Air Force gives more launches to ULA


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The heat of competition? The Air Force has added three launches to its $4 billion bulk-buy contract with ULA, including one that SpaceX had hoped to bid on.

The timing of this contract award, worth $383 million, is most intriguing, coming as it does mere days after SpaceX had dropped its lawsuit with the Air Force. It is almost as if the Air Force was waiting for that lawsuit to go away before it gave more contracts to ULA. Note also the launch cost for these three launches: $383 million for 3 launches, or about $127 million per launch. That’s more than twice what SpaceX charges for a Falcon 9 launch.

It sure looks to me like the Air Force does not have the taxpayers’ interests at heart, and instead is working an inside deal to help its buddies at ULA.

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6 comments

  • wodun

    Do we know what SpaceX’s price is? Their price for ISS supply missions was around $130m last I checked. Launching satellites should be cheaper but I wouldn’t be surprised if there is added expense from dealing with the government.

  • SpaceX generally says a Falcon 9 launch costs around $70 million. NASA paid more, because NASA wanted more, and because NASA is a government agency that doesn’t really care that much about how much it spends. Part of its agenda was to subsidize SpaceX. (If Kelly Starks is reading this he probably is pounding the air with his fist, shouting “That what I was saying!”).

    Then again, NASA also subsides ULA, as does the Air Force. In the end, SpaceX’s $70 million price beats them all by quite a lot. And in the case of the Air Force, it was my impression that Musk’s intention was to beat the ULA price, by a lot.

  • Edward

    A year ago, the estimate was $90 million for each military launch. This is 50% higher than for commercial launches, but is expected to cover the additional expenses that would be needed to comply with military requirements. I am interested in finding out whether SpaceX really *can* do it for that price.

    http://behindtheblack.com/behind-the-black/points-of-information/in-testimony-to-congress-wednesday-elon-musk-described-how-allowing-spacex-to-compete-as-a-military-launch-provider-would-significantly-lower-costs/

    “SpaceX could provide a Falcon 9 rocket for around $90 million as opposed to nearly $400 million for a ULA launcher.”

    And it looks like ULA has reduced their price from $400 million to $127 million.

    Even if SpaceX accomplishes nothing else new, it has already put pressure on the world’s launch providers to find ways to be more efficient with their resources and lower their prices. Musk’s creative approach to space access is revolutionizing the industry, and if he is equally creative in manned exploration (e.g. getting to Mars), then he will revolutionize that aspect as well.

  • Edward

    > Part of its agenda was to subsidize SpaceX.

    Are you certain that part of NASA’s agenda was to subsidize SpaceX? Do you have a reference? The per-launch price of the Commercial Resupply Services (CRS) contract may have been higher than the current commercial-launch price range due to business factors such as:

    1) Unknown cost of Falcon 9 launches. Before SpaceX launched a few Falcon 9s, the company may have been concerned about the initial cost per launch and how quickly they could reduce that cost. Thus, they may have bid higher than the current commercial price would indicate in order to make sure that they did not bankrupt the business. It is a fixed price contract, not a cost plus contract. If it costs SpaceX more than they thought when they bid, they have to eat the additional cost, possibly risking the survival of the company.

    2) Unknown success rate of the Falcon 9 rocket. We still don’t know the long-term success rate, and they may have wanted to make sure that they could lose a couple of the twelve (actually, 14, as two launches were tests that did not deliver cargo) rockets and spacecraft committed to this contract. Fixed price means that SpaceX, not NASA, will have to eat any problems that come along (lost vehicles, manufacturing/delivery problems, etc.). Orbital Sciences is suffering such a cost, right now, after a launch failure and now having to redesign their rocket for a new engine.

    3) SpaceX also supplies a spacecraft (pressurized Dragon and unpressurized trunk) that commercial payloads do not require, so the price is necessarily higher than launching a satellite into GTO.

    4) SpaceX has to comply with NASA requirements, which many/most/all commercial payloads do not have.

    I do not consider profit to be a subsidy. A company is allowed to have excellent sales and revenues are allowed to exceed expenses by more than expected amounts. A recent example is Apple Computer, which just exceeded the expected $67 billion first-quarter sales figure (a couple billion more or less, depending upon which analyst you listen to) for sales of almost $75 billion and a profit of $18 billion — the most quarterly profit of any company, anywhere, ever. I do not consider 25% profit to constitute a subsidy but to be a sign of a highly efficient and effective organization which sells popular products or services.

