Competition and EELV: Challenges and Opportunities in New Launch Vehicle Acquisition PART II

1. Competition and EELV: Challenges and Opportunities in New Launch Vehicle AcquisitionPART II Future in-Space Operations Presentation June 13, 2012 Stewart Money stewart@innerspace.net

2. Background and Summary of Part I The United States in 2012 is at a crucial decision point in determining how it will access space for the next decade or longer The Evolved Expendable Launch Vehicle Program is celebrating a remarkable string of successful launches, but costs are increasing beyond the point of sustainability At the same time, a different approach to launch development represented by the COTS Program and the SpaceX Falcon 9 is yielding impressive results but flight history is limited

3. EELV Program and Acquisition Costs are Rising To Unsustainable Levels • The estimated average total price for a Department of Defense EELV launch varies with annual launch rate, but has risen from $72 million in 2002 to approximately $420 million in FY 2012 • NASA currently pays the per unit cost for each launch acquired, receiving a comparatively reduced price from the full cost assigned to DOD • EELV cost increases are being passed on to NASA in the form of the NLS-II contract prices which are 50% higher than in the previous NLS I Contract. Not to exceed price for the Atlas V has increased from $125 million to $334 million • A 2011 OIG Report found that NASA carries a substantial risk of being assessed an additional $100 million per flight for its share of full program costs currently carried by DOD* *NASA OIG Report “Review of NASA’s Acquisition of Commercial Launch Services” 2/17/2011 IG-11-012

4. A Questionable RemedyThe EELV Proposed Block Buy GAO released a report in September 2011 heavily critical of a proposed Air Force / ULA solution to rising EELV prices; a 5 year 40 core ‘block buy” of EELV launch cores through 2017 The GAO report determined that the rationale for the block buy was based on a flawed industry survey conducted by United Launch Alliance biased towards a desired outcome, and further determined that DOD used the survey to formulate acquisition policy without ever asking to see source data GAO further determined that the block buy would: Potentially “Lock in” high prices (averaging $375 million per core) Create a bow wave of unused launch cores which could effectively extend the monopoly and preclude real competition for several more years

5. Block Buy Response Following GAO report release, Congress issued a hold letter to the Air Force regarding the block buy Air Force responded by announcing it would alter strategy and seek a price matrix from ULA searching for a “sweet spot” Also released an overdue New Entrant Certification Strategy Unconvinced, Congress effectively re-classified the program as ‘in development” subjecting it to increased scrutiny, resulting in an April report of a Nunn-McCurdy cost breach. The Air Force announced it would set aside a series of non critical launch opportunities for new entrants beginning in 2014 The actual level of commitment to competition is still difficult to determine Meanwhile…

6. Part III : A Different Approach NASA uses Space Station Resupply to Leverage Two New Launch Vehicles

7. COTS Program 2002: Policy Origin lies in Alternate Access to Station Program which is focused on supplementary delivery to ISS 2004: Post Columbia, the new Vision for Space Exploration leaves a gap in ISS transport after the Shuttle program’s scheduled end in 2010. Subsequent delays in Project Constellation widen the gap 2006: COTS is introduced as a secondary effort to support ISS and to spur Silicon Valley style competition in space access. Relies on Space Act Agreements, rather than Federal Acquisition Regulations 2007: Delays in Project Constellation and suspension of Delta II production add new emphasis to COTS, and place a premium on securing new launch vehicles

8. Orbital Sciences Introduces Antares • Fills missing Delta II medium category • Estimated pricing in line with historical Delta II range • Modest business plan contingent on 2-3 launches a year • Significant foreign content • Lingering reliability concerns following consecutive Taurus XL fairing failures Credit Orbital Sciences

9. SpaceX Introduces EELV Class Falcon 9With Revolutionary Pricing • First Launch: 6/4/2010 • Second Launch: 12/8/2010 • Third Launch: 5/22/2012 • Updated Performance LEO 13,150 kg / (29,000 lb.) GTO 4,850 kg / (10,692 lb.) • Standard Launch Price 2012 $54 Million $ 1,862 per lb. to LEO $5,050 per lb. to GTO • 24 Commercial launches on manifest Credit SpaceX

10. NASA NAFCOM Study to determine what it might have cost to develop the Falcon 9 under two different assumptions, a traditional versus a more commercial approach Initial work performed in 2010 Summarized in Appendix B Commercial Market Assessment for Crew and Cargo Systems 4/27/2011.

