The Great Resignation Has Been Greatly Exaggerated

I would like to acknowledge and thank Mr. Steve Hipple, Economist at the Bureau of Labor Statistics, for his generous assistance in assembling the data used in this post from the public-use micro data files of the Current Population Survey.  This post would not have been possible without his help.

A.  Introduction

There has been much discussion in recent months about workers resigning from their jobs at record high levels.  This has often been attributed to workers reassessing their lives and deciding their jobs are simply not worth it.  A new name has even been coined for this:  the “Great Resignation”.

But while resignations have indeed been high, two quite distinct matters have often been confounded.  One is workers resigning from a position in order to move to a new, more attractive and usually higher-paying, position with a different employer.  The other is workers resigning from a position with no intention to take a new job, but rather to leave the labor force and do something else.  The former reflects a reshuffling in the economy, with workers moving to positions where they will likely be better paid and more productive.  This should raise the overall productivity of the economy.  The latter (those leaving the labor force) would reduce the overall capacity of the economy, if significant.  But as we will see below, while quits from jobs in order to move to a new job is, indeed, at record high levels, the number quitting in order to drop out of the labor force is at this point quite modest, and likely also to prove temporary.  While the Covid pandemic led to a major shock in the labor market, previous trends in labor market participation rates are reasserting themselves.

This post will look at the data on each of these two issues – both important but also both quite different.  It will start with the figures on turnover in the labor market, and present these figures in the context of the net number of new jobs being created.  Quits are high, but hiring is also at record highs.  Workers are quitting their jobs largely to switch to more attractive jobs.

While far more modest, some workers have, however, left the labor market.  The second part of this post will look at the reasons given by those not in the labor force for why they are not, and how this has changed from before the pandemic hit.  This is based on original data assembled from the public use micro data files of the Current Population Survey (CPS).  While publicly accessible by scholars and researchers, these figures are not presented in the regular monthly reports of the Bureau of Labor Statistics on the CPS.  This data will hopefully serve to better inform the discussion on what has been termed by some as the “Great Resignation”.

We will see that the changes in the number of US adults deciding whether or not to participate in the labor force are now modest compared to pre-pandemic trends, and are mostly accounted for by older workers deciding to retire earlier than what would have been expected, on average, under previous patterns.  But to the extent some worker decides to retire now, a year or two earlier than when they had earlier planned, there will then be one less worker retiring a year or two from now.  That is, there will not be a long-term impact, and one should expect to see a return to previous trends.  And so far, that is precisely what we have been seeing.

B.  Quits, Job Openings, and Net New Jobs

The number of workers quitting their jobs each month has indeed risen – and to the highest levels of at least two decades (the data do not go back further).  But the number of workers being hired each month to fill open positions has also increased – to even higher levels.  And despite the record pace of hiring, the number of open jobs employers are seeking to fill has grown to especially high levels.

The figures are shown in this chart:

The data come from the Job Openings and Labor Turnover Surveys (JOLTS) of the Bureau of Labor Statistics (BLS), a monthly survey of employers (although with reports that lag one month compared to the more closely watched monthly BLS report titled “The Employment Situation”, with its figures on such estimates as the unemployment rate and on the net number of new jobs in the economy).  The JOLTS surveys are relatively recent, with data going back only to December 2000, in contrast to the CPS, which goes back to 1948.  The chart here is shown in terms of the absolute number of workers or jobs in each group.

[Side Note: One might sometimes see a chart similar to this but shown in terms of rates:  Hires and Quits shown as a percentage share of the number employed, and Job Openings as a percentage share of the number employed plus the number of job openings.  However, for the relatively short period here (21 years) the patterns in the two presentations look very much the same,]

The number of “Hires” are the number of workers added to the payroll in the given month, according to this survey of employers.  Employers are also asked how many workers left the payroll (“Total Separations”) and whether they were workers who left voluntarily (“Quits”), were laid off or discharged involuntarily (“Layoffs & Discharges”), or left for some other reason (“Other Separations”).  The BLS includes in the Other Separations category those who left to go into retirement, or due to a new disability, or due to deaths.  Hence quits are only one reason for workers leaving their jobs, although its share has been growing:  Layoffs & Discharges have been falling, while the number in the “Other Separations” category has been flat and relatively low. (These latter two categories were not included in the chart to reduce the clutter.)

Hires and the various categories of separations are all flows, measured by the BLS over the course of a full month (and then seasonally adjusted, which among other effects will compensate for the different number of days in different months).  The “Job Openings” estimate, in contrast, is a stock, reporting the number of open job positions the employer is actively seeking to fill as of the last business day of each month.  Its scale on the chart therefore should not be taken as directly comparable to the number of Hires or Quits on the chart, which are flows over the course of a one-month period.  While they happen to be similar in number, one could have reported the number of Hires or Quits over, say, a two-month period (in which case they would have been about twice as much).  One needs to remember that stocks and flows are different.

As the chart shows, open jobs that employers are seeking to fill (“Job Openings”) have grown sharply over the last year.  While the monthly rate of hires has also grown – to record levels – the hiring could not keep up.  And with more workers being hired and actively recruited to fill the open job positions, it should not be at all surprising that the number of workers quitting their old jobs to take a new job – a job that is more attractive to them that probably also pays more –  has also been increasing.  Thus there are resignations, but not to leave the labor force.  Rather, workers are resigning to switch to a new, more attractive, job.

Such “churn” in the labor market is a good thing.  Not only are workers moving to what is for them a more attractive (and likely higher-paying) job, but the productivity of the economy as a whole will also go up as a result.  Employers are able to pay more to attract the workers to these jobs because the workers hired into those jobs will likely be producing more than they had in their old jobs.

How do we know that the quits were largely in order to move to a new job?  It is clear from the magnitudes.  The number of quits in the JOLTS data from March 2020 through February 2022 totaled over 85 million over the two-year period.  And this does not even include those quitting in order to retire (they are included in the “other” category in JOLTS).  Yet as will be discussed in the next section below, the labor force in February 2022 totaled only about 2.7 million less as of February 2022 than what would have been the case had the pre-pandemic shares of participation in the labor force continued.  And close to three-quarters of that 2.7 million reduction was due to workers entering into retirement at somewhat greater rates than was the pattern before.  This is nowhere close to the 85 million quits over the period.

One can also compare the monthly averages for the labor turnover figures with the net figures for new jobs:

The chart shows the average monthly figures for 2021, all from the BLS (either from JOLTS or the CPS).  January figures are excluded as the BLS changes each January the population controls it receives from the Census Bureau for its CPS figures, without revising earlier estimates.  This can lead to an abrupt one-month change in January, making it not comparable to the changes found in other months.

The first three columns show the average monthly growth in 2021 in the adult population (117,000), in the labor force (192,000), and in the number of net new jobs (547,000).  Over the long term, the labor force cannot grow faster than the adult population, but it did in 2021 as the labor force participation rate rose in 2021 following the turmoil of 2020.  And the net number of new jobs could grow faster in 2021 than the increase in the labor force as the number of unemployed fell rapidly in this first year of the Biden administration.  But the economy is now at full employment, and unemployment will not be able to fall much further.  Thus over the longer-term one cannot expect the net number of new jobs to grow faster than the increase in the labor force, and one cannot expect the labor force to grow faster than the adult population (and indeed normally by substantially less, as not all adults choose to be part of the labor force).

In contrast to the figures seen in the first three columns, the average monthly number of workers hired is far higher.  So is the number of separations, and it is the relatively small difference between the number of workers hired into positions and those separated from them for whatever reason that equals the number of net new jobs in the economy.  The separations in 2021 mostly came from quits (70% of the total), with smaller numbers from layoffs or discharges and from the “other” category (where, as noted before, the BLS includes those choosing to quit due to retirement).

All this is consistent with a very strong labor market.  Workers are indeed resigning, but this is largely due to the opportunity to move to a more attractive, better paying, open job.  As we will discuss in the next section, relatively few are resigning to leave the labor force altogether.

C.  The Extent to Which the Labor Force Fell, and the Factors Behind It

As of February 2022, there were 592,000 fewer US residents in the labor force (in the seasonally adjusted figures) than there were in February 2020, just before the lockdowns due to Covid began.  This is not much:  Just 0.4% of the labor force.  But it is not a fair comparison.  The adult population grew over those two years, and thus one would expect that in normal circumstances, the labor force would also have grown.  The question is by how much.  For this one needs to construct some counter-factual scenario of what the labor force would have been (in normal circumstances) and compare that to what it in fact was (given the consequences of Covid) to see how much of a change there was.  Is there evidence here for a “Great Resignation”, of people leaving the labor force in high numbers?

A simple and reasonable counterfactual would be to assume the labor force (in a breakdown by individual groups based on gender and age) would have grown in the absence of the crisis at the same rate as their population.  Population growth is determined by long-term demographics.  That is, in this scenario it is assumed that the rates at which those in the individual demographic groups chose to be part of the labor force (the labor force participation rate) would have remained the same as what they were in February 2020.  Similarly, the rates of those choosing not to be part of the labor force would be the same as in February 2020 (it will simply be one minus the labor force participation rates), and similarly for the reasons given for not participating in the labor force (e.g. retirement, home or family care, full-time students, disability, and so on).  One can then compare changes in the labor force and in the numbers not in the labor force (by the reasons given for this), under a scenario where the participation rates in February 2022 were the same as they were in February 2020, to what they actually were in February 2022.

The households surveyed in the monthly CPS are asked, when they respond that they are not employed and have not been actively seeking a job, the major reason for why they are not in the labor force.  However, the BLS monthly report on the findings of that month’s CPS survey does not report these reasons.  The monthly report is already pretty long.  However, one can obtain these results from the CPS public-use micro data files on the CPS.  The results reported here come from those files (and were assembled by Mr. Steve Hipple of the BLS for this post).

The basic results for the whole population, and for men and all women separately, are summarized in this chart:

Had the participation rates remained the same as in February 2020, there would have been an extra almost 2.7 million workers in the labor force in February 2022.  The labor force would have been 1.6% higher than what it was.  While significant, I would not see this as qualifying as a “Great Resignation”.

[Technical note:  The calculations for those in the labor force and those not in the labor force (by reason) were worked out first for the most basic groups examined:  men and women, each in three different age groups of ages 16 to 24, 25 to 54, and 55 and above, for a total of six groups.  The aggregations for all men or all women, for both men and women in each age group, and for everyone together, were then calculated by summing over the relevant groups.]

Almost three-quarters of the 2.7 million reduction (2.0 million, or 73% of the total) reflected a higher share of adults choosing to retire.  This is consistent with the story that with the disruption in the last two years, coupled also with significant income supplements being provided to most households through the various Covid relief measures passed by Congress during the administrations of both Trump and Biden, a significant number of workers decided to retire earlier than they had previously planned.  It might be a year or two earlier, or possibly longer.  The implications of this are important, as it implies that the changes in the labor force will be temporary rather than permanent.  One more person retiring now, earlier than they had previously planned, means there will be one less person retiring at whatever that future date was to have been.

The second most important reason for leaving the labor force was to take care of home or family, with this accounting for 582,000 workers – 22% of the total reduction in the labor force in the scenario being examined.  This is also understandable in the context of the Covid crisis.  Many workers had to leave the labor force during the midst of the crisis to take care of school-age children when the schools were closed, but almost all schools are now once again open (albeit with some occasional disruption due to Covid outbreaks).  There might also have been a need to take care of family members who became sick during the crisis with Covid itself, and that might still have been a factor in February 2022 (as the Omicron wave subsided).  To the extent this has been Covid driven, these effects should also prove to be temporary as the Covid crisis recedes.

There are, in addition, a list of other possible reasons given in the CPS survey for not participating in the labor force (such as full-time studies as a student, disability, illness, and a catch-all “other” category).  In the aggregate the difference these made in the scenario being examined was small:  only 138,000 – or only 5% of the total reduction in the labor force in this scenario.

In terms of the gender breakdown, more women than men left the labor force in the given scenario (1.7 million women vs. 1.0 million men) even though the share of the labor force made up of women (47% in 2022) is less than the share made up of men (53%).  The shares of this due to more entering retirement or for taking care of home or family are broadly similar between men and women, which is perhaps surprising.  Indeed, the share reporting that they are not in the labor force due to home or family care was somewhat higher for men (25.2% of their total) than for women (19.4%), but it is not clear whether such differences should be considered significant.  The underlying data comes from surveys, there will be statistical noise, and these figures are all based on changes between what the February 2022 levels were and what they would have been in a scenario where we assume the February 2020 participation patterns had remained.

The figures broken down by age group were:

The largest single cause leading to lower participation in the labor force (in the scenario where prior patterns would have remained) was an increase in the share of retirees among those aged 55 and above.  This accounted for 1.5 million workers, which was 3.9% of adults in this age group.  Surprisingly (at least to me) was that there was essentially no difference in this age group of those who were not in the labor force due to home or family care.

Among prime-age workers (ages 25 to 54) there were roughly similar shares among those no longer in the labor force who gave as their reason retirement or for home or family care.  The total number no longer in the labor force (relative to the scenario being examined) was also relatively small for this 25 to 54 age group, at just 0.9% of the population in the age group.  The share no longer in the labor force in the group aged 55 and above was substantially higher, at 3.1% of the population of that age group.  This is as one would expect when the primary factor behind those leaving the labor force was early retirement.

The share of the youngest age group (ages 16 to 24) no longer in the labor force fell by 2.6%, but primarily here for reasons lumped into the “all other” category.  The largest single factor here was full-time studies, but this accounted for just 144,000 of the 414,000 (about 35%) in this “all other” category.  One should also note that while there is a small number in the “retired” category (19,000), this is probably just a reflection of the fact this is a survey.  Respondents do not always fully understand the nature of the questions or may have been in some unusual circumstance that does not fit in well with any of the listed possible responses.

Graphically, how much of a difference has it made?  Not much.  In terms of the labor force participation rates, one has for men and for women, as well as overall:

And by age group, as well as overall:

The “X” on each category shows where the labor force participation rates would be had the February 2020 rates (for the underlying groups of men or women by each age group) continued to hold.  There was certainly a large shock to the system at the start of the pandemic, with the lockdowns that suddenly became necessary in March 2020.  There was then a partial bounceback, followed by a leveling off but with a continued but slow recovery to the earlier patterns of participation rates.  While still not fully back to what they were, the difference is now relatively modest.

This return to previous patterns in the participation rates is likely also to continue.  With the single most important factor (almost three-quarters of the total) being people retiring earlier than what they had planned (or to be more precise, earlier than in the observed pattern in prior years, before the pandemic), the labor force numbers should be expected to return to their previous path in a few years.  As noted before, if some worker retires a year or two earlier than they had earlier planned, then there will be one less retirement in a year or two (as that worker is already retired).  This is consistent with the observed slow return to previous labor force participation rates.

