When Elon Musk went to Washington
Does Musk really make money from government contracts from Trump?
I had a conversation on Twitter/X last week with someone not from the United States (he seemed to hint at the U.K.) that Elon Musk’s cozy bromance with President Trump and the government contracts Elon has somehow have a causal link. As someone who has followed the rise of SpaceX from its humble beginnings and watched the way SpaceX had to scrape for a decade to get a foot in the door (Musk sued the Air Force just to be treated equally in bids), I find this allegation laughable to the point of comedy. Such a lame theory points to total ignorance of the system of government corruption surrounding launch services contracts in the U.S.
The Players
Until recently (and probably still), Military procurement in the United States has always been a good ole boys club, seeped in a seedy circle of mutual back-scratching between Department of Defense (DOD) procurement officials, Congressfolks, and a relatively exclusive list of large defense contractors.
You’ll have General Whosit of one of the branches of the military working as a procurement officer high up within the Department of Defense. He’s nearing retirement and wants a cushy post-retirement job somewhere with a comfortable salary to supplement his pension, and a golf bag leaning against the desk. So, he wants to get in good with one of the major defense contractors so that one day he might use his technical knowledge, security clearance, ability to navigate the cryptic military knowledge base, and insider contacts to get a job as a Salesman.
You’ll also have Congressman Whosit on the House or Senate Armed Services and/or Budget Committee. He knows that he might choose to retire or be forced to by losing an election someday. So, he wants to get in solid with large defense contractors to schmooze his way into a lucrative Lobbyist job, kind of a Washington insider sales guy.
There is also a sleezy underbelly to this mutual backscratching club that I won’t get into in detail here, beyond just calling it a sleezy underbelly and letting you use your imagination beyond that. Maybe I’ll just call it a mutual belly rubbing club instead of mutual backscratching.
I should add that the National Aeronautics and Space Administration (NASA) was born out of the U.S. military four years before I was born. Though totally separate from the DOD procurement model, its procurement model is a total clone of it and buys from those same defense contractors.
Competing Paradigms
I said that NASA’s procurement model is a clone of the DOD’s procurement model. Prior to the rise of SpaceX, which is structured around the Fixed-Price contracting paradigm, the Space industry used what is called the Cost-Plus contracting model. In Cost-Plus contracting, the providing company is not paid for the product; they are paid to develop it. This seems to work well for the DOD, but for NASA, it becomes a money pit where spacecraft projects languish on the ground for years, running up the tab, before ever flying. Under Cost-Plus contracting, the big money…the REALLY big money…isn’t in completing the spacecraft and sending it to space, but in dragging it out and milking it for all it’s worth on the ground until either Congress loses patience and cancels it (yes, it is Congress that does that, not NASA), or eventually it does actually fly. When the spacecraft does fly, the government owns it as if it were a fighter jet or something. NASA’s Space Launch System (SLS) is currently mired in this muck.
NASA would also shepherd small startups to do little things for their Spin-Off Program. For these smaller capability expansion projects, they would use a thing called Fixed-Price contracting where the provider is paid in stages as they achieve milestones, penalized if they fail to achieve milestones, and the contracting company owns the product in the end. NASA starts out as the task-master and becomes the product’s first, but not its only, customer.
Over the course of the rise of SpaceX, NASA has transitioned away from Cost-Plus contracting for orbital launch services and toward the Fixed-Price contracting that they used to just use for Spin-offs. This pretty much turns spacecraft into Spin-offs. However, the seedy, belly-rubbing club that I mentioned earlier fought back hard. Congress hates Fixed-Price contracting because they don’t get to decide which state gets the jobs or when the project will end, and NASA decides when the company is eligible for payouts based on performance rather than Congressional belly-rubbing. The old-school contractors hate Fixed-Price contracting because their businesses and bidding processes have been structured over the decades to need all that wasted money from Cost-Plus contracting and to rely more on belly-rubbing than on performance. The power struggle within NASA between the Cost-Plus contracting proponents and Fixed-Price contracting proponents has been furious as Cost-Plus gradually lost ground and hoped in vain with each presidential transition after Obama that an incoming new President would rescue them and restore the status quo. NASA Administrator under the Biden Administration, Bill Nelson, called Cost-plus contracting a plague on the agency…
"You get it done with that competitive spirit. You get it done cheaper, and that allows us to move away from what has been a plague on us in the past, which is a cost-plus contract, and move to an existing contractual price."
