Elon Musk, CEO & CTO Customer:

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1 I. Program Overview Name of Program: SpaceX Falcon 1 Flight 4 Your Name/title: Elon Musk, CEO & CTO Customer: SpaceX Falcon 1 Demonstration Flight Program Category o Sub-System R&D/SDD program or project o Sub-System Production/Sustainment program or project o System level R&D/SDD program or project o System level Production/Sustainment program or project Program Background: What is this program all about? (No more than one page) Describe The overarching need for this program History of the program The product that is created by this program Current status of the program SpaceX designed the Falcon 1 rocket to provide breakthrough advances in reliability, cost, and time to launch. We based our design on the philosophy that through simplicity, reliability and low-cost can go hand in hand. Falcon 1 employs simple, proven designs that reduce the costs traditionally associated with complex space launch systems. At under $10 million per launch, Falcon 1 is the world s lowest cost solution to accessing Earth orbit. This program serves is an ideal vehicle for the small satellite community and the baseline vehicle for SpaceX s Falcon 9. By employing the same architecture as the Falcon 1, Falcon 9 leverages the reliability built into the Falcon 1 design. Falcon 1 Flight History March 2006, 1 st Test Flight: Powered flight ended at T+34s due to fuel leak in engine bay. March 2007, 2 nd Test Flight: Powered flight ended at T+474s due to 2nd stage engine flame-out. Reached 278 km altitude & 5.1 km/s. Root cause: propellant slosh. August 2008, 3 rd Flight: Residual thrust after MECO caused stage re-contact and loss of vehicle. Sept 28, 2008, 4 th Flight: Achieved Earth orbit and successfully restarted upper stage. Product Falcon 1 is a two stage, liquid oxygen and rocket grade kerosene (RP-1) powered launch vehicle measuring 68 feet in length and 5.5 feet in diameter. Status On September 28, 2008, the Falcon 1 launch vehicle became the first privately developed liquid fuel rocket to achieve Earth orbit. Flight 5 of Falcon 1 is scheduled for a July 13 th launch. Success of Falcon 1 is a key stepping stone in the development of Falcon 9 as both vehicles share common architectural characteristics. With over 25 flights on manifest, including 12 flights of Falcon 9/Dragon for NASA to the ISS, SpaceX is exiting the R&D phase and moving to a fully operational launch services provider AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 1

2 I. VALUE CREATION = 10 POINTS Value: What is the value and competitive advantage created by this program to your: Customers Company and shareholders Excellence: Why should this program be awarded the Program Excellence Award? SpaceX provides highly reliable launch services at significantly lower prices than its competitors with much quicker turnaround times. Reliability translates into higher confidence of mission success which is of utmost importance. SpaceX s vehicles are 30% or less of the price of the competition. In addition, SpaceX is the only launch services provider designing reusable launch vehicles which will open the market to additional customers. The success of Falcon 1 required a willingness to rethink the truths about today s launch systems, with an appreciation for existing resources and technologies. SpaceX employed a new philosophy for the launch services industry: through simplicity you can achieve both reliability and low cost. SpaceX applies this philosophy throughout its business model and in just six years, SpaceX designed, developed, qualified and successfully launched Falcon 1, the lowest price per mission rocket in the world. This included the development of on-site production facilities, a world-class engine testing facility, two launch sites, three proprietary engines, in-house structures and avionics departments, and a highly functional, streamlined organizational framework. With these accomplishments, SpaceX has introduced innovation in just six years that the aerospace industry has not seen in nearly fifty years. III. ORGANIZATIONAL PROCESSES/BEST PRACTICES: (HOW DO YOU DO THINGS) = 30 POINTS Strategic: Describe how you developed your program strategy and competitive advantage in support of your company strategy, how you monitor progress toward achieving this strategy SpaceX was created to further human space exploration by reducing the cost of space access. To do this, the SpaceX strategy focuses on the following objectives: --Improve reliability by employing simple, proven designs. --Lower costs through extreme vertical integration. --Establish a baseline architecture that could be leveraged for medium/heavy lift vehicles. Competitive advantages include: --Leverage lessons learned from other launch providers. The Falcon 1 program was developed from a clean sheet of paper. This provided the unique opportunity to look back on the past 50 years of aerospace achievements and make design choices that would maximize the reliability of the vehicle while simultaneously reducing costs. --Extreme vertical integration to control costs. SpaceX was developed from the beginning to have majority control over the 2008 AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 2

