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