What Is Av Leak Talking About?

OK, I’ve read this article three times now, and I can’t figure out how they came up with the headline they did. Here’s the lead graf, on which it seems to be based:

Private space companies probably can expect at least 44 paying passengers for trips to orbit in the next 10 years, NASA has told Congress, but the price per seat could be higher than the U.S. government already is paying for rides on Russia’s Soyuz capsule.

So one would expect, in reading the rest of the piece, to see some explanation of that, right? But I can find nothing whatsoever to support it, or even an attempt to do so. The rest of the article is about the recent report that NASA gave Congress on commercial markets for human spaceflight, which the article itself admits doesn’t discuss cost. So what is the basis for the headline and lede, which seem to have no purpose other than to spread Fear, Uncertainty and Doubt (FUD) about commercial crew?

Anyone? Anyone? Bueller?

Anyway, the story did have the effect of piquing my interest, so I went off to read the report. Right off the bat, I found this paragraph in the summary potentially quite disturbing:

NASA plans to follow an alternative business method that allows U.S. industry more design ownership of their space systems and requires those companies to invest private capital to complement Government funds. This is similar to the approach NASA is using for the commercial cargo effort. NASA plans to award competitive, pre-negotiated, milestone-based agreements that support the development, testing, and demonstration of multiple commercial crew systems with a fixed Government investment. NASA also plans to use a unique Government insight/oversight model featuring a core team of sustaining engineering and discipline experts who closely follow the development of the vehicles. Additionally, NASA plans to use tailored human rating requirements, standards, and processes, with NASA providing the final crew transportation system certification.

Emphasis mine.

While later in the report, it clarifies this to indicate that this will be the case only for NASA employees and NASA-sponsored participants, many who read only the summary will think that NASA will be certifying commercial crew vehicles. Words mean things, and we fought and won a battle six and a half years ago to avoid certification of commercial spaceflight (something that the FAA would do, were it to occur, not NASA) in favor of launch licensing and informed consent. It could be a very serious hindrance to the development of the industry if there is a popular perception that vehicles “certified” by NASA are “safe” and those not are not.

We remain at a phase of the industry in which there will have to be a range of safety levels and prices, to allow the market to work. Yes, NASA is extremely risk averse (largely because human spaceflight isn’t important), but there will be others with a much higher risk tolerance, and they shouldn’t be required to pay high prices for excessive “safety” just because NASA wants to overdo it. As George Nield told Congress recently, we need to accept the fact that we may lose people in opening a frontier. What was unjust about the Challenger and Columbia losses was not the deaths of the crews per se, but that they weren’t properly informed of the real risk, and so didn’t have the information needed to make a rational choice. This was particularly the case with Challenger and Christa McAuliffe, who surely didn’t think that the risk was as high as it was (a hundred in one or so chance of dying). She might still have accepted it and flown if she had known that, but she should have been given the choice.

We need to understand that the level of acceptable risk is subjective, not objective, and that if what NASA astronauts were doing was important, we’d accept a much higher risk than we do now. There are people who would be willing to fly on a Falcon 9/Dragon without a launch abort system, and NASA’s insistence on one shouldn’t prevent them from flying. I hope that someone, perhaps Congressman Rohrabacher or George Nield, will push back on this report as written, and make it very clear that NASA is not going to be in charge of industry safety.

Going on, I found this quote, from page 25, a useful and important point that many don’t seem to understand:

Figure 13 only shows NASA’s needs for commercial crew and cargo transportation during the assessment period. NASA has already purchased over 40 crew seats on the Russian Soyuz system for ISS crew transportation and rescue services at a cost of well over $1 billion. Had commercial crew transportation been available to NASA, those 40+ crew seats could have been purchased from U.S. aerospace companies. Additionally, every year that there is a delay in the availability of commercial crew transportation (either because of budget cuts or other delays), some of the seat opportunities shown in Figure 13 will be transferred to Russia for the purchase of even more Soyuz seats.

This doesn’t discuss costs, and still doesn’t clear up the point of the AvLeak article, but it does point out the problem with continued dithering. I’m not generally of a protectionist mindset, but I’m not very happy shipping money overseas to a country that is continuing to wage a Cold War on us when that money could instead be developing an American capability that could reduce costs. I don’t believe that Commercial Crew is going to cost more than our Soyuz purchases, but I would support it even if I did, because I think that it’s in the long-term interest of not only the nation, but of mankind to reduce costs to orbit.