D.  Conclusion

The number of workers quitting their jobs has been high.  But the quits are not a reflection of workers dropping out of the labor force.  Rather, quits have been high as workers quit one job to move to another job – more attractive and likely better paying.  Hires have also been exceptionally high.  And despite the high rate of hiring, employers could not keep up and the number of open jobs they have been seeking to fill has grown.  While some workers have left the labor force during the disruptions of the Covid pandemic, about three-quarters of this (as of February 2022) stemmed from a somewhat higher share of workers choosing to retire.  But unless there has been a permanent change in retirement patterns (and there is no indication that there has been), decisions during the pandemic to retire earlier than previously planned will be self-correcting.

The high level of quits reflects, rather, an extremely strong labor market.  Indeed, the number of net new jobs created in 2021, the first year of the Biden administration, came to 6.7 million – the highest in any one year in US history.  (To be fair one should also note that the fall in the number of jobs in the US in 2020, the last year of the Trump administration, was also the highest in US history.  Thus the Biden record was made possible by the low starting point.)  With this strong labor market, workers have more of an opportunity to move to jobs that can make better use of their talents.  And they have taken advantage of this opportunity, which will be a boost both to the workers and to productivity in the economy as a whole.

It is Time to Admit the Purple Line Was a Mistake

The Path the Purple Line Will Take – Before and The View At Rock Creek Now

A.  Introduction

The proposed Purple Line, a 16-mile light-rail line passing in an arc across parts of suburban Maryland around Washington, DC, has become a fiasco.  The State of Maryland, under Republican Governor Larry Hogan, is preparing to sign a new contract with the private concessionaire that will pay that concessionaire $3.7 billion more than had been agreed to under the existing contract.  The total cost of that contract alone (there are significant other costs on top) will now be $9.3 billion (66% more than the $5.6 billion set in the earlier contract), and the opening will be delayed by at least a further 4 1/2 years (thus doubling the originally contracted construction period – now to a total of 9 years).  And the governor is doing this with no legislative approval being sought.

The Purple Line has long been controversial – due to its high cost, the disruption it is causing to a number of suburban neighborhoods, the destruction of parkland it has been routed through, and its use of scarce resources for public transit to benefit a privileged few rather than the broader community.  There are alternatives that would not only be far more cost-efficient but also less environmentally destructive.  The project illustrates well why the US has such poor public transit and poor public infrastructure more generally, as scarce resources are channeled into politically-driven white elephant projects such as this.

In response to the announcement of the terms of the revised contract with the concessionaire, I submitted to the Washington Post a short column for its “Local Opinions” section.  They have, however, declined to publish it.  This is not terribly surprising, as the Washington Post Editorial Board has long been a strong proponent of the Purple Line, with numerous editorials pushing strongly for it to go forward.  And while the Post claims that it supports an active debate on such issues, the guest opinion columns it has published, as well as letters-to-the-editor, have been very heavily weighted in number to those with a similar view as that of its Editorial Board.

I am therefore posting that column here.  It has been slightly edited to reflect developments since it was first drafted, but has been kept in style to that of an opinion column.

Opinion columns must also be short, with the Post setting a tight word limit.  That means important related issues can not be addressed due to the limited space.  But with room here, I can address several of them below.  Finally, I will discuss the calculations behind two of the statements made in the column, as a “fact check” backing up the assertions made.  These should themselves be of interest to those interested in the Purple Line project (and in public transit more broadly), as they illustrate factors that should be taken into account when assessing a project such as this.

B.  The Column Submitted to the Washington Post

This is the column submitted to the Post, with some minor changes to reflect developments since it was first drafted:

               It is Time to Admit the Purple Line was a Mistake

Governor Hogan has re-negotiated the contract with the private concessionaire that will build and operate the 16-mile long Purple Line through suburban Maryland.  The Board of Public Works has approved it, and despite an extra $3.7 billion that will be spent the Maryland legislature will have no vote.  The private concessionaire will now be paid $9.3 billion, a 66% increase over the $5.6 billion cost in the original contract.  And this is just for the contract with the concessionaire.  The total cost, including contracts with others (such as for design and engineering work) as well as direct costs at the Maryland Department of Transportation (MDOT), is likely well over $10 billion.

The amount to be paid to the concessionaire for the construction alone will rise to $3.4 billion from the earlier $2.0 billion, an increase of 70%.  And even though the construction is purportedly halfway complete (with $1.1 billion already spent), the remaining amount ($2.3 billion) is larger than the original total was supposed to be.  And the amount being paid to the private contractors for the construction will in fact be even higher, at $3.9 billion, once one includes the $219 million MDOT has paid directly to the subcontractors in the period since the primary construction contractor withdrew, and the $250 million paid to that primary contractor in settlement for the additional construction expenses it incurred.  That $3.9 billion is close to double the $2.0 billion provided for in the original contract.  In addition, the project under the new contract will require an extra 4 1/2 years (at least) before it is operational, doubling the time set in the original contract to 9 years.  Even though the project is purportedly halfway built, the remaining time required will equal the time that was supposed to have been required under the original plan for the entire project.

The critics were right.  They said it would cost more and take longer than what Maryland asserted (and with supposedly no risk to the state due to the “innovative” contract).  It also shows that it is silly to blame the opponents of the project.  The lawsuit delayed the start of construction by less than 9 months.  That cannot account for a delay of 4 1/2 years.  Furthermore, the state had the opportunity during those 9 months to better prepare the project, acquire the land required, and finalize the engineering and design work.  Construction should then have been able to proceed more smoothly.  It did not.  It also shows that Judge Leon was right when he ruled that the project had not met the legal requirements for being adequately prepared.

Even the state’s own assessment recognized that such a rail line was marginal at best at the costs originally forecast.  With the now far higher costs, no unbiased observer can deny that the project is a bad use of funds.  The only possible question is whether, with what has already been spent, the state should push on.  But so far only $1.1 billion has been spent on the construction, plus the state agreed to pay the former construction company the extra $250 million when it quit the project.  Thus close to $8 billion (plus what the state is spending outside of the contract with the concessionaire) would be saved by stopping now.

There are far better uses for those funds.  A top priority should be to support public transit in Montgomery and Prince George’s countries.  Even at the originally contracted cost for the Purple Line there would have been sufficient funds not only to double capacity on the county-run bus systems (doubling the routes or doubling the frequency on the routes or some combination), but also to end charging any fares on those buses.  Those bus systems also cover the entire counties, not simply a narrow 16-mile long corridor serving some of the richest zip codes in the nation.  In particular, better service could be provided to the southern half of Prince George’s, the location of some of the poorer communities in the DC area and where an end to bus fares would be of particular benefit.

Covid-19 has also now shown the foolishness of spending such sums on new fixed rail lines.  DC area Metro ridership is still 80% below where it was in 2019.   Rail lines are inflexible and cannot be moved, and in its contract the state will pay the concessionaire the same even if no riders show up.  Who knows what will happen to ridership in the 35 years of this contract?  In contrast, bus routes and frequency of service have the flexibility to be adjusted based on whatever develops.

It is time to cut our losses.  Acknowledge it was a mistake, don’t sign the revised contract, and use the funds saved to provide decent public transit services to all of our residents.

C.  Additional issues

a)  The Cost of Not Keeping the Original Construction Contractor

Media coverage of the proposed new contract has focussed on the overall $9.3 billion cost (understandably), as well as the cost of the construction portion alone.  The figure used for that construction cost has been $3.4 billion, a 70% increase over the originally contracted $2.0 billion cost.

But as noted in the column I drafted above, that $3.4 billion excludes what MDOT has paid directly to the subcontractors who have continued to work on the project since September 2020 (under the direct supervision of MDOT) after the original primary contractor (Fluor, a global corporation with projects on six continents) exited.  According to a report by MDOT in January 2022, $219 million was paid directly by MDOT for this work, and this will be in addition to the $3.4 billion to be paid to the concessionaire.  One should also add in the $250 million Maryland has agreed to pay the original primary contractor in the settlement for its claims that it incurred an additional $800 million in construction expenses on the project – expenses that were the fault of the state from an inadequately prepared project.  That $250 million was for construction costs incurred, and should be included as part of the overall construction costs that MDOT is paying the concessionaire.  The total to be paid for the construction (if there are no further cost increases, which based on the experience so far cannot be guaranteed) is thus in fact $3.9 billion.  This is close to double the original contracted cost of $2.0 billion.

This also raises another issue, which remarkably does not appear to have been discussed (from all that I have read).  The original contractor in 2020 had requested an additional $800 million in compensation for extra costs incurred in the project that it argued were the fault of the state.  One can debate whether this was warranted and whether it was the fault of the state or the contractor, but the amount claimed was $800 million.  Thus, had the state agreed, the total cost would then have been $2.8 billion, up from the originally contracted $2.0 billion.  The state rejected this, however, and then congratulated itself for bargaining the $800 million down to “only” $250 million.

But now we see that the overall amount to be paid the private firms building the rail line will be $3.9 billion.  Fluor was evidently right (even conservative) in its claim that building the project will cost more.  But the $3.9 billion it will now cost is $1.1 billion more than the $2.8 billion they would have paid had the state agreed to cover the $800 million (which probably could have been bargained down some as well).  This hardly looks like smart negotiating by Governor Hogan and his state officials.

Put another way, state officials refused to pay an extra $800 million for the project, insisting that that cost was too high.  They then negotiated a contract where instead of paying $800 million more they will pay $1.9 billion more – for the same work.  And then they sought praise for negotiating a new agreement where they will pay “only” an extra $1.9 billion.

Furthermore, the re-negotiated contract will not only pay $1.9 billion more for the construction, but also higher amounts for the subsequent 30 years when the concessionaire will operate and maintain the line.  Maryland had agreed to pay a total of $2.3 billion for this over the 30 years in the original 2016 contract, but in the re-negotiated contract will now pay $2.6 billion, an increase of $300 million.  Governor Hogan had earlier asserted that under its “innovative” PPP contract, the state would not have to cover any cost increases for the rail line operations over those 30 years – but now it does.  In addition, due to the now far higher construction costs and the proportionately much higher share of those costs that will be funded by borrowing (as the up-front grants to be provided will be largely the same – $1.36 billion will now be provided, vs. $1.25 billion before), the total financing costs over the life of the contract will now be $2.8 billion versus $1.3 billion before, an increase of $1.5 billion.  Thus the total contract will now cost $9.3 billion versus $5.6 billion before, an increase of $3.7 billion (which equals the $1.9 billion on construction + $0.3 billion on operations + $1.5 billion on financing).

It is difficult to see how there is any way this can be interpreted as smart negotiating.

b)  Don’t Blame the Lawsuit for the Problems

The politicians responsible for the Purple Line, starting with Governor Hogan, blame the lawsuit brought by opponents of the Purple Line for all the problems that followed.  This is simply wrong, and indeed silly.  The ruling by Judge Richard Leon delayed the start of construction by less than 9 months.  This cannot account for a delay that will now be at least 4 1/2 years (assuming no further delays).  Nor can it account for a project cost that is now $3.7 billion higher.

Judge Leon ruled in August 2016 that the State of Maryland had not fulfilled the legal conditions required for a properly prepared project.  The primary issue was whether a project such as this, with the unavoidable harm to the environment that a new rail line will have, is necessary to provide the transit services needed in the corridor.  Could there be other options that would provide the services desired with less harm to the environment?  If so, the law requires that they be considered.  The answer depends critically on the level of ridership that should be expected, and the State of Maryland argued that only a rail line would be able to handle the high ridership load they forecast.  Many of the Purple Line riders would be transferring from and to the DC Metrorail lines it would intersect, and the State of Maryland claimed that the DC Metrorail system (just Metro, for short) would see a steady rise in ridership over the years and thus serve as a primary draw for Purple Line riders.

Judge Leon observed that in fact Metro ridership had been declining in the years leading up this case (2016), and ruled that Maryland should look at this issue and determine whether, based on what was then known, a less environmentally destructive alternative to the Purple Line might in fact be possible.  If Maryland had complied with this ruling, they could have undertaken such a study and completed it within just a few months.  There would have been little surprise if such a study, under their own control, would have concluded that the Purple Line was still warranted.  The judge would have accepted this, and they could then have proceeded, with little to no delay.  Construction had only been scheduled to begin in October 2016.

Instead, the State filed numerous motions to reverse the ruling and to be allowed to proceed with no examination of their ridership assumptions.  They argued in those motions that there would be a steady rise in Metro ridership over time, and that by the year the Purple Line would open (then expected to be in 2022) Metro ridership would have been growing at a steady pace for years, which would then continue thereafter.  When Judge Leon declined to reverse his ruling, the State appealed and then won at the Appeals Court level.  The judges in the Appeals Court decided that the judicial branch should defer to the executive branch on this issue.  Construction then began in August 2017.  The Purple Line contractors said that they were delayed by 266 days ( = 8.7 months) as a result of Judge Leon’s ruling.

We now know that Judge Leon was in fact right in raising this concern with the prospects for Metro ridership.  Ridership on the system had in fact been falling for a number of years leading up to 2016, and it has continued to fall since then.  Metro ridership peaked in 2008, fell more or less steadily through 2016, and then continued to fall.  Ridership in 2016 was 14% below where it had reached in 2008 (despite the Silver Line opening with four new stations in 2015), and then was even less than 2016 levels in 2019.  And all this was pre-Covid.  Metrorail ridership then completely collapsed with the onset of Covid, with ridership in 2020 at 72% below where it was in 2019 and in 2021 at 79% below where it was in 2019.

Judge Leon was right.  Even setting aside the collapse in ridership with the onset of Covid, Metro ridership declined significantly and more or less steadily for more than a decade.  It was not safe to assume (as the state insisted in its court filings would be safe to assume) that Metro ridership would resume its pre-2008 upward climb.  And now we have seen not only the collapse in Metro ridership following from Covid, but also the near certainty that it will never fully recover due to the work-from-home arrangements that became common during the Covid crisis and are now expected to continue at some level.

In addition and importantly, while the Purple Line contractor noted that the judicial ruling delayed the start of construction by 266 days, this does not mean project completion should have been delayed by as much.  As Maryland state officials themselves noted, while the ruling meant construction could not start, the state could (and did) continue with necessary preparatory work, including final design work, acquisition of land parcels that would be needed along the right of way, and the securing of the necessary clearances and permits that are required for any construction project.  The state was responsible for each of these.  With the extra 9 months they should have been able to make good progress on each, and with this then ensure that the project could proceed smoothly and indeed at a faster pace once they began.

