What is the fundamental difference between SpaceX from one side and Lockheed Martin from other?

Question

For non-American is hard to understand why the “New Space” companies are depicted as 'commercial'or 'privately operated' companies in contrast of old NASA contractors which should be commercial companies too. SpaceX for example is highly subsidized by NASA through multiple exclusive contracts. Air Force also backed the company from its foundation – one of satellites lost in Falcon 1 experimental launches was paid by Air Force.

The tipping point for SpaceX was COTS contract.

This contract, designed by NASA to provide "seed money" for developing new boosters, paid SpaceX $278 million to develop the Falcon 9 launch vehicle, with incentive payments paid at milestones culminating in three demonstration launches

Having this in mind 'privately funded' is little confusing.

SpaceX's achievements include the first privately funded, liquid-propellant rocket (Falcon 1) to reach orbit on 28 September 2008;[5] the first privately funded company to successfully launch, orbit and recover a spacecraft (Dragon) on 9 December 2010; and the first private company to send a spacecraft (Dragon) to the ISS on 25 May 2012

Answer 1

In principle Lockheed Martin, Boeing, Orbital-ATK, and SpaceX are all commercial companies that build space related products. (Boeing and Lockheed Martin of course build lots of other stuff, airplanes, fighter jets, etc).

The difference in the context of space is how they have contracted for products and how they get paid.

The Space Shuttle was built mostly by Rockwell International (who was bought by someone I forget), with the SRBs made by ATK and so on. They did not build it, and sell services to NASA. They worked with NASA who developed the specifications, built it to NASA requirements, and operated it, paid by NASA.

The same basic model is true for SLS.

Atlas V and Delta 4 as perhaps slightly different in that the companies developed the boosters on their own, with some large amounts of funding thrown in by NASA and the Defense Department. Originally Boeing and Lockheed Martin were competing for the contracts, but then they merged into the United Launch Alliance for both boosters. NASA, DoD, and other customers then pay for launches as needed. Except that they also pay a yearly 'maintenence' fee on the order of a billion dollars to keep the service available, irrespective of launch orders.

The core difference to SpaceX and Orbital-ATK in the context of Commercial Space is that NASA said, we are offering a contract for 20,000 Kilos of cargo to the ISS. It needs to berth to a CBM port, and meet ISS safety standards, etc. They then funded a development program of a couple of hundred million dollars (Expanded a few times). NASA said, lets see what vehicles you come up with, your choice of launchers, and vehicle design.

That ended with a contract for 20,000 Kilos of cargo over 4-5 years to each of Orbital-ATK and SpaceX.

Next NASA said, lets do the same for manned flights. We will not hand you a design and say build it, rather you build a manned vehicle that meets our standards and we will buy flights. Again they have funded a development program to help get it going and the first few flights.

Then they will start buying flights, hopefully based on costs (but I doubt it) from Boeing (CST-100 vehicle) and SpaceX (Dragon V2).

The core difference is "Old Space" was cost plus, where they made more money the more it cost, so incentives to do it efficiently were not there. "New Space" is getting paid a fixed price, and they need to be able to deliver for less than that price to make a profit, so they are directly incentivized to be more efficient.

Another way of looking at it might be that NASA owns the Space Shuttles and Orion vehicles. SpaceX owns the Dragons, NASA just uses them for delivery services.

Answer 2

The difference is that under the "old" set up, NASA paid for a company to build rocket to NASA’s design and NASA owned the design. Under the new system, NASA pays for the use of the rocket and the design is owned by the company.

This does not look like much of a difference until…

You release that the companies can sell the usage of the rocket to other companies and nations to launch satellites. As the cost of building satellites has come down, if the launch costs also come down, the demand increases greatly… This then creates the beginning of a market.

Once the market is created, the companies will start to create new rockets without needing funding from NASA — or at least that is what NASA hopes.

Answer 3

Some companies are paid for their work on a pay as you go basis. For every 100 dollars of work, they might get 15 dollars for profit. If it takes longer or problems are found, or if the customer decides it wants something different and is willing to pay for the plans to change... they get even more money. While seemingly ludicrous in the business 'real world' outside large government contracting, this can actually be fair for the companies involved - especially if the customer is uncertain about what it wants or how long it should take, is prone to changing it's mind, and to do something (charitably) totally new.

Imagine if my wife wanted to hire a contractor to build something she couldn't describe in the back yard and wanted to pay the contractor a day at a time for an uncertain amount of work that she could halt at any time. What kind of terms would be negotiated?

However, how long it takes for this system, once entrenched, to resemble a Dilbert cartoon... I leave to the reader to judge.