Here’s how SpaceX won NASA’s Lunar Lander contract

NASA focused on costs when considering options for a key contract to land astronauts on the moon again, and that played into the hands of Elon Musk’s SpaceX.

But while the contract is now being awarded, the risks for both NASA and SpaceX remain high. Here’s a behind-the-scenes look at the process by which the space agency chose the manufacturer for the landing system for its ambitious Artemis program and what will follow for all parties involved.

Playback of the SpaceX human landing system. Image source: SpaceX.

The budget is not what NASA thought it would be

NASA initially intended to choose two winners to ensure redundancy, but SpaceX defeated Blue Origin and Jeff Bezos Read Holdings‘ (NYSE: LDOS) Dynetics subsidiary, which turned out to be a $ 2.9 billion winning contract, largely due to budgetary pressures.

Kathryn Lueders, head of NASA’s human spaceflight program, said in a 24-page statement explaining the decision that the agency had to make a sound call because of the quotations received for the human landing system (HLS) and the amount of money it had was allocated by Congress.

“Although the Agency’s desire remains to maintain a competitive environment at this stage of the HLS Program, at the initial prices and stage payment stages proposed by each of the Option A bidders, NASA’s current fiscal year budget has not supported even a single Option The prize, “she wrote.

Returning to the moon as soon as possible was a priority for the previous administration, but even before the November elections, it was unclear how much political support there was for Washington to make this happen on such a fast-track calendar. Last year, Congress allocated $ 850 million to Artemis, well over $ 3.3 billion. NASA said it will be needed to complete the mission by President Trump’s target date for 2024. In its recent budget proposal for the year Fiscal 2022, the White House Biden has allocated only $ 325 million to Artemis.

The good news is that, given that Trump’s artificial term is no longer leading the process, NASA will have more time and could eventually add additional contractors. But with Washington-dominated pandemic, economic stimulus efforts, major infrastructure packages and many other President Biden priorities, budget constraints that have forced NASA’s hand over HLS could be a harbinger of things to come for agency and contractors. which relies on it for funding.

SpaceX takes risks in hopes of a reward

Lueders wrote that although the technical specifications of the SpaceX were impressive, the prize was reduced to the total price. Although she did not disclose numbers other than the $ 2.9 billion SpaceX award, she said that “the total price estimated by Blue Origin was significantly higher than this, followed by the total price estimated by Dynetics, which was significantly higher. than that of Blue Origin ”.

Dynetics, as part of the publicly traded defense contractor Leidos, needs to pay attention to margins and probably doesn’t have the same incentive as a newcomer like SpaceX to use low prices to further settle with NASA. Blue Origin, although a private start-up similar to SpaceX, worked with Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC) in terms of its offering, so it may have lacked the level of financial flexibility that SpaceX enjoys.

SpaceX is also more willing to take the risks associated with the project. According to the assessment, the company “intends to self-finance and assume the financial risk for more than half of the development and testing activities”, a real plus for a limited government budget agency.

Image source: NASA.

This will mean more pressure on SpaceX, but it fits very well in the company’s multifaceted approach to space. In addition to collaborating with NASA and the Pentagon, the company is also developing commercial projects, including Musk’s ambitious plan to build Starship, a massive rocket capable of propelling a human mission to Mars and bringing it home again. The company’s ability to spread HLS research on a number of its other projects allows NASA to do its work at a low cost.

“We found SpaceX’s significant strength in its comprehensive plan to leverage HLS’s performance to advance a multifaceted approach to marketing its core Starship capability as the culmination of its management proposal,” Lueders wrote. “This contribution not only significantly reduces the cost to the government (which is reflected in the lower price of SpaceX), but also demonstrates a substantial commitment to the success of the HLS public-private partnership business model and SpaceX’s commitment to commercialize technologies. and skills. ”

The spatial landscape is changing

NASA raised a few eyebrows in early 2020, when it chose Dynetics and two relatively newcomers as finalists for HLS, and the SpaceX gain here only underscores that the company, through its new public / private approach, has strengthened its position by NASA reliable seller.

SpaceX is already transferring astronauts to and from the International Space Station, a mission with which it shares Boeing (NYSE: BA), even if so far, only SpaceX has risen to the challenge. SpaceX is also present in other areas of the Artemis project, with its astral spacecraft expected to eventually be used to bring astronauts out of Earth’s orbit to the moon and back.

The space is seen by defense contractors as a ripe area for growth, and the Pentagon’s need for increasingly advanced satellites, sensors and orbital weapons should help fuel sales for years to come. But for investors in officials like Boeing, Lockheed, Northrop and even Leidos, this decision is a blow to the hope that NASA can turn into a high-budget profit center.

If nothing else, the HLS award is proof that there are a growing number of viable competitors looking for a piece of pie that may not be as big as I once hoped. Expectations need to be adjusted accordingly.