This turned out not to be the case.  Despite the extra 9 months to prepare, the Purple Line contractors cited each of these as major problems causing delays and higher costs.  Final designs were not ready on time or there had to be redesigns (as for a crash wall that has to be built for the portion of the Purple Line that will run parallel to CSX train tracks); state permits were delayed and/or required significant new expenditures (such as for the handling of water run-off); and the state was late in acquiring “nearly every” right of way land parcel required (there were more than 600) – and “by more than two years in some cases”.

An extra 9 months for preparation should have led to fewer such issues.  That they still were there, despite the extra 9 months, makes one wonder what the conditions would have been had they started construction 9 months earlier.  The extra time to prepare the project – where these were later revealed still to be major problems – likely saved the project money compared to what would have been the case had they started construction earlier.  It simply makes no sense now to blame that extra 9 months for the difficulties when they in fact had an extra 9 months to work on them.

c)  Diversion of MARC Revenues to Get Around Maryland’s Public Debt Limits

Under the Purple Line contract, the State of Maryland will be obliged to pay the concessionaire certain set amounts over 35 years, starting with a payment of $100 million when operations start (in a planned 4 1/2 years from now), but especially then for the following 30 years when the concessionaire will operate the line.  The state will be obliged to make those payments for those 30 years on the sole condition that the rail line is available to be operated (i.e. is in working order).  Hence those payments are called “availability payments”.  The payments will be the same regardless of ridership levels.  Indeed, they will have to be made (and in the same amount) even if no riders show up.  A major share of the availability payments will be made up of what will be required to cover the principal and interest on the loans that the concessionaire will be taking out to finance the construction of the project, with the repayment then by the state through the availability payments.  The concessionaire is in essence borrowing on behalf of the state, and the loans will then be repaid by the state via the concessionaire.

These long-term budget obligations are similar to the obligations incurred when the state borrows funds via a bond being issued.  Indeed, this can hardly be disputed for the borrowing being done by the concessionaire to finance the construction, with the state then repaying this through the availability payments.  it is also, at 35 years, a longer-term financial obligation than any bond Maryland has ever issued.  Governor Hogan will be tying the hands of future governors for a very long time, as failure to repay on the terms he negotiated would be an event of default.

Due to concerns of excessive government borrowing undermining finances, many states have set limits on the amount they can borrow.  In Maryland, the state has set two “capital debt affordability ratios”, which limit outstanding, tax-supported, state debt to less than 4% of Maryland personal income and the debt service that will be due on this debt to less than 8% of state tax and other revenues.

If the 35-year long Purple Line obligations were treated as state debt, then there could be a problem of Maryland running close to, and possibly exceeding, these debt affordability ratios.  This is discussed in further detail in an annex at the end of this blog post, with illustrative calculations.  Exceeding those limits would be a significant issue for the state, and might conceivably put it in violation of conditions written into the contracts for its outstanding state bonds.  To avoid this, or even if the Purple Line obligations would bring it closer to but not over those limits, Maryland would need to limit its public sector borrowing, postponing other projects and programs due to the limited borrowing space that the Purple Line has used up.

The issue is not new.  It already arose in the contract signed in 2016.  But it will be even more important now due to the higher cost of the concession  – $9.3 billion to be paid to the concessionaire vs. $5.6 billion before.

Lawyers can debate whether the payment obligations (or a portion of them, e.g. the portion directly tied to the debt incurred by the concessionaire on behalf of the state) should or should not be included in the state’s capital debt affordability ratios.  But to forestall such a debate, MDOT has chosen to create a special trust account from which all payments for the Purple Line would be made.  That trust would be funded by Purple Line fare revenues (whatever they are) and grant funds received for the project (primarily from federal sources).  But MDOT acknowledges that such funding would not suffice for the financial obligations being incurred for the Purple Line, at least for some time.  And if direct support to cover this was then provided from the Maryland state budget, where revenues come primarily from taxes, the Purple Line obligations would be seen as tax-supported debt and hence subject to the borrowing limits set by the capital debt affordability ratios.

So instead of openly providing funding directly from the state budget, they will channel fare revenues collected on MARC (the state-owned commuter rail system) in the amounts necessary to cover the payment obligations on the Purple Line.  But MARC does not run a surplus.  Like other commuter rail lines it runs a deficit.  Each dollar in MARC fares channeled to cover Purple Line payment obligations thus will increase that MARC deficit by a dollar.  But then, for reasons that make little sense to an economist but which a lawyer might appreciate, those higher MARC deficits can be covered by increased funding from the state budget without this impacting the state’s capital affordability limits.  The identical payments if sent directly to cover the Purple Line obligations, however, would be counted against those ratios.

But this is just a shell game.  The funding to cover the Purple Line payment obligations are ultimately coming from the state budget, and routing it via MARC transfers simply serves to allow the state to bypass the capital debt affordability limits.  It also reduces transparency on how the Purple Line costs are being covered.

Nor are the agencies that assign ratings to Maryland state bonds being fooled by this.  S&P, for example, noted specifically that it will take into account the payment obligations on the Purple Line when they compute for themselves what the capital debt affordability ratios in fact are.

d)  Role (or Lack of It) of the State Legislature

Under the new contract Governor Hogan and his administration have negotiated, a total of $9.3 billion will be paid to the concessionaire, or $3.7 billion more than the $5.6 billion that was to be paid under the original contract.  The state legislature will apparently have no say in this.  While it will bind future administrations to make specified payments over a 35 year period, with payments that must be made regardless of ridership or any factor the state has control over (the rail line needs merely to be “available”), the only recognized check on this is apparently a vote in the Board of Public Works.  But there are only three members on this Board, only two votes are required for approval, and the governor has one of those two votes.  The legislature has no role.

I find this astonishing.  The state legislature is supposed to set the budget, but no vote will be taken on whether the further $3.7 billion should be spent.  Indeed, it appears the legislature would have no role regardless of how much the current governor is binding his successors to pay (Governor Hogan will be long out of office when the payments are due), nor for how long.  Suppose it was twice as much, or ten times as much, or whatever.  And while this commitment will be for 35 years to 2056 (five years past what was in the original contract), it appears the same would apply if the revised contract were extended to 50 years, or 100 years, or whatever.  Under the current rules, it appears that the legislature has accepted that the governor can commit future administrations to pay whatever he decides and for as long as he decides, with just the approval of the Board of Public Works.

This is apparently a consequence of the state law passed in 2013 establishing the process to be followed for state projects that would be pursued via a Public-Private Partnership (PPP) approach.  The Purple Line is the first state project being pursued on the basis of that 2013 legislation, with the legislature approving also in 2013 the start of the process on the Purple Line.  This legislative approval was provided on the basis of cost estimates provided to it at the time.  MDOT then issued a Request for Qualifications in November 2013 to identify interested bidders, a Request for Proposals in July 2014, and received proposals from four bidders in November and December 2015.  Following review and final negotiations, MDOT announced the winning bidder on March 1, 2016.  Only then did they know what the cost (under that winning bid) would be, and the state legislature was given 30 days to review the draft contract (of close to 900 pages) during which time they could vote not to approve.  But no vote taken would be deemed approval.  Then, with just the approval of the Board of Public Works as well (received in early April 2016), MDOT could sign the contracts on behalf of Maryland.

However, there will be no such review by the legislature of any amendments to that contract.  Amendments apparently require nothing more than the approval of the Board of Public Works, and with that sole approval, the governor is apparently empowered to commit future administrations to pay whatever amount he deems appropriate, for as many years as he deems appropriate.  The increase in the future payment obligations in this case will be $3.7 billion, but apparently it could be any amount whatsoever, with just the approval of the Board of Public Works.

Based on this experience, one would think that the legislature would at a minimum hold public hearings to examine what went wrong with the Purple Line, and what needs to be done to ensure the legislature retains control of the state budget.  The current legislation apparently gives the governor close to a blank check (requiring only the approval of the Board of Public Works) to obligate future administrations to pay whatever amount he sees fit, for as many years as he sees fit.

Central also to any legislative review of a proposed expenditure is whether that expenditure is warranted as a good use of scarce public resources.  One can debate whether the Purple Line was warranted at the initial cost estimates.  As will be discussed below, at those initially forecast costs even the state’s own analysis indicated it was at best marginal (and inferior to alternatives).  But even if warranted at the then forecast costs, it does not mean the project makes sense at any cost.  Based on what we now know will be a far higher cost, no unbiased person can claim that the Purple Line is still (if it ever was ) a good use of public resources.

Yet remarkably, it does not appear that any assessment was done by any office in Maryland government of whether this project is justified at the now much higher costs.  The issue simply did not enter into the discussion – at least in any discussion that has been made public.  Rather, at the Board of Public Works meeting on the project, Governor Hogan praised MDOT staff for continuing to push the project forward despite the problems.  Indeed, the higher the increase in cost for the project, the more difficult it would be to proceed, and hence the more the staff should be commended (in that view) for nevertheless succeeding in pushing the project through.  This is perverse.

Legislative review is supposed to look at such issues and to set overall budget priorities.  Yet under the PPP law passed in 2013, the legislature apparently has no role to review and consider whether an amended expenditure on such a project is a good use of the budget resources available.

D.  Fact Checks

a)  The Lack of Economic Justification for the Purple Line

The column includes the statement:

Even the state’s own assessment recognized that such a rail line was marginal at best at the costs then envisaged.  With the now far higher costs, no unbiased observer can deny that the project is far from justified.

This statement is based on the results of the state’s analysis reported in the Alternatives Analysis / Draft Environmental Impact Statement, released in September 2008.  The Alternatives Analysis looked at seven options to provide improved public transit services in the Purple Line corridor – an upgrading of existing bus services (labeled TSM for Transportation System Management), three bus rapid transit options (low medium, and high), and three light rail options (low, medium, and high).  All would provide improved public transit services in the corridor.  The question is which one would be best.

The summary results from the analysis are provided in Chapter 6, and the primary measure of whether the investment would be worthwhile is the “FTA cost-effectiveness measure” – see tables 6-2 and 6-3.  The Federal Transit Administration (FTA) cost-effectiveness measure is calculated as the ratio of the extra costs of the given option (extra relative to what the costs would be under the TSM option, and with both annualized capital costs and annual operational and maintenance costs), to the extra annual hours of user benefits of that option relative to the TSM option.  That is, it is a ratio of two differences – the difference in costs (relative to TSM) as a ratio to the difference in benefits (again relative to TSM).  Thus it is a ratio of costs to benefits, and a higher number is worse.  Hours of user benefits are an estimate of the number of hours saved by riders if the given transit option is available, where they mark up those hours saved by a notional factor to account for what they say would be a more pleasant ride on a light rail line (which biases the results in favor of a rail line but, as we will see, not by enough even with this).

The FTA issues guidelines classifying projects by their cost-effectiveness ratios.  For FY2008 (the relevant year for the September 2008 Alternatives Analysis), the breakpoints for those costs were (see Table II-2 in Appendix B of the FTA’s FY2008 Annual Report on Funding Recommendations):

High (meaning best) $11.49 and under
Medium-High $11.50 – $14.99
Medium $15.00 – $22.99
Medium-Low $23.00 – $28.99
Low (meaning worst) $29.00 and over

The Alternatives Analysis estimated that the Medium Light Rail Line option would have a cost-effectiveness ratio of $22.82.  This would place it in the Medium category for the FTA cost-effectiveness measures, but just barely.  This was important, as the FTA will very rarely consider for federal grant funding a project in its Medium-Low category, and never in the Low category.

The other two light rail options examined had worse cost-effectiveness ratios ($26.51 and $23.71 for the Low and High options respectively) that would have placed them in FTA’s Medium-Low cost-effectiveness category, and thus highly unlikely to be accepted by the FTA for funding.  Not surprisingly, the Governor of Maryland (O’Malley at the time) selected the Medium Light Rail option as the state’s preferred option, as the other two light rail options would likely have been immediately rejected, while the Medium Light Rail choice would have been within the acceptable limits – although just barely so.  And while in principle they chose the Medium Light Rail option, they then added features (and costs) to it that brought it closer to what had been the High Light Rail Option, while not re-doing the cost-effectiveness analysis.

Maryland should also have considered any of the three Bus Rapid Transit options, as their cost-effectiveness measures were uniformly better than any of the light rail options (with cost-effectiveness ratios of $18.24, $14.01, and $19.34 for the Low, Medium, and High options respectively).  They were better even without the scaling-up of user benefits (by a notional factor for what was claimed would be a more pleasant ride) that biased the results in favor of the light rail options.  And most cost-effective of all would have been a simple upgrading of regular bus services, introducing express lines and other such services where there is a demand.

These were all calculated at the costs as estimated in 2008.  We now know that the costs for the light rail line option chosen will be far higher than what was estimated in 2008.  That cost then was estimated to be $1.2 billion to build the line, and an annual $25.0 million then for operations and maintenance.  Adjusting these figures for general inflation from the prices of 2007 (the prices used for these estimates) to those of December 2021 would raise them by 34%, or to $1.6 billion for the capital cost and $33.5 million for the annual operational and maintenance costs.  But under the new contract, the capital cost will be $3.9 billion, or 2.4 times higher than estimated in 2008 (in end-2021 prices).  Also, the annual operational and maintenance costs (including insurance) in the new contract will be $2.6 billion over 30 years.  This payment will be adjusted for inflation, and the $2.6 billion reflects what it would be at an assumed inflation rate of 2% a year.  One can calculate that at such a 2% inflation rate, the annual payment over the 30 years in the prices of end-2021 would be $58.0 million, or 73% higher than the $33.5 million had been forecast earlier (also at end-2021 prices).

Putting the capital cost in annualized terms in the same way as was done in the Alternatives Analysis report, and adding in the annual operational and maintenance costs, the overall costs under the new contract (with all in end-2021 prices) is 2.3 times higher than what was forecast in 2008, when the Medium Light Rail option was chosen.  To be conservative, I will round this down to just double.  To calculate what the FTA cost-effectiveness measures would have been (had the forecast costs been closer to what the new contract calls for), one also needs ridership forecasts.  While we know that those forecasts are also highly problematic (as discussed in this earlier blog post, they have mathematical impossibilities), for the purposes here I will leave them as they were forecast in the Alternatives Analysis.

Based on this, one can calculate that the FTA cost-effectiveness measure would have jumped to $50.55 had the capital and operating costs been estimated closer to what they now are under the new contract.  This would have put the Purple Line far into the Low category for cost-effectiveness (far above the $29.00 limit), and the FTA would never have approved it for funding.  And at more plausible ridership estimates, the ratio would have been higher still.

b)  For the Cost of the Purple Line, One Could Double Bus Services in Suburban Maryland, and Stop Charging Fares

Resources available for public transit are scarce, and by spending them on the Purple Line they will not be available for other transit uses.  The Purple Line will serve a relatively narrow population – those living along a 16-mile corridor passing through some of the richest zip codes in the country, providing high-end services to a relatively few riders.  The question that should have been examined (but never was) was whether the resources being spent on the Purple Line could have been used in a way that would better serve the broader community.

