The Numbers Don't Lie - NASA's Move to Commercial Space Has Saved Money

Ars Technica's Rocket Report this week includes an excerpt from a longer article with the same title as this blog post.

As part of its initial investment of $396 million into SpaceX, NASA got development of the Cargo Dragon, Falcon 9, and a launch site at Cape Canaveral.
A cost of 50 times more
... At the same time, NASA was developing the Ares I rocket to fly crew into low-Earth orbit. Independent estimates placed the cost of Ares I at about $20 billion. President Obama ultimately canceled the Ares I, projected to have a similar lift capacity to the modern Falcon 9 booster, because it was behind schedule and over budget. The agency, in turn, got a bargain.

The beginnings of the commercial space program goes back nearly 15 years to NASA administrator Michael Griffin, appointed by George W. Bush in 2005.  NASA placed a small bet on the nascent commercial space industry when it sought to diversify its fleet for delivering cargo to the International Space Station.  In 2005, NASA had the space shuttle to ferry supplies, of course, but recognized that the aging system was not going to fly forever.  So NASA administrator Griffin, committed $500 million in seed money for the development of new, privately built spacecraft.

Griffin may not have realized what he had unleashed. The first small “Commercial Orbital Transportation Services” contracts awarded to SpaceX and Orbital Sciences have since expanded into other areas of spaceflight while multiplying in value from hundreds of millions of dollars into billions of dollars. NASA now looks to private companies for not just cargo delivery to orbit but, with Crew Dragon, people. NASA also recently sought commercial services for sending supplies to the Moon and even landing humans there. What began as a pebble tossed into a pond has become a wave.

Critics of this commercial approach certainly remain—it has disrupted the business models of traditional aerospace powers like Boeing and Lockheed Martin, which have long profited from lucrative cost-plus contracts. Some at NASA, too, still don’t trust commercial providers, and they’re especially wary of Elon Musk, the brash founder and chief engineer of SpaceX.

Insiders are still fighting over cost-plus contracts.  In the days before the advances in commercial spaceflight, NASA would specify precisely what they wanted and monitor the contractors with intensive audits, visits and oversight.  If a vehicle ran five years late and doubled its original budget, (cough - SLS - cough) NASA was on the hook for cost overruns. This tended to incentivize programs being late and over budget, but eventually the government got what it wanted. And those big contractors absolutely loved it.  To be fair, when the government is asking some company to do something no one on Earth has ever done, cost-plus is a way of reducing the risk.  The reality is the method becomes harder to justify when a company is building the next generation of something that has been done many times before. 

As the infomercials say, "but that's not all!"  Like every other government agency I'm aware of, there's a conveyor belt of managers going back and forth between the agency and the private sector; between the buyers and the companies they buy from.  That makes it in the interest of some NASA people for the contracts to go late and over budget, too, further incentivizing cost-plus contracts. 

Griffin used the analogy of having a house built to describe his vision for commercial space.

“The contractor builds homes for a living, I’m not creating the contractor’s company. He has to have a company before I will consider allowing him to build a home for me. He builds his homes, and if I like them, I can buy a design that he offers. At different stages of completion he gets money from me if he’s building my home, but he doesn’t get all the money until he has furnished all the product.”

An important point about this analogy that may not be obvious is that if the contractor screws up, it's on his nickel.  That would make the contract for commercial space much more like the "Firm, Fixed Price" model the DOD uses.

Ars presents this table of the highlights:

Program	Cargo Dragon	Commercial crew	Constellation
Type	Private, fixed-price	Private, fixed-price	Government, cost-plus
NASA costs	$396 million	$5 billion	$34.5 billion
Deliverable	Cargo Dragon	Crew Dragon	Ares I rocket
	Falcon 9 rocket	Starliner spacecraft	Orion
	Florida launch site	Booster integration	(costs are estimated)
Results	Cargo Dragon went on to fly	Crew Dragon to fly in May,	Ares I canceled, Orion to be
	20 ISS deliveries	Starliner next year	used only in deep space.

Don't make the mistake I made; the entry under Commercial Crew for Starliner isn't the SpaceX Starship we frequently talk about.  Starliner is the Boeing private capsule, which (it seems to me) will be lucky to be flying in a year.  That $5 Billion is the total amount NASA has spent among the various contractors in the running.

Put another way, while SpaceX developed a cargo version of its Dragon spacecraft, the Falcon 9 rocket, and built its launch facilities at Cape Canaveral, the Constellation Program was toiling away on Orion, the Ares I rocket, and ground systems. “We were effectively doing what the Constellation Program was doing with about the same amount of money, total, that they were burning in a single month,” said Mike Horkachuck, the NASA engineer originally assigned to SpaceX for the commercial cargo program. “So that kind of puts it into perspective.”

But that’s just for cargo missions. Now compare the costs for crew transportation. All told, NASA will invest nearly $5 billion in SpaceX and Boeing to bring their Crew Dragon and Starliner systems to the launch pad. Phil McAlister, a NASA manager for commercial space, noted that NASA was on track to spend about six times more for the single Ares I-Orion system than what it ultimately paid for two distinct private spacecraft launched on private rockets.

It's hard to overlook that SpaceX has done much more with much less than the old line contractors have.  For cargo, it has flown more missions for less. As part of the crew development program, NASA paid Boeing about 50 percent more than SpaceX. Despite this, SpaceX completed Crew Dragon about a year ahead of Boeing, which, again, is unlikely to fly a crewed mission before next spring at the earliest.