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

  • 1
    $\begingroup$ Really you'd have to ask those depicting a difference between two commercial companies, as there is no generic answer to this question. That said, a contract to provide a service isn't a subsidy. If NASA paid SpaceX (or any company) a portion of their costs for every flight thus lowering the cost to everyone that would be a subsidy. $\endgroup$ Jun 3, 2015 at 21:44
  • $\begingroup$ If NASA pay Boeing for building ""Destiny" module under its specifications but not by detailed design is it fundamentally different contract from ISS resupply missions made by SpaceX Falcon and Dragon developed partially by NASA's "seed money". $\endgroup$
    – Val
    Jun 3, 2015 at 22:08
  • $\begingroup$ Useful info here too: space.stackexchange.com/q/434/63 $\endgroup$
    – Erik
    Jun 4, 2015 at 13:35
  • $\begingroup$ "seed money" is really no different than what is going on on Kickstarter and other funding sites. To be a subsidy it has to either be a payment not in exchange for a product or service, or a payment well above market rates. Given the money has gone for products and services, it doesn't qualify under the former, and w/SpaceX they are cheaper than the others so it doesn't qualify under the latter. Who you sell to doesn't make you commercial or non-commercial. $\endgroup$ Jun 4, 2015 at 14:23
  • $\begingroup$ opinion from looking reliable source:"The Agency is SpaceX’s biggest customer and Mr. Musk has noted on more than one occasion that his company owes a debt of gratitude for NASA’s support and contracts during this early phase of its existence." <nasaspaceflight.com/2014/08/…> $\endgroup$
    – Val
    Jun 7, 2015 at 6:58

3 Answers 3


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.

  • $\begingroup$ Thanks for clarification. Using said criteria Arianespace rockets are may be also 'privately funded'. $\endgroup$
    – Val
    Jun 4, 2015 at 4:13
  • $\begingroup$ I recall closing cocktail at ICES 2008 conference in San Francisco. There were speeches from new commercial space. They was talked about how inefficient are government agencies and how emerging space companies will reduce launch costs by factor of ten working outside of the system of government contract. “Boeing and Lockheed engineers are smart guys but…” The real developments are slightly different: the cost of space launches have been reduced enough to beat competitors but not ‘dramatically’; the new space is closely integrated with NASA. In addition - new promises for breakthrough… $\endgroup$
    – Val
    Jun 4, 2015 at 4:17
  • 1
    $\begingroup$ @Val I dunno. SpaceX charges about 60 million for a launch on F9. Atlas V 401 is around 100 million. So that is a 40% reduction right off the bat. Pretty significant. And that is before SpaceX does recovery. IF (and only if) that works, then you will see an even bigger change. Using the Air Force costing model, the F9 development program was estimated in the multiple billions of dollars. SpaceX did it for a lot less than that. (As low as $300 initially). $\endgroup$
    – geoffc
    Jun 4, 2015 at 13:24
  • $\begingroup$ I like Elon but I like the truth. He have promised 1/10 reduction. Now stake is 1/100. That is the venture investors would like to hear. We need to keep our records.. it was begun with Shuttle 40 years ago I red articles in AIAA Journal for $60/kg (1974). There are more fundamental reason for high launch cost: access to launch sites, tracking, mission operations, range fee, insurance etc. - the vehicle cost is only part of equation. Fromm the other side there is no market logic for cost reduction too much at limited market. $\endgroup$
    – Val
    Jun 4, 2015 at 14:09
  • $\begingroup$ @Val ok. So SpaceX has been fairly clear that reusabilty is key. Lets see how that plays out. Think the ASDS will catch a stage on the CRS-7 flight in June? I hope so! $\endgroup$
    – geoffc
    Jun 4, 2015 at 14:47

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.


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.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.