3 production of Falcon 1. The 550,000 square foot headquarters houses the complete Falcon 1 production line as well as the manufacturing of all key hardware, structures and avionics. SpaceX is also vertically integrated from a testing standpoint, with a 300 acre state of the art testing facility located in McGregor, Texas. This level of control not only minimizes costs but also provides an intimate understanding of the vehicle and its components, resulting in superior quality control and reliability. The most significant indicator of the success of this strategy occurred when Falcon 1 became the first privately developed liquid fuel rocket to achieve Earth orbit. However, the success of this strategy is also measured by key development achievements, our launch manifest and progress of our Falcon 9 program. Development Achievements --Developed two of the three American launch vehicle main propulsion engines to see flight since the Space Shuttle Main Engine over 25 years ago. --Highest propellant mass fraction 1 st stage in the world (94.2%). --First non-explosive orbital flight termination system approved by DOD range safety. --Developed two launch sites (Cape Canaveral and Kwajalein) along with structures, avionics and software, ground systems and manufacturing and test facilities in just six years. --Demonstrated a rapid mission integration process supporting a wide range of customer s requirements. Launch Manifest --Secured over $2 Billion worth of business (over 25 missions) including the NASA Launch Services contract. Falcon 9 Development --Using the same Merlin 1C engine used in Falcon 1, Falcon 9 employs the only modern day boost phase propulsion system with engine out reliability. --Successful full mission duration 9 engine firing in Nov First demo flight scheduled for late 2009, Operational: Monitoring and Controlling How do you monitor your program s progress and make corrections to keep the program on track Physical proximity between engineering, fabrication, and production is key to successful program management. The distance between these disciplines and activities at SpaceX is measured in feet, not tens or hundreds of miles as is the case for other US launch vehicles. This minimizes the risk of incorrect or imprecise communication, a key challenge of systems engineering. At SpaceX, the engineering analyst is able to 2008 AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 3

4 participate across the lifecycle of their subsystem - from initial prototype through final quality inspection and test. Each member of SpaceX s management team serves as a discipline lead in addition to his or her management functions. Thus, each lead is a stakeholder in project management and is responsible for delivering quality products on time and within budget. This leadership team is also responsible for the systems engineering elements which increases the flow of vital information. Fewer interfaces allows for closer coordination between every element of the company and thus its products and services. Streamlined subcontracting processes also contribute to reduced development schedules and increased cost control. In addition, vertical integration yields cradle to grave and piece part to complex system design knowledge. Since Falcon 1 is designed, produced and tested in-house, SpaceX maintains real management and cost control over the Falcon 1 program, and is singularly postured to best understand anomalies when they occur, and fix problems readily, should they occur. SpaceX spends minimal time negotiating changes that arise from anomalies with subcontractors and suppliers. This helps to ensure successful schedule management. With respect to program management as it relates to the customer, SpaceX has integrated business development, contracting and mission management into one department. Traditionally, a sales department finalizes a contract and then passes it over to the mission management team. SpaceX mitigates this execution risk by keeping the sales team integrated with the mission management team, creating a singular point of contact to work to resolve potential issues. Operational: Supply Chain What processes, tools and relationship-building methods have you used to develop, refine and improve supply chain integration? This is one of the most imperative needs of our industry please provide in specifics and with data that assist you in gauging the effectiveness. Being vertically integrated, SpaceX has a marked decreased dependency on suppliers at a time when the second and third tier supplier base is shrinking in the aerospace industrial base. This eliminates risks associated with schedule and technical performance, especially when only a sole source is qualified to produce a subassembly. This does not mean that SpaceX avoids the use of suppliers, rather SpaceX selects suppliers having like corporate mindsets by a thorough evaluation process to ensure superior reliability, cost and availability. SpaceX suppliers do not own critical portions of the vehicle, rather the majority of our suppliers provide machining services and commercial-off-the-shelf components. In addition, the Falcon 1 vehicle is made completely in the USA of US parts. SpaceX avoids the schedule and technical risk of using foreign suppliers for services or vehicle subassemblies AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 4

