System engineering of launch vehicles and spacecraft is a challenging and complex undertaking. There are many diverse systems which must be integrated and balanced to produce an effective design. This involves a multiplicity of individual engineering relationships that are difficult to integrate and even more difficult to define in a best balance. Integration efforts involve many different approaches, from process management to mass balance. But these approaches either do not directly address the launch vehicle or spacecraft performance or require many adjustments to be made to discover a balance. The system integrating physics, derived from the fundamental physics of the system, is the key to identifying a fully integrated system performance measure. Launch vehicles and spacecraft are thermodynamic systems with performance defined by thermodynamic properties. Thus, thermodynamic exergy, which integrates all of the systems thermodynamic properties, provides the system integrating relationships. This provides a basis for determining the most efficient design from among many different configuration options and for guiding the design activities from an integrated system level. This paper explores the current physics relationships used in launch vehicle system design and demonstrates that thermodynamic exergy provides a more explicit and complete approach to system integration.