Elon Musk explains (not a permalink):
Whenever someone proposes to do something that has never been done before, there will always be skeptics.
So when I started SpaceX, it was not surprising when people said we wouldn’t succeed. But now that we’ve successfully proven Falcon 1, Falcon 9 and Dragon, there’s been a steady stream of misinformation and doubt expressed about SpaceX’s actual launch costs and prices.
As noted last month by a Chinese government official, SpaceX currently has the best launch prices in the world and they don’t believe they can beat them. This is a clear case of American innovation trumping lower overseas labor rates.
I recognize that our prices shatter the historical cost models of government-led developments, but these prices are not arbitrary, premised on capturing a dominant share of the market, or “teaser” rates meant to lure in an eager market only to be increased later. These prices are based on known costs and a demonstrated track record, and they exemplify the potential of America’s commercial space industry.
Here are the facts:
The price of a standard flight on a Falcon 9 rocket is $54 million. We are the only launch company that publicly posts this information on our website (www.spacex.com). We have signed many legally binding contracts with both government and commercial customers for this price (or less). Because SpaceX is so vertically integrated, we know and can control the overwhelming majority of our costs. This is why I am so confident that our performance will increase and our prices will decline over time, as is the case with every other technology.
The average price of a full-up NASA Dragon cargo mission to the International Space Station is $133 million including inflation, or roughly $115m in today’s dollars, and we have a firm, fixed price contract with NASA for 12 missions. This price includes the costs of the Falcon 9 launch, the Dragon spacecraft, all operations, maintenance and overhead, and all of the work required to integrate with the Space Station. If there are cost overruns, SpaceX will cover the difference. (This concept may be foreign to some traditional government space contractors that seem to believe that cost overruns should be the responsibility of the taxpayer.)The total company expenditures since being founded in 2002 through the 2010 fiscal year were less than $800 million, which includes all the development costs for the Falcon 1, Falcon 9 and Dragon. Included in this $800 million are the costs of building launch sites at Vandenberg, Cape Canaveral and Kwajalein, as well as the corporate manufacturing facility that can support up to 12 Falcon 9 and Dragon missions per year. This total also includes the cost of five flights of Falcon 1, two flights of Falcon 9, and one up and back flight of Dragon.
The Falcon 9 launch vehicle was developed from a blank sheet to first launch in four and half years for just over $300 million. The Falcon 9 is an EELV class vehicle that generates roughly one million pounds of thrust (four times the maximum thrust of a Boeing 747) and carries more payload to orbit than a Delta IV Medium.
The Dragon spacecraft was developed from a blank sheet to the first demonstration flight in just over four years for about $300 million. Last year, SpaceX became the first private company, in partnership with NASA, to successfully orbit and recover a spacecraft. The spacecraft and the Falcon 9 rocket that carried it were designed, manufactured and launched by American workers for an American company. The Falcon 9/Dragon system, with the addition of a launch escape system, seats and upgraded life support, can carry seven astronauts to orbit, more than double the capacity of the Russian Soyuz, but at less than a third of the price per seat.SpaceX has been profitable every year since 2007, despite dramatic employee growth and major infrastructure and operations investments. We have over 40 flights on manifest representing over $3 billion in revenues.
These are the objective facts, confirmed by external auditors. Moreover, SpaceX intends to make far more dramatic reductions in price in the long term when full launch vehicle reusability is achieved. We will not be satisfied with our progress until we have achieved this long sought goal of the space industry.
For the first time in more than three decades, America last year began taking back international market-share in commercial satellite launch. This remarkable turn-around was sparked by a small investment NASA made in SpaceX in 2006 as part of the Commercial Orbital Transportation Services (COTS) program. A unique public-private partnership, COTS has proven that under the right conditions, a properly incentivized contractor — even an all-American one — can develop extremely complex systems on rapid timelines and a fixed-price basis, significantly beating historical industry-standard costs.
China has the fastest growing economy in the world. But the American free enterprise system, which allows anyone with a better mouse-trap to compete, is what will ensure that the United States remains the world’s greatest superpower of innovation.
Not if Congress has anything to say about it. They continue to want a state-socialist jobs program.
Brilliant!
Your comment was a bit too short. Please go back and try again.