I chronicled this entire evolution from its start to now on my WordPress blog as it happened. President Obama started the fight in February of 2010 when he cancelled the Bush administration’s Constellation program that had started in January 2004. He made the cancellation official in October 2010 and Congress went ape crap bonkers in response, accusing President Obama of messing with Congressionally-approved expenditures. Sound familiar?
At the end of that fight, the series of different sized launchers under Constellation program were all consolidated down to one large launcher, the Space Launch System (SLS), to which NASA assigned all of their planned upcoming deep-space launch projects, including their Jupiter probe Europa Clipper, and every stage of their manned Moon and Mars missions. SLS would remain a Cost-Plus development project, but would not service the International Space Station (ISS). A new set of competing spacecraft development projects would be developed under Fixed-Price contracting for that.
SLS finally flew on Novermber 16th, 2022. Remember earlier when I said that the project actually started in 2004? It took almost 20 years for the SLS program to produce just one completed rocket! In contrast, the Falcon 9 rocket, which SpaceX had begun developing in 2005, flew its first test flight under a NASA Fixed-Price contract requirement on June 4th, 2010, and carried with it a mock-up of their ISS cargo capsule for the ISS. At the end of that year, the Falcon 9’s second test flight launched their first operational Dragon ISS capsule into orbit, which was safely and successfully recovered. The Falcon 9 then spent the next five years becoming reusable while taking over the world’s commercial launch industry with unprecedentedly low pricing and rapid launch cadence.
In 2018, during the first Trump administration, SpaceX launched its first Falcon Heavy after 10 years of development, tossing Elon Musk’s personal red Tesla Roadster into a solar orbit that intersects with Mars’ orbital path. Ever since then, the Falcon Heavy has filled the niche of the world’s most powerful operational rocket.
By 2020, the latest version of the Falcon 9 had started launching astronauts to the ISS aboard its new Crew Dragon. By the time SLS launched its first test flight in November 2022, the Falcon 9 had had 176 successful flights, and the Falcon Heavy had had 4. These 180 Falcon flights included commercial flights, launches to the ISS, other NASA launches, and launches for the Defense Department and foreign nations.
Through that same period, delay-induced cost overruns and unavailability resulted in every one of the planned NASA SLS launches being scaled back and reassigned to other launchers, often the Falcon 9, Falcon Heavy, a foreign launcher, or ULA’s Atlas or Delta Heavy. That includes the first test flight of the Orion orbiter, the manned space capsule that is supposed to be part of SLS program. It flew on the ULA Delta Heavy, which lifts half as much as a SpaceX Falcon Heavy and costs up to five times more.
Kicking in the door at the Air Force
Once SpaceX’s Falcon and Falcon Heavy launchers qualified for Department of Defense launches, SpaceX started bidding for contracts and losing for lame reasons while knocking full sets of digits off their bid amount compared with the more traditional and much better-connected launch company, United Launch Alliance (ULA). In response, Elon Musk publicly hinted about that seedy, belly rubbing club I spoke of earlier and suggested that it was the reason for the unequal treatment of his company by the Defense Department. He fought back by suing the Air Force in Federal court. Everyone was shocked, but I wasn’t. Evidence discovery in U.S. Federal lawsuits runs very deep and wide. The Air Force immediately reversed their treatment of SpaceX, giving them fair treatment in contract bidding and access to contract awards commensurate with their cost advantage, and SpaceX immediately dropped the lawsuit.
