Author Topic: Billion Dollar Subsidy  (Read 4967 times)

Offline QuantumG

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Re: Billion Dollar Subsidy
« Reply #20 on: 07/14/2017 06:48 AM »
Really expensive rockets, no subsidy though.  ;D
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 Chalmer

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Re: Billion Dollar Subsidy
« Reply #21 on: 07/14/2017 06:50 AM »
It is clearly a subsidy.

Taking the Wikipedia definition

Quote
"A subsidy is a form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.Although commonly extended from government, the term subsidy can relate to any type of support for example from NGOs or as implicit subsidies. Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, accelerated depreciation, rent rebates).

Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical. The most common forms of subsidies are those to the producer or the consumer. Producer/production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production. Consumer/consumption subsidies commonly reduce the price of goods and services to the consumer. For example, in the US at one time it was cheaper to buy gasoline than bottled water.

Whether subsidies are positive or negative is typically a normative judgment. As a form of economic intervention, subsidies are inherently contrary to the market's demands. However, they can also be used as tools of political and corporate cronyism."

Factors of productions is in this case things such as launch services, range fees, and maintenance. 

A subsidy doesnt mean that it is free money, given without any expectation of getting something for them. In this case the government subsidizes ULA through ELC to achieve more reliable launch and more flexibility than the market could otherwise offer at the same marginal price point. (At least until now with the entrance of SpaceX)

That the government is almost the sole customer doesnt change this.

Offline QuantumG

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Re: Billion Dollar Subsidy
« Reply #22 on: 07/14/2017 06:54 AM »
That the government is almost the sole customer doesnt change this.

Says who? The fact that ULA has to pay the government every time they launch a non-government payload totally destroys the claim that it's a subsidy. I really don't understand why anyone wants to claim that ULA's massively expensive launches are somehow subsidized by the government. If they were undercutting, well, ANYONE, I can imagine why you'd want to make that claim, but they're not.
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 Chalmer

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Re: Billion Dollar Subsidy
« Reply #23 on: 07/14/2017 07:10 AM »
That the government is almost the sole customer doesnt change this.

Says who? The fact that ULA has to pay the government every time they launch a non-government payload totally destroys the claim that it's a subsidy. I really don't understand why anyone wants to claim that ULA's massively expensive launches are somehow subsidized by the government. If they were undercutting, well, ANYONE, I can imagine why you'd want to make that claim, but they're not.

Says I.

The fact that there is some back compensation to the government in case of commercial sales, does not change anything in regards to the structure of the ELC as a subsidy. So it destroys nothing.

So you would argue something is only a subsidy if the receiver can price cut the competition? I am European I have seen a lot of old national champions being subsidized. That did not mean they got price competitive or undercut anyone. It meant they got kept alive to provide jobs, until the day they were so un-competitive that the public had enough and shut the money flow.

Look I said nothing about the fairness or validity of this arrangement. When the government forced a private launch monopoly with the creation of ULA, it was probably a good choice to arrange payments like this. But it does not change the fact that it is a subsidy.


Offline Next Spaceflight

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Re: Billion Dollar Subsidy
« Reply #24 on: 07/14/2017 07:27 AM »
Whether or not we call it a subsidy is not important. That's just a term, and I think we all understand how the ELC works. The actual meat here is whether or not SpaceX is on a level playing field with ULA when it comes to government launches.
« Last Edit: 07/14/2017 07:27 AM by Next Spaceflight »

Offline woods170

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Re: Billion Dollar Subsidy
« Reply #25 on: 07/14/2017 08:58 AM »
Whether or not we call it a subsidy is not important. That's just a term, and I think we all understand how the ELC works. The actual meat here is whether or not SpaceX is on a level playing field with ULA when it comes to government launches.
They are. Competitively awarded NSS launches are single, all-in contracts. ULA is not allowed to use any of the ELC funds to support a competitively awarded NSS launch. This rule-of-the-game was implemented to prevent the losing competitor from succesfully suing the USG for not providing a level playing field. In fact, the implementation of this rule-of-the-game is one of several reasons why the lawsuit between USAF and SpaceX (over the ULA block-buy) was eventually settled outside the courtroom in early 2015.
ULA subsequently used a minor consequence of this rule-of-the-game as an excuse to refrain from bidding on the first competitively awarded NSS launch. It was their pityfull attempt to have the new rule-of-the-game overthrown. However, it backfired on ULA big time when both USAF and US Congress heavily criticized ULA for not bidding on the contract.
« Last Edit: 07/14/2017 09:04 AM by woods170 »

Offline Semmel

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Re: Billion Dollar Subsidy
« Reply #26 on: 07/14/2017 09:16 AM »
Whether or not we call it a subsidy is not important. That's just a term, and I think we all understand how the ELC works. The actual meat here is whether or not SpaceX is on a level playing field with ULA when it comes to government launches.
They are. Competitively awarded NSS launches are single, all-in contracts. ULA is not allowed to use any of the ELC funds to support a competitively awarded NSS launch. This rule-of-the-game was implemented to prevent the losing competitor from succesfully suing the USG for not providing a level playing field. In fact, the implementation of this rule-of-the-game is one of several reasons why the lawsuit between USAF and SpaceX (over the ULA block-buy) was eventually settled outside the courtroom in early 2015.
ULA subsequently used a minor consequence of this rule-of-the-game as an excuse to refrain from bidding on the first competitively awarded NSS launch. It was their pityfull attempt to have the new rule-of-the-game overthrown. However, it backfired on ULA big time when both USAF and US Congress heavily criticized ULA for not bidding on the contract.

