SpaceX explains why the U.S. Space Force is paying $316 million for a single launch

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Gwynne Shotwell said the contract pays for launch services but also covers expenses for infrastructure and other items required for national security launches. 

WASHINGTON — When the U.S. Air Force announced Aug. 7 that SpaceX received a $316 million contract to launch a National Reconnaissance Office satellite in fiscal year 2022, many were surprised by the large price tag.

SpaceX President and Chief Operating Officer Gwynne Shotwell on Nov. 9 explained that the contract pays for launch services but also covers expenses for infrastructure and other items required for national security launches. 

“The launch was not that expensive,” Shotwell said during a panel discussion at the virtual World Satellite Business Week conference hosted by Euroconsult.

The $316 million contract was the first awarded to SpaceX under the National Security Space Launch Phase 2 launch service procurement. The other provider selected in this program, United Launch Alliance, was awarded $337 million to launch two missions comparable to the one awarded to SpaceX. 

This raised eyebrows because SpaceX’s previous national security launch bids were priced much lower than ULA’s. A recent Falcon Heavy launch contract SpaceX won from NASA, for example, was $117 million. In the first Phase 2 award, ULA is launching two missions almost for the price of one SpaceX mission. 

But Shotwell insisted the company’s launch prices are not going up. SpaceX is however charging the government for the cost of an extended payload fairing, upgrades to the company’s West Coast launch pad at Vandenberg Air Force in California, and a vertical integration facility required for NRO missions. 

The price “reflects mostly the infrastructure,” Shotwell said. 

Shotwell noted that the Aug. 7 contract does not completely cover all infrastructure expenses and other costs will be included in future Phase 2 bids.  

“This one was front loaded because the Space Force wanted this capability deployed quickly,” said Shotwell.

Speaking during the WSBW panel, ULA CEO Tory Bruno said the Phase 2 awards are proof of “how price competitive we were.” He said Phase 2 launch bids are fixed-price and do not include development costs. 

But SpaceX added development costs into its bid, said Shotwell, because the company never received funding for infrastructure and development that its competitors got. The Air Force in 2018 awarded ULA and other launch companies competing for Phase 2 contracts billions of dollars for the development of vehicles and for infrastructure. SpaceX did not win a Launch Service Agreement (LSA) development contract and sued the Air Force in response. A California judge dismissed the lawsuit last month.

ULA received a $967 million LSA contract. Shotwell said that has to be included in the equation “to get a complete look at what the Space Force is investing in the launch industry in the United States.”

Those LSA awards were “to help get the U.S. launch providers to be competitive for Phase 2,” Shotwell said. “We did not win that, so all the money that we needed to spend we needed to put into our Phase 2 award. And we were happy that we were still competitive.”