A specific alternative that should have been considered would have been to use the funds that are being spent on the Purple Line instead to support public transit more broadly in Montgomery and Prince George’s Counties.  What could have been done?  The alternatives can then be compared, and a determination made of which would lead to a greater benefit for the community.  Only with such a comparison can one say whether a proposed project is worthwhile.

Specifically, what could be done if such resources were used instead to support the local, county-run bus services in Montgomery and Prince George’s Counties (Ride-On and The Bus respectively)?  They already carry twice as many riders as what the Purple Line would have carried in the base period examined (according to its optimistic forecasts), had it been in operation then.  As we will see below, with the funds that the State of Maryland will make in the availability payments on the Purple Line (and net of forecast Purple Line fare revenues), one could instead end the collection of all fares on those bus systems and at the same time double the size of those systems (doubling the routes or doubling the frequency on the current routes, or, and most likely, some combination of the two).  With unchanged average bus occupancy, they could thus serve four times the number of riders that the Purple Line is forecast (optimistically, but unrealistically) to carry.

The services would also be provided to the entire counties, not just to those living along the Purple Line’s 16-mile corridor.  Especially important would be service to the southern half of Prince George’s County, where much of its poorer population lives.  The Purple Line will not be anywhere close to this.  Ending the collection of fares would also be of particular value to these riders.

For the comparison to the cost of running the county-run bus systems, I used data on their operating costs, capital costs, and fare revenues from the National Transit Database, which is managed by the Federal Transit Administration of the US Department of Transportation.  The data was downloaded on February 1, 2022.  The data is available through 2020, but I used 2019 figures so as not to be affected by the special circumstances of the Covid-19 pandemic.

The bus system costs in 2019, along with what the Purple Line costs will be, are:

(in millions of $)

County-Run Bus Systems (for 2019):
Operating costs $157.6
10-year average K costs $17.1
  Total costs $174.7
Fares collected $22.0
  Total to double capacity and no fares $196.7
Purple Line:
Annual availability payments $240.0
Less fares collected (forecast) $45.3
  Net Costs $194.7

The two bottom-line figures basically match, at around $195 million.  The net payments that will be made on the Purple Line over its 30-year life would be $194.7 million, based on the announced availability payment averaging $240.0 million per year less forecast average annual fares to be collected.  That average fare forecast is undoubtedly optimistic (as the ridership forecasts are optimistic), and is based on what was provided in 2016 when the original contract was discussed with the legislature.  I have not seen an updated forecast, but MDOT staff stated (at the Board of Public Works meeting on January 26 to discuss and vote on the new contract) that fares would not be changed from what was planned before.

The cost of doubling the size of the county-run bus systems would have been $157.6 million for the operating cost (based on the actual cost in 2019) plus $17.1 million for the capital cost (based on the 10-year annual average between 2010 and 2019, as these expenditures fluctuate a good deal year to year), or a total of $174.7 million.  It is assumed that government will continue to spend what it is spending now to support these bus systems, so the extra funding needed for doubling the systems would be those costs again (for that second half), plus what is received in fare revenues in the system now (the $22.0 million) as fares would no longer be collected.  Thus the net cost would be $196.7 million, very close to the amount that could be covered by what will be provided on a net basis to the Purple Line (and assuming, optimistically, fares averaging $45.3 million a year).

In addition to this, a total of $1.36 billion will be provided in grants to the Purple Line.  At the lower cost of the earlier, 2016, contract, a portion of those grant funds ($1.25 billion before) would have been needed to cover a share of the costs of doubling the capacity of the bus systems and ending the collection of fares.  One could in principle have invested those grant funds and at a reasonable interest rate have generated sufficient funds to close the remaining gap.  But with the now far higher costs of the renegotiated contract, there would be no need for a share of those grant funds for this, and they could instead be used to provide funding for other high-priority transit needs in the region.

E.  Conclusion

The Purple Line has long been a problematic project, and with the now far higher costs in the renegotiated contract with the concessionaire, can only be described as a fiasco.  After rejecting a demand from the contractor to pay $800 million more to complete the construction of the rail line, they will instead now pay $1.9 billion more to a total of $3.9 billion for the construction alone, or close to double the originally negotiated cost of $2.0 billion.  They will also now pay more for the subsequent operation of the line.  It is all a terribly wasteful use of the scarce funds available for public transit, and comes with great environmental harm on top.  Funds that will be spent by the state under this concession contract could have been far better used, and far more equitably used, by supporting the public transit systems that serve the entire counties.

Despite the much higher costs, there does not appear to have been any serious assessment of whether the Purple Line can be justified at these higher costs.  At least there has not been any public discussion of this.  Rather, MDOT staff appear to have been directed to do whatever it takes, and at whatever the cost it turns out to be, to push through the project.  But that is in fundamental contradiction to basic public policy.  A project might be warranted at some low cost, but that does not then mean it is still warranted if it turns out the cost will be far higher.  That needs to be examined, but there is no evidence that there was any such examination here.

We should also now recognize as obvious that forecasts of ridership on fixed rail lines are uncertain.  Ridership on the DC Metro rail lines not only fell, more or less steadily, over the decade leading up to 2019, but then collapsed in 2020 and 2021 due to the Covid crisis.  Ridership in 2021 was almost 80% below what it was in 2019.  And it is highly unlikely that Metrorail ridership will ever recover to its earlier levels, as many of the former commuters on the system will now be working from home for at least part of the workweek.

Despite this, Governor Hogan has adamantly refused to look at alternatives to building a new fixed rail line, with this to be paid for via a 35-year long concession with private investors that will tie his successors to making regular availability payments regardless of whatever ridership turns out to be, and regardless of any other developments that might lead to more urgent priorities for the state’s budget resources.  The issue is not only that the ridership forecasts on the Purple Line are highly problematic, with mathematical impossibilities and other issues.  It is also, and more importantly, that any such ridership forecasts are uncertain.  Just look at what happened with Covid.  It was totally unanticipated but led ridership to collapse almost literally overnight.  And the effects are still with us, almost two years later.

The fundamental failure is the failure to acknowledge that any such forecasts are uncertain, and highly so.  There might be future Covids, and also other future events that we have no ability to foresee or predict.  For precisely this reason, it is important to design systems that are flexible.  A rail line is not.  Once it is built (at great cost), it cannot be moved.  Bus routes, in contrast can be shifted when this might be warranted, as can the frequency of services on the routes.

None of this seems to have mattered in the decisions now being taken.  As a consequence, and despite billions of dollars being spent, we do not have the transit systems that provide the services our residents need.

 

 

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Annex:  Details on the Diversion of MARC Revenues to Get Around Maryland’s Public Debt Limits

The State of Maryland follows a policy to limit its public borrowing so that state debt does not become excessive.  Specifically, it has set two “capital debt affordability ratios”:

1) Keep the stock of tax-supported state debt below 4% of personal income in the state;

and 2)  Keep debt service on tax-supported state debt below 8% of state revenues.

I am not sure whether these are limits have been set by statute, but as policy they will in any case be reflected in the state bond ratings.  It is also possible that representations, and perhaps even covenants, have been made in the Maryland state bond contracts stating the intention of the state to keep to them.  If so, then violation of those limits could have consequences for those bonds, possibly putting the state technically in default.

The commitments Governor Hogan will be making in signing the concession contracts for the Purple Line are in essence the same as commitments made when the state issues a bond and agrees to pay amortization and interest on that bond as those payments come due.  For the Purple Line, the private concessionaire will similarly be borrowing funds, but the State of Maryland will then have the obligation under the contract to repay that borrowing through the availability payments to be paid to the concessionaire for 30 years.  In addition to repaying (with interest) the borrowings made by the concessionaire, the availability payments will also cover the operational, maintenance, and similar costs over the 30-year life of the contract during which the concessionaire will operate the line.

Under the original contract, signed in 2016, these payments were expected to average $154 million per year for 30 years.  Under the new contract, they are expected to average $240 million a year.  One can debate whether all of the availability payment (which includes payment for the operations and maintenance) or simply some share of these payments should be considered similar to debt, but the payment obligation is fundamentally the same.  Governor Hogan is committing future governors (up until 2056) to make these payments, with the sole condition that the concessionaire has ensured the rail line is available to be used (hence the label “availability payments”).  In particular, they will be obliged to make these payments regardless of what ridership turns out to be, or indeed whether any riders show up at all.  That risk is being taken on fully by the state and is not a concern of the concessionaire (who, indeed, will find things easier and hence preferable the fewer the number of riders who show up).

These availability payments have all the characteristics of a debt obligation.  But if it were treated as state debt, it would have to be included in the capital debt affordability limits, and this could affect the amount that the state could borrow for other purposes.  One can debate precisely what obligations to include and the timing of when they should be included, but purely for the sake of illustration, let’s use the 2016 contract amounts and assume that the obligation to be repaid would have had a capital value of $2.0 billion (equal to the then planned construction cost, minus grants received for it, but plus the present discounted value of non-debt operating and other costs that have been obligated).  Assume also this would have applied in 2017.  Based on figures in the November 2021 report of Maryland’s Capital Debt Affordability Committee (see Table 1 on page 26), the ratio of tax-supported state debt to Maryland personal income was 3.5% in 2017, or below the 4% limit.  However, if the full $2.0 billion from the Purple Line would have been added in 2017, following the contract signing in 2016, that ratio would have grown to 4.1%.

Similarly, the Capital Debt Affordability Committee report indicates (Table 2A on page 28) that debt service on tax-supported public debt in 2017 was 7.5% of state revenues.  If one were to add the full annual $154 million payment that would be due (under the original contract) for the Purple Line already in 2017 (too early, as it would not be due until construction is over, but this is just for illustration), the debt service ratio to state revenues would have risen from 7.5% without the Purple Line commitments to 8.2% with it – above the 8.0% limit.  Of the $154 million, about two-thirds would have been used to repay the funds borrowed to pay for the construction (plus for the equity, which was a small share of the total).  If one argued that only these payments on the debt incurred (and the similar equity cost) should be included, and not also the 30-year commitment to cover the operational and similar other costs, then the ratio would have risen to 7.98% if it applied in 2017 – basically at the 8.0% limit.

Again, these figures are simply for illustration, and the actual additions in 2017 would have been less and/or applied only in later years.  But as a rough indication, they indicate that the Purple Line debt and payments due would be materially significant and hence problematic.

it was thus important that MDOT structure these payment obligations in such a way that it could argue that they are not for “tax-supported public debt”.  This would be the case, for example, if the fare revenues from ridership on the Purple Line would suffice to cover the debt service and other payment obligations incurred.  But even MDOT had to concede the Purple Line revenues would not suffice for that in at least the early years, although it did assert (unconvincingly) that ultimately they would.

MDOT therefore established a separately managed trust for the Purple Line, which would be used to make the payments due and into which it would direct not simply Purple Line fare revenues and grants to be received for the project (primarily from federal sources), but also sufficient revenues from the MARC commuter rail line (operated by MDOT) to make the payments.  It argued also that only the debt service component of the availability payment would have to be included (about two-thirds of the total payment obligation in the 2016 contract), with the operations, maintenance, and other such costs not relevant to the capital debt affordability ratios (despite being a long-term, 30-year, commitment).  The State Treasurer, Nancy Kopp in 2016, ruled that this structure was acceptable and that Purple Line debt should thus not count against the state’s capital debt affordability limits.

But while deemed not applicable for the capital debt affordability limits, the immediate question that arises is what then happens to MARC?  Commuter rail lines in the US do not run a surplus, and require subsidies from a government budget to remain in operation.  MARC is no exception.  If a portion of MARC revenues are diverted to cover payments on Purple Line debt, then MARC’s deficit will rise by that amount and Maryland’s subsidies to MARC will have to rise by that same amount.  And those subsidies will come from state tax revenues.  Hence state tax revenues are in reality covering the Purple Line debt payments, and routing it via MARC does not change that reality.  At a minimum, transparency is being lost.

Furthermore, and as noted before, the state bond rating agencies have made it known that they are fully aware of what is going on, and will include these Purple Line obligations into their calculations.  S&P explained in May 2016 that upon the signing of the Purple Line contract, they will include the net present value of the payments to be made by the state during the construction period in their calculations of the state’s tax-supported debt ratios, and that once operations begin will include in the ratios the full availability payments net of fare revenues collected on the Purple Line only.

Maryland’s payment commitments under the revised Purple Line contract are now expected to average $240 million a year, far above the $154 million expected before.  MDOT has once again made its case with the new State Treasurer (Dereck Davis, who took office on December 17, 2021, replacing the long-time former Treasurer Kopp) that these long-term payment obligations should not count against the state’s Capital Debt Affordability Ratios.  While I have not seen a formal ruling on this from the State Treasurer’s office, presumably he agreed with the MDOT view as otherwise it would not have been presented to the Board of Public Works on January 26.

The SpaceX Starship: Revolutionary, If It Works (Which It Probably Will – Eventually)

Source: Wikipedia – Super heavy-lift launch vehicle

A.  Introduction

SpaceX is currently developing a truly gigantic rocket it has named Starship.  It would be revolutionary.  Not only would it lift a heavier payload than the Saturn V, the rocket that took Apollo to the Moon and until now the heaviest lift launch vehicle that has successfully flown, but Starship is also being designed to be fully reusable.  Both the first stage and the orbiter would fly back to the launch pad, where they each would be caught in mid-air as they land by arms extending from the launch tower.  They would then be refueled and after minimal reinspection be able to take off again, within hours.  And each flight would cost only $2 million.

If all this works as intended.  And that remains to be seen.  But there are good reasons to believe it will, eventually.

It is certainly likely that there will be explosions or other causes of failure in the early orbital test flights now upcoming, and that even once operational the turn-around time will at first be a good deal longer than a few hours and the cost a good deal more than $2 million for a flight.  But even a cost that is ten times higher would still be incredibly cheap for such a lift capacity.  And the iterative process SpaceX follows of testing to failure, learning from the test, redesigning to address the problems found, and then testing to failure again, is a process that has allowed SpaceX to work through to a successful design.  It took some years of such tests before the first stage of the Falcon 9 rocket of SpaceX was successfully flown back to the launch site (or to a platform on a drone ship in the ocean) and landed, and then reused after some refurbishment.  But eventually, after a number of test failures, SpaceX worked out how to do this.  It is now routine.  And prior to SpaceX demonstrating this technology, the established view was that this would be basically impossible for an orbital launch vehicle.

Furthermore, in April 2021 NASA awarded SpaceX a close to $3 billion contract to build a variant of the Starship orbiter that would carry NASA astronauts from lunar orbit to the surface of the Moon and back.  It did this following a year of NASA engineers closely examining the SpaceX proposal (along with competing proposals from two others), reviewing the Starship plans with full access to all the technical information and to the development and testing plans.  NASA concluded the SpaceX Starship system could be relied upon to deliver on its proposal.  This is a tremendously important vote of confidence in the Starship system.

