Author Topic: Billion Dollar Subsidy  (Read 4966 times)

Offline QuantumG

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Billion Dollar Subsidy
« on: 07/13/2017 10:55 PM »
Quote from: Elon Musk
Worth noting that Boeing/Lockheed ("Other US" on chart) get a billion dollar annual subsidy even if they launch nothing. SpaceX does not.

https://twitter.com/elonmusk/status/885631423306006528

Elon said so.
Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? The slowest possible.

Offline whitelancer64

Re: Billion Dollar Subsidy
« Reply #1 on: 07/13/2017 11:11 PM »
Not exactly new news.

Release No: CR-178-14
Sept. 16, 2014

"United Launch Services LLC, Littleton, Colorado, has been awarded a $938,372,859 modification (P00048) to previously awarded FA8811-13-C-0003 cost-plus-incentive-fee contract for fiscal 2015 EELV launch capability for the Delta IV and Atlas V families of launch vehicles."

https://www.defense.gov/News/Contracts/Contract-View/Article/606021/
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Offline QuantumG

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Re: Billion Dollar Subsidy
« Reply #2 on: 07/13/2017 11:27 PM »
How is a contract to provide services a subsidy?
Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? The slowest possible.

Online Lars-J

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Re: Billion Dollar Subsidy
« Reply #3 on: 07/14/2017 01:40 AM »
How is a contract to provide services a subsidy?

Subsidy may be a strong term, but it is debatable. It is a service that for every other launch provider on Earth is baked into the launch contract. (Which is why it will be changing) ULA already gets paid handsomely to launch payloads.

This generic "launch capability" service (good luck trying to get them to itemize that one) is an extra fee on top to "keep on the lights", but in reality is seems to be a mechanism to funnel $$$ directly from tax payers to Lockheed Martin & Boeing. Think of it as a ~$80 million "tip" for every ULA launch.

Others will obviously disagree.  ;)
« Last Edit: 07/14/2017 01:43 AM by Lars-J »

Offline QuantumG

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Re: Billion Dollar Subsidy
« Reply #4 on: 07/14/2017 02:13 AM »
Quote from: Tory Burno
Sorry. That is simply not true. There is no "billion dollar subsidy". Amazing that this myth persists.

https://twitter.com/torybruno/status/885682630603268096
Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? The slowest possible.

Offline Lar

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Re: Billion Dollar Subsidy
« Reply #5 on: 07/14/2017 02:38 AM »
Except... What would you expect Tory to say? He's a good guy, playing the hand he was dealt. He can't come out and say "yes, it's a subsidy" even if it was...

You can make the argument that it's not a subsidy, not exactly, but if SpaceX got it, you know almost everyone would call it one.
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Offline QuantumG

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Re: Billion Dollar Subsidy
« Reply #6 on: 07/14/2017 02:42 AM »
Can you make the argument that it is a subsidy? Do ya even know what they use the money for?

Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? The slowest possible.

Offline Lar

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Re: Billion Dollar Subsidy
« Reply #7 on: 07/14/2017 02:51 AM »
If I knew exactly what they use the money for I guess that would weaken the argument that it's a subsidy.

I gather you think it's not. OK. Noted. Others think it is. Also noted. A lot of "yes it is", "no it isn't" probably isn't all that helpful[1]. Sometimes it pays to state what you mean more plainly, QuantumG. Savvy?

1 - as amusing as a tweet war between Elon and Tory might be, that's about all it is so far anyway.
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Offline Sam Ho

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Re: Billion Dollar Subsidy
« Reply #8 on: 07/14/2017 02:59 AM »
ELC has been discussed quite a few times already. Here's a thread from last month.

https://forum.nasaspaceflight.com/index.php?topic=43159.0

Offline su27k

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Re: Billion Dollar Subsidy
« Reply #9 on: 07/14/2017 03:06 AM »
The focus on the word "subsidy" is missing the point, you can change it to "contract" if you like, the point is Boeing/Lockheed gets annual government funding even if they don't launch anything, this is not true for SpaceX.

Online envy887

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Re: Billion Dollar Subsidy
« Reply #10 on: 07/14/2017 03:09 AM »
Can you make the argument that it is a subsidy? Do ya even know what they use the money for?

The money goes to fixed costs associated with maintaining launch infrastructure and capabilities. It's not directed to particular launches and doesn't vary directly with the number of launches that actually happen.

Attached is an interesting if slightly dated report on ELC and ELS:

Online envy887

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Re: Billion Dollar Subsidy
« Reply #11 on: 07/14/2017 03:12 AM »
The focus on the word "subsidy" is missing the point, you can change it to "contract" if you like, the point is Boeing/Lockheed gets annual government funding even if they don't launch anything, this is not true for SpaceX.
Which leads to an interesting question: can they use ELC funds to support launches that are competitively bid?

If they can, that would be a major advantage, since a lot of overhead would already be paid off.

Offline Lar

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Re: Billion Dollar Subsidy
« Reply #12 on: 07/14/2017 03:15 AM »
The focus on the word "subsidy" is missing the point, you can change it to "contract" if you like, the point is Boeing/Lockheed gets annual government funding even if they don't launch anything, this is not true for SpaceX.
Which leads to an interesting question: can they use ELC funds to support launches that are competitively bid?

