For decades, space exploration has been the sole province of national governments, in part because of the enormous expense. NASA’s space shuttle program – which flew 135 missions between 1982 and 2011 – cost about $209 billion overall, averaging around $1.6 billion per launch, according to NASA. But the price to reach space is starting to fall, driven by U.S. business innovation and efficiency.

In 2004, President George W. Bush announced that NASA’s shuttle program would be closed to make room for a new family of rockets and spacecraft, the Constellation Program. Yet, Constellation was cancelled in 2010 due in large part to its exorbitant cost, calling into question the United States’  status as the world’s space leader since the 1969 moon landing.

“The obvious barrier to human exploration beyond low Earth orbit is the cost of access to space,” said SpaceX CEO Elon Musk during his testimony before the Senate in 2004. “This problem of affordability dwarfs all others. If we do not set ourselves on the track of solving it with a constantly improving price per pound to orbit, in effect a Moore’s law of space, neither the average American nor their great-great-grandchildren will ever see another planet.”             

Eight years later, Musk’s Space Exploration Technologies Corporation (SpaceX) became the first private company to launch a spacecraft into Earth orbit and guide it to rendezvous with the International Space Station (ISS). This was a remarkable achievement not only because it was achieved by a corporation, but also because the overall price tag was significantly less than what it would have cost NASA.

A History of High-Cost Missions

Decades ago, NASA set out to control costs by switching from one-time use only rocket parts to reusable parts.  The space shuttle was the first reuseable spacecraft when it launched in 1981. But the cost of maintaining the engines was much higher than anticipated, negating any cost savings from introducing reusable parts.  A 2003 NASA report found that the engines require high levels of manpower to perform inspections, maintenance, and operations. “As a consequence,” the report says, “the labor- intensive needs of the [main engines] provide a significant impact to the overall cost efficiency of the Space Transportation System.” 

The lack of competition also contributed to NASA’s high costs. NASA missions focus on safety and success; in the private sector, profit is another consideration. During the 1990s, NASA began to source globally, resulting in lower costs.

A 2002 Futron Corporation whitepaper analyzing trends in price per pound to orbit found significant reductions in costs between 1990 and 2000:

This can be attributed in large part to increased competition, particularly the introduction in the first half of the decade of lower-priced Chinese and Russian launch vehicles. The overall commercial launch market adjusted by lowering prices, stabilizing around $12,000 per pound in the latter half of the 1990s, nearly one-third less than launch costs at the beginning of the decade.

Recognizing the benefits of competition, NASA established the Commercial Orbital Transportation Services (COTS) program in 2006. The program was initiated to reduce costs by fostering competition. Brent Jett, deputy manager of NASA’s Commercial Crew Program and himself a former shuttle astronaut, says lack of competition is “why a system costs $8 billion to build.”  

Fostering the Competitive Environment

NASA’s COTS program is set up in two phases. In Phase 1, spanning 2006-20012, NASA invested about $800 million with commercial partners SpaceX and Orbital Sciences Corporation (Orbital) to demonstrate cargo space transportation flights. In Phase 2, the industry partners will supply the ISS.  Orbital is contracted to supply eight flights (paid about $1.9 billion), SpaceX 12 flights ($1.6 billion).

This industry-government initiative have already demonstrated the cost effectiveness driven by U.S. business innovation. SpaceX and Orbital have both developed proprietary space technologies at a fraction of the cost of what NASA would have spent to achieve the same end. Since its founding in 2002, SpaceX’s total company expenditures through 2010 were less than $800 million. During that time, it developed the Falcon1 and Falcon 9 rockets and the Dragon spacecraft, constructed launch and manufacturing sites, and launched numerous test flights. Compare this with government costs – NASA estimates it would have cost $3.97 billion alone to develop the Falcon 9 rocket using the NASA-Air Force cost model.

Unlike NASA, Musk says his company operates on a Silicon Valley operating system and DNA – the Apple or Google of space transport. His team is tightly integrated, with engineering and manufacturing occurring on the same factory floor. The company is built for efficiency, though safety standards are no less stringent than the government’s. The innovative private sector approaches are achieving what NASA could not under its old model.

International Competition and a New Consumer Market

U.S. businesses face stiff competition in the space market, most notably from Russia. Without the space shuttle, the United States is currently paying the Russian Federal Space Agency to carry U.S. astronauts to the ISS, which U.S. taxpayers contributed $50 billion to build – about half of the total cost.

NASA has purchased six round-trip flights on Russia’s Soyuz spacecraft in 2013 and 2014, costing an average $55.8 million per seat. The long-term goal for U.S. space companies is to be able to ferry astronauts to the ISS, keeping NASA’s budget in the U.S. private sector rather than fund the space operations of the United States’ former Cold War rival.

Russia is also a leader in the emerging space tourism industry. A Russian company, Orbital Technologies (a subsidiary of the part state-owned RKK Energia), is planning to launch an orbiting space hotel in 2016. The first module would hold up to seven passengers, costing about $50 million to $60 million a trip. Funding challenges and concerns about the safety of Russian rockets, however, make achieving the hotel within four years a substantial challenge. Russia’s space program has sent seven “space tourists” into low-Earth orbit, the first in 2001, when Dennis Tito paid about $20 million for an eight-day trip to the space station. U.S. companies are striving to offer more affordable rates.

Virgin Galactic, headquartered in New Mexico , has confirmed it will begin commercial space flights in 2013. The company's sub-orbital trips will be operated from Spaceport America, the first purpose-built commercial spaceport in southern New Mexico. Bigelow Aerospace, founded by American motel tycoon Robert Bigelow, has launched inflatable habitats into orbit with plans to offer space tourism.

Earlier this year, SpaceX and Bigelow Aerospace announced an alliance in which they will eventually offer government and commercial passengers SpaceX transportation to Bigelow’s space stations. While the cost for these commercial tickets is still in the hundreds of thousands of dollars, continued investment and development of the market could drive down costs – certainly cheaper than $20-million-ride on a state-owned Russian spacecraft.

Russia’s space efforts remain largely state funded, and they fall short of the progress the United States is making on multiple fronts. Sergei Zhukov, head of Space Technology at Russia’s Skolkovo Innovation Center, says, there is little private sector involvement in Russia’s space industry. The United States, however, draws on public and private groups, ensuring a robust space presence. Zhukov says:

The U.S. today is the only country that pursues virtually all types of space activity…As for development of the private segment, the U.S. policy adheres to a strict division of responsibility: study of the solar system, including planets and asteroids, is the business of the state, whereas developing near-Earth space is the domain of private companies. And you should remember that the giant contractors of the U.S. space agency today, be it Boeing, Lockheed Martin or Orbital, are all private enterprises. They ensure America’s technological lead.

Private enterprises were instrumental in NASA’s most recent accomplishment , the landing of the Curiosity rover on Mars in August with a show of technological innovation and proficiency unmatched in history. One of the rover’s most important pieces of hardware is a robotic arm built by the U.S. company MDA Information Systems, Inc., with the help of technology from the New York-based Aeroflex Corp.

After the successful landing, President Obama’s senior advisor on science and technology John Holdren said:

If anybody has been harboring doubts about the status of U.S. leadership in space, there’s a one-ton, automobile-size piece of American ingenuity...sitting on the surface of Mars now.

While the space shuttle program is over, America’s era in space is far from it. It is thanks to the free market, power of competition and private sector innovation that the United States will continue exploring the final frontier, though now at a more manageable cost.