11. NASA NAFCOM SpaceX Cost Analysis • Used NASA Air Force Costing Model with inputs supplied by SpaceX to see what the cost of a traditional procurement and single test flight would have been. • Format was Cost Plus Fee for both NASA and Commercial Approach • Results: 3.97 Billion under NASA model • But: 1.69 Billion under a more commercial approach • Actual SpaceX numbers were somewhat closer to 300 million, plus 90 million for Falcon 1 • NASA personnel visited SpaceX; asked questions and refined their inputs • Reran the model; this time to include a second test flight as well • Results: 1.38 Billion for cost plus commercial approach 443 million for a fixed fee approach

12. NAFCOM Study Inquiry into SpaceX Cost Basis Cites Three Key Factors for Low Cost • SpaceX operates a lean, production oriented workforce - pricing is very much a factor of overall payroll • SpaceX is vertically integrated • Cites 80% of value produced in house • Maintains every dollar contracted out costs 3 – 5 dollars in administrative and overhead expense • Reduced infrastructure cost with Design Development Test and Engineering • Falcon 9 uses a common engine to both stages, Flown on Falcon 1 • Uses a common fuel to both stages • Uses a common fabrication technique to both stages; Second stage is essentially a shorter version of the first

13. COTS 2/3 Mission success provides NASA with ISS cargo capability only 11 months after final Shuttle mission Only source of significant downmass for ISS Flight proven entry for Commercial Crew Competition Commercial market expansion with Dragonlab Potential BEO capability SpaceX / COTS Partnership Now Successfully Extends Beyond Launch Vehicles Into Orbital Systems Credit SpaceX

14. Sailing into HistorySpaceX Dragon Mission marks a clear validation for the COTS program, and the use of Space Act Agreements in achieving major accomplishments with historically low public investment. $396 million total NASA investment leverages both the Falcon 9 and the complete Dragon system, an unprecedented return Marks the full scale introduction of an entirely new space transportation and exploration infrastructure with far reaching implications SpaceX success is going to spark a vigorous debate over current and future space programs which will intensify dramatically with the introduction of the Falcon Heavy

15. Engines: All U.S. Production Engine, Merlin 1C Imported Engine: AJ-26 Spaceports: Improvement s to Mid-Atlantic Regional Spaceport Potential SpaceX commercial spaceport Next Generation Improvements RLV Testing : Falcon Grasshopper Falcon Heavy COTS Secondary Benefits Mid Atlantic Regional Spaceport AJ-26

16. Almost There:Assured Crew Return Vehicle HL-20 X-38 ACRV NASA has pursued different programs for an ISS emergency return vehicle over the years including HL-20, X-38 and an Orion based version. In each case, real or projected cost overruns prevented implementation The COTS 2/3 flight and successful landing demonstrated many of the elements necessary achieve to this long held goal An interim crew capable Dragon, without launch abort system offers an early option for achieving U.S. capability with minimal additional investment

17. Assessing COTS : What Does it Mean? The NAFCOM results confirm what many assume to be self evident, that a “commercial like “ approach to hardware development can be generally far less expensive than a traditional cost plus effort when the technology is readily achievable The COTS experience to date indicates that development costs can be minimized even further when a private company invests its own capital in pursuit of a solution with commercial applications It remains an open question whether NASA is willing, or even able to extend the COTS approach to future procurement, but the possibilities are compelling A failure to fully examine potential future applications would amount to a major failure of leadership unworthy of a great nation

18. Part IV: Existence Proof With a 3rd Successful Launch of Falcon 9, SpaceX Has Passed a Critical Threshold Can extending the COTS approach meet new launch needs?

19. Policy Basis for Extending the COTS /CRS Experiment The need for low cost access to space across all sectors is greater now than at any previous time due to constricted budgets and looming demographic crises. NASA efforts at lowering costs through direct development of reusable launch systems such as the Shuttle, X-33 and other programs failed to achieve critical goals EELV program has clearly failed to reduce costs as well Though results are currently limited to one company, SpaceX, it appears the COTS program’s soft approach to hardware development is providing an example of an alternate path towards achieving progress in lowering the cost and increasing the capacity for access to space. Absent a new major policy initiative: This is as good as it gets

20. Extending the COTS Example What Are the Key Factors? • Establishing a core market “Anchor Tenancy” • Close Integration With Potential Commercial Applications • SAA or Non Traditional Contract Approach • Modest investments from government combined with “In the Pink” contactor investment • “Cut Your Losses” strategy for failed entries : Kistler • Performance Milestones • Commitment to competition through all phases • Multiple winner strategy through service period with contract assignment by price and performance • Partially funded test flights • Taking the long view

21. New Launch Needs Flight Qualified Medium Class Science Launcher Affordable Alternative To Atlas V Throughout Intermediate Class Range Competitive Commercial Crew Entrant Heavy Lift Vehicle for Future in Space Operations SLS Booster Competition w/ New Main Engine Development Advancement in Re-usable Launch Technology

