Lies, Damned Lies, And Launch Costs or Why Federal Space Policy Continues To Bind Us To The Mudball

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Lies, Damned Lies, And Launch CostsorWhy
Federal Space Policy Continues To Bind Us To The
Mudball

• Space Access 2009
• April 2-4
• Phoenix, AZ
• By
• Rand Simberg
• Recovering Aerospace Engineer
• Who Fell Off The Wagon

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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

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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(N1) Cost(N)
• Cost Is Function Of N And
• Where N Is The Number Of Events
• Represents The Cost Of Only Doing The Next N

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Three Ways Of Computing Cost Of A Launch

• Marginal Cost -- Cost(N1) Cost(N)
• Average Annual Cost -- Cost/Year/NYear
• Average LCC Cost -- LCC/NProgram

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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)?

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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

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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 (lt 1M or 0.1)?
• Mission-Specific Crew Training
• 150M/Flight

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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

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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

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Space Station Example

• How Much Do Space Stations Cost?
• In Early 1990s, SSF Was Estimated To Cost Thirty
  Billion Including DDTE
• 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
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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)?

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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)?

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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

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New Vehicle Development Decision

• Consider Sunk Development Costs For Existing
  Vehicle For Overall Average Cost Per Flight?
• No
• Consider DDTE 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

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One Final Example

• Decision To Buy A Launch On One Commercial
  Provider Versus Another
• Do We Use...
• Marginal Cost?
• Average Cost?

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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
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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

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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

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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

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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 (gt 10 Years_at_ 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

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Consider Alternative To Redoing Apollo

• All Architectures Considered By Majors In Concept
  Exploration And Refinement (CER) 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)?

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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?

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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