Who’s up for a fresh round of the always popular game, guess how the government is wasting your money now? Sometimes the quiz questions involve boring old stories about $30,000 toilet seats or $100K hammers. Those are fun, of course, but they don’t really add up to a hill of beans compared to what the Defense Department spends. Much of the money is, of course, badly needed for our military, but they get up to their own spending sprees in other areas.
One of these is the business of launching rockets into space. I’m not talking about the cost of satellites or weapons or any other cargo they might be carrying. I just mean the basic launch vehicles themselves. And there’s one vendor in particular who seems to have corned a nice chunk of that market. It’s United Launch Alliance (ULA) and they’ve held a tidy position as a prime vendor for quite some time, essentially building a monopoly on the market. If we stick with them, however, we will soon be paying well over $400M for every launch. Details from Ars Technica.
In 2014, the US Government Accountability Office issued a report on cost estimates for the US Air Force’s program to launch national security payloads, which at the time consisted of a fleet of rockets maintained and flown entirely by United Launch Alliance (ULA). The report was critical of the non-transparent nature of ULA’s launch prices and noted that the government “lacked sufficient knowledge to negotiate fair and reasonable launch prices” with the monopoly…
Now, transparency is coming to the federal launch market, allowing lawmakers to more directly compare the costs of ULA’s launch vehicles against those of new space competitors, such as SpaceX. Because of the fiscal year 2016 National Defense Authorization Act, the Air Force budget request must consolidate rocket launch costs into a single budget line beginning in fiscal year 2020.
The Air Force recently released budget estimates for fiscal year 2018, and these include a run out into the early 2020s. For these years, the budget combines the fixed price rocket and ELC contract costs into a single budget line. (See page 109 of this document). They are strikingly high. According to the Air Force estimate, the “unit cost” of a single rocket launch in fiscal year 2020 is $422 million, and $424 million for a year later.
Does it sound like ULA has a pretty sweet deal? You ain’t seen nothing yet, kids. Check out this report from The Daily Caller. They reveal that ULA actually received $860M of your tax money just to exist. Now that’s what’s known as good work if you can get it.
Rather than just complaining, we can at least report a smidgen of good news. It looks like the White House is now trying to introduce some competition into the process and bring the prices back down.
During a congressional hearing earlier this month, new Air Force Secretary Heather Wilson acknowledged this by saying, “The benefit we’re seeing now is competition. There are some very exciting things happening in commercial space that bring the opportunity for assured access to space at a very competitive price.” A careful reading of the new Air Force budget provides an inkling of just how great those savings might be. SpaceX sells basic commercial launches of its Falcon 9 rocket for about $65 million. But, for military launches, there are additional range costs and service contracts that add tens of millions of dollars to the total price. It therefore seems possible that SpaceX is taking a loss or launching at little or no profit to undercut its rival and gain market share in the high-volume military launch market.
Is it possible that SpaceX is undercutting their rates at a loss just to get their foot in the door? Sure. Plenty of companies do that. If they are awarded a chance at the job and they suddenly begin charging as much as or more than ULA then we’ll need to break out the carrot and the stick or look elsewhere. But if they can keep the costs considerably lower than ULA (or at least force ULA to compete more) and the White House goes this route, Trump will have managed to break up the essential monopoly we’re currently dealing with and put more restraints on federal spending. He could use some good news these days, so it’s probably worth exploring.