Hmm, I should rewrite the Falcon 9 sentence to clarify my intent. I meant to express that more affordable rockets were possible in the 90s compared to what existed, rather than that the F9 exactly was possible in the 90s.
They were, some Soviet engine design from the 70s were the best for their niche until the late 2010s.
Given that the Soviet Union collapsed soon after and that no competitive international launch market really began to emerge until the 2000s this isn’t surprising. There was no incentive to improve. Moreover, engines are just one component of the rocket launch cost equation.
The technical problems leading to high space launch costs have been identified and cures proposed, but the long delay until the recent reduction in launch costs suggests that cultural and institutional barriers have hindered implementing potential technical improvements.
One study suggested that the record low cost of the Saturn V could be reduced by a factor of 5, to a cost similar to the Falcon Heavy.
The fundamental cause of the past high commercial launch cost seems to be lack of competition. The US launch industry has been a monopoly, the United Launch Alliance (ULA), and its main customer has been the US government, NASA and the military, which need high reliability and had little incentive to exert cost pressure. The ULA lost most of the commercial market to Russia and Arianespace which are also heavily subsidized by their governments
In 2010, NASA compared SpaceX’s cost to develop the Falcon 9 to the cost NASA’s models predicted using the traditional cost-plus-fee method. Using the NASA-AF Cost Model (NAFCOM), NASA estimated that it would have cost NASA $1,383 million to develop these systems using traditional contracting. The estimated SpaceX cost was $443 million, a 68% reduction from the traditional approach.
Until recently, virtually all major players in this space (heh) were monopolies, whether public or private. These organizations had little incentive to improve and were known to be highly inefficient. Why assume the Soviets reached a magical price floor that was impassable prior to the 2010s?
And what incentives to improve could there have been?
If you mean on some alternate earth where human incentive structures are different and they had some Apollo sized project going on in their equivalent of our 90s, sure it probably would have been feasible to drive down the price of expendable rockets by a factor of 2 or 3 at their equivalent of 90s technology. Assuming they made it in huge quantities and the opportunity cost of capital was zero.
But nobody would have taken a fixed price contract to build rockets in our version of Earth, actual U.S., circa 1990s, without a huge profit margin built into it because rocket manufacturers also have access to accountants and actuaries, etc., who can price out possible risks. It didn’t help that there really only was one or two companies willing to invest capital into doing so. Which precluded the possibility of selecting a lower bid.
And no one else in the U.S. wanted to invest capital to establish a third manufacturer for the reasons described above.
Which is why the Pentagon hasn’t moved entirely to fixed price contracts, because for many systems there’s literally no competition for their business, so it would probably increase the price over cost-plus contracts since corporations have to borrow at higher interest rates for debt then the government can.
But nobody would have taken a fixed price contract to build rockets in our version of Earth, actual U.S., circa 1990s, without a huge profit margin built into it because rocket manufacturers also have access to accountants and actuaries, etc., who can price out possible risks.
It’s okay to grant them a huge profit margin with priced-out risks. That way, if they manage to reduce their costs, they make a bigger profit.
it would probably increase the price over cost-plus contracts since corporations have to borrow at higher interest rates for debt then the government can.
The government essentially guaranteeing the loans of companies does reduce the interest rate on the debt, because it means that if the project fails the government pays for the losses.
It also means that the chance that the project succeeds at its initial price is less because the company has no incentive to stay within the budget.
Right, so the upfront sticker price of a fixed price contract to build rockets in the 90s would have been much higher then that of a cost-plus contract.
Maybe after you include the delays, overruns, etc., it would turn out to be a lower price. But NASA didn’t need the votes at some future date, they needed the votes at the time of approval, in order for the project to happen.
Thus it would never get past Congress unless somehow NASA could guarantee that the congressmen voting for it would still be in power to benefit from the possible future savings, which is impossible in a democracy.
The problem is a mix of economic illiteracy of congressmen and corruption.
If we would make more fixed-prize contracts you could start attacking politicians who make cost-plus contracts on the basis that they cost the tax-payer a lot of money. If you try to enforce a standard of “any politician who makes cost-plus contracts that then run above budget is to blame for that”, you could shift the system to be more productive.
You write newspaper articles that blame the responsible politicians. You say that their actions resulted in a lot of wasted money and talk about how they took campaign donations from interests that profit from the government being responsible for the losses instead of private industry.
Elon Musk pushed for more space contracts to go fixed-price. In both space and defense, you could research who’s responsible for moving things in the right direction and who blocked it and resulting in wasted money.
If someone at Vox would decide they want to do something good for the world they could do it.
I don’t see how this could overcome the counter-efforts of those who currently benefit from cost-plus contracts. They after all have a lot more to lose, individually, then a society of several hundred million, where the per person costs may be a couple hundred dollars total in any given year.
Getting enough votes and maintaining voting discipline to enforce any standard at all is incredibly tough in the U.S. elections systems.
If a project goes fails and you write about how John is responsible for wasting a lot of tax-payers money because John decided to to a cost-plus contract instead a fixed-price contract, it’s hard to argue that John isn’t blameworthy if you can’t say who’s supposed to get the blame.