Finally, along those lines, I want to quote the final appendix in full:

NASA recently conducted a predicted cost estimate of the Falcon 9 launch vehicle using the NASA-Air Force Cost Model (NAFCOM). NAFCOM is the primary cost estimating tool NASA uses to predict the costs for launch vehicles, crewed vehicles, planetary landers, rovers, and other flight hardware elements prior to the development of these systems.

NAFCOM is a parametric cost estimating tool with a historical database of over 130 NASA and Air Force space flight hardware projects. It has been developed and refined over the past 13 years with 10 releases providing increased accuracy, data content, and functionality. NAFCOM uses a number of technical inputs in the estimating process. These include mass of components, manufacturing methods, engineering management, test approach, integration complexity, and pre-development studies.

Another variable is the relationship between the Government and the contractor during development. At one end, NAFCOM can model an approach that incorporates a heavy involvement on the part of the Government, which is a more traditional approach for unique development efforts with advanced technology. At the other end, more commercial-like practices can be assumed for the cost estimate where the contractor has more responsibility during the development effort.

For the Falcon 9 analysis, NASA used NAFCOM to predict the development cost for the Falcon 9 launch vehicle using two methodologies:

1) Cost to develop Falcon 9 using traditional NASA approach, and

2) Cost using a more commercial development approach.

Under methodology #1, the cost model predicted that the Falcon 9 would cost $4.0 billion based on a traditional approach. Under methodology #2, NAFCOM predicted $1.7 billion when the inputs were adjusted to a more commercial development approach. Thus, the predicted the cost to develop the Falcon 9 if done by NASA would have been between $1.7 billion and $4.0 billion.

SpaceX has publicly indicated that the development cost for Falcon 9 launch vehicle was approximately $300 million. Additionally, approximately $90 million was spent developing the Falcon 1 launch vehicle which did contribute to some extent to the Falcon 9, for a total of $390 million. NASA has verified these costs.

It is difficult to determine exactly why the actual cost was so dramatically lower than the NAFCOM predictions. It could be any number of factors associated with the non-traditional public-private partnership under which the Falcon 9 was developed (e.g., fewer NASA processes, reduced oversight, and less overhead), or other factors not directly tied to the development approach. NASA is continuing to refine this analysis to better understand the differences.

Regardless of the specific factors, this analysis does indicate the potential for reducing space hardware development costs, given the appropriate conditions. It is these conditions that NASA hopes to replicate, to the extent appropriate and feasible, in the development of commercial crew transportation systems.

Again, emphasis mine. Shorter version: our cost models are busted, and we don’t know how to do cost estimation for this new generation of space development companies. But the costs are a lot lower than most people think, and very promising for the future.

31 thoughts on “What Is Av Leak Talking About?”

  1. re “certification” I’ve now seen and heard this repeated numerous times by NASA guys, including ones that I know are ‘for’ commercial cargo and crew. The problem with them is that they are tone-deaf and going along with terminology that only supports the opponents.

    The so-called study trumpets what’s not true and nearly hides what is, re commercial vs. Russia/NASA prices. Doubtless the still-potent opponents of commercial anything set up this situation.

  2. It is amazing how people get so confused over SpaceX low prices. Elon’s company does not have the huge NASA/Air Force/US Government overhead. He only pays people to do specific jobs, not to sit around on their butts and push paper. Only now that SpaceX is in production mode is the company really starting to expand. It is ridiculous that they are shocked that SpaceX beat their price models. It is a start up run by someone who has successfully started other businesses.

  3. Rand,

    [[[Additionally, NASA plans to use tailored human rating requirements, standards, and processes, with NASA providing the final crew transportation system certification.]]]

    What did you expect, they would just accept FAA standards? Actually I expect NASA will work closelywith FAA on setting, which is why FAA is setting up shop in Florida and will probably hired a number of the engineers who are now available due to the Shuttle shutdown.

    And yes, expect a common standard driven by NASA requirements. That way the the FAA won’t be embarrassed in some future Congressional hearing by having lower standards for space tourists then for NASA astronauts. Yes, the per seat will go up when they get done. And this is exactly what I warned was the major risk to the industry from CCDev, making NASA standards the industry standards.

  4. “Yes, NASA is extremely risk averse”

    Not really, considering how long they continued to fly the Shuttle, how they were happy to put a crew on top of an unproven solid, how long they continued to sabotage commercial crew when it became obvious Ares and Orion would be operational time, how eager they were to scuttle the ISS and how they are not betting billions on a launcher without payloads. They’ve been living dangerously for a long, long time.