    The CRS contract calls for SpaceX to supply 12 flights for a total cost of $1.6 billion and taking at least 20,000 kg to the ISS. Orbital Sciences’ contract is similar (about $1.9 billion for 8 flights taking at least 20,000 kg). I suspect that SpaceX made business decisions in similar fashion as Orbital for pricing its Commercial Orbital Transportation Services and CRS bids. Unless Orbital Sciences was likewise intended to be subsidized, then I doubt that SpaceX is subsidized. SpaceX may or may not be making a nice profit on the CRS contract, depending upon the cost of Dragons and their trunks, and the cost of complying with NASA’s additional requirements.

    The contract prices make it look like SpaceX was trying to be the low-cost supplier even back then, supplying the same amount of uphill delivery for 15% lower price than Orbital. SpaceX does more for a lower price than Orbital does. I seem to be missing the subsidization.

  • Heh. I really don’t want to rehash the debate you had with Kelly about the issue of subsidy vs profit, since in general I agree with you.

    Nonetheless, there is a policy component to the decisions NASA has made in awarding its contracts that is not merely picking the best price or even the best vendor. Government agencies sometimes decide to award a contract because of a whole myriad of other issues, including political pressure, policy concerns, national security, pork concerns, and even personal connections between managers. One positive component that definitely does exist inside our government in a cutting edge field like space is, “How can we the government best help this new industry get jump-started?” Even I, who clearly dislikes government and would like it involved as little as possible, recognizes that this idealistic approach does exist and is a factor in these decisions.

    Whether those in government ever answer that question correctly is another discussion for another day. It is important however to recognize that this component exists, and was unquestionably a factor in NASA’s original decisions to award SpaceX and Kistler the initial cargo contracts.

    Remember Kistler? In hindsight it seems obvious that they never had a chance to finish that contract. I think NASA picked them however in the hope the contract could help them get their business started. In this context the contract award could be considered a subsidy, though because it could only be paid after the company achieved its milestones it wasn’t much use to Kistler, as they didn’t have the financing to proceed without that NASA cash in hand.

  • Edward

    > Remember Kistler? … I think NASA picked them however in the hope the contract could help them get their business started. In this context the contract award could be considered a subsidy, though because it could only be paid after the company achieved its milestones it wasn’t much use to Kistler,”

    Yes, I remember Kistler; I had rooted for them for years. Well, under the above definition, the entire COTS, CRS, CCDev, etc. programs are subsidies for all contract winners, as their entire purpose is to promote the start of a commercial space industry. There are laws from 1984 and 1990 (I think I have the right years) that encourage government to do such promotion. It is like the patent office; the Constitution (Article 1, Section 8) empowers Congress “To promote the Progress of Science and useful Arts.” If the COTS contract was set up in such a way that it wasn’t much use for Kistler, then maybe it was less of a subsidy and more of a standard performance contract.

    I think that we will have to disagree on this issue (although you wrote, “in general I agree with you”), but it may just be that we differ on our definitions.
    http://dictionary.reference.com/browse/subsidy?s=t

    It isn’t as though these companies are being reimbursed by government for services that they are losing money on, as is happening in the case of Arianespace (definition #3).

    I do not consider the COTS, etc., contracts to fall under definition #1, as the contracts are for goods and services bought (mostly services) rather than given as grants or direct aid.

    If this is not considered profit, then there must be a better word for this type of government action than “subsidy.” I have not heard anyone say that it is subsidization for other government contracts that hire one or more companies to develop and produce or service military or space systems.

    As with the transcontinental railroad (political motive: to prevent California from Seceding, as had the Southern States), the government had a need to fill, and commercial companies were going to have to be hired to fill it, and they were going to have to make a profit on a bold venture that no one had done before. Otherwise, they would be looking like Kistler, right now, and that was nobody’s intention. (BTW, because of the competition for building the railroad, it was completed sooner than expected.)

    As for motives for spreading around money, that is a consequence (intended or otherwise) of cost-plus contracts. A company with a cost-plus contract only needs to be as efficient and effective as it takes to avoid having the contract cancelled. As I note in a reply, below, ULA has reduced its per-launch price dramatically; an indication that they realize that they need to be — and are able to be — more efficient. I have not heard anyone declare that ULA has been subsidized for these past few years.

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