This post will first review the Starship system and what it promises to deliver.  It is really pretty astounding.  The big question is whether it will work, and that remains to be seen.  But the post will review the development process SpaceX is following, and contrast that with the sharply different process NASA is following with its Space Launch System (SLS) rocket.  The SLS, with its high cost and long delays, was discussed in some detail in an earlier post of this blog.  The contrasts in the approaches taken are stark.  The SLS will be a similarly sized rocket as Starship (a bit smaller), but has followed a very different design and development process.  Development began in 2011, with a design where the major components (the engines and the solid-fuel boosters strapped on the side) were the same as those used on the Space Shuttle or from other existing sources.  This should have saved both time and expense.  Yet despite this, there has yet to be a test flight of the SLS even though it is now more than ten years later.  The much delayed first flight is now scheduled (as I write this) for February 2022 (and had been set as November 2021 just a few months ago), and it is expected that recently discovered problems will delay this further.  Hopefully that first (and only planned) test flight will succeed.  If it does not, it is not at all clear what will happen to NASA’s plans to return to the Moon under the Artemis program.  As discussed in my earlier post, each SLS costs $2 billion to build, and under current production plans a second one will not be available for another two years in any case.

The Starship system that NASA has chosen to carry crew to the Lunar surface and back is also quite astounding.  This post will review what it would be able to do, and contrast this with the two competing proposals that NASA considered – the proposal from a team with Blue Origin (owned by Jeff Bezos) in the lead and one with the firm Dynetics in the lead.  The contrast is huge, where the SpaceX Starship proposal would deliver far more in several different dimensions (and at far lower cost).

The capabilities of the Starship also immediately raise the question of whether NASA should make use of it in a total revamp of its Artemis program to return astronauts to the Moon.  Instead of stuffing the crew into the relatively tiny Orion capsule for the trip from the Earth to lunar orbit, launched on an SLS that costs $2 billion per launch, why not use what would otherwise be an empty Lunar Starship for the journey?  The Lunar Starship will not only have all the life support systems needed by the crew for a multi-week journey, but the fully furbished habitable volume on the Lunar Starship is over 1,000 cubic meters, vs. just 9 cubic meters in the Orion capsule.  Certain technical issues would of course need to be worked out, but that should not be an insurmountable obstacle.

There likely will be obstacles, however, but political ones rather than technical ones.  This post will conclude with a discussion of those issues.  In my earlier blog post, I estimated that just for the period from when the programs started to what is planned by FY2023, Congress will have appropriated and NASA will have spent a total of $21.8 billion on the Orion capsule and a total of $32.4 billion on the SLS, for a total of $54.2 billion on them together.  It would be embarrassing, to say the least, to recognize that they turn out not to be needed, and that the SpaceX Starship system would not only be far less expensive but also far more capable.  And politicians do not appreciate being embarrassed.  While the politicians have asserted that they have been funding these programs to achieve certain space exploration goals, what appears to have driven the support of a number of the key Senators and Congressmen on the committees that set the NASA budget has been less the space exploration goals and more the resulting number of well-paid jobs in their constituencies.  Seen in this light, the high cost of the SLS / Orion systems is not a flaw but a feature.

But this is not sustainable.  How much the US government will spend on space exploration is limited, and treating it as a jobs program will mean national goals will either be long delayed or never met at all.  And while private companies such as SpaceX can help NASA achieve national goals (faster and at lower cost), they can only help if they are used to help.  Congress has often been opposed, with both Democrats and Republicans unfortunately aligned on this.  China is now moving fast in its space exploration program, and NASA may soon be left far behind if Congressional priorities do not change.

B.  The SpaceX Starship, and the SpaceX Approach to Development and Testing

SpaceX is currently developing, and actively testing, the extremely large rocket it has named Starship.  If it works, it will be revolutionary.  Starship will be huge – larger than the Saturn V as well as the SLS – and capable of delivering to low earth orbit a payload of 100,000 kg initially with this expected to grow to 150,000 kg or more as it is further developed.

The diagram at the top of this post shows Starship in comparison to other heavy-lift vehicles to give you a sense of its size.  It is huge.  And while the design is still evolving as its testing program proceeds (with the version of Starship shown in the diagram from a year or two ago), its basic dimensions will remain the same.  The Saturn V is well known, and is the heaviest-lift launch vehicle that has ever flown.  The SLS Block 1 will be the initial version of the SLS, with its first flight test now planned for 2022.  The SLS Block 2 Cargo is a planned follow-on SLS variant – still to be developed – that would have the heaviest lift capacity of the SLS series if it is ever built.   Finally, the N1 launch vehicle was developed, in secrecy at the time, in the USSR in the 1960s to carry its cosmonauts to the Moon.  There were four tests between 1969 and 1972.  Each failed with an explosion, and the especially spectacular explosion on the second test on July 3, 1969 – just 13 days before the launch of Apollo 11 – has been estimated to have been comparable in magnitude to that of the nuclear bomb dropped on Hiroshima. It was the biggest man-made non-nuclear explosion in history.

The SpaceX Starship will be a two-stage vehicle, with a first stage (named the Super Heavy) that will have a thrust at take-off that is more than double what it was on the Saturn V.  The first stage will initially use 29 of the newly-developed engines named Raptor, with a plan to increase this to 33 Raptor engines very soon.  And that number might rise to as many as 37.  The engines burn liquid methane with liquid oxygen.  The second stage will be powered by 6 Raptor engines (three optimized for burning in the vacuum of space and three for operation at ground level), with the spacecraft carrying the cargo and/or crew fully integrated into it.  Confusingly, this second stage/spacecraft has been named Starship, which is also the name of the whole rocket including the first stage Super Heavy booster.  To ease possible confusion, some refer to the second stage/spacecraft as the “Orbital Starship”, and I will as well.  The Orbital Starship would come in several variants, with vehicles just for cargo (Cargo Starship), for a human crew (Crew Starship), and to serve as a fuel depot in space (Fuel Depot Starship).  And as will be discussed in more detail below, NASA has extended a contract to SpaceX to build a variant that will take an astronaut crew to the Lunar surface and back (Lunar Starship).

Importantly, all components of Starship will be fully reusable, with the plan that there would be just minimal to no maintenance required between launches.  The Super Heavy booster would return to the launch site and relight some subset of its engines for a soft landing.  Indeed, as noted above, the plan is that it would come down precisely at the launch tower, where two extended arms on the tower would catch it as it (slowly) comes down.  No landing legs would be required.

The Orbital Starship would also be fully reusable.  It will have heat shield tiles that are chemically very similar to those used on the Space Shuttle, along with wing flaps and tail (see the drawing above) to guide the Orbital Starship as it re-enters the atmosphere and then lands.  A restart of a subset of the engines near the end will allow for a soft landing.  And as with the Super Heavy, the plan is for it to return to the launch tower to be caught as it comes down by the two large arms.  The plan (and hope) then is that the Starship and Super Heavy could be re-attached, refueled, and launched again within hours, with just minimal inspection required to ensure all was fine.

The payload will also be huge.  The immediate design goal is a payload to low Earth orbit of 100 tons.  This would be more than the SLS (95 tons in the initial, Block 1, version), although less than the Saturn V (140 tons).  But SpaceX plans to raise the payload capacity relatively soon to 150 tons through various means, and some have argued it might grow to even more.  As noted above, the number of Raptor engines on the first test flight will be 29, but will soon be increased to 33 and eventually possibly to 37.  Elon Musk (in a tweet on Twitter in July 2021) also mentioned the possibility that the number of Raptor engines on the Orbital Starship might be increased from six to nine at some point.  The additional three would all be the Vacuum Raptor variant.  This flexibility that has been built into the design of the Starship system – where adding core engines does not necessitate a complete revamping – is really quite remarkable.

The power of each engine will also soon be raised.  The Raptor 2 engine, which is already now starting to be produced, will have 230 or more tons of force – a big increase over the 185 tons of force in the first version of the engine that has been on the test flights thus far.  SpaceX also has a history of upgrading the performance of its rockets over time.  The initial version 1.0 of the Falcon 9 rocket could carry a payload to low Earth orbit of 9.0 tons.  But this rose to 22.8 tons in the Block 5 model that is now standard (22.8 tons when the boosters are expended, or 16.8 tons when the booster is recovered). That is, the Falcon 9 can now carry to orbit 2 1/2 times what it could when it first flew.

Will Starship work?  That remains to be seen, but testing is underway and there are reasons to be optimistic.  As I write this in December 2021, there have been seven test flights, all (so far) of the Starship upper stage, with simple up and down flights of up to 12.5 kilometers and a landing attempt on each.  There were a series of sometimes spectacular crashes (or as SpaceX calls them, RUDs, for Rapid Unscheduled Disassemblies), but the seventh (and hence final flight of the series) was fully successful, so they have moved on.  The plan now is to conduct a first test of the full Starship, with the Super Heavy plus the Orbital Starship launching from the SpaceX base in Boca Chica, Texas (on the Gulf of Mexico at the border with Mexico).  The first test would be of an almost orbital flight (more than 80% of what a full orbit would be) to land about 100 kilometers northwest of Kauai in the Hawaiian Islands.  The Super Heavy would return most of the way to the Boca Chica base but come down softly in a “landing” in the waters of the Gulf of Mexico around 20 kilometers off the coast on this first try.  The Orbiter Starship would come down through the atmosphere, testing its heat shield in particular, to “land” in the waters of the Pacific.

It will be an ambitious first test of the complete rocket, and the likelihood of everything working right the first time is low.  But this is in keeping with the SpaceX development and testing approach (to be further discussed below), which is to test early and often, and then iterate on the designs until they work.  While no date has been publicly announced for this first test (SpaceX is a private company and under no obligation to announce this), the indications are that the aim is for a first flight sometime early in 2022.  However, this will depend on SpaceX receiving necessary permits (related to environmental and safety issues) from the FAA, and it is not clear as I write this when this process will be completed.  While SpaceX ignored this requirement on one of the early test flights of Starship, it is now on notice from the FAA and it is doubtful they will ignore them again.

As noted before, if the design works it would be revolutionary.  It would be fully reusable, with both the first (Super Heavy) and second (Orbital Starship) stages returning not simply to a base but to the very launch tower where they would be caught in mid-air.  Probably the biggest question mark is whether the heat shield that covers one side of the Orbital Starship will prove to be durable and quickly reusable with no maintenance required.  As noted above, the chemical composition of the material is similar to that used on the heat shield for the Space Shuttle.  But on the Space Shuttle, extensive checks and maintenance of the heat shields proved to be necessary after each flight, with this a major contributor to the high cost of the Shuttle.  The original plan (and hope) was that a Space Shuttle could be turned around and flown again within two weeks of its landing from its preceding flight.  This proved impossible.  In the later years of the Shuttle program, each operational Shuttle was generally flying only once a year.

SpaceX has learned and applied important lessons from the experience with the Space Shuttle, and has addressed the heat shield tile issues in two important ways.  First, while most of the over 21,000 heat shield tiles on each Space Shuttle Orbiter had to have a unique shape due to the shape of the Shuttle, most (although not all) of the tiles on the Starship Orbiter will have a standard, hexagonal, shape.  This will make them far easier to replace when needed, as a new, custom-molded, tile will not (normally) need to be made each time.  And second, the tiles on the Starship Orbiter will be attached to built-in spikes on the body of the Starship, rather than attached with just a special glue.  It is hoped this will make them more durable.

If a fully and rapidly reusable design can be made to work, the cost of each flight of the Starship will be incredibly low.  Elon Musk has said that the fuel would cost only about $900,000 on each flight, and with the other operational costs the total would only be about $2 million per flight  This might well be optimistic (Elon Musk often is), but even if it is, say, ten times higher at $20 million per flight, then with a 100,000 kg payload the cost per kilogram will be roughly one-hundredth of the cost per kilogram of a launch on the similarly sized SLS.  And it will be roughly one-tenth of the cost per kilogram of launching on the current lowest-cost launcher – the Falcon Heavy.  And if it truly works out to be $2 million per launch, then the cost will be one-thousandth of what it would cost on the SLS.  This is all pretty incredible – if it works.

The development cost will also be far below what it has cost NASA to develop its similarly sized SLS.  As discussed in the earlier blog post, the cost of developing the SLS will have reached over $32 billion by FY2023.  While the cost of developing the Starship has not been published (SpaceX is a private company), and indeed as not is known by anyone what in the end it might be as development is still underway, Elon Musk has said in an interview that he expects it will come to about $5 billion to complete.  If that turns out to be the case, that would be less than one-sixth the cost of the SLS.  And while it is not clear whether the $5 billion includes the cost of including a section of the Starship to house the crew, if it does then for comparability the cost of developing the Starship with the crew quarters should be compared to the cost of SLS and Orion together  That will total over $54 billion – $32.4 billion for the SLS plus $21.8 billion for Orion.  That would be ten times higher than the cost of developing a crew capable Starship, if the $5 billion estimate for Starship turns out to be correct.

But the design remains to be proved.  While the first test flight will be important, the odds are high that there will be a failure at some point during that test.  As long as the Starship manages not to explode on the launch pad (with the damage that would cause to the launch pad) the flight should be considered a success.  Valuable information will have been obtained.  Particularly valuable, if it gets to that point, will be information on how well the heat shield holds up on re-entry.

The process followed by SpaceX is iterative.  A design is developed, a prototype is built, and it is then quickly tested – to the point of failure to see how much it can do.  Alterations are then made in response to what did not work in the test, with the revised design then soon tested again to take it to the next stage.  Failures are common and indeed expected.  Musk has noted that if failures did not occur, then you were not pushing it far enough.

Importantly also with this approach to development, manufacturing methods need to be developed to allow that frequent testing to the point of failiure to be at a cost per test that is not high. As Musk noted in a tweet in February 2020:

“Hardest problem by far is building the production system of something this big. …  Building many rockets allows for successive approximation. Progress in any given technology is simply # of iterations * [times] progress between iterations.”

This would then also drive design decisions.  For example, and directly counter to the conventional wisdom, the Starship hull and tanks are made of stainless steel.  Steel is seen as heavy – not good for a flying vehicle – and almost all rockets and spacecraft have been made of aluminum.  In the initial design, Starship was to be made of advanced carbon fiber.  Carbon fiber is light and can be made to be strong, but for several reasons the decision was made to switch to stainless steel.  Prominent among them was that stainless steel is relatively easy to work with – it can be bent or reshaped when needed for a design change – plus it is cheap.  As Musk noted in an interview in January 2019 (just after they announced Starship would be made of steel rather than carbon fiber), the type of stainless steel they need costs only about $3 per kg, vs. $135 per kg for carbon fiber.  Furthermore, there is about 35% wastage when one works with carbon fiber, so the true cost per ton for carbon fiber is over $200 per ton.  Any scrap from the stainless steel can be melted down and used.