  5. Good analysis, the conclusion was left unsaid about the contradiction between the beginning quote and the ending quote. Clearly if SpaceX costs are 1/10th or less of NASA estimates, then the lead paragraph about NASA testimony to congress are badly off.

  6. It is difficult to determine exactly why the actual cost was so dramatically lower than the NAFCOM predictions. It could be any number of factors associated with the non-traditional public-private partnership under which the Falcon 9 was developed (e.g., fewer NASA processes, reduced oversight, and less overhead), or other factors not directly tied to the development approach. NASA is continuing to refine this analysis to better understand the differences.

    Gee, what could possibly explain this mystery? Could it be that since SpaceX developed just about everything in-house, they didn’t need a bunch of NASA engineers with clipboards for every person actually doing some work? Could it be that SpaceX didn’t charge itself cost-plus prices on every component in the rockets? Could it be that they used far fewer people (a few hundred) instead of the traditional “cast of thousands”? Could it be that SpaceX didn’t generate enough CYA paperwork to deforest a major state? It’s such a mystery!

    Apparently, no one has every done it the way SpaceX did so all of the inputs into their models are useless. Those models reflect how things were always done, with schedule delays and cost overruns as a normal part of doing business.

  7. There is no precedent for what SpaceX has done in the rocket business. This is similar to Elon Musk’s cost structure at Tesla and at PayPal.

    You have to use a Silicon Valley computer-industry cost model to have an accurate comparison with SpaceX. This is probably why SpaceX, Blue Origin, Armadillo, XCOR, and Masten are making so much progress and the Aerospace industry can not understand them or compete effectively. Their leadership teams were trained in the computer industry, so they don’t know how to build things the Aerospace way…….which is a good thing.

    Building a rocket engine, rocket strcutures, and avionics from scratch at these cost levels has never been done before.

    Orbital Sciences successfully developed the Pegasus rocket for ~ $150 million in the 1980’s, but this used solid rocket engines from ATK and important parts from other vendors. Orbital Sciences could not control rising production costs, because they assemble other companies’ parts and have to pass through their overhead costs. OSC also could not scale their Pegasus design to a Taurus II class rocket, while Elon could scale his Falcon 1 into a Falcon 9 by reusing engines and avionics.

    I think another huge advantage that Elon Musk has is the use of new software design tools and the increase in cheap computing power. It used to be that 25% of the cost of a rocket was avionics hardware and software, but I would guess that a $100 Android phone could handle spaceship guidance now versus a $20-Million avionics system from Draper labs. It use to be that a rocket engine was 50% of costs, but if he has a 100-person team that can design and manufacture engines on computer-controlled machines like the auto industry does, then SpaceX is way ahead of others.

    The real question is…….why are SpaceX rockets only half the price of Russian and other commercial rockets like the Zenit and Soyuz 2?

    The anwer is……because SpaceX has 1,300 high cost employees in California to feed (i.e. fixed labor costs of ~ $200-Million/year). If SpaceX can increase production rate or move its factory to China, then prices would come down even further. SpaceX won’t do this until it gets competition from Blue Origin.

  8. Did the same people develop NASA’s cost models who developed the global warming models?

  9. I doubt SpaceX could move, or would want to move, its factory to China anytime soon. Industrial espionage and ITAR are both showstoppers.

  10. No need to move overseas.

    If SpaceX would simply move it’s factory to someplace like Alabama, it could likely cut it’s labor costs in half due to the much lower cost of living there.

  11. Who would trust a rocket from Alabama?

    *pokes self*

    Anyway, on Fox News’ launch coverage today, they interviewed Eugene Cernan about commercial launch. He said his usual but added that we should keep flying the Space Shuttle for 30 more years. If we’d have known people would try to fly it for 60 years wouldn’t we have added hibernation chambers for the crew, or perhaps made it a multi-generational ship with astronauts raising their kids and grandkids on it?

  12. George,

    Maybe they should do that for the B-52, KC-135, C-130 and U-2 which are all approaching the 60 year milestone. And lets not forget the pair of WB-57s NASA is still flying.

  13. But Thomas, those aircraft don’t require tens of thousands of man-hours of maintenance after every flight. As long as NASA operates the Shuttles they will absorb much of NASA’s budget, precluding other projects. So the real comparison is what if we never built another airplane after the B-52, with manned aviation stopped just prior to the F-100 and Boeing 707?