5 Primary systems such as rocket engines, stages, interstage adapters, propellant tanks, payload fairings, heat shields, and avionics are all produced in the United States by or for SpaceX. The SpaceX management team is also experienced in fixed price contracting and cost control. SpaceX minimizes the cost of overhead through using only fixed price contracting. Cost reimbursable government contracts bring significant and costly reporting requirements that can perturb the basic management tools used by SpaceX. This type of contract also leads to lack of surety in longer term prices. Operational: Risk Management Describe the processes used to identify risk and avoid future/potential issues or risks. Operational: Opportunity Management Describe how your program team identifies opportunity and manages The effectiveness of our supply chain structure is evident in the Falcon 1 launch vehicle itself. Designed for superior reliability, at under $10 million per launch, Falcon 1 is also the world s lowest cost solution to accessing Earth orbit, due in large part to our unique supply chain philosophy. The SpaceX approach to risk management is to identify risks early in the program such that adequate time is allowed for mitigation plan development and implementation, which then reduces the likelihood of the risk occurring. This approach also minimizes both schedule and cost risks. Risk, whether technical, schedule related, or financial in nature are considered in all decision making throughout the organization. To support this approach, SpaceX has developed an electronic risk database tracking tool, known internally as Trac, using commercially available software. This system is used in all aspects of risk management. Risks are first identified by anyone in the company and entered into the system via the company intranet. Risk is then assigned to a specific program and immediate risk communication is handled through an alert system. All risk activity from risk detailing, photographing, monitoring, handling, analysis and any mitigation and verification is all documented in the particular risk ticket opened by the original risk owner or reporter. The tracking tool keeps everyone in the loop throughout this process, creates a searchable repository for this risk to live and be used for future research, comparison, or lessons learned. Finally, the risk tracking tool can output risk detail that is easily reported as necessary. This tool has created an effective and efficient risk management process that also doubles as institutional knowledge for the company as a whole. SpaceX has a flat structure and as such, the management team is extremely accessible and decisions are made quickly with minimal red tape. The management team is empowered to make key decisions which allow the program to take advantage 2008 AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 5

6 this opportunity. Team Leadership: Team Motivation Describe how you accomplish full team integration, motivation, and inspiration. Team Leadership: Knowledge Management Describe how knowledge, best practices, lessons learned are shared and used across the team to improve performance. Team Leadership: Leadership Development How do you develop team s skills and build future leaders Lessons Learned: Describe how you collect lessons learned and how they are shared with your of time-sensitive opportunities. Control over a majority of our production schedule also allows us to create opportunities that may not otherwise exist. Team motivation begins at the hiring level. SpaceX seeks out individuals who are both highly self-motivated and truly passionate about space. SpaceX includes stock options as part of employee compensation, and top performers are rewarded with additional options on an annual basis. Using these approaches, the success of the program is the ultimate motivator. Also, the SpaceX culture is similar to that made famous in Silicon Valley. The company offers free snacks and drinks, monthly company-wide lunches and special incentives, such as Zero-G flights, for top performers. Recognition is also a significant motivator. Senior management often recognizes employees both directly and publicly for notable accomplishments, which reaffirms to employees that their efforts regardless of their position in the company will not go unnoticed. Knowledge management at SpaceX focuses on combination of direct communication and documentation. The company uses an apprenticeship program to pass knowledge from more experienced individuals to new hires, with a focus on decision making skills and hands-on experience. For documentation, SpaceX uses a real time issue tracking and reporting using Trac. Trac is a user friendly, paperless anomaly reporting system where SpaceX can document defects, nonconformance, enhancements, corrective actions or history of a product being manufactured or tested. The Trac system is used companywide and covers software, hardware, avionics hardware history, avionics hardware development, avionics testing, ground control, improvement ideas, guidance navigation and control, launch anomalies, propulsion activities and ERP. The Trac software allows all users to be aware of open issues across multiple disciplines at any given time, bringing enhanced transparency and communication to SpaceX s programs. At SpaceX, and in the Falcon 1 program in particular, the average age of our engineers is 28, which brings innovation and fresh perspectives to the program. However, the average age of our management team is 45, which brings valuable industry experience to the organization. As such, future leaders benefit from the experience brought by management, but they are encouraged to challenge the status quo through presentation of new ideas and opportunities. As a relatively young company, employee retention is key to collecting lessons learned. SpaceX offers tremendous consistency and experience in its Senior management team AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 6

