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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."
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 failures (one partial success) and Atlas V is at 71 launches with no failures (one partial success).
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.
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.
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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.
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then buy insurance. The DoD can insure their payload and factor that into the prices from both rocket company.
- 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.
No company ever undercuts their nearest competitor by 7x to take a loss. If they had to increase their price 6x to make a profit, they'd do it and still get the contract. The only reason to go so much lower than the competition is to encourage more volume sales, which is only good when making a profit on each.
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As a federal worker I can tell you without question that most people there have a total disconnect between their job and its source of employee salaries. In every level of government from local city govt to the feds there's a ritual every fiscal quarter to find ways to spend what's left from the last budget. Managers encourage employees to come up with ways to get it done because if they don't spend every dime they got on the last budget they can't reasonably argue for more on the next. This is totally aside from the plethora of management that get a healthy portion of their self-worth from the size of their own little fiefdom within government. The more people, servers, vehicles, buildings, land, etc under their control, the more important they are in the eyes of themselves and the other bureaucrats. The more influence they have, the more likely they are for promotion, and on and on.
I've seen people get cash awards for literally doing nothing more than holding open a door.
I've seen groups buy thousands of dollars of office supplies, from paper to staplers to toner cartridges to pens, only to lock them in cabinets no one is allowed to access for years until all the stuff they already have an excess of is expended.
I've seen groups buy thousands of dollars worth of chairs that sit in storage rooms for years unused.
I've seen groups increase the size of their cubicles, not because the employees need or even want more space, but because it allows them to keep entire suites in federal buildings all to themselves, rather than share the previously unused space with other groups.
I've seen tens of thousands of dollars spent on brand new servers that sit in boxes never opened in computer rooms for years until their manufacturers warranty expires and they are "excessed".
I've seen managers refuse to turn off racks filled to overflowing with obsolete servers powered on in datacenters because "someone might need them someday", all the while sucking power because turning them off would cause people to ask why they are there at all but leaving them on with nice bright green lights causes not a single blink of an eye. .
(I've been paged in the middle of the night for more than one of those servers because a hard drive light was amber....)
I've seen staff members flown to conferences that have nothing to do with their job only because, "well, we have travel and training money in the budget, so lets send the Windows administrators to a seminar in Taos to learn about some software we don't have and don't intend to buy".
I've seen staff giddy over the fact that they were gifted meaningless trinkets in appreciation for all their hard work, and then look at me stupefied when I said, "You know you bought that right?
I've seen software purchases in the tens of thousands of dollars to do what 4 other pieces of software we already have do in our production environment already.
And yes, I've reported these things. They are ignored.
Short of punching someone in the nose it's damn near impossible to get fired from federal public service. Managers have to fully document every failure, document every attempt at modifying the behavior, and prove that by the end of a full one year period the employee refuses to adjust. Aside from proving that being really difficult, all the employee has to do is say, "I'm struggling, and I need help.", for which the manager is required to send them to training, counseling or whatever else seems appropriate, and the one year idiocy clock resets. All this while the federal worker's union crawls up the manager's ass with a flaming torch and pitchfork.
And all THAT assumes that the manager even tries to correct the behavior, which is my experience is somewhat uncommon. Instead they give the employee passing job evaluations that happen every quarter. To do otherwise would ensure that no other federal manager (who has access to every applicants federal work history records) will hire an employee with a documented h
"But we have to pass the bill so that you can find out what is in it,..." - Nancy Pelosi
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?
There's a simple solution to this: The layer above them needs to make it so that even if they don't spend every dime they got on the last budget they can reasonably argue for more on the next. You know, treat each period as an independent item[1]. Start from scratch.
Someone should patent that. They could call it "Zero based budgeting" or something.
And by the way, the thing yo mention is by no means confined to the public sector.
[1] If there weren't so many aspies around here I wouldn't need to state this, but obviously this wouldn't apply to long term projects - like digging the Panama Canal - that run for many periods.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
I have seen all of this in the private sector, empire building is a problem with managers not the sector.