There are also other advantages to steel, including its far higher melting point (which means less depends on the heat shield tiles, and they can then be made both simpler and lighter).  But the flexibility provided by using a relatively inexpensive and easily worked material is key in the SpaceX iterative development approach with its frequent testing and then redesign.

The decision to switch to stainless steel from the original plan to use carbon fiber also illustrates the flexibility in the overall approach followed by SpaceX.  Elon Musk’s first public announcement of his intention to build what evolved into Starship was made in November 2012.  The Raptor engines that would power the rocket were already being tested on NASA test stands in 2014.  The initial design, then at a 12-meter diameter, was revealed in September 2016.  This was then changed dramatically, to a 9-meter diameter design, in September 2017.  Through this point, the rocket would have been made of carbon fiber.  But then in December 2018, Musk revealed they had decided to switch to stainless steel for the reasons noted above.  And then just four months later, in April 2019, they were already conducting their first flight tests of what they called the Starhopper vehicle.  These were tests basically of the Raptor engine, the use of the engine to allow for a soft landing (and the controls required for this), and the stainless steel design.  The Starhooper test vehicle was tethered for its first “flight” on April 3, 2019 and it rose just one foot.  They then took it to one meter two days later on April 5.  The first untethered flight was in July 2019 to 20 meters, and the final test was in August 2019 when it rose to 150 meters and moved sideways for a short distance before returning to land softly on the ground.

There were then a series of seven tests of what became increasingly similar to the Orbital Starship starting just one year later, between August 2020 and May 2021.  The test vehicle had just one Raptor engine for the first two tests (rising just to 150 meters, and then landing) and then three Raptors in the subsequent tests (where it rose to a height of up to 12.5 km before returning to the pad to try to land).  After a few spectacular crashes and explosions, the Starship had a clean landing at the pad on the seventh and hence final flight.  There were modifications made following each test flight, fixing what went wrong, and they got it right by the seventh such flight.

The iterative SpaceX approach is in sharp contrast to that used by NASA in its development of the far more costly SLS.  As noted before, there has not yet been even one flight test of the SLS design, with the first now scheduled for February 2022 but most likely until sometime later due to recent issues being discovered.  Yet it has been under development since 2011, and arguably from before as the SLS design has many similarities with the Ares V rocket that at that time was under development (but then superseded by the SLS).  And the SLS design is based on existing rocket components, with the four main engines the same as those on the Space Shuttle (the Ares V would have had five of those engines, but otherwise the same).  The two solid-fuel side boosters are also taken from the Space Shuttle (and indeed make use of ones left over from the Space Shuttle program for the initial several SLS boosters to be built – but each with five segments rather than four).  And the second stage of the initial SLS is taken from that used on recent Delta IV rockets.

Drawing from existing rocket components is not necessarily wrong, as it should have led to lower costs and a shorter development period.  It is thus particularly difficult to understand why it has taken so long – with no flight test even after ten years – and why the cost has been so high.  In contrast to SpaceX, NASA has followed an approach where great care (and expense) is taken to try to ensure the full and final design is completely right, with few tests of the overall system.  Indeed just one test flight is planned for the SLS.  If this test fails, it is possible the total program will end.  It will depend on whether they can determine whether the cause of the failure can be found and relatively easily fixed.  A failure would in any case cause major delays of probably years.  A second SLS will not be available for two years (in the current schedule), and it could take longer depending on what they determine was the cause of the failure on the first test.  That is a lot riding on just one test, for a program expected to cost over $32 billion.

C.  Starship as a System to Land Astronauts on the Moon

1)  Introduction

The decision by NASA in April 2021 to select the SpaceX proposal to ferry astronauts from lunar orbit to the surface of the Moon and back was highly significant for several reasons.  First, and importantly, it was a clear vote of confidence by NASA management and its technical staff that the Starship system would not only work but would work soon.  NASA teams had thoroughly reviewed the proposal of SpaceX (as well as the two competing proposals, from Blue Origin and Dynetics) for more than a year, with full access to the technical teams at SpaceX.  As a critical, outside, reviewer seeking to find any holes that there might be in the SpaceX plans, NASA’s conclusion that the SpaceX proposal was doable is of great significance.

Second, the use of Starship for this purpose illustrates well the capabilities Starship will have, once it is operational, for not only such lunar missions but more broadly.  It is therefore of interest to examine in some detail what SpaceX is now being contracted to do, how it would work, and what Starship might then be used for, in particular in support of NASA’s goal to return to the Moon and establish a base there.  Contrasting the SpaceX proposal for what NASA is calling its “Human Landing System” (or HLS) with the two competing proposals that NASA considered is also of interest as it highlights how uniquely capable the Starship system is in comparison to the best that others can offer.

2)  Lunar Starship – The SpaceX Proposal for the HLS

NASA has contracted SpaceX for its Human Landing System, where it would serve as one component of the system NASA would use to return men (and as NASA repeatedly emphasizes in its PR materials, also women and a person of color) to the Moon.  Other major components of that system include the Orion spacecraft to carry crew from the Earth to lunar orbit, a “Lunar Gateway” that would be a modest-sized space station in permanent orbit around the Moon and serve as a waystation to transfer crew and cargo to the vehicles that would bring them to the lunar surface, and the SLS rocket that would carry the crew and possibly cargo to lunar orbit from the Earth.

NASA developed this basic plan to return to the Moon in the mid-2010s, with a goal of a first landing back on the Moon by 2028.  This time frame was then greatly compressed in 2019 by the Trump administration, with NASA charged with accomplishing this by 2024.  Vice President Mike Pence (in his capacity as head of the National Space Council) made the announcement, but stated this was “at the direction of the President”.  While the reason for the choice of 2024 was never officially stated, few failed to notice that 2024 would have been the final year of a second Trump term in office, had he not lost the election in 2020.

NASA then modified its plans in accordance with this new mandated schedule.  While the new schedule was never realistic, the revised, compressed, schedule did have real impacts on the mission designs and on contracts signed.  And while NASA has now finally acknowledged that the 2024 target will not be possible, it is still officially following the plans as drawn up during the Trump presidency.  The only change is the first landing on the Moon with a crew would not take place in 2024, as planned before, but in 2025 (which is still far from realistic – several more years should be added).  The new NASA Administrator Bill Nelson announced the 2025 date during a press conference in November 2021, and blamed the delay on the seven months lost due to the litigation by Blue Origin protesting the award of the HLS contract to SpaceX (which will be further discussed below).  Bill Nelson is a former Democratic Senator from Florida who has long been closely involved with NASA space programs, flew on the Space Shuttle in 1986 as a member of Congress, and was one of the key Senators (along with Republican Senator Shelby of Alabama and others) who wrote into legislation in 2010 the requirement that NASA develop the SLS (discussed further below).

Based on these still official NASA plans (albeit slightly delayed to 2025), NASA would organize the return to the Moon through a series of missions that it has labeled the Artemis program (where Artemis was the twin sister of Apollo in Greek mythology).  Specifically:

a)  Artemis I:  This would be the first, uncrewed, test flight of the SLS together with the Orion capsule, with a scheduled launch date (until recently) of February 2022.  It has been repeatedly delayed.  The original plan (in 2011) was that the SLS would have flown no later than 2017.  And while a new official launch date has not yet been set as I write this, no one expects that it will launch in February, this time due to new problems recently found in a malfunctioning computer for the SLS engines.

When the launch does take place, the SLS would send the unmanned Orion capsule first into Earth orbit and then to the Moon, passing just 60 miles above the lunar surface before entering into a high orbit of 38,000 miles above the Moon.  It would spend several days there and then return to Earth, passing again 60 miles from the lunar surface, and then testing its heat shield in the high-speed re-entry to Earth.  The entire mission would take several weeks.

b)  Artemis II:  This would be the first crewed launch of the SLS and Orion.  Until recently the official plan was for it to go in 2023, but with the acknowledgment that the first crewed landing on the Moon will not be before 2025, it has been pushed to May 2024.  This is still unrealistic.  And as the Office of the Inspector General of NASA noted in a recent assessment of the Artemis program, sending a crew on a mission around the Moon on the first flight of the Orion capsule with life support systems in place is an “operational and safety risk”.  The life support system has not been included in the Orion capsule being tested on the Artemis I mission to save on cost (and maybe time).

Artemis II would be a ten-day mission, with the SLS first launching the Orion into a high Earth orbit, during which the Orion and its life support systems would be monitored to see whether all is working properly.  After about two days it would then be launched to the Moon, but not into lunar orbit.  Rather, it would be sent on a fly-by trajectory where it would use lunar gravity to swing around the Moon, in a large figure-8, and then return directly to Earth.

c)  Artemis III:  This would be the first crewed landing on the Moon, with about one week to be spent on the lunar surface and the whole mission taking about two weeks.  The Orion would be launched on the SLS and would go to a very high lunar orbit (what they call a “Near Rectilinear Halo Orbit”, or NRHO).  The NRHO will have an apogee of 43,500 miles and a perigee of 1,900 miles, and just one orbit will take seven Earth days.

The original plan was that the Lunar Gateway would have been prepositioned in this orbit to serve as a staging area where the Orion would unload its crew and cargo, with the HLS then loaded with the crew and cargo from it to take them to the lunar surface.  But while there may be some components of the Lunar Gateway system ready in lunar orbit by then, there are skeptics on whether it will be ready by whenever Artemis III might be launched.  In that case, the transfers of crew and cargo would be done directly from the Orion to the HLS.  This of course calls into question why it is needed at all.  There might be a quite valid scientific justification for such a facility in orbit around the Moon, but so far the rationale given has been its role in the Artemis missions.

SpaceX won the contract for the HLS.  Under its proposal, a version of the Orbital Starship would be developed which would operate solely in the space environment to ferry crew and cargo back and forth to the lunar surface.  It would never re-enter the Earth’s atmosphere and hence would not need the heat shield.  Nor would there be a need for the large wing flaps and tail that on the Orbital Starship are required for aerodynamic control on re-entry to the Earth.  And while I have not seen this written in any of the limited plans that have been made publicly available (details on the Artemis plans that have been made public are surprisingly sketchy), it is not at all clear that the Lunar Starship would require all six of the Raptor engines that are on the Orbital Starship.

Three of those Raptor engines are optimized for operation in the vacuum of space (Vacuum Raptors), and three (Sea-Level Raptors) are optimized to operate in the atmosphere near sea-level for the return and soft-landing on Earth.  I have not been able to find in any reports whether all six are needed for the initial launch into Earth orbit, but with three designed for operation at sea-level, it is not clear that all six are.  Furthermore, the Lunar Starship itself would be lighter than an Orbiter Starship (due to no heat shield nor flaps) so less thrust would be needed.  It is therefore not clear whether the three Sea-Level Raptor engines would be needed, and if not this would also save a good deal of weight.  And with three Raptor engines sufficient for a landing on Earth, one would assume that three would more than suffice to land in the far lower gravity of the Moon.  Indeed, while full details have not been made public, the final phase of the landing of the Lunar Starship on the Moon would not use the Raptor engines at all, but rather a large number (possibly 24) of medium-sized thrusters positioned in the mid-body of the Lunar Starship for the final landing.  This is so that the Raptor engines at the bottom do not blow out an excessive amount of debris as they land.

Keep in mind also that once a vehicle is in orbit, the thrust required in order to, say, launch the craft on to a trans-lunar trajectory (TLI) from Earth orbit to the Moon (or vice versa) does not have to be all that strong.  The power required comes from the combination of thrust times the duration of the burn, so a set of engines with a lower overall thrust could achieve the velocity required by having the engines stay on for a longer period of time.  This is in contrast to a launch from the Earths’s surface, where a high thrust is needed to escape the pull of gravity.  Once in orbit, one does not need to rush this.  So again, it is not clear that one would need to keep all six Raptor engines on the Lunar Starship.  The only issue is whether the initial launch of the Lunar Starship into Earth requires all six Raptors, even though only three are optimized for operation in a vacuum.

The Lunar Starship would be launched into Earth orbit on the Super Heavy booster, as would be standard.  Some set of its own Raptor engines would also be fired for this.  It would then be refueled in Earth orbit before launching to the Moon.  This ability to refuel in orbit is a key ability of the Starship system, and is central to the flexibility that Starship allows in serving multiple objectives.  Prior to the launch of the Lunar Starship, a Fuel Depot Starship would have been launched into Earth orbit, where it would have received fuel carried and then transferred to it from multiple Orbital Starship launches.  The Fuel Depot Starship would essentially be a set of two large fuel tanks (one for liquid methane and one for liquid oxygen – the fuel plus oxidizer used by Starship) that has been well-insulated given the cryogenic temperatures the fuel and oxidizer need to be kept at.  And since the Fuel Depot Starship would be kept in orbit and not land back on Earth, there would be no need for a heat shield nor the wing flaps (nor for all six of the Raptor engines I assume) on it either.

A fully-fueled Starship can hold 1,200 tons of fuel (or technically, fuel plus oxidizer).  But each Starship launched from Earth would be able to carry 100 tons of cargo initially, with this expected to grow relatively soon to 150 tons.  Assuming the 150-ton capacity, Elon Musk noted that eight Starship flights to the Fuel Depot Starship would provide the 1,200 tons needed to fill the tanks on a Lunar Starship.  But how full the tanks would need to be will depend on how much the Lunar Starship would weigh (with no heat shield, wing flaps, nor possibly some of the Raptor engines), and how heavy of a payload would be taken to the lunar surface.  Musk concluded that only four flights to deliver fuel might be sufficient.

Much of this is still not clear – at least in what has been made public – and the final answer will depend on how heavy a payload the Orbital Starship will be able to carry to low Earth orbit (100 tons or 150 tons or something in between), how much lighter the Lunar Starship might be than the regular Orbital Starship, and how heavy the payload to the Moon would be.  And with differing payloads, the number of refueling flights needed might well differ from mission to mission.  None of this has as yet been spelled out, and likely is not yet fully known to anyone given the factors that are still uncertain.  But the key point is that the Starship system provides for flexibility where if additional flights are needed to lift the fuel required for refueling of the Lunar Starship in orbit, they can be carried out as needed.

