Author Topic: NASA told to slow down CRS payment schedule for Orbital's cargo runs  (Read 26386 times)

Online john smith 19

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Both companies were behind in their demo flights by a major margin. NASA needed to keep a closer eye on both of them. Rocketplane Kistler lost it's COTS contract for falling behind on their milestones but these other two did not. That is very interesting and how Orbital has gotten funds for CRS without having their demo flights. ( the first flight was for the launcher )
This is a bit of a revision of history. RK lost its SSA because it could not meet its funding requirement. NASA re-bid the contract and Orbital got the remaining funds (about 1/2 what Spacex got) but later on NASA "decided" they wanted a "risk reduction flight" and paid OSC about another $300m, making their award roughly up to that of Spacex.

Yep. "Demonstrate before contract" was a bluff. The partners called.
Maybe.

But there's a difference between confirming there is a contract in place and you will get paid (as long you somehow deliver the cargo to the ISS) and paying 70% of that value before you do so.

So yes, Orbital gets to "bank" the cash, but they have to give it back if they mess up. In return, NASA gets the assurance that the hardware for those later missions has started down the production pipeline. Gerstenmaier says the resulting reduction in "programmatic risk" is quite valuable ... and he would know!
Why? They are no where near demonstrating successful docking. Basically NASA have handed OSC [edit c$910m c$1.33Bn]
 to place on the money market to earn interest for how ever many years it takes them to start executing this contract.

Note I don't know if Spacex got the same terms but I would would be equally unhappy if they did.
« Last Edit: 06/18/2013 09:16 AM by john smith 19 »
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Offline kkattula

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Launch vehicles are not built in a few days or even weeks.

I expect that without staged CRS payments, they wouldn't have been able to start building much of the CRS hardware yet.

And if they hadn't started yet, there would be no chance of meeting NASA's resupply requirement schedule. So NASA spends some money up front to get what they want, when they need it.

Orbital are not a black box. NASA has enough insight into what they're doing to have confidence the money won't be wasted. OIG are just quibbling about the precise level of confidence that's appropriate.

Orbital are not banking the money. They're spending it building rockets. Their profit margin is most likely in the final payment for each flight.
« Last Edit: 06/18/2013 09:31 AM by kkattula »

Offline QuantumG

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This is a bit of a revision of history. RK lost its SSA because it could not meet its funding requirement.

Uh huh.. that's one way to put it.. another way, the way the rest of the world sees it, NASA revealed proprietary information about RPK's financial requirements and financiers started demanding unreasonable equity because they knew RPK was on the hook.

Quote
Note I don't know if Spacex got the same terms but I would would be equally unhappy if they did.

They did get the same deal. Kelly Starks has been complaining about this for years.
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Offline QuantumG

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Launch vehicles are not built in a few days or even weeks.

I expect that without staged CRS payments, they wouldn't have been able to start building much of the CRS hardware yet.

And if they hadn't started yet, there would be no chance of meeting NASA's resupply requirement schedule. So NASA spends some money up front to get what they want, when they need it.

Alternate reality science fiction.

We have no idea what might have happened. In the rest of the world people deliver things on schedule and under budget, or they don't get paid. In the NASA (and DoD) world people know they'll get paid anyway, so they don't have any incentive to deliver any faster than is necessary to keep the money flowing.
Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? Well... have you heard of Zeno's paradox?

Offline spectre9

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Cygnus isn't cheap.

Give Orbital a break.

It's not like they're getting bank interest on a stack of spacecraft sitting in a shed.

antonioe even joked about one of the service modules getting cobwebs.

At least Orbital will be launching their next flight to ISS on a rocket that has already been tested as of today.

Offline Jim

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Here's NASA scoring an own goal it seems:

http://www.nasaspaceflight.com/2013/06/nasa-told-slow-down-crs-payment-orbitals-cargo-runs/

From the article
"the company is on track to receive up to 70 percent of the funds associated with six of its eight CRS missions prior to having flown a demonstration flight.
What???

They are going to bank 70% of the cash for 75% of their  contract without delivering a single Kg of payload to the ISS?

This is just wrong.  AFAIK Antares is still in development. The actual delivery contract should not have started paying them until they actually started delivering stuff.

The obvious question is are Spacex on these terms as well? Because they seem exceptionally generous by the standards of a commercial contract and NASA should not have signed it with either of them.   :(


They are getting paid for work done, mission integration was the bulk of the costs (along with hardware build)
spacex got the same deal (where do you think all the money for V1.1 came from?).  Don't know why anybody is surprised.  The progress payment schedule options were in the RFP for the contract and some words are below.

