The numbers don’t lie—NASA’s move to commercial space has saved money

By Eric Berger

The SpaceX Crew Dragon spacecraft arrives at Launch Complex 39A at NASA’s Kennedy Space Center in Florida.
Enlarge / The SpaceX Crew Dragon spacecraft arrives at Launch Complex 39A at NASA’s Kennedy Space Center in Florida.

When NASA astronauts Doug Hurley and Bob Behnken blast off inside a Crew Dragon spacecraft later this month, they will not only launch into space. They will also inaugurate a potentially transformative era for the space agency.

No private company has ever launched humans into orbit before. Therefore the success of their mission, and others to come in the near future, may go a long way toward determining whether the promise of commercial spaceflight and lower cost access to space becomes the new reality.

This moment has been a long time coming. Nearly 15 years ago, 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. NASA had the space shuttle to ferry supplies, of course, but that aging vehicle was not going to fly forever. So the agency’s administrator at the time, Mike 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.

Yet it is Musk's firm that has delivered NASA a human-rated spacecraft in its hour of need, with Russia continuing to raise prices for rides into space nearly a decade after the space shuttle’s retirement. And if you speak with the NASA engineers who have worked alongside SpaceX engineers for more than a decade, they appreciate what the company has accomplished.

“This has been a great relationship for the both of us,” said Kathy Lueders, who manages the NASA program overseeing Crew Dragon. “It’s been rewarding to see how our NASA teams have learned from SpaceX, and how the SpaceX teams have learned from NASA. Together, we have become stronger for this nation.”

At times, their cultures have clashed. SpaceX relentlessly seeks to innovate, cut costs, and move fast; the space agency is far less nimble and much more risk averse. Yet the coming together of America’s space agency and its most audacious space company has borne fruit and benefited both. NASA has provided money and advice; SpaceX has delivered the goods.

It has not been an easy road to get here.

"Utter horse pucky"

Even before Griffin offered funding for private spaceflight he faced concerns about “commercial” space. Change is hard, and some critics legitimately believed the private companies were simply not ready to supplant NASA for mission-critical functions.

Up until then, for big human spaceflight projects, NASA engineers had decided precisely what they needed, selected a contractor to build it, and then monitored every step with paperwork in triplicate. For this, the contractor got reimbursed for its costs, plus a generous fee. If a vehicle ran five years late and doubled its original budget, NASA was on the hook for cost overruns. This tended to not encourage on-time delivery, but eventually the government got what it wanted.

Griffin's "commercial" space proposed a different way. Instead of beginning with a detailed blueprint for what a contractor should build, NASA would stipulate the service it wanted. For “commercial cargo,” NASA sought the delivery of a few tons of food, water, supplies, and science experiments into orbit. But it did not tell the private companies how to do this. Instead, they were left to design their own vehicles to meet this need. NASA would pay a fixed price for these services and no more. In return the companies retained ownership of their spacecraft.

“In my own mind, I envisioned it as being somewhat like the arrangement when you build an expensive custom home,” Griffin explained in 2013. “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.”

Griffin faced opposition to this within his own administration even before he awarded contracts to SpaceX and Orbital Sciences to begin designing and developing their cargo spacecraft. Often, senior officials at NASA came and went between the agency and large contractors. This allowed the old-guard aerospace contractors, long accustomed to cost-plus contracts, to maintain some control over the direction of the agency.

The career of Scott Horowitz is illustrative. From 1996 to 2001, the US Air Force Colonel and NASA astronaut piloted three shuttle missions and commanded a fourth one, helping to service the Hubble Space Telescope and supply the space station. He left NASA in October 2004 to take a senior position with ATK, which built the solid-rocket boosters for the space shuttle. Horowitz held this job for about a year before returning to NASA to become chief of a new division that supervised the agency’s lunar exploration plans, known as Constellation.

Back at NASA, Horowitz helped shape strategy for the Moon plan, which included a new rocket named Ares I to launch crews into orbit. Ares I would use some of the same technology that powered the shuttle—a modified shuttle solid rocket booster would serve as its first stage. Accordingly, in April 2006, NASA awarded a $1.8 billion contract to Horowitz’s old company, ATK, to begin design work. So closely tied to the former astronaut was Ares I that it soon earned the nickname “Scotty Rocket.” One year after the award to ATK, Horowitz left NASA. Then, from 2008 to 2010, ATK paid him $100,000 in lobbying fees. (Horowitz could not be reached for comment).

Horowitz also emerged as one of the chief critics of NASA's efforts to commercialize aspects of spaceflight. An oral history interview Horowitz later gave to NASA provides a sense of the hostility he and some agency leaders had toward commercial space companies. The interviewer, Rebecca Wright, asked Horowitz about NASA’s claim that the commercial cargo program had helped it develop robust and cost-effective launch services for the space agency.

“That statement is complete and utter horse pucky," he responded.

Horowitz then asserted that the Ares I and SpaceX’s Falcon 9 rocket had similar costs, citing a 2009 test flight of an Ares I prototype. “Interesting point—when we flew Ares I-X, which flew right after I left, (NASA) went back and did a total cost analysis—full-cost accounting, government, all of our waste and all of our overhead. The number I saw was about $400 million to fly that flight,” he said. “The cost to get to the first Falcon 9 flight was about $400 million.”

This comparison between the Scotty Rocket and the Falcon 9 rocket is jaw dropping, and not in a good way. But before explaining why, it's vital to understand how NASA went from commercial cargo flights to the larger step of allowing private companies to launch humans.

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By the end of 2008, both SpaceX and Orbital Sciences were well on their way to developing spacecraft—Cargo Dragon and Cygnus, respectively—and NASA felt confident in moving forward with awarding contracts for actual cargo delivery services. SpaceX received $1.6 billion for a dozen missions, and Orbital $1.9 billion for eight flights.