7 team and company The core team has been together since its formation in The vice presidents for propulsion, structures/r&d, launch, and business development continue to make up the core team. Staff functions of human resources and information technology continue to be led by the same individuals first brought to SpaceX. And many of the directors and managers joined prior to first flight of the Falcon 1 rocket, learning the critical technical and operational lessons. Specific lessons learned from the Falcon 1 program are captured and shared via our anomaly reporting system known as Trac. The apprentice-type relationship between management and employees also allows for continuous sharing of this information. Best Practices: Identify one or two specific Best Practices that you applied in your program and that you believe to be unique approaches. A unique function of SpaceX s organizational structure is its ability to test to failure. SpaceX owns its testing facilities, which allows the physical testing of engines and structures to failure, as opposed to relying solely on analysis. This expedites development and testing, gives an in-depth familiarity with the vehicle design, as well as an understanding of the sequence of events preceding failure. For example, the Merlin 1C qualification test series ended with an actual fuel Foreign Object Debris (FOD) ingestion test. The test injected a #10 nut and washer through the fuel impeller during firing, with no catastrophic failure of the engine. This practice not only satisfied the testing process, but also provided additional insights that are only possible through actual testing. Additionally, SpaceX employs real time issue tracking and reporting using the Trac system mentioned previously. This allows headquarters to connect directly with our Texas, Florida and Kwajalein locations for instant dispositions on key issues, allowing for expedited issue resolution. Next Practices: To what extent and how can your practices be shared with other programs and become Next Practices? The Falcon 1 vehicle provided the baseline for Falcon 9 and as such, best practices developed through this program can easily be shared. IV. ADAPTING TO COMPLEXITY: (HOW DO YOU DEAL WITH YOUR PROGRAM S UNIQUE COMPLEXITIES) = 30 POINTS Identify the Program s Market Uncertainty level using the definitions below. Then describe how you deal and address this specific uncertainty: The Falcon 1 program is a new generation of highly reliable, low cost launch services as a direct result of approaching the launch services industry from a breakthrough perspective. SpaceX s in-house manufacturing facility, vertically 2008 AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 7

8 - Is it a Derivative of existing product/system? - Is it a New Generation of existing product line/system applied to new market segment? - Is it a Breakthrough Program (new to the world product or system) Identify the Program s Technological Uncertainty using the definitions below. Then describe how you deal and address this uncertainty: - Low-tech: application of mature, well-established technology - Medium Technology: existing technology adopted to meet new design requirements - High-Technology: recently developed new technology - Super High-Technology: non-existing technology that needs to be developed during the program. Identify the level of your System Complexity using the definitions below. Then explain how you are dealing with this complexity: - An Assembly performing a single function. - A Sub-system fitting within a larger collection of systems? - A System a collection of subsystems performing multiple functions? - An Array a system of systems ; a widely dispersed collection of systems serving a common mission? Identify the Pace of your team s effort using the definitions below. Then describe how you deal with the integrated design and assembly capabilities, and flat organizational structure created a paradigm shift in the launch services industry. This has allowed SpaceX to experience significant growth during a time of economic downturn. The Falcon 1 program is low tech in terms of technological uncertainty. Built upon decades of employee experience in the launch services industry, the Falcon 1 program applies that knowledge to a clean-sheet rocket design that not only accounts for, but mitigates, a high number of common failure modes. The Falcon 1 program mitigates associated risks through state-of-the-art issue tracking, a free-flow of information between disciplines, and the test-to-failure mentality of quantifying uncertainty. The Falcon 1 program can be considered an Array inasmuch as the launch vehicle is comprised of many systems (avionics, propulsion, structures, launch operations, and more) and each system must work together to serve a common mission. The key advantage SpaceX has in dealing with the high level of system complexity is that SpaceX acts as the creator, owner and operator of the Array. In addition, the technology being employed is relatively well understood (i.e. RP1/LOX propellant constituents have been used for 50+ years). Because SpaceX designed Falcon 1 under the philosophy that through simplicity, both reliability and low cost can be achieved, the net product was an Array comprised of a system of relatively simple and well understood systems. As a result, a newcomer can come up to speed on Falcon 1 in relatively short order, the vehicle can be put together and launched with a very small team (less than 30 people), and decisions can be made rapidly due to the in house knowledge and expertise on these systems. To our knowledge, no rocket development program has been executed as rapidly as Falcon 1. The SpaceX team considered Falcon 1 development time 2008 AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 8