Fully refueled, the Lunar Starship would then be sent to lunar orbit, to either the Lunar Gateway (if it has been built) or just to the similar orbit, to await the Orion capsule carrying the crew who would be launched on an SLS.  The Lunar Starship would likely already have most or all of the cargo required, but if there is anything additional carried on the Orion it would be transferred along with the crew.  The Lunar Starship would then carry the crew and cargo to the surface of the Moon and serve as a base for the crew during the time they spend on the lunar surface.  On the first mission (Artemis III) the current NASA plan, as noted above, is that this would be one week.  Also, the contract specifications NASA wrote for the HLS competition was that the initial mission to the Moon would be for two astronauts to land while two would remain in lunar orbit at either the Lunar Gateway (if available) or just in the Orion capsule.  After the initial mission, NASA’s plan is that the HLS should be upgradable so as to be able to carry four astronauts to the surface and back.  But given the extremely large capacity of the SpaceX Lunar Starship, it is likely that they will build in the capacity to carry a crew of four from the start.  And if NASA keeps to its plan to use Orion to carry astronauts to lunar orbit from the Earth, then that will be the ceiling as the Orion can carry no more than four (other than in an emergency).

Once the Lunar Starship carries the crew back to the Orion capsule waiting in lunar orbit, the Orion with the crew would return to the Earth.  The Lunar Starship, designed to be fully reusable for this role, would return on its own to Earth orbit where it could then be refueled by multiple regular Starship launches, stocked with any cargo desired, and then sent back to the Moon for the next NASA mission.  And the cycle could keep repeating.

3)  Comparison of the Three HLS Proposals:  SpaceX, Blue Origin, and Dynetics

After an initial request for proposals for the HLS in 2019, NASA provided funding in May 2020 to three teams to develop their proposals further.  The three chosen were Space X (with its Lunar Starship); a team that called themselves the “National Team” but which was led by Blue Origin and which is typically referred to as the Blue Origin proposal; and finally a team led by the not too well known aerospace firm Dynetics.  The HLS vehicle of Dynetics is named “ALPACA” (an acronym for Autonomous Logistics Platform for All-Moon Cargo Access).

The three proposals differed radically, both in the approaches taken and in their size.  Such diversity in approaches is certainly good and healthy, but at the same scale they would look like this:

Source: IEEE Spectrum, January 6, 2021

 

The mission plan using the Lunar Starship was described above.  The plans are quite different for the Blue Origin and Dynetics proposals.  A short description of each will be helpful before the three proposals are directly compared.

Blue Origin has worked in partnership with Lockheed Martin, Northrup Grumman, and Draper for its proposed lunar lander.  Its design is the most traditional, with a broad similarity to the design of the lunar lander (the LEM) of the Apollo program.  That is, there will be three separate components, with a descent stage (to be built by Blue Origin itself, and called the “Descent Element”), an ascent stage (to be built by Lockheed Martin, and called the “Ascent Element”), as well as a “Transfer Element” (to be built by Northrup Grumman) that is basically a rocket engine with fuel tanks that would take the proposed HLS from the high lunar NRHO orbit to a low lunar orbit where it would disconnect and the descent stage would take over.  Draper (or Draper Labs) would be responsible for the descent guidance system and flight avionics.

Together they call themselves the “National Team”, with Blue Origin in the lead.  They have named their proposed lunar lander the “Integrated Lander Vehicle” (or ILV).  The firms in the National Team basically come out of the traditional aerospace industry.  While some might consider Blue Origin (owned by Jeff Bezos) as different – as a private, entrepreneurial, company more akin to SpaceX – it really isn’t.  Much of the Blue Origin leadership has been drawn from traditional aerospace firms, and it has followed a development process more similar to that of traditional aerospace than that of SpaceX.  Its CEO, Bob Smith, came to Blue Origin from Honeywell Aerospace, and had previously held senior positions at the United Space Alliance (a joint venture of Lockheed Martin and Boeing that managed aspects of the Space Shuttle program for NASA) and before that at The Aerospace Corporation.

The three components of the Blue Origin ILV would be flown to the NRHO lunar orbit on three flights of the United Launch Alliance (ULA) Vulcan Centaur rocket that is now under development.  The United Launch Alliance is a 50/50 joint venture of Boeing and Lockheed, and the Vulcan Centaur would be a follow-on launcher that would replace ULA’s Atlas V and Delta IV boosters that are now being phased out.  The Vulcan Centaur will use rocket engines (named “BE-4”) being developed by Blue Origin, but due to repeated delays in delivering those engines, ULA has had to postpone the first test flight of the vehicle.  At one point it was supposed to have flown in 2020.  Most recently, the formal plan is for a test flight in 2022, but some have noted that with the continuing delays at Blue Origin, the first test flight might not be until 2023.

Alternatively, instead of flying the three components of the Blue Origin ILV to the NRHO on three of the still-to-fly Vulcan Centaur launch vehicles (with the three components of the ILV then assembled together into one unit there), it could be flown to lunar orbit already assembled on one flight of the still-to-fly SLS.  But additional SLS vehicles are not available, and would cost $2 billion each if they were.  A single Vulcan Centaur launch is expected to cost perhaps $120 to $150 million.

After receiving the NASA crew and cargo in the NRHO lunar orbit, the Blue Origin ILV would then be taken to a low orbit around the Moon with the Northrup Grumman Transfer Element, after which it would disconnect and the Blue Origin Descent Element would take over for the final descent to the surface.  Using the Transfer Element basically saves on the weight of the larger tanks (and associated hardware) that would otherwise be required if all of the trip from the NRHO to the lunar surface were powered by the Descent Element.  And as discussed below, it might be possible to reuse the Transfer Element on subsequent missions, although this would require that the fuel it needs be brought to the lunar NRHO orbit in some way.

The habitable space in the ILS would be a pressurized cabin on the Ascent Element, and the crew would live there for the time they spend on the lunar surface (about a week on the initial mission).  Cabin space would be tight, and only enough for a crew of two on the initial flights.  NASA’s original plans for the return to the Moon was for a crew of four, but reducing this to two for the initial two flights was one of the simplifications NASA introduced (albeit at a greater overall cost in the long run) when the Trump administration instructed NASA to accelerate its plans and get a crew to the Moon by 2024.  But the intention is for crews of four after the first two missions, and one of the criteria NASA indicated it would consider in the competition for the HLS contract was whether the proposed lander could be relatively easily scaled up to handle a crew of four.  One factor NASA cited when it decided not to accept the Blue Origin proposal for the HLS was that such a scaling-up to accommodate a crew of four would be difficult with its design.  A substantially larger cabin in the Ascent Element would be needed, which would weigh more as well as take more space, which would require not only a substantially redesigned Descent Element to handle the extra weight but also more powerful Ascent Element engines to return the crew to the NRHO lunar orbit.

Once the Ascent Element returns the crew to the NRHO orbit, the crew along with any cargo (lunar rocks) being brought back would transfer to the waiting Orion (or first to the Lunar Gateway, if it is there yet), and then return to Earth on the Orion.

What is not fully clear is what will then happen in terms of reusability of (portions of) the Blue Origin HLS.  The Descent Element can clearly only be used once, as it would remain on the surface of the Moon.  The Ascent Element might in principle be usable again (if designed for this), and possibly also the Transfer Element (if it is designed to hold sufficient fuel to bring it back to the NRHO orbit following its use for bringing the HLS to a low lunar orbit).  However, each would then need to be refueled if they were to be used again, and probably two Vulcan Centaur launches would be required to bring those fuels (which are also different for each – liquid hydrogen and liquid oxygen for the Ascent Element and hypergolic fuels that ignite on contact for the Transfer Element).  it is not clear whether much, if anything, would be saved by developing the tankers to bring those fuels to the NRHO and then transferring them to the Ascent and Transfer Elements.  The tankers would then be thrown away as they could not be returned to Earth, and it is not clear whether much would be saved over just building new copies of the Ascent and Transfer Elements (along with the Descent Element) and then sending them fueled to the NRHO.

Dynetics has given the name ALPACA to its proposed HLS.  Dynetics is a medium-sized aerospace firm, based in Huntsville, Alabama, that was acquired by the defense contractor Leidos just a few months before NASA announced in April 2020 that Dynetics would be one of the three HLS proposals it would fund for further development.  While Dynetics would work with a number of subcontractors (the two most important being Sierra Nevada  Corporation – an aerospace firm – and Draper once again for the avionics), the responsibility for the design is fully with Dynetics.

The Dynetics design is quite radically different from any that have been considered before.  As seen in the artist’s rendering above, the Dynetics ALPACA would be basically a crew cabin with rocket engines and their tanks on the two sides.  Three launches on a Vulcan Centaur would be required to bring it to the NRHO lunar orbit – one for the empty ALPACA and two for the fuel and oxidizer (liquid methane and liquid oxygen).  The fuels would then need to be transferred to the ALPACA in the NRHO lunar orbit, and NASA cited this as a concern when it reviewed the Dynetics proposal.  The technology still has to be developed.  While there would also be in-space transfers of the cryogenic fuel and oxidizer in the SpaceX Starship proposal – and in far greater volumes – this would be done in Earth orbit for the Starship instead of lunar orbit for the Dynetics ALPACA.  If a problem arose, it could be more easily addressed if still in Earth orbit.  Furthermore, development of this refueling ability is central to the Starship system, and hence SpaceX is devoting a good deal of attention to ensure it will be able to do this.  Dynetics and its partners would not require this ability for anything other than their ALPACA.

Once fueled and ready, the Orion would be launched on the SLS, rendevous with the ALPACA in the NRHO lunar orbit for the transfer of the crew and cargo, and the ALPACA would then take the crew to the surface.  NASA found an important issue during its review of the Dynetics proposal, however.  Given the weight of ALPACA, the thrust of its engines, and the fuel that would be carried, NASA concluded that there would be insufficient fuel to keep ALPACA from crashing into the lunar surface, even with no crew or cargo at all.  That is, its payload capacity would be negative.  Dynetics conceded that this was indeed an issue with its current design, but was confident that they would be able to lighten ALPACA sufficiently so that it would be able to carry the crew and cargo and not crash.  NASA, however, was skeptical.  Such spacecraft normally increase in weight as they are further developed, as issues are found requiring modifications to resolve those issues.  It is rare that there would be a reduction in their weight.  And NASA’s bid specification was that the HLS had to be able to bring to the lunar surface a minimum of 865 kg (of crew and cargo, including the space suits needed to venture outside), with a preferred goal of 965 kg.

Assuming it could land, the ALPACA proposal had the significant positive in its design in that the crew cabin would be very close to the ground.  In the Lunar Starship proposal, the habitable crew cabin would be far above the ground, and an elevator arrangement would be used to carry the crew back and forth from the surface.  In the Blue Origin ILV, the crew cabin would also be far above the ground (although not as high up as on the Lunar Starship), but the crew would need to climb down and up a 12 meter (39 foot) ladder in their lunar spacesuits to reach the surface.  That would be cumbersome and probably tiring despite the low lunar gravity (as the lunar spacesuits would be heavy and bulky), and possibly catastrophic should anyone slip and fall.

At the end of the stay, the Dynetics ALPACA would then fly the crew back to the NRHO orbit to link up with the Orion (or Lunar Gateway if it is there), where the crew and any returning cargo would be transferred for the return to Earth on the Orion.  The ALPACA could then wait there, and if to be used on a subsequent mission, could be refueled with two launches of a Vulcan Centaur carrying fuel to it as would have been done on the initial mission.

The designs and mission plans are therefore radically different in the three proposals.  The proposed costs, as well as the payload and other capacities of the resulting bids, also differed dramatically, as summarized here:

Lunar Starship

Integrated Landing Vehicle (ILV)

ALPACA

Lead Firm

SpaceX

Blue Origin

Dynetics

Other Primary Firms

none

Lockheed Martin Northrup Grumman Draper

Sierra_Nevada  Draper

Max Payload to Lunar Surface

100 tons

850 kg

negative

Habitable Volume

1,000 m3

12.4 m3

14.5 m3

Floor Area

325 m2

4.7 m2

5 m2

Max Crew Size

Many (well more than 4 if desired)

   2 at first; redesign    for 4

2 at first; later 4

NASA Development Award, April 2020

$139.6 m

$479.7 m

$239.7 m

Final Bid Price, April 2021

$2.94 b

$6.00 b

$9.08 b

Depending on the number of refueling flights of Starship to Earth orbit, the Lunar Starship could conceivably carry as much as 100 metric tons of cargo to the lunar surface.  This dwarfs the estimated 850 kg that the Blue Origin ILV could bring (which is close to, but slightly below, the minimum NASA specification that it should be able to bring 865 kg to the surface).  And as noted above, NASA does not believe the Dynetics ALPACA would be able to carry even itself to the surface without crashing into it.

The habitable volume of the Lunar Starship would also be enormous, at 1,000 cubic meters.  This is larger than the entire habitable volume of the International Space Station (which is 916 cubic meters), and the ISS had to be slowly assembled in space over a period of 13 years.  In sharp contrast, the habitable volume of the Blue Origin ILV would be just 12.4 cubic meters, which it says would be enough for a crew of two, but acknowledges would not be enough for a crew of four.  Hence the need for an extensive redesign of the Blue Origin ILV if it were to be used for subsequent Artemis missions when they would need to accommodate a crew of four.  And the Dynetics ALPACA would have a volume of 14.5 cubic meters – only a bit more than on the Blue Origin ILV – which it argues would be sufficient for a crew of four.  Keep in mind that the habitable space for the crew is not simply for their landing on the lunar surface, but for their stay there of about one week on the first Artemis mission with this increasing to a planned 30 days on the following Artemis mission and even more later.  Such accommodations would be tight, especially for a crew of four.

Resting on the lunar surface, where there is gravity and not simply the weightlessness of a vehicle in orbit, the floor area will also matter.  For the Lunar Starship, the floor area (on several different floor levels) would come to 325 square meters (3,500 square feet).  That would be the floor area of a very substantial house in the US.  In contrast, the floor area on the Blue Origin ILV would be just 4.7 square meters, and only slightly more at 5 square meters on the Dynetics ALPACA.  Five square meters for a crew of two for a week is not much, and especially not for a crew of four for a month or more on the lunar surface.

NASA announced in April 2020 it would provide funding to the three competitors for them to develop more concretely their proposals.  But the dollar amounts provided were not equal.  NASA was relatively quite generous with providing almost $480 million to the Blue Origin team, but just half this (almost $240 million) to Dynetics for its ALPACA proposal.  And to SpaceX the grant was just below $140 million.  One cannot argue that NASA was unfairly favoring SpaceX in its grants for the further development of the proposals.

Finally, the price SpaceX bid for the contract – at $2.94 billion – was less than half the $6.00 billion price Blue Origin offered, and less than one-third the price of $9.08 billion Dynetics said it would need.  The price includes the development of the vehicle, a test flight where it would go through the full mission sequence (including landing on and then returning from the lunar surface) but without a crew, and then the Artemis III mission itself with a crew of two.

Based on all this, it should not be difficult to see why NASA chose the SpaceX proposal.  Basic feasibility is of course key, and NASA certainly paid close attention to this.  It found, for example, that by its calculations, the Dynetics ALPACA would not be able to land on the Moon with any payload at all.

