NASA cost estimating and Falcon 9

Question

I have found this interesting report Commercial Market Assessment for Crew and Cargo Systems Pursuant to Section 403 of the NASA Authorization Act of 2010 (P.L. 111-267), published in April 2011.

In Appendix B there is this text:

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 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.

After this there is the key statement:

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.

And to be fair, it finishes:

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.

The question: Has NASA published any reports, or updates, recently saying that they (hopefully) understand better the apparent problems of their cost models and how they have adjusted their models for the future?

To be clear, I'm not looking for SE member's opinions of why their model over-predicted the Falcon 9 development cost. Nor am I looking for any entertaining display of wit regarding well-worn NASA jibes, I can go elsewhere to find that easily. What I'm looking for is published output that says, from NASA, what they've learned.

Answer 1

I did not find any report published by NASA, but I found a quite interesting paper of the 31st Space Symposium.

Short summary / most important facts if you do not read the paper:
For cost estimation of space systems mainly three modells are used:

1. The Parametric method (e.g. NAFCOM),
2. the Analogy method
3. and the Engineering (Bottom-Up) method.

All methods depend on the knowledge obtained through previous program experience. This is not unlike any type of manufacturing industry. The spacecraft industry, however, can experience significant technological advancements that render the dependence on historical programs somewhat useless.

This is why SpaceX has not used one of these conventional methods.

Elon Musk and his team at SpaceX apparently rejected both analogy and parametric methods to estimate the cost of the Falcon launch vehicles. They determined that no prior launch vehicles were sufficiently similar for either method to work. Instead the SpaceX team used a bottom-up approach from the beginning, improving the estimates as engineering data accumulated and became more precise.

So what can the goverment agencies (e.g. NASA, ESA) do?

Government agencies are often handicapped in their use of engineering estimates early in the acquisition process both by a frequent intention to develop and use cutting edge technologies and by inadequate access to the needed component-level data. This puts the government in a difficult position as rapid innovation reduces the utility of parametric models. The government needs a third way.

...

Another possibility is for government agencies to gain access to engineering cost data or estimates based on engineering costs by the simple expedient of paying for them. Vendors could be contracted to produce engineering cost estimates on their own projects in advance of new procurements, while showing their work to the customer. In any case, government agencies will need to be as nimble and innovative as their vendors if they are to keep up with the new pace of development.

Although it is not published by NASA, I hope it helped.

Answer 2

Appears this presentation from NASA addresses your question. Page 3 is titled "Original cost estimates vs. SpaceX actuals"

Doesn't go into great detail, but sheds some light on the differences between the contracting approaches, and mentions learning more from SpaceX about specific costs that refined their estimate.

To answer your question, it would appear they have updated their models and incorporated learnings from the SpaceX team.

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• NASA did not perform a detailed analysis to explain the significant differences between the cost estimates and SpaceX actual costs.
• However, SpaceX attributed their cost efficiencies to a few primary factors.
  1. Workforce ‐ Total vehicle DDT&E costs are primarily a product of the total workforce needed to accomplish the effort (SpaceX workforce numbers substantiate their development development cost claims)
  2. Organizational complexity – SpaceX estimates that every dollar sent out of the company actually costs between $3 and $5 based on subcontractor overhead and profit and
  3. Infrastructure ‐ Total infrastructure required for the DDT&E effort and infrastructure utilization percentage.

These factors suggest that reducing the total workforce; number of management layers and infrastructure can substantially reduce DDT&E costs when compared to traditional NASA environment/culture.