9 program s pace requirements: - Regular timing based on past efforts - Fast Competitive the pace is driven by desire to be first to market - Time Critical there is an absolute and critical-tosuccess deadline - Blitz there is a crisis element driving immediate response critical as a result of the time-sensitivity associated with the scheduled retirement of the Space Shuttle. Falcon 1 is the baseline from which SpaceX has built the larger Falcon 9. The Falcon 9, along with our Dragon spacecraft, will provide NASA with an all-america solution to the retirement of the Shuttle in 2010, and close the gap in US access to the International Space Station. SpaceX s unique organizational structure and extreme vertical integration were key drivers in successfully putting Falcon 1 into orbit in just six years. Other Complexities Describe other complexities faced by this program team and how you address them. V. METRICS (HOW DO YOU MEASURE PROGRAM S PERFORMANCE) = 30 POINTS (NOTE: WE ARE NOT LOOKING FOR YOUR SCOPES BUT THE MEASURES AND METRICS YOU ARE USING) How do you measure the impact of your program on your customer and your customer s satisfaction? Include a description of your metrics, as well as numerical evidence. How do you measure your program s efficiency performance in terms such as schedule and budget? SpaceX measures customer satisfaction in a number of ways. As part of our mission management process, customer surveys are distributed post mission to assess the quality of the customer experience. SpaceX also maintains a log of both positive and negative customer feedback across both launch and business programs, including the nature of the comment, specific quotes and action items. Additionally, repeat customers are a key sign of the program s success. As a development program, the Falcon 1 had two repeat customers, DARPA and ORS, which demonstrates confidence in the Falcon 1 program. The efficiency performance of the Falcon 1 program is measured in part via traditional documentation tools. For example, SpaceX maintains a log of Quality Objectives and Data Metrics. For each mission, SpaceX monitors contract milestones met versus # slipped, as well as mission requirements met versus not met. However, the Falcon 1 program is unique because the program was designed from the beginning to take advantage of efficiencies that would be difficult to implement in a more traditional aerospace environment. For example, since the Falcon 1 vehicle was designed from scratch by SpaceX, we were able to make design choices that reduced the overall cost of the vehicle, such as using the same propellants for both stages and opting not using hydrogen which is much more expensive. By designing, building and manufacturing a majority of the vehicle inhouse, we also avoid price and schedule inefficiencies of dealing with single-source vendors AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 9

10 In addition, Falcon 1 operations were also designed with schedule and budget efficiencies in mind. Our entire launch team is under 30 people and the Launch site is maintained by five people. Our design allows for simultaneous loading of RP1, LOX and helium on both stages all within 1 hr of launch and launch recycle after previous ignition abort can begin within 30 minutes. How do you measure your program s business success (operating margin, earned value or other indicator that can be released publicly) How do you measure and assess the long-term contribution of your program to the corporation/organization? How do you measure and assess the impact of your program on your team development and employee satisfaction? Additional Metrics: Describe any additional metrics you are using to measure your program s progress and success Falcon 1 is the baseline vehicle for Falcon 1e and Falcon 9. Every flight on the manifest, representing over $2B, can be used as an indicator of success for the Falcon 1 program. In particular, SpaceX was awarded a $1.6 billion NASA contract for 12 flights of Falcon 9/Dragon to ISS when Shuttle retires. Investors are also an indicator of the program s success. Even prior to the successful flight 4 of the Falcon 1, private venture capitalists have been interested in SpaceX as an investment opportunity. To date, SpaceX has secured approximately $35M in venture capital funds. Our experience with Falcon 1 has provided the baseline for future launches of Falcon 9. Through the Falcon 1 program, SpaceX has developed an intimate understanding of launch vehicles that can be applied to Falcon 9. In addition, the Falcon 9 hardware is now flight-tested in large part as a result of the Falcon 1 program. This impact can be measured in part by our launch manifest. Our manifest includes over 25 missions across government and commercial customers, both domestic and international. SpaceX measures and assesses the impact of the Falcon 1 program on our team through a variety of key metrics. Our attrition rate is extremely low, coupled with an ever increasing number of applicants. On average, the SpaceX growth rate is over 50% a year. In addition, all employees are granted options at the time of hire so execution of those options is another key metric in measuring employee satisfaction AVIATION WEEK PROGRAM EXCELLENCE INITIATIVE 10