Avoiding opportunities to get blamed is a very strong motivator for many politicians.
What it takes, is enough reform-minded journalists who are willing to consistently talk about it for 1-2 decades.
This would work if it was the only contentious topic at stake during an election. However in reality, given recent trends, there will likely be dozens of hot button topics at stake and only a few viable candidates, and virtually all other topics carry more emotional appeal, and more motivated voting blocs, then fixed-price contracting standards.
It seems exceedingly unlikely that this issue would get enough oxygen for it to be decisive in selecting any elected candidate.
Hmm, I should rewrite the Falcon 9 sentence to clarify my intent. I meant to express that more affordable rockets were possible in the 90s compared to what existed, rather than that the F9 exactly was possible in the 90s.
Given that the Soviet Union collapsed soon after and that no competitive international launch market really began to emerge until the 2000s this isn’t surprising. There was no incentive to improve. Moreover, engines are just one component of the rocket launch cost equation.
From NASA:
Until recently, virtually all major players in this space (heh) were monopolies, whether public or private. These organizations had little incentive to improve and were known to be highly inefficient. Why assume the Soviets reached a magical price floor that was impassable prior to the 2010s?
And what incentives to improve could there have been?
If you mean on some alternate earth where human incentive structures are different and they had some Apollo sized project going on in their equivalent of our 90s, sure it probably would have been feasible to drive down the price of expendable rockets by a factor of 2 or 3 at their equivalent of 90s technology. Assuming they made it in huge quantities and the opportunity cost of capital was zero.
NASA commissioned rockets under cost-plus contracts. Those contracts don’t produce incentives for the manufacturers of the rockets to cut costs.
If you want lower costs you need manufacturers to compete by making fixed-price bids.
But nobody would have taken a fixed price contract to build rockets in our version of Earth, actual U.S., circa 1990s, without a huge profit margin built into it because rocket manufacturers also have access to accountants and actuaries, etc., who can price out possible risks. It didn’t help that there really only was one or two companies willing to invest capital into doing so. Which precluded the possibility of selecting a lower bid.
And no one else in the U.S. wanted to invest capital to establish a third manufacturer for the reasons described above.
Which is why the Pentagon hasn’t moved entirely to fixed price contracts, because for many systems there’s literally no competition for their business, so it would probably increase the price over cost-plus contracts since corporations have to borrow at higher interest rates for debt then the government can.
It’s okay to grant them a huge profit margin with priced-out risks. That way, if they manage to reduce their costs, they make a bigger profit.
The government essentially guaranteeing the loans of companies does reduce the interest rate on the debt, because it means that if the project fails the government pays for the losses.
It also means that the chance that the project succeeds at its initial price is less because the company has no incentive to stay within the budget.
Right, so the upfront sticker price of a fixed price contract to build rockets in the 90s would have been much higher then that of a cost-plus contract.
Maybe after you include the delays, overruns, etc., it would turn out to be a lower price. But NASA didn’t need the votes at some future date, they needed the votes at the time of approval, in order for the project to happen.
Thus it would never get past Congress unless somehow NASA could guarantee that the congressmen voting for it would still be in power to benefit from the possible future savings, which is impossible in a democracy.
The problem is a mix of economic illiteracy of congressmen and corruption.
If we would make more fixed-prize contracts you could start attacking politicians who make cost-plus contracts on the basis that they cost the tax-payer a lot of money. If you try to enforce a standard of “any politician who makes cost-plus contracts that then run above budget is to blame for that”, you could shift the system to be more productive.
How would you envision the logistics of enforcing such a standard?
You write newspaper articles that blame the responsible politicians. You say that their actions resulted in a lot of wasted money and talk about how they took campaign donations from interests that profit from the government being responsible for the losses instead of private industry.
Elon Musk pushed for more space contracts to go fixed-price. In both space and defense, you could research who’s responsible for moving things in the right direction and who blocked it and resulting in wasted money.
If someone at Vox would decide they want to do something good for the world they could do it.
I don’t see how this could overcome the counter-efforts of those who currently benefit from cost-plus contracts. They after all have a lot more to lose, individually, then a society of several hundred million, where the per person costs may be a couple hundred dollars total in any given year.
Getting enough votes and maintaining voting discipline to enforce any standard at all is incredibly tough in the U.S. elections systems.
If a project goes fails and you write about how John is responsible for wasting a lot of tax-payers money because John decided to to a cost-plus contract instead a fixed-price contract, it’s hard to argue that John isn’t blameworthy if you can’t say who’s supposed to get the blame.
Avoiding opportunities to get blamed is a very strong motivator for many politicians.
What it takes, is enough reform-minded journalists who are willing to consistently talk about it for 1-2 decades.
This would work if it was the only contentious topic at stake during an election. However in reality, given recent trends, there will likely be dozens of hot button topics at stake and only a few viable candidates, and virtually all other topics carry more emotional appeal, and more motivated voting blocs, then fixed-price contracting standards.
It seems exceedingly unlikely that this issue would get enough oxygen for it to be decisive in selecting any elected candidate.