Heh.
SpaceX is the most exciting thing in spaceflight in years. Good for Elon.
I just saw the C-1 capsule today. It was very impressive, even more so sitting next to the Orion mockups…
Musk “spiking the football”? Heh.
The average price of a full-up NASA Dragon cargo mission to the International Space Station is $133 million including inflation, or roughly $115m in today’s dollars,
As another data point, the current issue of Popular Mechanics quotes Elon Musk saying that a circumlunar mission would cost $150-200 million.
For $10 billion, the US government could buy one Orion development program (and no launches) or 50+ manned circumlunar flights.
That’s assuming no discounts for quantity purchase and no learning-curve effects that bring the cost down.
What does it say about members of Congress that they would rather have a government-owned capsule and no flights than a privately owned capsule and 50 flights?
SpaceX has only spent 800 million in the history of the company. They have developed 2 rockets, multiple engines, and a spacecraft that have all performed successfully. If congress really wants a 100 mt rocket, why don’t they give Elon a fixed cost contract to build a BFR. I’m sure he could do it for under a billion total, not two billion every year until 2016, then at least 500 million per launch. But, SLS is a jobs program, not a space program. Big government at its best.
I add my kudos for SpaceX, but, playing devil’s advocate, I’m uncomfortable with the phrase “public-private partnership”. It smacks of fascism to me. That’s not a slam at SpaceX; just an observation. It seems to be the rule worldwide nowadays. There are many examples of close ties and even incestuous relationships between government and business. The Chinese People’s Liberation Army owns and operates all kinds of for-profit businesses.
Whatever you want to call it, it’s certainly an improvement over strictly government-run enterprises, or cost-plus contracts. But Mussolini invented fascism as a sort of “new, improved” version of socialism. He may be having the last laugh.
It shows the advantage a firm has without legacy costs and pricing for high production runs.
Rickl,
The Transcontinental Telegraph and Transcontinental Railroad would be consider public-private partnerships in today’s world. Nothing wrong with the idea. Nor is it socialist.
It shows us the cost of relying on products of the arsenal system (*any* countries arsenal system). The built-in costs we keep carrying forward for no advantage.
Look, theres a reason that weapons systems cost the way they do – you pay cost plus on many components because you need them *now* for a national security reason and thats it. When you use it again for some other purpose, the cost structure follows along like a bad penny. Do this a lot and your numbers fall apart.
Arsenal system projects work of the concept of few being enough. If you need to scale, you rebuild from scratch knowing the scale. You never can do vertical, because you can never know the requirements of the future well enough.
Musk’s approach works because he greatly reuses what he has already. When have we ever done that in HSF with a cost effective architecture?
‘The Transcontinental Telegraph and Transcontinental Railroad would be consider public-private partnerships in today’s world. Nothing wrong with the idea. Nor is it socialist.”
Both came with massive fraud and runaway costs to taxpayers and the government chose winners and losers. The private RRs built track of better quality cheaper and yes, it is socialist by any definition.
Bill,
Both the Union Pacific and Central Pacific were private railroads. But like COTS, they got a fixed price loan and land for each mile laid. And some of the other private railroads cut cost and quality as well in order to reach destinations first, where do you think the organizers of the Union Pacific learned the tricks? Such fraud was common before government regulation.
Musk: … If there are cost overruns, SpaceX will cover the difference. (This concept may be foreign to some traditional government space contractors that seem to believe that cost overruns should be the responsibility of the taxpayer.)
LOL In your face, LockMig, Northrop-Sukhoi, and BoeingAntonov!
The thing that really pisses off the Congress is that Elon doesn’t include in his budget expenses to cover lobbying and bribes, like all the Old Space companies do. Thats the “plus” in “cost plus”. The House wants its vig.
That article was interesting, but it didn’t really deliver on the promise to explain why SpaceX’s costs are lower. Just “vertical integration” – we knew that already.
Thomas, again, there were plenty of private RRs and by that I mean privately financed, which were successful and charged lower rates on better tracks. They already knew the tricks from other corruption. The whole concept of government finance, even today leads to fraud, corruption and poor service. Medicare, food stamps, public hospitals, defense, education, whatever the program, they all have oversight and billions are still wasted. But you keep beating that government partnership is good drum regardless of the facts.
