Beyond cost tools: Spacecraft net present value and the hosted payload paradigm

Abstract

This article is at the intersection of and integrates two broad considerations in the space industry, namely, the emergence of the hosted payload paradigm and the increased emphasis for the acquisition of space systems to be value driven. Spacecraft, and hosted payloads, are value delivery artifacts; their value derives from the flow of service they provide to different stakeholders. Their design and acquisition should be value centric or at a minimum value informed. In this article, we first provide a value model and analysis for a spacecraft, which includes its life cycle cost, as well as its revenue model. The revenue model accounts for the services provided by the primary payload and their lease price, the loading dynamics, and provisions for its obsolescence. When integrated, these two models allow us to calculate the spacecraft net present value (NPV) and its return on investment. A sensitivity analysis helps us to identify the effectiveness of the different value levers of a spacecraft. Second, after a brief review of the hosted payload paradigm and developing a baseline spacecraft NPV model, we integrate considerations of the hosted payload into the value analysis, and in the process, we develop a pricing standard (and model) for hosted payloads. For the hosted payload business model to be sustainable, both main stakeholders in the transaction, the owner of the spacecraft (host) and that of the hosted payload (guest) have to see a net value in the hosting arrangement.We propose that the pricing of the hosted payload should be at a minimum ΔNPV neutral. This condition helps us calculate the lower bound for an upfront payment from the guest, an annuity or rentlike payment, or a combination of both.We developed the analytics for this condition and the three payment options, and we extended it beyond the ΔNPV neutral baseline to include an X% incremental return on the hosted payload.We conclude with a general reflection on value considerations in space systems and a series of analytical questions raised in this article and left as fruitful venues for future work.