If they can, that would be a major advantage, since a lot of overhead would already be paid off.

per other threads on this, if I recall correctly, I think they have to pay back part of the subsidy for each commercial launch from the subsidized facilities.
"I think it would be great to be born on Earth and to die on Mars. Just hopefully not at the point of impact." -Elon Musk
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Offline Lar

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Re: Billion Dollar Subsidy
« Reply #13 on: 07/14/2017 03:32 AM »
"I think it would be great to be born on Earth and to die on Mars. Just hopefully not at the point of impact." -Elon Musk
"We're a little bit like the dog who caught the bus" - Musk after CRS-8 S1 successfully landed on ASDS OCISLY

Offline AS-503

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Re: Billion Dollar Subsidy
« Reply #14 on: 07/14/2017 03:43 AM »
@ QuantumG
I see you threw the cat amongst the pigeons with your thread title.
Maybe you should have italicized the word subsidy?

Speaking of the ELC, who (ultimately) is the cat and who are the pigeons? ;)


Offline Lar

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Re: Billion Dollar "Subsidy"
« Reply #15 on: 07/14/2017 04:04 AM »
Maybe you should have italicized the word subsidy?
Can't do that in titles (with this forum software) that I am aware of. You can, however use "scare quotes" I suppose... as I did in this post.
"I think it would be great to be born on Earth and to die on Mars. Just hopefully not at the point of impact." -Elon Musk
"We're a little bit like the dog who caught the bus" - Musk after CRS-8 S1 successfully landed on ASDS OCISLY

Online yokem55

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Re: Billion Dollar Subsidy
« Reply #16 on: 07/14/2017 04:27 AM »
@yokem55 @elonmusk covers a fixed number and a specific and definite scope. It simply gives the USG flexibility to be late with the birds or change their order
https://twitter.com/torybruno/status/885692106949271552

So, it ends up being a means for the government to prepay for some fixed launch costs. This ends up stabilizing ULA's cash flow in the face of variable demand. Is it a 'subsidy'? Well, I count 6 commercial launches in 3 years including the Cygnus launches. Would that commercial demand have been enough to keep everything running properly if the government only paid for it's launches in full as it needed them?

Online Lars-J

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Re: Billion Dollar Subsidy
« Reply #17 on: 07/14/2017 04:51 AM »
@yokem55 @elonmusk covers a fixed number and a specific and definite scope. It simply gives the USG flexibility to be late with the birds or change their order
https://twitter.com/torybruno/status/885692106949271552

So, it ends up being a means for the government to prepay for some fixed launch costs. This ends up stabilizing ULA's cash flow in the face of variable demand. Is it a 'subsidy'? Well, I count 6 commercial launches in 3 years including the Cygnus launches. Would that commercial demand have been enough to keep everything running properly if the government only paid for it's launches in full as it needed them?

If ULA can't keep "everything running properly" without the ELC payment, they need to raise prices. Just like everyone else.

But Tony is fond of quoting launch contract prices without the ELC factored in (for orders that fall under the ELC umbrella), which is a misleading comparison, and he knows it.

I have no objection to ULA - in  fair market - being paid the funds that are part of ELC payment. If the government feels that this extra cost buys them extra flexibility or assurance. BUT... it ought to be included in the launch bid and contract.
« Last Edit: 07/14/2017 04:52 AM by Lars-J »

Offline Next Spaceflight

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Re: Billion Dollar Subsidy
« Reply #18 on: 07/14/2017 05:26 AM »
Ok, so I asked ULA CEO Tory Bruno some questions on Twitter, to try and get some additional info out of him. Here's are his responses.

Q: Would ULA support SpaceX being given a similar contract? I think SpaceX's argument is that you are getting money that's unavailable to them.

A: Better Question for USAF. This was simply a split contract structure.  1 to build. 1 to fly. Same scope for anyone.

Q: Yes, but you are the only one that has it. My question is, would you have any objections to competitors getting it as well.

A: Everybody has it. It's the same whether it's bundled in one contract or 2. USAF's choice. Have not seen it in the recent competitions

Q: Ok, so you are saying that if SpaceX was awarded a launch at a certain price, the ELC equivalent is just factored into the launch price?

A: Same. Just 1 contract vs 2. This structure not used on recent competitions. Single stand alone contracts. We compete to the same RFP

Q: I see... And the current single contract price for ULA is the rocket builder one?

A: RocketBuilder is a single contract, total fly away price.

Link to our convo: https://twitter.com/torybruno/status/885704801698316289

Ok, but the thing is if you do the math and divide the amount that ULA is paid by the AF, divided by the number of launches, you get the controversial $400 million. THE MATH DOES NOT WORK.

It seems to me that when someone claims ULA is subsidized, ULA states that in reality it's just two separate fees instead of one. But when someone does the math and gets $400 million, ULA claims that they charge much less by ignoring some of the "subsidies." Additionally, the RocketBuilder.com excuse is bogus. The Delta IV isn't even mentioned on the site, and the Air Force purchased most of the launches in question before ULA started cutting costs.

Edit: To be fair to ULA though, the word "subsidy" might be a bit too far. Additionally, SpaceX makes it seem like it's $400 million per launch + a $1 billion subsidy for ULA. I don't see how this adds up either.
« Last Edit: 07/14/2017 05:34 AM by Next Spaceflight »

Offline woods170

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Re: Billion Dollar Subsidy
« Reply #19 on: 07/14/2017 06:46 AM »
Here is a short summary of this thread:

Neither Elon, nor Tory, are strangers to spin.

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