They are following the same template as was done for Spacehab and launch service contracts.  On a typical spacecraft launch service mission, the final payment based on launch is only 10-20% of the total contract.
« Last Edit: 06/18/2013 12:48 PM by Jim »

Offline Jim

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We have no idea what might have happened. In the rest of the world people deliver things on schedule and under budget, or they don't get paid. In the NASA (and DoD) world people know they'll get paid anyway, so they don't have any incentive to deliver any faster than is necessary to keep the money flowing.


wrong take. 
« Last Edit: 06/18/2013 12:35 PM by Jim »

Offline Jim

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The following constraints apply:
(A) Mission milestone payments made for resupply missions prior to completion of ISS
integration, shall not exceed 30% of the cost of that mission.
(B) The final milestone payment must equal at least 20% of the cost of each mission.
(C) After successful completion of ISS integration, the total of milestone payments prior to (and including) the MIR shall not exceed 50% of the total cost of the mission.

Offline Lurker Steve

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Note I don't know if Spacex got the same terms but I would would be equally unhappy if they did.

How do you think SpaceX was "Cash Flow Positive" without launching any spacecraft ??

Offline kkattula

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Launch vehicles are not built in a few days or even weeks.

I expect that without staged CRS payments, they wouldn't have been able to start building much of the CRS hardware yet.

And if they hadn't started yet, there would be no chance of meeting NASA's resupply requirement schedule. So NASA spends some money up front to get what they want, when they need it.

Alternate reality science fiction.

We have no idea what might have happened. In the rest of the world people deliver things on schedule and under budget, or they don't get paid. In the NASA (and DoD) world people know they'll get paid anyway, so they don't have any incentive to deliver any faster than is necessary to keep the money flowing.


LOL. I think we all know who's living in an alternate reality.  ::)
 
Milestone payments are commonplace in industry. That doesn't mean they don't have associated deadlines. When things fall behind, they usually get re-negotiated initially, not cancelled unless they miss multiple deadlines. Try building a house even.

Offline RocketmanUS

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Launch vehicles are not built in a few days or even weeks.

I expect that without staged CRS payments, they wouldn't have been able to start building much of the CRS hardware yet.

And if they hadn't started yet, there would be no chance of meeting NASA's resupply requirement schedule. So NASA spends some money up front to get what they want, when they need it.

Alternate reality science fiction.

We have no idea what might have happened. In the rest of the world people deliver things on schedule and under budget, or they don't get paid. In the NASA (and DoD) world people know they'll get paid anyway, so they don't have any incentive to deliver any faster than is necessary to keep the money flowing.


LOL. I think we all know who's living in an alternate reality.  ::)
 
Milestone payments are commonplace in industry. That doesn't mean they don't have associated deadlines. When things fall behind, they usually get re-negotiated initially, not cancelled unless they miss multiple deadlines. Try building a house even.
For building a house example. A contractor gets payed after they have completed a milestone, not before. If they did fall behind they can would would most likely be replaced.

The thing here is NASA allowed them to slip to far. SpaceX finished their costs demo in 2012 when they were to have completed it in 2008. That is a major slip in schedule. If they did this in home building they would have been replaced. It would have been better for NASA to put out an offer to who ever in an American company could deliver cargo to the ISS by a certain date, first come first serve. For funding companies could have raised capital from the private sector, true commercial.

Offline Prober

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A contract is a contract. The contract  should be locked in and followed.  ;)
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Offline baldusi

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That the government actually finances the bulk of the contract is the most efficient way, actually. US government debt rate if about 1% for a 5year obligation and about 0.15% for 1 year. I seriously doubt that OSC could borrow for less than 6%, and I suspect it's closer to 8%. But even at 5%, OSC would have to pass the final cost to the government anyways, thus, the US government would have to pay more.
Besides, we don't know, but I guess (because of things that Antonio said) that most if not all of the simulations and validations of the whole system haven been already passed. Thus, is not an undemonstrated system. Lots and lots of ground validation and simulations have been made. And after the ATV, HTV and Dragon experience, NASA knows a lot about simulating a rendevouz mission. And since Cygnus uses the HTV comm subsystem and berth procedures, it's got some of the critical assets already demonstrated, ditto with the space hardware (which is based off the Starbus). In other words, NASA should be more confident now on Cygnus than on Dragon 3months before COTS 2/3.
And they should balance the advanced money against the possibility of under utilization on ISS. If it's a 105B project, how much does each hour of science costs? My guess is that the cost of not being able to fully utilize the station is way more than the risk of Antares/Cygnus complete failure. But that takes someone that actually worries about the utility of the station and not about penny pinching for the sake of it.