Thank you Woods, that is a nice in-depth explanation. I did not know that ELC money cant be used for competitive bids. Furthermore, because it has to be repaid for each launch that is not supported by ELC, it actually has a 0-sum effect on the competition between ULA and SpaceX.
Going to some extreme, if ULA would ONLY launch competitive or commercial launches in one year, the entire sum of ELC would have to be given back? Or the other extreme, if ULA would launch no competitive or commercial payload, but at least one NSS payload, could it keep the entire sum of ELC? If that is the case ULAs best strategy would be to do exactly that: no competitive bids, no commercial bids and only launch sole source contracts for the DOD. I cant imagine that this would be true, there must be some mistake in my logic. Yet, that seems to be exactly what ULA tried to do and what we see in development, ULA gets cut off from the commercial market and it tried (as you mentioned) to wiggle out of competitive bids.

Offline Steven Pietrobon

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Re: Billion Dollar Subsidy
« Reply #27 on: 07/14/2017 11:01 AM »
Just noting that the chart that Elon is referring to has a degree of crystal ball gazing for 2017 and pretty much all crystal ball gazing for 2018.

As to subsidies, it should be noted that Falcon 9, Dragon, Dragon 2 and Raptor all received subsidies in one way or another during their development. SpaceX is not above taking handouts from the government. Pot, Black, you know the rest.
Akin's Laws of Spacecraft Design #1:  Engineering is done with numbers.  Analysis without numbers is only an opinion.

Offline jak Kennedy

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Re: Billion Dollar Subsidy
« Reply #28 on: 07/14/2017 11:14 AM »
Just noting that the chart that Elon is referring to has a degree of crystal ball gazing for 2017 and pretty much all crystal ball gazing for 2018.

As to subsidies, it should be noted that Falcon 9, Dragon, Dragon 2 and Raptor all received subsidies in one way or another during their development. SpaceX is not above taking handouts from the government. Pot, Black, you know the rest.

Would you label all the money SpaceX received as subsidies or also as development costs? NASA wanted a service and sometimes you have to pay for technology to be developed.

Offline Steven Pietrobon

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Re: Billion Dollar Subsidy
« Reply #29 on: 07/14/2017 11:25 AM »
Would you label all the money SpaceX received as subsidies or also as development costs? NASA wanted a service and sometimes you have to pay for technology to be developed.

I wouldn't label all the money as a subsidy. In the real commercial world, a company funds any new developments out of their own pocket or funds they borrow (which they then pay back from the profits selling the product). If you receive development money with no obligation to pay that money back, then that looks like a subsidy to me.
Akin's Laws of Spacecraft Design #1:  Engineering is done with numbers.  Analysis without numbers is only an opinion.

Online gongora

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Re: Billion Dollar Subsidy
« Reply #30 on: 07/14/2017 11:44 AM »
The amount ULA pays back to the government when they do a commercial launch is a tiny fraction of the ELC.

Offline woods170

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Re: Billion Dollar Subsidy
« Reply #31 on: 07/14/2017 12:08 PM »
The amount ULA pays back to the government when they do a commercial launch is a tiny fraction of the ELC.
Unsurprising given that commercial launches constitute a tiny fraction of the ULA launch manifest.

Offline Chasm

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Re: Billion Dollar Subsidy
« Reply #32 on: 07/14/2017 12:18 PM »
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.

\_(ツ)_/

They get the money so that the government can (more or less, within the contracted restrictions) launch any of their satellites on any of the any of the contracted rockets at any time in any order.
Should the government decide to postpone again and again and not launch anything for a year they still get paid. Do'h!
I really doubt that SpaceX would do such switches for free in their fixed price contracts...

Any mission outside of block buy has to reimburse the government for ELC. That is NASA but also all the remaining USAF and other government launches. The is much talk about this reimbursement being to small but since it de facto only transfers money from one budget to another it does not really matter too much. Commercial launches are too rare for ULA.