22. Medium Category: Delta II Experience Highlights the Risk of a Single Launch Solution Both Falcon 9 and Antares await a launch task order to begin the certification process, however in the case of Falcon 9, this should be forthcoming NASA has streamlined the certification process, but it still takes time SMD launches are frequently more demanding, requiring additional stages and extra consideration, and offer the familiar dilemma of placing a valuable payload on new launch vehicle. NASA lacks a method for demonstrating high orbit or deep space capability on new vehicles without endangering expensive payloads Incorporating a key COTS element, partially funded demonstration flights, following an anticipated science mission trajectory with test or non critical payloads would allow for faster integration of new launch vehicles for SMD at an earlier point in the process

23. Intermediate Category: The Falcon 9 Offers Existence Proof of An Affordable EELV Class Vehicle • The third successful launch marked a major milestone in the Aerospace Corporation’s 3/7 reliability rule • Accelerated launch schedule will offer new data points quickly • A planned upgrade, the Falcon 9 v. 1.1 is scheduled to be introduced in 2013, debuting on CRS flight # 3. With a successful campaign, SpaceX will have unambiguously demonstrated what an EELV class launcher “should cost” • At that point continued support of radically more expensive launch systems become financially and morally unacceptable • The policy question should then shift to establishing a price ceiling and encouraging new competition at or below that level

24. Applying COTS Lessons in Enabling Commercial Crew • Deputy Program Manager Brent Jett, Spaceflightnow.com • 5/2/2012 “NASA: competition at core of commercial crew program” The recent Congressional pressure to select a single provider highlights a struggle over the future of NASA and the U.S. space program, and whether it will apply lessons learned in the COTS program Commercial Crew began as COTS-D Program officials explicitly recognize the goal is not simply to develop commercial transportation, but to use competition to drive costs lower. “To down select to one (provider ) now would kind of take us back to the old ways of doing business” Reversion to FAR contracting poses a significant threat to progress made. NASA will have to wield it lightly

25. A Sustainable Solution for Commercial CrewFalcon 9 SpaceX has publically offered Commercial Crew at $140 million per flight. Based on NLS-II pricing, there is a reasonable expectation of a significant cost difference between Falcon 9/Dragon and the least expensive Atlas V based entrants of not less than $100 million per flight. Rocket agnostic crew vehicle proposals suggests a strong rationale for Falcon 9 inclusion under multiple scenarios Falcon 9 ‘s current limited flight history is offset by a manifest which includes approximately 17 flights before operations begin in 2015 at the earliest Elimination of a planned CST-100 escape system demonstration flight suggests the intersection of budget and launch costs is already having an effect

26. Developing Heavy Lift : Planned Falcon Heavy Approaches $1,000 per lb. Threshold 53,000 KG to LEO $128 Million • A successful introduction would mark a bell weather event in access to space • Delta IV Heavy has already proven CBC concept but price is exorbitant $375 million plus DOD infrastructure support renders full cost close to $500 million per flight • Falcon 9 V 1.1 serves as the core booster for Falcon Heavy • Is it possible to integrate into current plans the arrival of an affordable heavy lift option without undue disruption? Credit SpaceX

27. ISS U.S Flight Manifest Through 2020 27 Unassigned cargo flights present a unique opportunity to drive new launch innovations Source : FAA 2011 Commercial Spaceflight Forecast

28. Possible Path: COTS-HL Unassigned Cargo flights represent a low risk strategy for extending the COTS approach to accelerate the introduction of Falcon Heavy as a NASA launch vehicle and establish an affordable heavy lift option Achievable through a progressive development schedule Contract provision to allow for initial payload delivery via existing Dragon capsule with optional 4.3 meter extended trunk in lieu of standard CRS delivery Initial pathfinder for larger cargo containers in ATV class or greater On ramp provision for additional entrants

29. COTS-HL Benefits Falcon Heavy introduction with no disruption of ISS support ISS cost reduction with possible operating lifetime extension, and increased opportunity for private investment Carrier vehicle for ISS expansion elements such as a Bigelow module Potential for multi destination manifesting “space freighter” Affordable heavy lift vehicle for Future In Space Operations which do not require a SLS sized booster Effective near term demonstration of the Falcon Heavy / Dragon combination which is capable of Lunar and Mars mission architectures

30. Follow On to COTS-HL Implementation of COTS-HL would open the path for a COTS style acquisition of a new and more affordable Multi Purpose Logistics Module with applications for ISS, FISO and SLS exploration and commercial architectures MPLM NASA MSFC Advanced Concepts Office