Changing Administrations
When Donald Trump won the presidency in 2016, his transition teams began preparing executive agencies for the transfer of power. He made no secret of the fact that he intended to “Drain the Swamp” and that included NASA. Everyone knew that there were things that Trump didn’t like about how Obama had run NASA, and it was said that his NASA “transition team” more closely resembled a “boarding party”. By then, the power struggle within NASA between Old-Space and New-Space had reached a very high temperature, and with Trump acting very anti-Obama and anti-Green energy, and both of those issues being very tightly connected to Elon Musk, the Old-Space proponents hoped that the upcoming and very disruptive Trump Administration would put a stop to the revolution within NASA that Barack Obama and Elon Musk had started. Both sides worked very hard for Trump’s favor, but in the end, he stayed out of their dispute, saying he preferred to watch the fight and see who won. However, he also warned both sides that he expected results, gave Senator Jim Bridenstine, with a strong space history, the job of NASA director, and told Vice President Mike Pence, a well-respected former Governor and Senator, to keep an eye on NASA. During his first administration, Trump wanted a crewed lunar landing to close his future second term and over time became very frustrated with sluggish Old-Space and enamored with the peckish New-Space, Elon Musk, and SpaceX. Under Trump and Bridenstine, NASA pretty much jumped into Fixed-Price contracting with both feet.
Then Joe Biden won the election in 2020, and his transition team came in. Old-Space hoped, again, that the incoming administration that vowed to reverse everything Trump had ever done would rescue them from their rapid descent to irrelevancy. Elon Musk’s peckishness had lost him favor with the Democrat Party and its fan base, and Tesla’s lack of a unionized labor force had lost him favor with Joe Biden. All of this conflict manifested very publicly, and some government agencies, like the Federal Aviation Administration, began resisting and delaying new SpaceX development in annoying little ways. Beyond that, however, Biden didn’t care much about space, and all he did to help Old-Space was spare them from Trump’s unrealistic 2024 lunar landing expectation. He put Vice President Harris in charge of watching NASA and appointed Bill Nelson as NASA Administrator to ensure the agency was strongly led. Bill Nelson was a very strong proponent of New-Space, but I doubt that Biden knew about that or cared. Over the course of the Biden Administration, Kamala Harris repeatedly demonstrated herself to be more clueless about space than the average high school student.
So, from that moment on, Old-Space was doomed, and Elon Musk was already on the rise within NASA and the DOD like a rocket long before he joined Donald Trump’s reelection campaign.
Conclusion
There are many other fun and lengthy details sandwiched into this story that you can find on my Wordpress blog if you’re interested.
Most of the money that SpaceX makes is from business in the commercial launch industry market, not the cut-rate costs SpaceX bids for NASA fixed-price contracts or from U.S. Space Force or Reconnaissance Office contracts. He has shouldered out every other large orbital launch provider worldwide except for maybe ArianeSpace. SpaceX, with its dramatically lower dollars per pound to orbit, has been expanding the reach of Commercial Space into new industries, filling the needs of those new markets as it builds. It launches more rockets into space every year than every government or company on Earth combined, excluding China.
StarLink’s revolutionary idea of low-altitude, North to South orbiting communications satellites didn’t start with Elon Musk, but he now owns many times more of the satellites currently operating in orbit than everyone else on Earth combined, giving every human on Earth access to the Internet using a dish the size of a pizza box. Yes, the U.S. Space Force has a piece of that too, providing the United States military air, land, and sea assets with seamless, low-latency communications worldwide. Many of those satellites can be reached from your cell phone now, too, and will soon provide you with temporary connectivity anytime you wander out of range of your provider’s tower—if it doesn't already.
Tesla is not currently doing as well as Elon’s space efforts, but it is a publicly traded company, and Elon only owns part of it. Tesla remains the leader of the electric vehicle industry, and their competition leases the use of their charging stations here in the U.S. and their AI-based self-driving technology. Efforts by terrorist groups in the U.S. to damage Tesla as a company have only slowed them down, not stopped them.
So, Elon Musk needs no help from Donald Trump to secure government contracts, nor do those contracts contribute more than a fraction to his net worth, and the awarding of those contracts pre-dates the second Trump Administration anyway. Donald Trump, still very much a Washington outsider, needs Elon Musk’s help to bend NASA, the DOD, and other agencies to his will, not the other way around.