwa2]

I don't think NASA does insurance because it's a business decision and NASA isn't a business.

The DSCVR launch was delayed because the Air Force (which is run more like a business) insisted on taking out an insurance policy on the SpaceX launch. They were involved because they were paying for it, since DSCVR was sort of an odd collaboration between NOAA, NASA, and the USAF.

Spacecraft insurance is expensive since the insurance actuaries actually want comprehensive statistical data on each launch vehicle, and that's simply not available on new launch vehicles with less than ~21 (remember the threshold for statistical significance?) launches.

Re:as always....

[MightyYar]

How would insurance save money? Another middle man to pay. The only justification for insurance is when you need to smooth out the bumps in your spending - an individual may not have $30,000 sitting around to replace their crashed car. NASA can almost always slip a schedule; self insurance makes a lot of sense for them.

Re:as always....

[Paradise Pete]

My curiosity is who at NASA is responsible for the insurance not being bought.

Insurance is not magic. As the entity selling the insurance is making a profit, obviously purchasing insurance is a money-losing proposition, so its only function should be to mitigate disaster. Losing $110M is not a disaster, and therefore *not* buying insurance is the more responsible use of the taxpayer money.

Re:as always....

[msauve]

"NASA is thinking about making these companies take out insurance policies"

Who do you think can make a better actuarial judgment of the risk, NASA or an insurance company? The government is certainly large enough to be self insured, which is in the long run cheaper than paying an insurance company which intends to make a profit to assume the risk.

And, forcing the private launch service companies to take out insurance adds even more cost, by adding another level of administration to pass the money through.

Insurance?

[Anonymous Coward]

If I ship something, it is up to me to pay insurance if I wish to do so. Otherwise, I take my chances on something happening to the cargo or it getting completely lost.

Why should the rocket manufacturer pay the insurance. That should be NASA's/the taxpayer's responsibility just like any other package delivery system. Let the insurance companies figure out a premium based on the success/failure rate of each rocket launching company and price accordingly.

Re:Insurance?

[Lab Rat Jason]

I came here to say exactly this... if SpaceX has to buy a policy, you don't think they're going to pass that cost through to NASA anyways? Pft!

Re:Insurance?

[DickBreath]

This will cost the taxpayers no matter how you slice it. Either the taxpayer eats it, like now. Or NASA gets insurance, which costs the taxpayer. The insurer WILL make a profit and will pass the cost of failure to the policy holder through increased premiums. So NASA could make SpaceX get the insurance. All that does is mean that SpaceX will increase its prices to NASA to account for the cost of insurance (eg, the cost of inevitable failures).

By making either NASA or SpaceX get insurance, you add in another greedy industry (insurance) that get their fingers in the pie and make a profit. Great way to save the taxpayer money.

Re:Blew up one of our instruments, too

[thrich81]

Saturn I -- 10 launches from 1961 to 1965, 10 operational successes. And that was using clustered engines and liquid hydrogen engines in the EARLY 60s.

Better than the shuttle

[Bugler412]

Better than multiple billions and astronaut lives lost for a cargo run. Hell, a shuttle launch that succeeded cost over a billion per launch.

doesn't matter what you call it

[NostalgiaForInfinity]

Gerstenmaier added that NASA is thinking about making these companies take out insurance policies that would cover the cost to taxpayers in the event of another failure.

I think this is a good idea, but not for the reason Gerstenmaier says. What it will do is get another private entity to look at the risks of these launches and price them accurately. This will make it clearer in the budget how costly these launches actually are.

However, the cost for insurance will simply be added on top of the contract, so the tax payer pays for it either way. In fact, with insurance, the tax payer will pay more on average than without insurance.

Also for the Pad.

[mbone]

The Orbital failure took out the pad, which was owned by the Commonwealth of Virginia, which had neither insurance nor reserve cash to pay for a new one. That caused a scramble to find the bucks to repair the pad.

Re:SpaceX too good to be true?

[Geoffrey.landis]

Well, maybe more expensive Russian rockets cost what they do for a reason?

Well, that reason is certainly not reliability-- Russian rockets have been pretty failure prone lately.
http://spacenews.com/proton-fa...
http://spacenews.com/progress-...
http://spacenews.com/russian-s...

Atlas-V and Delta-IV been doing pretty good, though: so far both have had a 100% record for reaching orbit, although each one has had one launch with an underperforming upper stage that put it into lower-than-planned orbits.

Re:No Insurance??

[Lab Rat Jason]

All insurance schemes are designed to amortize the risk... in this case, amortize the cost of a failure over the previous, and subsequent successes... and the middleman skims a little off the top. So I look at this and think buying insurance is actually just a waste of money.

To anyone who would disagree: If the only insurance you've ever bought is for your car... you probably don't know shit about insurance.

Re:They don't already?

[Firethorn]

They may be self-insuring (getting lower launch costs by not requiring insurance - maybe the launch is $150M insured).

This was my thought. Rocket launches are risky, so any insurance is going to be expensive.

So let's say they require commercial insurance to be bought, and the insurance company correctly predicts a 5% failure rate. But they have expenses to cover, the insurance is 'unusual' and highly variable, it's a small market, etc....

Just to break even, they would have to charge 1/20th the cost per launch, but that's not the end of it. They have expenses and profit to worry about. For something like rocket launches? 20% overhead wouldn't be out of line, I think.

So rather than the 'insurance' cost per launch being 5%, it's now 6%. For a $100M launch, that means self covering costs, on average, $5M. Commercial insurance would increase that to $6M.

Re:No Insurance??

[fnj]

Correct me if I'm wrong, but you seem to think that somehow insurance will lower the cost of the accidents. But it's perfectly obvious that, in the long term, that can't possibly be true. The insurance company has to make a profit - PLUS its own overhead costs. - plus of course covering the payouts.

The reason an individual (unless very wealthy) doesn't self-insure is because the things he is insuring against are very low-runner risks, but if/when they do occur, he would be instantly bankrupt. That's not the case for the US government. $110 million is pin money. Petty cash. Pocket change. Rounding error. They can save money by self insuring.

Now, if they didn't build in a cushion to the program to cover such boo-boos, that is entirely a different thing. Then they would be stupid. That doesn't change the equation that in the long run it is always cheaper to self insure.

$110 Million!? Dammit!

[RevWaldo]

And we had our hearts set on getting that F-35 jet fighter!

Well, 3/4 of one anyway...

.