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."

Comments

Meh

[Richard_at_work]

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.

Re:Meh

[Richard_at_work]

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

[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.

Re:Meh

[K. S. Kyosuke]

Delta IV Heavy's eight launches are one of the reasons why the JWST flies on Ariane 5.

Re:Meh

[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

[EnsilZah]

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...

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.

Re:Meh

[Feyshtey]

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....

Re:Meh

[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.

Re:Meh

[bgarcia]

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)
The Delta IV Heavy can deliver 63,470 lb to LEO and 31,350 lb to GTO (ref).

- 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). And SpaceX has been providing launch costs 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

[cheesybagel]

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.

Re:Meh

[rocket rancher]

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.)

Re:Meh

[cheesybagel]

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.

Re: Meh

[Anonymous Coward]

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

[nospam007]

"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?

Re:Meh

[AHuxley]

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

[MightyYar]

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.

Re:Meh

[Solandri]

Atlas V is about $109 million (used to be about $180 million before competition).

Delta IV Heavy is about $435 million. 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 more.

Also worth noting that a "fair and reasonable" price is not what it costs to make the product plus some percentage. It's what the buyer is willing to pay. If the buyer (govt in this case) thinks it's worth paying $1 billion per launch (space shuttle), then that's a fair and reasonable cost. As long as what you pay is less than the benefit you gain, then it's a reasonable economic transaction.

The key to lowering costs is competition, not requiring transparency of the seller's accounting. Nobody wants to have to go through Walmart's accounting books to guarantee they're getting a "fair and reasonable" price when they go shopping there. It's a helluva lot easier to compare prices at a bunch of competing stores selling the same stuff. If the government wanted lower prices, they should've prohibited Boeing and Lockheed from forming ULA together.

Re:Meh

[stoatwblr]

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 already paid for and ready to go. If you wanted to build a second one it'd probably only cost a few tens of millions.

Author is biased

[gurps_npc]

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.

Re:Author is biased

[queazocotal]

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

Re:Author is biased

[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 to LEO (~$700/lb)
http://www.spacex.com/about/capabilities

to GTO, The Atlas is
Atlas V $109M 3500lb ~$31K/lb
Atlas V $153M 6695lb ~$23K/lb
Falcon 9 $62M 18300lb ~$3.3K/lb
Falcon H $90M 58860lb ~$1.5K/lb

note these payloads are for fully expendable Falcons, which may be more expensive than one where they can recover parts.

so if you are going to Geosync orbit, SpaceX is about 1/10 the cost of ULA

Re:This is not surprising

[Namarrgon]

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?

Re:If you are worried about reliability

[Brett Buck]

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.

Re:Say what?

[Gavagai80]

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.