Lies, Damned Lies, And Launch Costs
or
Why Federal Space Policy Continues To Bind Us To The Mudball
Space Access 2009April 2-4
Phoenix, AZ
ByRand Simberg
Recovering Aerospace Engineer Who Fell Off The Wagon
Why Am I Talking About Things Like Marginal Costs At Space Access?
Marginal Costs (And Other Economic Concepts) Are A Key Element Of Economic Decisions, Even When We Don't Recognize It
Understanding Their Effects Can Lead To Better Economic Decisions
Lack Of Understanding Of (Or Lack Of Interest In) Economic Issues Like These Has Been Disastrous For Space Policy
What Are Marginal Costs?
The Marginal Cost Of An Ongoing Activity Is The Cost That Doesn't Include The Overhead
Overhead Is Something That Has To Be Paid Whether The Activity Is Occurring Or Not
Computed As: Cost(N+1) – Cost(N) Cost Is Function Of N And; Where N Is The Number Of Events Represents The Cost Of Only Doing The Next “N”
Three Ways Of Computing Cost Of A Launch
Marginal Cost -- Cost(N+1) – Cost(N) Average Annual Cost -- Cost/Year/N
Year
Average LCC Cost -- LCC/NProgram
An Example: Car Costs
All Costs Of Driving (Owning) A Car Car Payments Car Insurance Maintenance Repair Fuzzy Dice, Dashboard Jesus, Silvery Silhouette Girls, Wide Whitewalls,
Curb Feelers, “Nuke The Gay Whales” Stickers, Jumping Shocks, etc. Fuel
Marginal Cost Of Driving A Car Fuel
Average Cost: ~$0.50/Mile (Federal Allowance) Marginal Cost: ~$0.10/Mile (Fuel Costs)
Another Example: Restaurants Restaurants Have Several Fixed Expenses
Rent/Mortgage Utilities Employee Salaries Marketing
Marginal Cost Of Meal Food
This Is Why Fast-Food Places “Super Size” For So Little Money
Moral: To Save Money And Lose Weight, Don't Eat Out
Space Shuttle
Shuttle Has High Fixed Costs Due To “Standing Army” To Support It ($3B-$5B/Year)
Average Cost: ~$1B/flight Marginal Costs
SRB Refurbishment ET Replacement Cryogenic Propellants (< $1M or 0.1%) Mission-Specific Crew Training ~$150M/Flight
This Explains Cost Disparities
Do Not Believe Any Number You See For Cost Of A Shuttle Flight Until You Know: Basis Of Overall Budget Estimate (Harder Than
You Might Think) Number Of Flights Assumed
Low Number (~$100M-$200M) Has To Be Marginal Cost
Other Numbers (Half Billion, $600M, $1B) Some Sort Of Unsubstantiated Average
How To Reduce Average Costs?
One Theory: Reduce Fixed Costs DC-X Used Small Crew Not Realistic For Practical Orbital Vehicle
Problem Is Not Large Standing Army Boeing Airliner Fleet Has Large Standing Army Ticket Prices Low Regardless Army Can Only Be Reduced So Much
Have To Fix Denominator, Not Numerator GET FLIGHT RATES UP
Space Station Example How Much Do Space Stations Cost? In Early 1990s, SSF Was Estimated To Cost
Thirty Billion Including DDT&E* Had To Cut Five Billion From Budget Cost Of Flight-Ready Hardware Was $5B Implications
Save Five Billion And Have No Station Add Five Billion And Have Twice The Station Government Tends To Choose Former Course
* Yes, I Know That Doesn't Include Shuttle Launch Costs
Which Cost Should We Use?
Depends On Type Of Policy Decision Existing Launch System
Decisions About Particular Mission Should Be Made On Marginal Cost Basis
Decisions On Major Multi-Flight Development Program (e.g, ISS) Should Use Average Annualized Costs
Developing New Launch System? Average LCC Cost (Upsets Proponents Of New
Systems)
Hubble Example Launch Cost For Hubble Decision Should Be Marginal
Cost Shuttle Flying Anyway For ISS, With Standing Army Cost Of Flying One Additional Mission Appropriate
Rand's Opinion: Hubble Repair Upgrade Not Worth The Money, Even At $150M For Launch Cost (Doesn't Consider Payload Costs)
High Opportunity Costs (Could Probably Get Better Hubble-Like Results For Less Money Some Other Way)
O'Keefe Made Right Decision For Dumb Reason (Crew Safety)
Exploration Example
Is Shuttle Competitive For Supporting Future Series Of Human Exploration Missions?