As President Obama came into office in January, 2009, he was inclined to further the commercial efforts begun under the Bush administration. He and his vice presidential candidate, Joe Biden, had even campaigned on it.

“We want to reinvigorate our national space program and that includes creating an environment for a vibrant commercial space program,” Biden had said at an October campaign stop in Florida.

After reviewing NASA and its spaceflight efforts, President Obama did indeed cancel the Ares I rocket, opting to make Orion a deep space capsule only and relying on commercial companies to fly humans to the space station. (The cancellation of the Scotty Rocket in favor of commercial providers probably explains Horowitz's antipathy). As the Obama administration pushed this idea, Congress pushed back. Many members were not ready to cede that much authority to emerging private companies such as SpaceX.

Push came to shove in 2010 as NASA sought congressional funding for companies to begin developing spacecraft to launch humans. During that same year, SpaceX was preparing to fly its Falcon 9 rocket for the first time. This was a demonstration mission for the booster needed to loft its Cargo Dragon into orbit. In April 2010, President Obama visited SpaceX’s launch site at Cape Canaveral Air Force Station, a vote of confidence for the company. At the time, SpaceX had a decidedly mixed record of success. It had failed on three of five launches of a smaller rocket.

President Barack Obama tours SpaceX facilities, along with founder Elon Musk, at Cape Canaveral Air Force Station in April, 2010.
Enlarge / President Barack Obama tours SpaceX facilities, along with founder Elon Musk, at Cape Canaveral Air Force Station in April, 2010.

Behind the scenes, the deputy administrator of NASA and a handful of other advisers pressed the president to keep the faith as SpaceX neared its first launch. But they knew what a failed launch could mean.

“It is scary as shit to recommend the President support something that you know will succeed in the long-term, but might embarrass him in the short term,” NASA's deputy administrator at the time, Lori Garver, said in an interview. “We tried to be as clear as possible that while this path was 100 percent the best way to get the most out of our space program for the nation, there would likely be setbacks.”

But there were no setbacks. In June 2010, the Falcon 9 made a successful debut flight. Also that year, NASA began awarding fixed-price contracts to begin developing commercial crew vehicles, not only to SpaceX, but also to Boeing, Sierra Nevada Corporation, and Blue Origin. In 2014, NASA would down-select to SpaceX and Boeing. By then, the space shuttles were in museums. It was up to the private sector to step up.

Revisiting the Scotty Rocket

Let’s now turn to the question of value. Recall that Scott Horowitz cited a cost of $400 million for the Ares I rocket and compared this to the development cost of the first Falcon 9 flight. However, the $400 million cited by Horowitz is not for Ares I development; that's merely the cost for a test flight of a single space shuttle solid rocket booster, with hardware mock-ups on top.

"The rocket that thundered aloft from NASA’s Launch Pad 39B sure looked like an Ares I," Apollo 11 astronaut Buzz Aldrin said at the time. "But that’s where the resemblance stops. Turns out the solid booster was—literally—bought from the Space Shuttle program, since a five-segment booster being designed for Ares wasn’t ready. So they put a fake can on top of the four-segmented motor to look like the real thing."

What would it have actually cost to bring the Scotty Rocket to the launch pad? Before President Obama pushed Congress to fund private vehicles, NASA had intended to use the Ares I rocket and Orion spacecraft to fly crews to the space station. In 2009, NASA estimated it would cost $24.5 billion to develop Ares I and Orion. But an independent analysis later that year found the true cost probably would be at least $34.5 billion.

The majority of that, likely about $20 billion, would have been spent on the Ares I rocket. Twenty billion dollars for a rocket capable of lifting about 25 metric tons to low-Earth orbit.

Under the commercial cargo development program denigrated by Horowitz, NASA eventually paid $396 million to SpaceX. However, this money was not earmarked just for the rocket. It also paid for development of the Cargo Dragon spacecraft and a launch pad in Florida. The modern Falcon 9 rocket can lift 23 metric tons to low-Earth orbit.

This is nearly as much lift capacity as the Scotty Rocket, which would have cost 50 times as much to develop.

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.

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.

Speaking earlier this month at a committee meeting of NASA’s Advisory Council, McAlister said of these savings, “That is significant. That is money that we have been able to plow into our deep space mission.”

LEO and beyond

Of NASA's commercial providers, SpaceX has delivered the greatest value. 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 is unlikely to fly a crewed mission before next spring at the earliest.

In turn, SpaceX has gleaned great value from working with NASA, both financially and in know-how for safely flying humans.

“NASA has been an extraordinary customer, and an extraordinary partner, a mentor for us,” said Gwynne Shotwell, the company’s president. “Hopefully NASA has enjoyed the relationship as much as we have. We’ve learned from them. We were founded in 2002 to fly people to low-Earth orbit, the Moon, and Mars. NASA has certainly made that possible.”

Change has come relatively slowly to NASA, but thanks to the successes by SpaceX with cargo and, hopefully soon, crew, change is definitely coming. In just the last two months, SpaceX won a contract to deliver cargo to the Lunar Gateway, and the company was one of three successful bidders for work to develop a Human Landing System as part of NASA’s new Artemis plan to return humans to the Moon. These were fixed-price awards, meaning that NASA would pay only a share of the development costs.

Skeptics remain of this new way of doing business. Looking ahead to the Artemis program, some in Congress say NASA must own the lunar lander, not buy services from the private sector. But the launch of two humans from Florida in a week or two could go a long way toward quieting those who say what NASA can and cannot do, in an era when Dragons breathe fire and rockets return by sea.