Offline RocketmanUS

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That the government actually finances the bulk of the contract is the most efficient way, actually. US government debt rate if about 1% for a 5year obligation and about 0.15% for 1 year. I seriously doubt that OSC could borrow for less than 6%, and I suspect it's closer to 8%. But even at 5%, OSC would have to pass the final cost to the government anyways, thus, the US government would have to pay more.
Besides, we don't know, but I guess (because of things that Antonio said) that most if not all of the simulations and validations of the whole system haven been already passed. Thus, is not an undemonstrated system. Lots and lots of ground validation and simulations have been made. And after the ATV, HTV and Dragon experience, NASA knows a lot about simulating a rendevouz mission. And since Cygnus uses the HTV comm subsystem and berth procedures, it's got some of the critical assets already demonstrated, ditto with the space hardware (which is based off the Starbus). In other words, NASA should be more confident now on Cygnus than on Dragon 3months before COTS 2/3.
And they should balance the advanced money against the possibility of under utilization on ISS. If it's a 105B project, how much does each hour of science costs? My guess is that the cost of not being able to fully utilize the station is way more than the risk of Antares/Cygnus complete failure. But that takes someone that actually worries about the utility of the station and not about penny pinching for the sake of it.
Private investment, not borrow.

Let the people take a risk with these companies so they can also benefit from it too. With the government backing them, the government borrowed money and now the people have to pay the principal plus interest. Each company could have raised the needed money over a course of time. If at some point an investor did not like what they were seeing they would not need to invest in the new rounds of sale of stock ( or such ). Others could buy the new stock if they wanted to. With private funding over time the company would have to answer to it's share holders who would not put up with miss leading or false info on the milestones completed to that date. A person could also sell their shares if they needed or wanted too. With government all American have to pay whether they wanted the project or not.

Offline QuantumG

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Or, to put it another way, one is likely to be much more concerned with cost (and schedule, because it's often the same thing) when one is spending one's own money.
Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? Well... have you heard of Zeno's paradox?

Offline Robotbeat

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QuantumG, I don't think you're being realistic. Name this magic industry that has the same sort of challenges but always delivers on time or budget.
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Offline QuantumG

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QuantumG, I don't think you're being realistic. Name this magic industry that has the same sort of challenges but always delivers on time or budget.

What challenges? The complete lack of a sensible industrial base? Hmm.. what's the cause of that?

Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? Well... have you heard of Zeno's paradox?

Offline macpacheco

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Here's NASA scoring an own goal it seems:

http://www.nasaspaceflight.com/2013/06/nasa-told-slow-down-crs-payment-orbitals-cargo-runs/

From the article
"the company is on track to receive up to 70 percent of the funds associated with six of its eight CRS missions prior to having flown a demonstration flight.
What???

They are going to bank 70% of the cash for 75% of their  contract without delivering a single Kg of payload to the ISS?

This is just wrong.  AFAIK Antares is still in development. The actual delivery contract should not have started paying them until they actually started delivering stuff.

The obvious question is are Spacex on these terms as well? Because they seem exceptionally generous by the standards of a commercial contract and NASA should not have signed it with either of them.   :(

A wild guess, Antares has a couple of congressmen in their pockets ?
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Offline QuantumG

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A wild guess, Antares has a couple of congressmen in their pockets ?

Hanlon's razor.

Never attribute to malice that which is adequately explained by stupidity.

People who believe most problems can be solved by throwing (other people's) money at it are just as likely to come up with this solution, and that's exactly why they said they did it.
Jeff Bezos has billions to spend on rockets and can go at whatever pace he likes! Wow! What pace is he going at? Well... have you heard of Zeno's paradox?

Offline joek

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The actual delivery contract should not have started paying them until they actually started delivering stuff.
They have been "delivering stuff".  Such arrangements are not unusual in government or commercial contracting.

A wild guess, Antares has a couple of congressmen in their pockets ?
Who is Antares?  Seriously, that's ill-informed and offensive speculation.

Or, to put it another way, one is likely to be much more concerned with cost (and schedule, because it's often the same thing) when one is spending one's own money.
A significant amount of OSC's and SpaceX's own money is also at risk, having "contributed more than 50 percent of overall development costs".

Not to mention claw-back provisions for monies paid should the provider be terminated for cause; the limitation of liability by the government to monies paid regardless of reason for termination; and that "If required,the Contractor shall grant the Government a preferred creditor's lien i.e., a first lien paramount to all other liens against all work in process sufficient to recompense the Government for all monies advanced under this contract should the Contractor's performance prove to be materially unsatisfactory."
« Last Edit: 06/19/2013 04:24 AM by joek »

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