Rocket Lab: How DOGE Can Help Them

Overview

Elon Musk’s proposed presidential advisory commission, the Department of Government Efficiency (DOGE), has gained a lot of attention since President-elect Donald Trump announced it after his election win in November. Although it bears “department” in its name, the strategic advisory body for spending for government leaders will not be an official federal agency or commission. There are no plans of seeking congressional authority to set up the office.

Instead, it will only be an advisory body, which will be headed by billionaires Elon Musk and Vivek Ramaswamy. In their Wall Street Journal op-ed, the pair announced that they would “serve as outside volunteers, not federal officials or employees”.

This also means that they (and those who will help) intend to not receive any compensation, including those of the potential staff that will be recruited to work for more than 80 hours a week.

With this, eliminating some government spending is highly likely to redirect resources to what Musk and the new administration see as high-priority programs, likely including space exploration. Rocket Lab could seal more contracts with the US government despite Musk’s strong influence in the incoming administration.

What is DOGE?

Musk and Ramaswamy outlined their mission centered on three reforms, namely regulatory rollbacks, workforce reductions, and cost-cutting measures. They aim to target federal regulations they view as exceeding congressional mandates, streamline the federal workforce through layoffs, agency relocations, and stricter in-office requirements.

They also intend to reduce budget expenditures by curbing unauthorized programs, cutting appropriated but unspent funds, and exposing potential inefficiencies such as waste and fraud in government contracts. Recent research found out that the number of people who work for private enterprises and nonprofits but get paid from the U.S. Treasury is now more than three times as large as the entire on-payroll federal civilian workforce. That doesn’t mean these personal are ‘stealing’ by any means. Many are serving serious roles for the US government. But it does mean DOGE will likely scrutinize their roles even more.

On DOGE’s X (formerly Twitter) account, they continue to allege the current government of excessive spending on worthless projects, which includes a previously proposed pay hike for members of Congress from $174,000 to $243,000 per annum, $6.9 million allotted for studying ‘smart toilets’, $20 million for a new Sesame Street show in Iraq, and $1.5 million to use kittens in analyzing motion sickness, among others.

How Does DOGE Help Rocket Lab?

By rolling back federal regulations deemed excessive, Rocket Lab may likely benefit from fewer compliance burdens through shorter processes and faster approvals for permits or contracts if inefficiencies within relevant federal agencies are addressed early. To this point, highlighting and eliminating waste in government spending will redirect resources to high-priority programs, which will likely include space exploration and technology development.

Since Trump favors cost-cutting measures once he steps into office, it’s likely that the government will favor contractors that offer high value services but at a lower rate. Rocket Lab’s reusable rockets are expected to bring down launch prices, which is the opposite of Boeing’s very expensive government contracts such as the $4.2 billion fixed-price agreement with NASA on the Starliner commercial crew program. SpaceX was also awarded $2.6 billion to build another crew space transportation system to ferry astronauts to and from the ISS .

Boeing reported in October that their Defense, Space & Security business lost $2.4 billion in the quarter, with a -43% operating margin because of these fixed-price contracts.

On the other hand, Rocket Lab has been known for drastically reducing costs. Its Electron rocket only costs $5 million per satellite sent into orbit, which is way below other dedicated launch services. It is also confident of going into fixed-price contracts with the government.

With the upcoming Neutron rocket, analysts expect the cost of goods for the launch to only be at around $20-25 million, whereas even SpaceX’s Falcon 9 costs double. Neutron’s $4,230 per kilogram cost is way lower than the Falcon 9’s $6,000 per kilogram rideshare pricing,

With the coming administration, CEO Peter Beck expressed his confidence about Trump:

“Trump is seen as someone who is favorable for the space industry. There is certainly something about this Trump and Musk premium that’s beneficial to the industry.”

Risks

Some analysts are skeptical about the planned advisory commission. For example, the Brookings Institution believes that Musk and Ramaswamy's project is unlikely to be impactful since they still need statutory changes in terms of cutting one-third of the government’s spending.

Under the Impoundment Control Act of 1974, which requires US presidents to spend money as Congress mandates, Trump vowed to challenge this Act so DOGE’s plans can push through without congressional approval if the current Supreme Court will support their efforts.

In addition, any proposal that will affect Social Security, Medicare and Medicaid spending by the government will most likely face a huge backlash from the public. Ramaswamy, however, denied this in early December in an interview and said that it was still premature to discuss huge cuts on these entitlement programs:

“Right now, there are hundreds of billions of dollars flowing out the door of all of those programs ending up in the hands of people who, even under the statute, should not be receiving those payments."

And then there’s the risk of history repeating itself. DOGE has been compared to President Ronald Reagan's Grace Commission in the ‘80s to curb the government's wasteful spending. However, it was found out that the commission overstated their savings estimates and many of the recommendations they proposed ended up not being implemented at all.

Bottom Line

The proposed advisory body, DOGE, led by Elon Musk and Vivek Ramaswamy, will strictly focus on reducing wasteful government spending, streamlining federal processes, and targeting excessive regulations. They plan to cut costs by eliminating inefficient programs, curbing unauthorized expenditures, and exposing wasteful projects, such as excessive congressional pay hikes and frivolous research. 

This could mostly likely benefit companies like Rocket Lab by fostering cost-effective contracts, and redirecting resources to what Musk and Trump see as high-priority sectors such as space exploration. The key skepticism remains with legal barriers, public backlash over entitlement cuts, and historical parallels to unsuccessful efforts like Reagan's Grace Commission.

Despite this, I’m still very bullish about Rocket Lab. Trump is supportive of space exploration and companies like Rocket Lab, even with Musk’s influence, will not be left behind.

Disclosure: At the time of this publication some members affiliated with Marksman Research own stock, options or other interest in RKLB.