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