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Been looking at the amazing success of SpaceX and from what I found, the contracts they get awarded don't seem to make much sense. It looks like they are simply getting paid less each time NASA awards a contract. Examples that I found:

Commercial Resupply Services

  • SpaceX - $1.6b for 12 filghts on Falcon 9 (13150kg payload capacity)
  • Orbital - $1.9b for 8 flights on Antares (6120kg payload capacity)

That roughly works out to $39k per kg for Orbital, but only $10k per kg for SpaceX. Even if SpaceX allocates less than half their capacity to the primary CRS payload, they still deliver much more than Orbital for the same amount of money. Am I missing something?

Commercial Crew Development

Not even part of the 5 companies selected for CCDev 1 even though they did put in a proposal. CCDev 2, they did get selected as one of 4, but got less funding than Boeing and Sierra Nevada Corporation. CCiCap, they were seleced as one of 3, but still got less funding than Boeing.

In September, they announced SpaceX and Boeing received contracts to provide crewed launch services to ISS.

  • Boeing got $4.2b
  • SpaceX got $2.6b

From Wikipedia "Both Boeing and SpaceX were awarded for the same set of requirements". If they need to do exactly the same thing, why did Boeing get awarded some 61% more money?

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    $\begingroup$ SpaceX gets awarded less because they ask for less. Their selling point is lower cost launches though efficiency in design, manufacture, and management $\endgroup$ – GdD Jan 13 '15 at 8:50
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    $\begingroup$ It's as simple as that. Well, maybe not as simple as that. SpaceX may well have been playing a bit of gamesmanship with their 2.6 billion bid, which was just low enough to keep two players in the CRS game (something NASA wanted very much), but not low enough to allow Boeing to play a role (Boeing is the more expensive but more likely to succeed competitor of SpaceX). That strategy by SpaceX didn't work. NASA somehow managed to scraped together the money to allow SpaceX and Boeing to proceed. $\endgroup$ – David Hammen Jan 13 '15 at 11:38
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    $\begingroup$ It's because the good old boys of aerospace have a number of representatives and senators in their pocket. Building SLS and Orion is a pork barrel jobs program. linkedin.com/pulse/… $\endgroup$ – HopDavid Jan 13 '15 at 14:50
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    $\begingroup$ David, you say Boeing was in CRS, but I thought it was Orbital ATK that was in CRS. Did you mean to say CCD, or did you mean to say Orbital? $\endgroup$ – ORcoder Apr 2 '18 at 20:51
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This is due to a variety of reasons which I will detail further down in my answer, but let me first correct a few of the points you raise.

Corrections

Contract Awarding

These contracts represent the amount of funds requested by each company, and is essentially their "bidding price" for the services they can provide. NASA then selects companies from those that applied based on their technical & managerial performance, as well as their bid value.In both instances, for CRS & CCDev, SpaceX simply underbid the competitors. NASA is not giving SpaceX a "hard time", rather, SpaceX is bidding what they believe they can accomplish the contract for.

CRS Specifics

Also, you misunderstand the CRS contracts. They don't state that Orbital Sciences should carry up 6120kg on each of its 8 flights, and likewise, they don't state that SpaceX should carry up 13,140kg on each of its 12. Rather, the agreements state both companies are required to fly up a minimum cargo mass of 20,000kg over their requested number of flights. Therefore, the correct cost/kg value is 80,000/kg for SpaceX & 95,000/kg for Orbital Sciences. There is no downmass requirement, even though Dragon can carry down cargo. If you don't mind reading through dense documents, here's SpaceX's CRS contract.

Payload Capacity

You also confuse the capacity of Cygnus & Dragon - which are the cargo vehicles which actually berth to the ISS. You're stating the maximum payload of Antares & Falcon 9 to a 200x200km Low Earth Orbit, the rockets which carry both cargo vehicles uphill, respectively. Both the Cygnus & Dragon vehicles weigh a significant amount and only so much can be packed inside.

In fact, both craft are actually rather complementary to each other and serve the CRS program well. Due to the lower power of the Antares rocket, Cygnus was only able to carry up 2,000kg to the ISS per flight, and all of it had to be pressurized - there was no storage for unpressurized items of NASA's manifests. Cygnus also doesn't return to Earth, instead it can dispose of 1200kg via reentry, a capability Dragon does not have. Additionally & crucially, Cygnus is a very large vehicle with a spacious interior, it has nearly 19m^3 of volume. You'll see why this bit comes in useful later.