Anyway... By all accounts that type accounting is going the way of the Dodo. The current bids should be largely for a time when it is already done and over with.
The next phase should be interesting. The current expectation is still 2 providers with a 60/40 split.
I wonder how that will play out, my crystal ball says 60/60 split. 60% of the launches to SpaceX, 60% of the money to ULA. Because Elon Time, my bet is that SpaceX will postpone too much to get the certification requirements for the more specialized and expensive launches done in time.
Which is very good for assured access to internet drama. 8)

Online envy887

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Re: Billion Dollar Subsidy
« Reply #33 on: 07/14/2017 01:26 PM »
Would you label all the money SpaceX received as subsidies or also as development costs? NASA wanted a service and sometimes you have to pay for technology to be developed.

I wouldn't label all the money as a subsidy. In the real commercial world, a company funds any new developments out of their own pocket or funds they borrow (which they then pay back from the profits selling the product). If you receive development money with no obligation to pay that money back, then that looks like a subsidy to me.

In both cases the USG is paying for activities that it needs but that wouldn't be profitable as purely commercial ventures. The real difference between most SpaceX contracts and ELC was:

1) competitively bid vs. sole-source, non-competitive
2) a firm fixed price vs. cost-plus incentive fee
3) active development with a specific fixed end goal vs. ongoing operations with no end goal
4) only paid for milestone achieved vs. obligated whether those operations were actually used

Online Chris Bergin

Re: Billion Dollar Subsidy
« Reply #34 on: 07/14/2017 01:41 PM »
This is always going to be a food fight. Certainly politics in play, so has to go into space politics. Better than locking it as people go on and on and on about the same things discussed over the years.

Online yokem55

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Re: Billion Dollar Subsidy
« Reply #35 on: 07/14/2017 01:42 PM »
Just noting that the chart that Elon is referring to has a degree of crystal ball gazing for 2017 and pretty much all crystal ball gazing for 2018.

As to subsidies, it should be noted that Falcon 9, Dragon, Dragon 2 and Raptor all received subsidies in one way or another during their development. SpaceX is not above taking handouts from the government. Pot, Black, you know the rest.
The difference here though is that SpaceX have very specific deliverables and milestones to reached on the development of specific pieces of hardware. I'm not sure what the exact deliverables are for the ELC contract.

Online envy887

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Re: Billion Dollar Subsidy
« Reply #36 on: 07/14/2017 02:30 PM »
Just noting that the chart that Elon is referring to has a degree of crystal ball gazing for 2017 and pretty much all crystal ball gazing for 2018.

As to subsidies, it should be noted that Falcon 9, Dragon, Dragon 2 and Raptor all received subsidies in one way or another during their development. SpaceX is not above taking handouts from the government. Pot, Black, you know the rest.
The difference here though is that SpaceX have very specific deliverables and milestones to reached on the development of specific pieces of hardware. I'm not sure what the exact deliverables are for the ELC contract.

There are specific deliverables for ELC, including payload and mission integration and analysis, propellant, pad maintenance, etc. Everything required to launch up to a certain number of missions.

Online yokem55

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Re: Billion Dollar Subsidy
« Reply #37 on: 07/14/2017 03:28 PM »
Just noting that the chart that Elon is referring to has a degree of crystal ball gazing for 2017 and pretty much all crystal ball gazing for 2018.

As to subsidies, it should be noted that Falcon 9, Dragon, Dragon 2 and Raptor all received subsidies in one way or another during their development. SpaceX is not above taking handouts from the government. Pot, Black, you know the rest.
The difference here though is that SpaceX have very specific deliverables and milestones to reached on the development of specific pieces of hardware. I'm not sure what the exact deliverables are for the ELC contract.

There are specific deliverables for ELC, including payload and mission integration and analysis, propellant, pad maintenance, etc. Everything required to launch up to a certain number of missions.
If the number of missions launched is less than the 'up to' number, does the government get a credit in the following year? Or does the ELC for that year simply cover fewer launches?

Offline Jim

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Re: Billion Dollar Subsidy
« Reply #38 on: 07/14/2017 03:39 PM »
BUT... it ought to be included in the launch bid and contract.

It can't be.  The Air Force buys multiple rides and also buys the ability to delay or swap payloads separately.  It can't be bought one launch at a time.  Air Force launch services and spacecraft are funded by separate sources, unlike NASA's.

Offline Lar

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Re: Billion Dollar Subsidy
« Reply #39 on: 07/14/2017 03:57 PM »
If the number of missions launched is less than the 'up to' number, does the government get a credit in the following year? Or does the ELC for that year simply cover fewer launches?
The idea as I understand it is that the ELC is paying for fixed costs of assured access to space, so if the government does fewer launches, the ELC simply covers fewer launches.

Tory and Elon are both spinning but Tory actually explains all this pretty well (you have to despin filter it a bit, but that's OK) inthe SFN op-ed link I posted before. It's worth reading, honest.

Also


\_(ツ)_/
...
Which is very good for assured access to internet drama. 8)

LOL! We already have that. No need for any extra payments there ! :) (that post wins the thread so far)
"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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