June 30, 2016

SpaceX, NASA, and Failed Launches

For those cynical about America’s commercialization of outer space—or that are set particularly against Elon Musk’s Space Exploration Technologies Corporation (SpaceX)—the recent release of NASA’s inspector general’s report on the failed 2015 SpaceX launch may deepen skepticism. In June 2015, one of the company’s Falcon 9 rockets exploded two minutes after take-off, destroying its cargo and raising questions about the viability of commercial space launches. This confirms something we already knew: namely, that space exploration is hard. There are risks in allowing private companies to handle the cargo for national missions. The benefits, however, are worth the risky endeavor.

The explosion in 2015 destroyed $118 million in cargo for the International Space Station (ISS). Of particular concern was the loss of a docking adapter that would have been used to prepare the ISS for future American manned missions. This means that the ISS will have only one such docking adapter when demonstration flights are made to test manned capsules in 2017. The station will, however, have enough adapters when actual manned missions begin, so the damage done to the mission will likely be minimal.

While $118 million is a lot of money, the competitive pricing for the Falcon 9 helps offset the loss. The ISS resupply contract with SpaceX was worth $1.6 billion for 12 missions. This averages to around $133 million per launch. The cost for this failed launch, in total, is then $251 million. The average launch cost for the United Launch Alliance (ULA), a government-funded group established to maintain access to space, is $225 million for its current contracts (not counting the retainer paid to the group to maintain launch capability). With that pricing, the savings from using the Falcon 9 offset the loss of cargo within two launches. The ULA does have a launch system it can field for $164 million, but even if NASA relied on this system, the SpaceX price point would pay back the loss of cargo in under four launches. The company has six successful launches under its belt, and so has offset the cargo loss and still saved NASA between $68-434 million, depending on which ULA rockets NASA would’ve had to use.

SpaceX’s involvement in the launch industry has also sparked a new, all-American space race. Jeff Bezos’ Blue Origin is working hard to compete with SpaceX, and other companies are also working to win government contracts. As this competition heats up, prices for launches will fall. If SpaceX and Blue Origin can perfect their reusable boosters, launch costs could drop below $45 million. In the long-run, the risks associated with new companies and new rockets will be very much outweighed by the benefits of lower costs and increased choice.

The report by NASA’s inspector general does raise some concerns about the management of risk assessment at NASA. That SpaceX headed the investigation into its own rocket failure, while consistent with its contract, raised flags about how the agency handles such crises. SpaceX’s report was found to be transparent, so there were no concerns about abuse of their involvement in the investigationbut the report did suggest that NASA alter its procedures to have an independent group manage such investigations in the future. Yet in considering reforms to its procedures, NASA must ensure that investigations don’t become overly drawn out. With competition growing in the space environment, a company’s ability to survive will rely on investigations being timely and responsible.

The loss of cargo in June 2015 did cost money, and it introduced complexity for life on the ISS. But launching things into space is rocket science, and there will be accidents. Safety is paramount, and these accidents should be carefully investigated. Yet it is imperative that the benefits of such operations are recognized, as is the fact that the private space industry is quite literally helping the United States stay connected to the stars.