The quotation offered by LSAteam comes from Rule 13. "Budget." If you read on just a bit more you'll find this identical wording in the last paragraphs of both 13. i) d. and 13. ii) d.
Items which need not be covered by the budget include prototyping costs; launch equipment or the launch site (except for costs which would be incurred for a repeat mission, as stated above); licence fees, permissions etc; charges made for attendance by safety personnel (provided that such personnel play no direct role in the mission); legal costs; medical costs; insurance costs; fines, penalties or loss of earnings arising from any cause whether prior to, during or after the mission; travel costs of people associated with the mission.
When the N-Prize was first suggested at Halfbakery.com, no one, certainly not Paul, had any idea what legal entanglements might be involved in N-type spaceflight. Many of the laws now governing such launches had yet to be enacted. Indeed, as first proposed, success likely would not have been materially possible without even considering the legal obstacles.
The "organisers" of the competition have pragmatically adapted the rules as the realities of private small-scale space transportation have become better understood. The Chief Optimist has clearly been very generous with his interpretation of launch costs. He has focused on the material cost of the launch itself rather than the developmental or legal or bureaucratic cost.
His standard has always been inescapably simple, "What would the total material cost be to do it again?"
SANEAlex wrote:Anyway it's nice to see someone else who still thinks the problem is solvable but agree it is likely to cost more than the prize is worth...
The problem is definitely solvable. The numbers favor success, but only just barely! As generous as Paul's challenge is, however, entrants have always understood (one hopes) that the cost of developing even a teeny tiny spaceflight launch system would far exceed the winnings. Anyone hoping to realize a profit from the prize money alone is greatly in need of an accountant.