    The B-1A was cancelled after an Air Force cost analysis showed that it’s maintenance and support costs would turn the Air Force into an organization entirely dedicated to B-1A, with no money left to do anything else. NASA worked themselves into the same corner, without enough of a budget to even perform major engineering upgrades to the Shuttle fleet (such as eliminating the APU’s and going all electric) and there is only one way out.

  14. How much more expensive will the Dragon Crew be than the Dragon Cargo?

    $54m(F9) -> $115m(F9 Dragon Cargo) -> ? (F9 Dragon Crew)

    Certainly will be cheaper than Soyuz rides but it will be nice to know the price.

  15. Absolutely yes our cost models are total nonsense. To anyone in this area, with an understanding of cost accounting distortions this … is hardly a surprise.

    Accounting is a tool that is frequently abused to generate the kind of documentation one desires. By changing the definitions to suit, one can even make it self consistent.

    Financial analysis in these area is about telling the history and interpreting it from the context of the moment. Because the needs of successive projects are different, and the way to get to the desired immediate result are often unrelated, the dissection of the cost model of each has nothing to do with the prior, so the only use of such costing is to get to the immediate goal, otherwise it is dominated by cost distortion end to end.

    For cost accounting to work, you have to retain the same basis/rules all along, and reconcile required changes backwards to avoid inducing distortions. Its very complicated. Not to even add in the rationalizations to distort the accounting in accommodating various needs in order to satisfy various constituencies. In essence many got too used to too malleable accounting spanning many decades, such that it ended up meaning nothing.

    Even in starting with a “clean sheet”, the cost structures of the past dominate how contractors are used to working together – it takes very little to inject back into the system.

    One advantage of a vertically integrated company is that all the cost centers are under one roof – thus embedded costs are more traceable and it is possible to eliminate many at once by replacing a nested subsystem entirely, where you couldn’t before because the components spanned vendors/etc and thus its cost structure had to be endured.

    NASA is doing the right thing here – actually the only thing it can do. It’s a way of closing the loop on the very difficult transition ahead. Many don’t know how broken certain things really are within aerospace.

    Oh, as to the difference in pricing seats … a seat is not just a seat. Capabilities, qualities, and environment are very different. Plus the value of US seats are always going to be at a premium to elsewhere for obvious reasons. Why should this be a surprise?

    Another item – as real “commercial space” business models start to close, you should expect that such pricing will get more widely distributed, as value-based pricing models displace primitive cost-based models. As is the case with all emerging markets historically. That is a good thing.

  16. It doesn’t really matter if seats on Dragon do cost more than seats on Soyuz. NASA still wants a domestic capability and would pay a reasonable premium. And it will still be cheaper than doing crew rotations with shuttle.

    Incidentally, Musk always quotes a price based on seven seats, but I it seems like there would only be three people on board an ISS-bound Dragon. The Russians would still be running Soyuz and taking care of the crew rotation for the other three crew members, wouldn’t they?

  17. As an ex-ATK launch systems employee (not my first choice, but money is money) I know all too well about why Spacex defies previously existing cost models.

  18. “There is no precedent for what SpaceX has done in the rocket business.”

    Scaled Composites, and SpaceShipOne, among other projects, show that the SpaceX experience is not unique. It is high time old NASA and USAF cost models are scrapped.

  19. Elon has said in the past $17m a person, $20m for NASA. Deforesting a state is expensive. Their is only a small difference between Dragon Lab and Crewed are seats, life support and the escape system which is part of the Dragon vehicle. What is expensive is certification of the escape system.

    $119(F9 Dragon Commercial Crew)

    $140m(F9 Dragon NASA Crew)

  20. You know, I wonder if Elon could make a go if it in the Air Superiority business? Match the F-22’s capabilities for 15mil a copy? Or is a that a bridge too far?

  21. Elon could make a go at the air superiority business with a $15 million a copy F-22 competitor.

    If you look at the new stealthy combat UAVs, they could potentially be manufactured as $15-M F-22 competitors.

  22. If you were a young ambitious technician/engineer who wants to go out and make a difference, do you choose old Aerospace or the new? The old will do powerpoints until the government funds run out. The new will go build, break, and repeat. The old will worry about their salaries and parking spaces. The new dream of Mars or IPOs. The MBA run old companies crunch numbers and employees. The new dream big. Elon’s company has elan. It matters.