Have To Use Average Annual Costs (Plus Potentially Consider Costs Of Restarting Production And Building Additional Orbiters)
Have To Include “Cost Of Unreliability” (We'll Be Replacing A Few)
Answer: No
New Vehicle Development Decision
Consider Sunk Development Costs For Existing Vehicle For Overall Average Cost Per Flight? No
Consider DDT&E Costs For New Vehicle For Overall Average Cost Per Flight? Yes
Difference Is One Cost In Past, Other In Future This Is Why It's Hard To Justify New Launch
Systems, At Least For Low Activity Rate
One Final Example
Decision To Buy A Launch On One Commercial Provider Versus Another
Do We Use... Marginal Cost? Average Cost?
One Final Example
Decision To Buy A Launch On One Commercial Provider Versus Another
Do We Use... Marginal Cost? Average Cost?
Neither. We Use PRICE
Quick Review
Cost Accumulation Of Labor And Resources Required
To Produce An Outcome Value
Subjective Number Depending On Evaluator Price
Agreed-Upon Transaction Cost Between Buyer And Seller For Good Or Service
Low Marginal Cost Implies Unit Costs Highly Dependent On Activity
Level
Billions Spent On EELV Development To Reduce Costs Twenty Percent
Market Reduction Early In Decade Resulted In Fifty Percent Increase In Per-Launch Price
Ergo, Flight Rate Much More Important Parameter Than Vehicle Design In Driving Launch Costs, Even For Expendables
Marginal Cost Discriminates Expendables Have High Marginal Cost
Have To Build New Vehicle Every Flight Sets Minimum Average Cost Per Flight
Reusables In Theory Have Low Marginal Cost Just Refuel, Like Car Example Potentially Low Average Cost For High Flight Rate
Shuttle Worst Of Both Worlds Partially Expendable (Where Most Marginal Cost Is) Low Flight Rate, So Can't Take Advantage Of
Reusability
What Does It Mean For VSE?
Ares-I/Orion Projected Total LCC Of Up To $50B Will Require Fifty Flights To Reduce Average Cost To
$1B/Flight (> 10 Years@ 4 Flights/Year) Doesn't Include Costs Of Other Constellation
Elements (Ares V, Altair, EDS, etc.) Marginal Costs Of Lunar Missions Will Be Billions,
Average Costs Much Higher Not Affordable, Not Sustainable Ergo, Not In Keeping With Aldridge Commission
Recommendations
Consider Alternative To Redoing Apollo
All Architectures Considered By Majors In Concept Exploration And Refinement (CE&R) Studies Were Low Flight Rate
None Of Them Envisioned More than A Couple Crewed Lunar Missions Per Year
Why Should This Excite The American People? Why Not Consider Infrastructures That Scale
To Allow Mass Movement Of Humans And Cargo To/From Moon (i.e., Low Marginal Cost)?
Have To Break Out Of Expendable Mind Set
Only Full Reusability Allows Low Marginal Cost Only Propellant Depots – LEO, Lagrange
Points, LLO, Lunar Surface – Allow Reusability All The Way To Moon And Back
Reusability for In-Space Elements Much Easier Than For Launch Systems (No Entry Thermal Issues, No Need For Landing Systems, etc.)
Why Not Consider This Alternate Architecture, Which Could Surely Be Done For Less Than $50B?
Need To Break Out Of Apollo Groove
Need Low, Not High-Marginal Cost Architecture Biggest Mistake Of Aldridge Commission And
White House Was Not Forbidding NASA From Developing New Launch Systems For VSE
Need To Figure Out How To Go To The Moon With Launch Systems We Have, And Not Launch Systems We'd Like To Have
Generate Huge Competitive Market For Propellants, Hardware, People To Finally Drive Down Launch Costs