How SpaceX Won NASA's Lunar Lander Contract

In case you might not know by now, SpaceX, the space exploration company started by Elon Musk, is leading its industry significantly. This month, the company got an even bigger boost when it announced that it had won a contract from NASA to help the latter with developing a lunar lander for future missions.

How SpaceX Won NASA's Lunar Lander Contract

The announcement wasn't much of a surprise for many industry insiders. SpaceX has been notching up win after win over the past few months, and it was always the frontrunner in this mission - in a field where names like Blue Origin and Dynetics Inc. also play.

However, it is worth understanding SpaceX's strategy and why this win could pretty much seal a bigger future for a company that has been on the rise for a while now.

Budget Constraints Stifle NASA

The NASA lunar lander contract is a big deal on all fronts. NASA had initially intended to pick two companies to help develop the project, providing a broader group of copmp[etitors that could shed more ideas and help with expedited processes. However, budgetary issues forced it to hand the contract entirely to SpaceX.

According to reports, Kathryn Leuders, the director of NASA's spaceflight program, explained that the agency had faced budget constraints from the United States Congress. After a cursory examination of the quotes obtained for the project's human landing system (HLS), it was more important to hand the contract to the most cost-effective option.

So, instead of getting as many companies on board as possible, NASA chose to turn the contract into a winner-take-all situation.

"While it remains the Agency's desire to preserve a competitive environment at this stage of the HLS Program, at the initial prices and milestone payment phasing proposed by each of the Option A offerors, NASA's current fiscal year budget did not support even a single Option A award," Leuders wrote.

As many know, the Trump administration did a lot of work in its focus to return humans to the moon. Former President Trump inaugurated the United States Space Force and seemed to be fascinated with the idea of establishing a dominant force in outer space. However, even before Trump left power in January, it was unclear how much space travel and domination had in Congress.

Last year, Capitol Hill approved a $850 million budget for Artemis, the NASA project that looks to perfect human space travel. However, the budget was much lesser than the 3.3 billion NASA had earmarked to get things done. NASA hoped to get the funds to be able to meet the Trump administration's deadline of 2024, and it would need a great deal of money to get there.

Interestingly, the Biden administration looks less focused on space travel than the Trump regime. In its budget proposal for 2022, the Biden White House allocated just $325 million to Artemis.

It is understandable, of course. President Biden is focusing more on economic relief following the recent coronavirus pandemic and its many effects on the American economy. Any budget proposal will focus on this objective, and with Congress already split on what seems to be excessive spending by the Biden cabinet, there is no space for what it would seem as "not overly necessary."

While the budget cuts are bad news, there's a silver lining. Trump's deadline is now invalid since he is no longer in power. With the deadline no longer dictating NASA's process, the agency has more time and could even add some more projects and contractors based on future budget proposals.

So, with more attention on Biden's various plans (infrastructure, racial justice, economic recovery, coronavirus treatments, etc.), there is a significant chance that NASA will face more budget constraints. The agency has already had to make accommodations for the HLS, and this trend could be a sign of things to come for everyone that relies on it for funding.

SpaceX is the Perfect Risk Partner

As NASA's statement explained, the price was the most significant factor in NASA's decision to award the HLS to SpaceX - even though the company had impressive specifications. She didn't say much about the finances, except that the company won $2.9 billion in funding for the project. However, she pointed out that Blue Origin and Dynetics had significantly higher prices, making their proposals unworkable for NASA at this point.

Dynetics is part of Leidos - a publicly-traded defense company. So, with investors on its neck, the company has to be careful about profit margins. Its incentives are also different from those of SpaceX, which can easily use low prices to gain market share and curry favor with NASA.

As for Blue Origin, the company worked with Lockheed Martin - another defense contractor and aviation company, on its project. A third partner is Northrop Grumman - a company in the same field as Lockheed. While Blue Origin is a private company with SpaceX's flexibility, the firm appeared to have been carrying too much baggage in terms of its partners and their financial commitments to their investors.

All in all, SpaceX is in a much better position to pursue the project. The company is in a better room to take risks with NASA, especially since it plans to self-fund and even take on some of the financial risks for over 50 percent of the testing and development activities. For a government agency facing a considerable budget constraint, this is a real benefit.

All eyes will now be on how SpaceX and NASA can work together in the future.


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