  23. Gary,

    Scaled Composites and SpaceShipOne are indeed good examples of the precedent that SpaceX has set.

    SpaceShipOne was operational in 2004 for $28-Million, and it is likely that Virgin Galactic’s SpaceShipTwo will not be operational until 2013 for a $500-Million investment. Blue Origin probably has had dramatically better cost and schedule performance in advancing from their Goddard spaceship to their New Shepard sub-orbital passenger vehicle than Scaled Composites has demonstrated in advancing from SpaceShipOne to SpaceShipTwo.

    Scaled Composites did not have cost control of the engine technology for SpaceShipOne or SpaceShipTwo, and the fact that Northrop now owns 100% of Scaled Composites might be contributing to SpaceShipTwo looking more like a traditional aerospace program with high costs and slipped schedules.

    I think that most people should be apalled that SpaceShipTwo might not be operational until a decade after SpaceShipOne and at 20-times the cost. The whole point of SpaceShipOne was to attract investors to something with a reasonable investment time horizon, but SpaceShipTwo is looking like a traditional government aerospace program with horrible cost practices.

    It is possible that Blue Origin may have an operational sub-orbital passenger vehicle before Virgin Galactic, and for much less money. The same is true of XCOR and Armadillo (but less likely).

  24. Anom hit on several good points, but one of his (?) points is especially valid. SpaceX has benefitted from the use of high-tech CAD to design their hardware and very capable CNC machines to build it. The cost of those technologies has dropped radically as a function of their capability. Add to that the fact that by having almost all of their production in house, it’s easer to fully utilize those machines and their operators as compared to a bunch of small subcontractors. Those technologies weren’t even wet dreams when legacy engines like the RL-10 were designed. SpaceX designed their systems from the start for mass production. I’ve been told they’re planning on being able to build 400 Merlin engines a year. They may not squeeze the last fraction of a second of Isp out of their designs but the cost savings more than make up for any relative inefficiency.

  25. If SpaceX can increase production rate or move its factory to China, then prices would come down even further.

    Can’t move to China due to ITAR regulations.

    As to NASA “certification” of the vehicles, IIRC the ISS program requires a “Certification of Flight Readiness” for all visiting vehicles. Maybe NASA plans on doing the paperwork for that inhouse. And it’s a lot of paperwork.

  26. If SpaceX can increase production rate or move its factory to China, then prices would come down even further.

    The presumption of a “china” strategy that makes everything better … is at the heart of the sickness that afflicts the US right now.

    It is a fundamental misunderstanding of the value and drawbacks of outsourcing. I’ve heard it within five minutes of a start-up’s presentation to obtain capital, as well as the gloating of Chinese partners on the unbelievably cupidity of American businessmen.

    When will we see an end to this unthinking nonsense? The US as a economic power won’t recover until we do.

  27. > As to NASA “certification” of the vehicles, IIRC the ISS program requires a “Certification of Flight Readiness”
    > for all visiting vehicles. Maybe NASA plans on doing the paperwork for that inhouse. And it’s a lot of paperwork.

    Yes, Flight Readiness is exactly what NASA means when it talks about certification. This was stated at the Commercial Space Transportation Advisory Council meeting last week.

    In addition, the Associate Administrator for Space Transportation stated that AST does not plan to enforce a common standard driven by NASA requirements. As usual, Tom Matula is spreading FUD.

  28. Edward,

    If you believe that I have a bridge to sell you. But watch and you will see what happens.

  29. When will we see an end to this unthinking nonsense? The US as a economic power won’t recover until we do.

    When the idiots run out of other peoples’ money. I think the bailout mentality has lead to a class of people who can do stupid things for years, profiting from it all along, and then get bailed out to repeat the process. When that stops, we might see a return to sensibility.

  30. Karl,

    I agree with that and I think the top management and Board of Directors should have been required to feel the pain by forfeiting their personal wealth to the federal government in return for its bailing out their firms. Instead of getting golden parachutes worth tens of millions of dollars they should have ended up on unemployment insurance like the workers that loss their jobs as a result of their poor management. And the firms themselves should have been broken up into smaller units to eliminate the need for future bailouts.

    Instead many of those institutions just got larger by using the TARP funds for mergers instead of clearing their books of bad investments with the result that there is another ticking meltdown in all the foreclosed homes and homes that are underwater. The Debt Ceiling stand-off may be just the trigger that sets it off.

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