31. SLS Advanced Booster and Main Engine Development SLS Program calls for a competitively bid Advanced Booster of roughly 3 million lb. thrust to support a goal of 130 ton LEO capacity Likely powered by a new large (> 1 million lb. thrust) RP-1 main engine Winning entrant would be a Heavy Lift first stage in its own right, suggesting a wider market potential A conventional sole winner, cost plus acquisition model will almost certainly perpetuate the inefficiencies of prior systems Given SpaceX’s demonstrated success with Falcon 9 and purported interest in developing a Falcon X with an F-1 class main engine, could a COTS-HL competition be extended to the Advanced Booster program?

32. Whither Reusability ?Potential Path : COTS-R NASA has effectively abandoned the pursuit of reusability as a major initiative, even though it remains the only real avenue for a permanently expanding future in space The Air Force is funding a long term Reusable Booster Program as a successor to EELV, but runs the risk of repeating past mistakes Private companies such as SpaceX, Blue Origin, XCOR and Armadillo are pursuing the goal from many different directions A continued COTS style campaign of ISS re-supply offers a unique and otherwise unavailable opportunity to progressively test and incorporate partial or fully re-usable launch elements with modest public investment

33. Towards Reusability ULA Aerial Engine Recovery Concept Incentives can be incremental: Purchase of performance data on first stage “fly back” maneuvers Demonstration of hardware recovery procedures Recovered engine test firings Demonstration launch of recovered elements

34. Achieving Reusability with COTS-RIncentivizing SpaceX and Blue Origin • SpaceX and Blue Origin are both pursuing fully reusable launch systems. Breaking the barrier of reusability is of sufficient importance to trump other considerations including temporary ISS oversupply • Automatic rewards for achieving first or second stage reusability in an ISS supply context • Guaranteed minimum flight contract assignment incentive for re-usable systems with non punitive pricing • Standing incentive for new entrants SpaceX Falcon 9 Second Stage Blue Origin Suborbital Test Article

35. Solving the ISS “Last Mile Problem” Would allow delivery by virtually any launch system with minimal constraint, allowing wide open competition in driving down launch costs MMSEV NASA MSFC Advanced Concepts Office Flexcraft NASA MSFC Advanced Concepts Office A significant component in FISO and SLS applications with no current development path is a Multi Mission Space Exploration Vehicle (MMSEV) Preliminary incorporation at ISS could be used in automated mode to rendezvous with cargo delivered to the vicinity, but not within proximity to the station, functioning much as a harbor pilot

36. Final Considerations NASA’s focus on BEO overlooks the inescapable fact that the job in LEO is far from finished, and that launch costs are still too high to support an expanding commercial infrastructure Applying a COTS like approach to extended ISS logistics presents the opportunity to make significant progress in lowering the cost and increasing capacity of space launch systems while continuing a renewed program of deep space exploration

37. A “Matrix Moment” Innovations being driven by NASA’s Commercial Orbital Transportation Program and currently best represented by SpaceX offer decision makers with a choice, to remain trapped in a cycle of high costs and limited progress, or to embrace an emerging reality in which the sky is no longer the limit Screenshot from “The Matrix”

38. Epilogue: The Fruits of Competition Boeing introduces the B-247 in 1933. Defers TWA order until 60 units are delivered to United Airlines 10 Passengers 180 MPH Range 745 Miles B-247 Credit United Airlines TWA CEO Jack Frye asks Douglas Aircraft to produce a new airplane with specifications exceeding the B-247. 14 Passengers 210 MPH Range 1,085 miles Finishes second in the 1934 London-Melbourne Air Race DC-2

39. 1934 : American Airlines CEO asks Douglas to produce a luxury sleeper aircraft with more capacity than the DC-2. 1935: The result is the Douglas Sleeper Transport. After 7 production units, a daytime version is produced and The DC-3 is Born DC-3 21-32 Passengers Max speed 230 MPH Range 1513 Miles First Flight 12/17/1935

40. And More than 70 Years Later…. The DC-3 and its immediate offspring are still flying in commercial applications around the world on a daily basis, including the Space Coast Regional Airport

41. Author’s Articles Cited in Presentation Competition and the future of the EELV program The Space Review, 12/12/2011 Competition and the future of the EELV program (part 2) The Space Review, 3/12/2012 Following SpaceX down the rabbit hole The Space Review, 4/18/2011 An American fable The Space Review, 10/10/2011 Sailing in the Wake of History The Space Review, 6/04/2012 stewart@innerspace.net Cover Credit SpaceX Concluding Credit American Airlines