NASA To Pay More For Less Cargo Delivery To the Space Station (arstechnica.com)

A new report from NASA's inspector general, Paul Martin, finds that NASA will pay significantly more for commercial cargo delivery to the ISS in the 2020s rather than enjoying cost savings from maturing systems. "NASA will likely pay $400 million more for its second round of delivery contracts from 2020 to 2024 even though the agency will be moving six fewer tons of cargo," reports Ars Technica. "On a cost per kilogram basis, this represents a 14-percent increase." From the report: One of the main reasons for this increase, the report says, is a 50-percent increase in prices from SpaceX, which has thus far flown the bulk of missions for NASA's commercial cargo program with its Dragon spacecraft and Falcon 9 rocket. This is somewhat surprising because, during the first round of supply missions, which began in 2012, SpaceX had substantially lower costs than NASA's other partner, Orbital ATK. SpaceX and Orbital ATK are expected to fly 31 supply missions between 2012 and 2020, the first phase of the supply contract. Of those, the new report states, SpaceX is scheduled to complete 20 flights at an average cost of $152.1 million per mission. Orbital ATK is scheduled to complete 11 missions at an average cost of $262.6 million per mission.

But that cost differential will largely evaporate in the second round of cargo supply contracts. For flights from 2020 to 2024, SpaceX will increase its price while Orbital ATK cuts its own by 15 percent. The new report provides unprecedented public detail about the second phase of commercial resupply contracts, known as CRS-2, which NASA awarded in a competitively bid process in 2016. SpaceX and Orbital ATK again won contracts (for a minimum of six flights), along with a new provider, Sierra Nevada Corp. and its Dream Chaser vehicle. Bids by Boeing and Lockheed Martin were not accepted.

Comments

Unexpected Costs

[im_thatoneguy]

Translated: SpaceX thought they needed to charge a premium to deal with bureaucracy but wildly underestimated just how much bureaucracy is required to interact with a multi multi billion dollar internationally operated property.

Re:Unexpected Costs

[Anonymous Coward]

Yeah, or not. NASA invested $454M up-front in SpaceX, less than what they spent on the space shuttle in a year, and as a result got dramatically cheaper per-flight costs - saving billions:

The most significant improvement, beyond even the improvements of 2-3X times reviewed to here, was in the
development of the Falcon 9 launch system, with an estimated improvement at least 4X to perhaps 10X times over
traditional cost-plus contracting estimates, about $400 million vs. $4 billion

Re:Unexpected Costs

[swillden]

Translated: SpaceX thought they needed to charge a premium to deal with bureaucracy but wildly underestimated just how much bureaucracy is required to interact with a multi multi billion dollar internationally operated property.

Not really. SpaceX were cheap only if you ignore the truckload of money that NASA paid them to develop their rockets and the fact that NASA bought 12 flights to carry supplies to the ISS, but the first two were basically test launches with very light payloads (CRS-1 and CRS-2).

SpaceX was only expensive if you can't do simple arithmetic.

For the first round of 20 flights, SpaceX is 20 * ($262.6M - $152.1M) = $2.2B cheaper than ULA. Subtracting out the $454M up-front investment, that still leaves a net savings of $1.75B. Even if you consider the time-value of the money by adding, say, 6% compound interest on the initial outlay all the way through 2020 (which is ridiculous), NASA will still have saved $1.18B vs ULA. And that's assuming ULA didn't get any development funding, which is false since both Boeing and Lockheed Martin built their spacegoing capability largely on NASA dollars, mostly under the old cost plus model (vastly more expensive).

NASA's own analysis looks even better for SpaceX, estimating the cost savings of launch system development alone (not considering operational savings) at over $3.5B. Of course, they were comparing to their traditional model.

And, frankly, continuing to undercut the competition by such a large margin would just be bad business. If your price is 42% lower than your nearest competitor's -- for the same quality of service, etc. -- you're leaving money on the table. Moreover, since NASA refuses to contract only a single supplier, it's not necessary to beat everyone, only to beat enough of them to stay in the group of contract recipients. This higher price will provide more capital to fund Musk's real goal: building a Mars transport system. Or to generate larger returns for its investors, which is totally fair since they put up as much as NASA did, and while we don't know how much they've taken out (if any), it can't be very much so far. Certainly far less than NASA's "profit" as compared to other launch options. But I think most of it will go into funding the Mars plans.

Re:comparison

[galabar]

Nope. Read the whole article. Prices are still cheaper because of the private sector's involvement.

NASA did something right!

[hyades1]

At least they rejected the bids from Lockheed Martin and Boeing. Dear lord, what a zillion-dollar clusterf^ck THAT would have been!