But after its detailed review of the SpaceX plans during the year it was funding the more concrete development of those plans, and with full access to all the SpaceX technical teams and the work they had done, NASA engineers concluded the SpaceX proposal was feasible.  As noted before, this in itself was a tremendous vote of confidence in the still-to-fly Starship.  And NASA also concluded that SpaceX would be able to deliver on these plans quite soon.  While I personally have strong doubts that this will be possible by 2024 (or even 2025), this time frame is of interest as it implies that NASA engineers believe the basic Starship system will be flying successfully very soon, i.e. by sometime in 2022.  It implies that they have concluded that the current Starship design is basically doable, and that a major redesign will not be necessary for it to be successful.

Despite the clear superiority of the SpaceX proposal over those of Blue Origin and Dynetics, the latter companies did not see it that way.  Soon after NASA’s decision was announced in April 2021, both Blue Origin and Dynetics appealed to the US Government Accountability Office (GAO), arguing that NASA had not properly followed government procurement procedures.  Such appeals are not uncommon, and sometimes lead to reversals.  But the GAO concluded, in a report issued on July 30, that NASA had followed the proper procedures and was justified in making the award to SpaceX.

While Dynetics accepted this and moved on, Blue Origin decided then to file a court case protesting NASA’s decision.  This was frustrating to many, as NASA could not grant the award to SpaceX nor work with SpaceX on the contract while an appeal was underway.  Both sides (NASA and Blue Origin) agreed, however, to expedited court procedures where the judge would make a decision (without a jury) and would do so by early November.  The judge’s decision was then announced on November 4, rejecting Blue Origin’s claims.  The full decision was released on November 18, after Blue Origin had been given the chance to make redactions of commercially confidential information in that judicial opinion.

4)  The Possibilities with Lunar Starship

The mission profiles discussed above follow what NASA has set out for its Artemis plans to return to the Moon.  That is, NASA set how the HLS chosen would be used, and the missions are based on use of an Orion to take the astronauts to the high NRHO lunar orbit and an SLS to launch them there (along with, possibly, use of the Lunar Gateway in the NRHO orbit to serve as a staging area).  The Lunar Starship would then take the crew from the lunar orbit to the surface of the Moon and back.  The Starship would have been launched into Earth orbit, refueled there, then flown to the NRHO orbit, and following the delivery of the crew back at the NRHO would be flown back to Earth orbit for refueling after which it could be used again for the next lunar mission.

But if a Lunar Starship can do all this, there is the obvious question of why one needs the Orion, the SLS, and the Lunar Gateway, at all.  The Lunar Starship will have all the life support systems, seats, and other equipment required to carry the astronauts to a lunar landing and then to support them there for extended periods (one week on the first mission, a month on the second, and more later).  It will also have lots of space and an ability to carry a cargo load far in excess (more than 100 times as large) of what NASA set in its minimum requirements.  Forcing the four astronauts to squeeze into the Orion capsule (with a habitable volume of just 9 cubic meters) for the multi-day flight to lunar orbit, while the Lunar Starship (with a habitable volume of 1,000 cubic meters) would fly there empty, seems absurd.  It would be similar to forcing a group of four to squeeze into a Volkswagon Beetle for a drive across the US, while a luxury bus drove the same route, but empty, only to be used for a final short segment at the end of the journey.

I fully acknowledge that there will be technical issues to work through.  Fuel loads would have to be calculated and would need to suffice.  But the flexibility in the Starship system, where additional in-orbit refuelings could be provided if there is a need, combined with a scaling back, if need be, of the payload to be lifted (a 100-ton capacity means there is a lot of room for adjustment), means that if a Lunar Starship in the NASA HLS role is feasible, then it should certainly be for this expanded role as well.

The mission plan would then be that once there is a fully fueled Lunar Starship in Earth orbit (with whatever number of refueling flights to the Fuel Depot Starship that might require, with the Lunar Starship then fueled from what has been stored in the Fuel Depot Starship), the NASA crew of four (or even a substantially higher number, as there would be plenty of room) would be flown to transfer to the vehicle while it is still in Earth orbit.  They could be flown there on a regular Orbital Starship flight or even on one or more flights of a Falcon 9 with the now well-tested Crew Dragon capsule.  They would then be flown on the Lunar Starship directly to the lunar surface, or possibly first to a lunar orbit and then to the surface.

Furthermore, given its vast size the Lunar Starship could in effect be an instant base on the Moon.  There would be no need to bring to the Moon via a series of separate flights all the components that would otherwise be needed to build such a base.  NASA’s long-term Artemis plans had envisaged this following the first two Artemis landing missions (at least in the plans set before Lunar Starship was chosen).  A permanent, habitable, structure (“Artemis Base Camp”) would have been built on the lunar surface to house the crews, with this slowly expanded in size as additions are brought on subsequent missions.  With the available space in the Lunar Starship, there would be no need.  And the Lunar Starship would also have the space needed, as well as the cargo capacity, for the lunar rovers that NASA has planned.

The Lunar Starship as a lunar base would also have the rather unique capability of being packed up, lifting off, and then flown to a new location, if there is any desire to do this.  There might be value in exploring various sites around the Moon – in a search for frozen waters supplies, for example.  One would just have to ensure that adequate reserves of fuel were brought along.  And if, as some believe likely, significant amounts of frozen carbon dioxide along with frozen water are found on the Moon (most likely near the South Pole, which is why this has been chosen for the early missions and the planned Artemis Base Camp), then it would be possible to produce the liquid methane fuel the Starship uses along with the liquid oxygen, and refuel the Lunar Starship while it is there.

If there is a need for additional cargo, one could also design a version of the Lunar Starship to carry cargo only.  It would fly there on its own (which is now a standard technology – indeed under the NASA HLS contract the Lunar Starship would be required to complete an entire unmanned flight as it would under Artemix III, including landing on the Moon, as a test of the entire system before any crew is put aboard).  If it was not then to be returned to the Earth and thus not need the fuel to do so, but rather remain on the surface as a permanent addition to a growing lunar base, such a cargo flight could bring a load of as much as 200 tons.  This is huge.  The weight (mass really) of the entire International Space Station is, after all the additions over the years, now 420 tons.

And the possibilities the Starship system would open up are not just limited to the Moon.  Very recently, a group of prominent planetary scientists issued a White Paper arguing that with the availability of Starship, the traditional approach taken to planetary exploration missions should be radically re-thought.  With the capacity of the Starship, along with its low cost, planetary missions could become not simply far more frequent but also simplified in design.  Rather than spend a good deal of money and a good deal of time in refining the spacecraft to reduce its weight by a few ounces or its dimensions to fit into the limited capacity of the existing rockets that are used, one could simply use off-the-shelf equipment when Starship is used to send it on its way.  Finally, there is of course the missions to Mars for which the Starship system has been designed.  But all this goes beyond what I intended to cover in this already long post.

Finally, flying the lunar missions on Starship rather than with the Orion, SLS, and associated systems would be far cheaper.  As an extremely rough calculation:  Assume that each Starship launch will cost $20 million (ten times the $2 million Elon Musk has said it will ultimately cost) and that 10 Starship launches would be required for each mission (for refueling in orbit – note that the Lunar Starship and the Fuel Depot Starship would remain in space following their initial launch and would be reused), for a total cost of $200 million for the launches.  For simplicity, assume all the other costs of the launches and then for carrying out the mission would be similar and hence the total cost would be $400 million to carry out the mission.  While crude, this estimate almost certainly errs on the high side.  The actual cost is likely to be lower, but take $400 million for the purposes here.

In contrast, the Office of the Inspector General (OIG) of NASA in a recent (November 15, 2021) report assessing NASA’s Management of the Artemis Missions estimated that the cost of a single SLS launch with an Orion capsule for an Artemis mission would come to $4.1 billion.  The SLS itself (none of which is reusable – all is thrown away in each launch) would cost $2.2 billion.  This is similar to, but 10% more than, the estimated $2.0 billion cost per launch for the SLS made by the White House Office of Management and Budget (OMB) and released in a letter to Congress in 2019.

The NASA OIG estimated that the cost of an Orion crew vehicle, including the cost of the Service Module being built by the European Space Agency, would total $1.3 billion, of which $300 million would be for the Service Module.  In my earlier blog post, I used the contracted amount NASA would pay for the third through the fifth Orion vehicles ($900 million each), but the earlier ones would be higher and the $1.0 billion estimate of the OIG is consistent.  Interestingly, I had thought in my earlier blog post that the European Space Agency would be covering the cost of the $300 million Service Module they are making for the Orion, but the OIG report clarifies that this will not really be the case.  While the Europeans will be paying the contractor that will build the module, NASA will then not charge the Europeans $300 million (per Orion) for costs incurred on behalf of the Europeans at the International Space Station.  That is, this is a barter agreement, so NASA is in fact paying that $300 million cost, but indirectly.  By including it in the ISS budget, where it is not broken out in what is made publicly available, one cannot determine the true cost of the complete Orion vehicle without access to unpublished information.

Finally, the NASA OIG also includes in the cost of an SLS launch the pro-rated share of what it costs to maintain the ground facilities (the launch pad, etc.) needed for an SLS launch.  Since there will be only (at most) one SLS launch per year, this will be the annual budget for maintaining and then using (once) that capacity, which the NASA OIG estimates to be $568 million per launch.

The NASA OIG therefore estimates the total cost per launch of the SLS with Orion will be $4.1 billion.  This would be ten times the generously estimated cost of doing the same via Starship, and for far less capacity.

D.  Politics

Why then keep funding the SLS and Orion?  In the near term, it might make sense.  After all, despite all that has already been done to test and develop Starship, the testing is not yet complete and orbital testing is still to start.  And while NASA technical staff concluded it should ultimately work, it might not.  The key tests will be in the next year, however, and we should know by the end of 2022 (or before) whether Starship will work as planned.  There will certainly be failures at first in the upcoming orbital tests.  As discussed above, this is to be expected in the iterative development process used by SpaceX.  But with iterative improvements, with solutions found to the problems uncovered, it will eventually work.  We will only know that for sure, however, when it does.

Whether Starship will work should be known, however, by no later than the end of 2022.  Provided Starship has demonstrated that it will indeed work, should one then expect to see NASA (with Congress) decide to close down the SLS and Orion funding and switch over to the far more capable and far less costly Starship system?  The answer to that is:  not likely.

First of all, it will be politically embarrassing to admit that it was a mistake.  By the end of FY23, over $54 billion will have been spent ($32 billion for the SLS and $22 billion for the Orion).  The fundamental error came when Congress in 2010 forced the Obama administration to start development immediately of a heavy-lift launcher that became the SLS.  The Obama administration had recommended that NASA should first examine and test certain new technologies (in particular in-orbit refueling ability), with the results then used to determine how best then to design such a launcher.  Congress, and in particular the Senate, insisted (and wrote into law in the 2010 NASA authorizing legislation) that the heavy-lift launcher be designed immediately and furthermore that it make use of the key components of the Space Shuttle (e.g. the engines) in that design.  By mandating this, those in their states and districts who had been employed building such components for the Space Shuttle would remain employed.  But with such requirements written into law, some wags have concluded the SLS should not stand for Space Launch System but rather Senate Launch System.

Republican Senator Shelby of Alabama (home of the NASA Marshall Space Flight Center in Huntsville – the center with the primary responsibility for the SLS) was a key advocate, as was Republican Senator Kay Bailey Hutchison of Texas (home of the NASA Johnson Space Center in Houston – responsible for manned space flight operations).  Senators from Mississippi (home of the Stennis Space Center, where large rocket engines are tested), Louisiana (home of the Michoud Assembly Facility), and Utah (home of the company that builds the solid rocket boosters that are strapped on to the first stage) were also important advocates.  As was one Democratic Senator – Bill Nelson of Florida (home of the Kennedy Space Center), who was the chair of the subcommittee that drafted the NASA Authorization Act of 2010 when Democrats controlled the Senate.

Former Senator Bill Nelson is now NASA Administrator.  Canceling SLS and Orion would be an embarrassment for him, even if Starship demonstrates its full ability to carry out the nation’s lunar exploration plans – and do so far more effectively and at far lower cost.  As NASA Administrator he has already signaled that NASA intends to continue to use the SLS, and for possibly 30 years or more.  In October, NASA issued a “Request for Information” to the aerospace industry, requesting proposals from firms willing to produce, operate, and maintain the SLS rocket system until the 2050s, with the stated intention that this should reduce the “baseline per flight cost” of an SLS launch by “50% or more”.  The NASA Request for Information did not say, however, what the current baseline cost was from which the 50% would be taken, and refused to respond to reporter queries on what NASA estimates that cost to be.  But as noted above, the White House Office of Management and Budget indicated in a letter to Congress in 2019 that the cost was $2.0 billion per launch.  A more recent estimate from the NASA OIG puts that cost at $2.2 billion.

But NASA itself has consistently refused to reveal what the per launch costs of the SLS will be.  This is despite repeated recommendations over the years by oversight bodies that it should.  For example, the Government Accountability Office (GAO), which is formally part of the legislative branch reporting to Congress, recommended NASA provide such an accounting in a 2017 report, when it was already clear that the SLS would be delayed and well over the original planned cost.  More recently, the NASA OIG report of November 15, assessing the management of the Artemis program, recommended that NASA management provide such figures.  But NASA management has continued to refuse.  The NASA OIG report made nine recommendations, and NASA management accepted seven (two partially).  But it rejected the two recommendations on the issue of being transparent on costs.

Congress has, however, not forced NASA to reveal those costs.  While the overall budget of NASA is known year by year, as well as the budgets of major sub-aggregates of certain individual programs as NASA has organized them, one cannot work out from this the overall cost of a major program such as Artemis (with responsibilities for portions of the program spread across much of the agency) nor work out a separation between the cost of developing a new vehicle or system such as the SLS and the cost then of using that system on individual missions.  There is a lack of transparency, although entities such as the GAO or the NASA OIG (as well as journalists and other outsiders) may try to come up with estimates.

Senators and Members of Congress may be quite comfortable, however, with this lack of transparency.  It then does not draw attention to the overall costs (and how high those costs might have grown to) even though they still wish to see (and to publicize) how much is being spent in their particular districts.  And NASA is glad to provide this.  For examples, see here, here, here, here, here, and here.  Spending more is seen not as a flaw but as a feature.

The SpaceX Starship, if it works, may have a cost of just $2 million per launch.  Even if the cost turns out to be ten times that, it will still be dramatically less costly than an SLS alone, and even more so of an SLS plus Orion system.  Furthermore, and importantly, it would be far more capable.  It would enable far more to be achieved in meeting the stated national objectives of the space exploration program than would be possible with the SLS plus Orion system.  It would be quite revolutionary.  But it will only be used for this purpose if the American political system allows it.