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

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

But even though the contract is being awarded now, the risks for both NASA and SpaceX remain high. Here’s a behind – the – scenes look at the process by which the space agency selected the manufacturer for the landing system for its ambitious Artemis program, and what will come next for all involved.

The budget is not what NASA thought it would be

NASA originally planned to pick two winners to ensure redundancy, but SpaceX has Jeff Bezos’ Blue Origin and Leidos Holdings‘ (NYSE: LDOS) subsidiary Dynetics, which appears to be a $ 2.9 billion contract for winners, mainly due to budget pressures.

Kathryn Lueders, head of NASA’s human space program, explained in the 24-page statement that the agency had to make an audible call because of the quotes received for the human landing system (HLS) and the amount of money raised by the Congress was awarded.

“While it is the agency’s desire to maintain a competitive environment at this stage of the HLS program, NASA’s current fiscal year budget did not support even a single option A, but at the initial pricing and milestone payment phase set by each of the option A providers have been proposed. award, ‘she wrote.

The return to the moon as soon as possible was a priority of the previous government, but even before the November election, it was unclear how much political support there was in Washington to make it happen on such a fast timeline. Last year, Congress allocated $ 850 million to Artemis, far less than the $ 3.3 billion NASA said it would achieve by the then President Trump’s 2024 target date. In its recent budget proposal for fiscal 2022, the Biden White House allocated only $ 325 million to Artemis.

The good news is that with Trump’s artificial deadline no longer running the process, NASA will have more time and eventually be able to add additional contractors. But with the attention in Washington largely dominated by the pandemic, economic stimulus efforts, key infrastructure packages and the many other priorities of President Biden, the budget constraints that NASA has forced on HLS could be a harbinger of the things that the agency and contractors must come. relying on it for funding.

SpaceX takes the risk in hopes of a reward

Lueders wrote that although SpaceX’s technical specifications were impressive, the award amounted to the total price. Although she did not disclose any figures other than the $ 2.9 billion SpaceX award, she said that “Blue Origin’s total rated price was significantly higher than that, followed by Dynetics’ total rated price, which was significantly higher as Blue Origin se. “

Dynetics, as part of listed defense contractor Leidos, should pay attention to the margins and probably do not have the same incentive as a newcomer like SpaceX to use low prices to further establish themselves with NASA. Blue Origin, although a private launch similar to SpaceX, works with Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC) on its bid, perhaps it also did not have the level of financial flexibility that SpaceX enjoys.

SpaceX is also more willing to take risks on the project. According to the estimate, the company plans ‘to self-finance and accept financial risk for more than half of the development and testing activities’, a real plus for a budget-limited government agency.

This will put more pressure on SpaceX, but it fits in well with the company’s versatile approach to space. In addition to collaborating with NASA and the Pentagon, the company is also developing commercial ventures, including Musk’s ambitious plan to build the Starship, a massive rocket capable of driving a human mission to Mars and bringing it home again. The company’s ability to distribute HLS research across a number of other projects enables NASA to perform its work at a discount.

“I found SpaceX’s strong strength for its comprehensive plan to leverage its HLS contract performance to promote a versatile approach to commercializing its underlying Starship capability, as a highlight in 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 it also demonstrates a significant commitment to the success of the HLS Commercial Partnership Model and SpaceX’s commitment to the commercialization of technologies and capabilities. “

The spatial landscape changes

NASA raised a few eyebrows in early 2020 when it selected Dynetics and two relative newcomers as finalists for the HLS, and the victory of SpaceX here only serves to emphasize that the company with its new public / private approach as its position a reliable NASA strengthened. seller.

SpaceX already transports astronauts to and from the International Space Station, a mission it shares Boeing (NYSE: BA), even if only SpaceX took up the challenge. And SpaceX is present in other parts of the Artemis project, and the Starship is expected to eventually be used to bring astronauts from Earth’s orbit to the moon and back.

Space is seen by defense contractors as an area ripe for growth, and the Pentagon’s need for more and more advanced satellites, sensors and orbital weapons should help sales in the coming years. But for investors in established companies like Boeing, Lockheed, Northrop and even Leidos, this decision is a blow to the hope that NASA can turn into a lucrative, high-budget 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 we ever hoped. The expectations must be adjusted accordingly.