Paul D.
Lost in the obviousness (from the point of view of those doing it).
The outsourcing model – contract it all out – is a way for management to avoid having to actually manage. You get layers and layer of subcontracting as well, usually.
SpaceX found that when you outsourced to the usual companies, they in turned outsourced. After several layers, you get to an engineering outfit that makes stuff. Which is then integrated back up the chain into a product. Imagine the costs and miscommunication built into that structure.
Alternatively you have a guy with a CNC’d lathe on your factory floor, and your own design crew.
It has long been known that with skilled management and good cost control a few high paid individuals can beat a crowd of cheap people.
Back in the late 80s, there was an Economist article that pointed out that the cost of employing a German steel worker was 19 times that of their Indian equivalent. The Germans were making 21 times as much steel per head……
Best thing that can happen to SpaceX is to get a diverse set of nongovernmental customers.
The outsourcing model – contract it all out – is a way for management to avoid having to actually manage. You get layers and layer of subcontracting as well, usually.
SpaceX found that when you outsourced to the usual companies, they in turned outsourced. After several layers, you get to an engineering outfit that makes stuff. Which is then integrated back up the chain into a product. Imagine the costs and miscommunication built into that structure.
Alternatively you have a guy with a CNC’d lathe on your factory floor, and your own design crew.
I had a great conversation with a SpaceX employee last month at the space symposium in Colorado Springs. We discussed the roll after liftoff on the first Falcon 9 flight. He said that since they built everything, they were responsible for fixing the problem. There was no finger-pointing between different departments or subcontractors. They just got together, figured out the problem, and implemented the solution (which wasn’t very difficult).
Taking ownership and responsibility for the vehicle as a whole allows SpaceX to work very quickly compared to conventional space companies. For each level of contractors and subcontractors, you have additional overhead expenses. Every contractor and subcontractor has the expectation of making a profit so those costs all add up. When the work is done elsewhere, you can easily run into quality control and integration issues which lead to costly delays and overruns (see Boeing 787). SpaceX has eliminated almost all of that.
Not too many people to hide behind in a small company 🙂
Traditional space companies remind me more and more of the record business. A gigantic spaggeti ball of outsourcing, hidden costs and no clear lines of responsibility…..
Traditional space companies remind me more and more of the record business.
Yeah, they’re like the bastard child of “The Mythical Man-Month” and Parkinson’s Law. As a company grows larger, the amount of effort taken to satisfy the internal bureaucracy grows exponentially. Meanwhile, the very growth of the company drives the growth of the bureaucracy.
Bill,
You haven’t a clue about you talking are talking about. The only government railroad in the 1860’s was the one the military operated during the Civil War. The rest were ALL private. Also the government assistance the Union Pacific received was any different, other than magnitude, that other railroads received since the B&O was charted in 1831.
Back then you didn’t you have the political ideology debates that have paralyzed the building of infrastructure since the 1960’s. Government partnerships simply built it. Its why you have much of it falling apart today, not having been repaired for decades.
Typo – that should be “the assistance was not any different”.
The D.D. Harriman model works. I guess RAH was right after all.
Thomas Matula Says:
May 5th, 2011 at 3:30 pm
You have some serious comprehension deficits. The only person mentioning government RRs is you. Ideology debates started from day one, Hamilton vs. Jefferson for one example. A whole host of characters including them battering each other for decades about a national bank is probably one of the best examples. Road building was a debate involving states against the federal government as to who should pay and how. Because of the lack of action, many private roads paid for by tolls were built. I don’t know if you have the illness afflicting Ezra Klein or not but your knowledge of history seems to be suffering some form of myopia.
Bill,
If I may refresh your memory….
[[[The private RRs built track of better quality cheaper and yes, it is socialist by any definition.]]]
So if the Union Pacific was not a private railroad what was it? A charity? (rolling eyes…)
All railroads received different forms of government subsidies. Some like the Union Pacific low cost loans and large land grants because they were the first to build to the Pacific, others, like the Great Northern free right-of-way across native American reservations and smaller land grants as they were slower to build to the Pacific (only reaching Seattle in 1893…).
But the government was involved in all of them.