At an estimated $1.55 billion in cost per launch, and $209 billion total over its 30-year history, the U.S. Space Shuttle program was easily NASA's most expensive project since the Apollo Moon Program -- but NASA's next project is going to make it look like a bargain. Two years ago, an investigation by the U.S. Office of Management and Budget (OMB) estimated that each time NASA launches its new Space Launch System (SLS), taxpayers will ante up "over $2 billion."
As it turns out, OMB was being optimistic.
$2 billion...and then some
Last week, NASA awarded one of its main subcontractors on the SLS project, Northrop Grumman (NOC 1.55%), a $3.2 billion contract to build booster rockets for five SLS rockets that will participate in the Project Artemis moon program. For each of the Artemis IV, V, VI, VII, and VIII, Northrop Grumman will build a pair of rocket boosters to help lift the massive rockets into orbit, then send them on to the moon. The company will also build a test booster for the Artemis IX "Booster Obsolescence and Life Extension" (BOLE) program -- so 11 boosters in all.
These boosters are essential to the Artemis program, providing "more than 75% of the thrust for each SLS launch," as NASA explains, but they do come at a cost. Specifically, each rocket booster will cost taxpayers -- and benefit Northrop Grumman -- more than $290 million.
To put that number in context, when NASA hired SpaceX to launch its Geostationary Operational Environmental Satellite (GOES) U spacecraft in September, the total cost of the Falcon Heavy rocket that will do the work -- including the core stage and two side boosters (all of which are reusable) was just $152.6 million. Yes, you read that right. For the cost of just one Northrop Grumman booster rocket (which will be discarded after launch), NASA could buy two entire SpaceX rocketships. For what Northrop is charging to help launch one single SLS, NASA could launch four Falcon Heavy missions.
Comparing apples to rockets
Is this a fair, apples-to-apples comparison, though? Actually, no. It's not fair -- to SpaceX.
Northrop Grumman boasts that each of its SLS booster rockets "produces 3,600,000 pounds of maximum thrust -- greater than fourteen 4-engine Boeing 747s at full take-off power." That sounds like a lot, but in fact, Falcon Heavy is even more powerful. As SpaceX describes it, "the world's most powerful rocket" produces five million pounds of thrust at liftoff. And to further sharpen the distinction, SpaceX adds that this is "equal to approximately eighteen 747 aircraft" (emphasis added).
Turns out the Falcon Heavy beats SLS's booster by a margin of four whole airplanes!
What it means to investors
And now we come to the crux of the matter: Even given that Northrop Grumman's rocket boosters cost so much, isn't this a good thing for the company? Doesn't more money for Northrop mean more profits for investors in Northrop Grumman stock?
Not necessarily, no. It actually creates a risk to Northrop stock.
Kerbal Space Program enthusiasts would probably shudder in horror at the aerodynamics, but on paper NASA could build a 40% more powerful SLS -- and spend half as much on its boosters -- by discarding Northrop Grumman's contribution and strapping a pair of SpaceX Falcon Heavies to the SLS core stage instead.
Granted, that's not going to happen. For the first few Artemis launches at least, I think you can safely assume that the rocket will be built -- regardless of cost -- by NASA's handpicked contributors to the SLS program. Northrop will provide the boosters. Boeing will build the core and second stage. Aerojet Rocketdyne will contribute main engines. And Lockheed Martin will place an Orion spacecraft up top.
But once SLS rockets start launching, and taxpayers -- and Congress -- get a clear view of just how many billions of dollars each launch costs, I have serious doubts about the program's longevity. In the uncertain, but certainly possible, event that SpaceX succeeds in building an even better, even cheaper rocket in the form of the Starship, and gets it flying before the moon project has gone on too long, I see a very real risk that Project Artemis will be canceled on the grounds of its exorbitant expense.
If that happens, it won't matter how many booster rockets Northrop Grumman has been hired to produce -- for a rocket that will no longer be flying. It won't even matter whether SpaceX, or some other company, replaces Northrop, Boeing, and all the rest as NASA's key moon partner. All those Northrop contracts will go away, taking billions of dollars of anticipated Northrop Grumman revenue with them.
This, in a nutshell, is what Northrop investors should be worrying about going forward.