Current design of space ship is analogous to building part of an airplane in a factory and part of the airplane on the runway. You can imagine that's a pretty expensive way to split the construction so the fact that we can just do the entire integrated rocket, transport it as a single unit, that definitely reduces costs.
What Space X ultimately contributes to space travel might please the government in other ways. One of the significant innovations of Falcon V is that because it's got five engines on the main stage, it can actually lose an engine and reach orbit safely, ... If the space shuttle were to lose one of its solid rocket boosters the people on the shuttle would be doomed.