Thursday, September 1, 2022

Why Would Any Company Work to be the Best in Spaceflight?

The first space-news I saw today was that NASA had awarded five more Crew Dragon flights to SpaceX, bringing their total to 14.  Good news for SpaceX, and it makes sense to me both as a "space nut" and as a taxpayer.  After all, their competitor (after the downselect to just these two) was Boeing, and Boeing has yet to fly a crewed flight of their Starliner capsule.  Yes, their uncrewed Orbital Test Flight 2 (OFT-2) this May went well, but it wasn't flawless - several thrusters failed on orbit, they just didn't destroy the mission.  The first crewed flight is penciled in for February of '23 (any date that far out is best considered aspirational).  That tells me that any Starliner missions to the ISS wouldn't be until late '23 at best.  

Later in the day, I saw that NASA will pay Boeing twice as much per flight as SpaceX.  It was also revealed that Boeing will fly six Starliner missions over the projected life of the ISS (until 2030).  Hmm.  That says for the same outlay as 14 Crew Dragon missions, NASA could buy seven Starliner flights - except Boeing doesn't have access to seven boosters and would only transport half as many people.  They contracted United Launch Alliance for six Atlas V systems and since it depends on Russian engines, after the six set aside for Boeing, ULA would need to man-rate their Vulcan.  Which is still waiting on BE-4 engines from Blue Origin.  Those will be there "real soon now, we promise."

Stated another way, if a SpaceX flight costs X, their revenue is 14X while Boeing's revenue is 12X.  Instead of reaping big benefits for being first to fly with a successful manned flight from US soil, SpaceX will take in 14/12 or not even 20% more than Boeing (16.7%).  The first manned Crew Dragon mission was near Memorial Day of '20.  It's not inconceivable that the first manned Starliner mission will be around Memorial Day of '23.  Three years later.

On the positive side, with those 20 crewed launches NASA can support the ISS for the rest of its expected life at two launches per year with four astronauts per launch. NASA still has the option to buy more launches from either provider.  

"NASA may have a need for additional crew flights to the International Space Station beyond the missions the agency has purchased to date," agency spokesman Josh Finch told Ars. "The current sole source modification for SpaceX does not preclude NASA from seeking future contract modifications for additional transportation services, as needed."
During a news conference last week, Boeing's program manager for commercial crew, Mark Nappi, said the company is looking at "different options" for Starliner launch vehicles. These options include buying a Falcon 9 from a competitor, SpaceX, paying United Launch Alliance to human-rate its new Vulcan rocket, or paying Blue Origin for its forthcoming New Glenn booster.

Now, of course, these were openly bid as fixed price contracts and a company isn't likely to go in wanting to lose money.  Boeing has spent an estimated half billion dollars of their own money to re-do the Orbital Test Flight and get to this point - which is cleaning up their own mistakes, a part of any fixed price development.  Eric at Ars Technica does a finer analysis of the numbers than I did and is worth reading if you like those details.  He cites Boeing's total as $4.39 billion and SpaceX's total as $4.93 billion, largely on the income from the 14 flights to the ISS.  That's close to 12.3% more than Boeing and not quite the 16.7% increase I calculated from 14 flights vs. 12.

A pretty Crew Dragon shot of the capsule used for  the Inspiration 4 mission in mid-September of '21.  SpaceX photo.  

Which gets us back to the title question.  SpaceX obviously outperformed Boeing on this contract, developing hardware faster and better, and yet the "also ran" company will earn over twice as much per flight.  So tell me: why would any company work hard to be the best in spaceflight?  Economics is all about incentives.  It looks like being the second place contractor gets bigger incentives.



  1. Smells like having the best lobbyist is the real prize.

  2. Well, yes, the 2nd rated company will be grossing much more per flight than SpaceX.

    But then again, their costs are much more than 4X per flight, so their net profit per launch is significantly reduced. Especially if you count in all the added costs of re-testing, relaunching, refurbishing, re-recovering, recertifying...

    AND Boeing ain't getting any non-governmental commercial passenger flight money. SpaceX has launched private, non-governmental flights to the ISS and to orbital space. That's cash in the hand, thank you, here's your ticket (yes, much more complex, but that's cash and flights that Boeing isn't getting.)

    The government is subsidizing Boeing. And the government is getting, so far, absolutely nothing. And Boeing is paying out the nose to fix their company's boo-boos and screwups and total copulation-ups.

    Gee, say Israel wants to put up a crew. Are they going to the ChiComs? The Russians? The Europeans? Indians? Northrop-Grumman/Sierra Nevada? LockMart? Boeing? Nope. Not at all. They'll talk to Elon and they'll buy a private Israeli company's peoples flight.

    Same with anyone wanting private ORBITAL missions or trips. For, realistically, not much more than flying on Bezo's puddle-jumper, you (and up to 5 of your friends or other people) can buy an orbital flight on Dragon.

    And that's just using Dragon. When (not if, though it may take a while) Crew Starship comes on line, then the price per ticket will fall and fall and fall. Jeez, SpaceX is basically talking about suborbital point-to-point at tens-of-thousands once service is started, all flying higher than BO or VG.

    Boeing may be grossing more per flight, but SpaceX, with their much leaner organization, is probably netting the same or more per flight, and every time they launch they get better, faster, cheaper, which means netting more mullah per flight.

    Yes, it sucks that Boeing is basically ripping off American taxpayers for absolutely (so far) nothing, but Big Government has a history of subsidizing failures (like, oh, say, AMTRACK...) and riding said failures into the ground.

  3. NASA, and other Govt orgs incentivize the 2nd (and sometimes the 3rd) ranked suppliers even if they are not in the same league as the 1st because the Govt fear a sole supplier will have excessive leverage (like any monopoly). I think NASA believes it is in the best interest of the Govt to do business this way in spite of the costs incurred (more contract $, dreduced contract performance, etc)

    In the space business the costs of entry are high, and the returns (for Govt contracts) are not that great. SpaceX only has small advantages in the Govt market, but can (and does) leverage that into big advantages in the commercial market. This policy also allows a Govt agency to justify more staff (and ankle biter support) and more budget, the goal of all Govt organizations. The side effect of these leveling efforts is we end up with slower development and technical advancement as well as significantly higher costs. SpaceX, as a relative newcomer, shows what progress is possible. One downside of NASA providing rewards for less than top notch performance can be seen as Boeing, the rest of the space industry, and even newcomer Blue Origin have reduced incentives to fix their troubles managing cost, schedule and technical aspects of their development.


  4. Something I didn't quote in the article (trying to avoid that TL:DR syndrome) is that the NASA administrator at the time Commercial Crew was getting started thought that without Boeing, congress would have never funded it. I'll quote it here:

    Still, Boeing's participation has been essential for NASA, both in fostering competition and in securing congressional funding. The NASA administrator at the time the development contracts were awarded in 2014, Charles Bolden, confirmed this during an interview in 2020. He said Congress would not have funded the commercial crew program had Boeing not bid alongside SpaceX.

    "Boeing was a dream," Bolden told Aviation Week. "I call them a champion in being willing to accept the risk for a program whose business case didn't close back then. And I'll be blunt. I don't know whether the business case closes today."

  5. Boeing is an integral part of the Military-Industrial Mafia so of course they are going to get the gold plated contract. SpaceX is just some upstart, a mark to be exploited until it is bled dry.

  6. Because regardless of the money, the BEST is still acknowledged as the BEST.