Dragon on the other hand can haul up & down 3,310kg of cargo. It can also be a mix of unpressurized and pressurized components. A unique selling point of Dragon is it’s the only ISS visiting vehicle that can return significant amounts of cargo back to Earth intact. Sounds great, right? Here's where it falls flat, a bit. Dragon only has a pressurized volume of 11.2m^3. On nearly all flights, Dragon has been volume limited. ISS cargo takes up a lot of room, and actually doesn't weigh all that much. Because of this, Dragon has never been utilized to its mass capacity, its critical constraint is volume. Here's a cargo manifest for CRS-4, showing that Dragon only launched 2216kg uphill.

SpaceX's Cost Advantage

Why SpaceX tends to be cheaper is because they're what is called a "new space" company. Rather than being founded on a traditional corporate structure, they tend to follow a more agile development strategy similar to startup technology companies - Musk himself was one of the cofounders of PayPal.

Flat organizational structure

SpaceX has very little middle management. There's no more than 1-2 layers between Elon Musk and Joe Bloggs, our propulsion intern. In fact, right up to the last few minutes before a launch, any employee can email Elon personally and ask for it to be scrubbed if they have reason to believe launching may be dangerous - he even works in a cubicle like everyone else (check out their offices in this video, although it's getting a bit dated now). This drastically cuts down on the inefficiencies across the company, resulting in quicker communication & less paychecks needed to be handed out. SpaceX is a very lean piece of meat.

This can be contrasted with an "old space" company like Boeing, where a far larger fraction of the employees are in managerial positions, less are engineers and technicians. That's not to say they don't get work done, but it's slower and more costly than SpaceX's approach.

Off the shelf components & vertical integration

Traditionally aerospace has been a game of subcontracting. A launch provider will handle the rocket and assemble the components provided by everyone else, who requested the parts from others. This adds transportation costs and can result in price gouging. SpaceX build the entire rocket themselves. They build their engines, they build their tanks, they build their software, they build their equipment. As Bill Nye said: "Metal comes in one door, rockets roll out another".

SpaceX also ditched the idea of using "aerospace grade" components in their rockets - much to the annoyance of the Air Force & NASA. Check out this album of photos of a washed up Falcon 9 fairing on the Eastern seaboard, you'll see lots of plastic clip ties amongst the mangled carbon fibre. No other aerospace company employs clip ties whatsoever! Often, SpaceX found that the aerospace grade components costs an order of magnitude more and did not deliver much extra performance. Toilet stall handles as Dragon parts, for example.

Modern equipment with no legacy costs

Everything SpaceX operates has been conceived and built in the last 10 years. They've benefitted massively from Computer Automated Design tools and modern technology, embracing concepts such as 3D printing. This makes their rockets cheaper, and therefore their bids by extension. They don't have to maintain old software of old design specifications like others, for them to migrate to a newer system would be extremely expensive.

All this results in a highly optimized company that can deliver a bid price well below that of their competitors.

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  • $\begingroup$ Thanks. I did misunderstand the Contract Awarding as NASA actually also awarding a price to the contract, so that does make sense. I though I was misunderstanding the payload calc on CRS, but as you showed, my assumption that there is still a discrepancy (although a smaller one) was correct. Your points on SpaceX Cost Advantage are interesting, but should not really factor into NASA decision making. I also understand why they would award a contract to more than one vendor. To me, there is still a mismatch though, in that the cheaper vendor should get a greater share of the work. $\endgroup$ – neelsg Jan 13 '15 at 12:27
  • $\begingroup$ Spelling correction i believe. Under Payload Capacity Both the Cygnus & Dragon vehicles way a significant amount. Way should be weigh. $\endgroup$ – paqogomez Jan 13 '15 at 16:27
  • $\begingroup$ "To me, there is still a mismatch though, in that the cheaper vendor should get a greater share of the work." Contracts are signed with one company only. Other companies' performances don't factor into it. $\endgroup$ – ReactingToAngularVues Jan 15 '15 at 19:05
  • $\begingroup$ While I am a fan of SpaceX, this answer is very one-sided. There is another side to most of these issues. For example, at some point, SpaceX will have to deal with legacy systems. What is more important is a company's ability to move to newer approaches. I suspect there are those at, say, Boeing that would say that they are doing that. There are CAD systems at 3D printers at Boeing for example... $\endgroup$ – Erik Apr 3 '15 at 20:54
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    $\begingroup$ @Erik, don't get me wrong, I'm a fan of SpaceX, but not a fanboy. I enjoy spaceflight as a whole and look forward to ULA & Boeing getting in on the Commercial Off The Shelf action with Atlas V & CST-100! $\endgroup$ – ReactingToAngularVues Apr 3 '15 at 23:51

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