Author Topic: NASA told to slow down CRS payment schedule for Orbital's cargo runs  (Read 30611 times)

Online QuantumG

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You must be confused.. the danger is not that the contractor will be found materially unsatisfactory. The danger is that Congress will decide NASA should be doing resupply some other way, or just get bored with having the ISS, and order them to pay out the contracts prematurely. SpaceX and Orbital Sciences will get even more money for jam in that likely situation. To NASA the contractors can do no wrong. To Congress, they can do no right.
Human spaceflight is basically just LARPing now.

Offline joek

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You must be confused.. the danger is not that the contractor will be found materially unsatisfactory. The danger is that Congress will decide NASA should be doing resupply some other way, or just get bored with having the ISS, and order them to pay out the contracts prematurely. SpaceX and Orbital Sciences will get even more money for jam in that likely situation. To NASA the contractors can do no wrong. To Congress, they can do no right.

Hogwash.  Any other "likely situation"'s you'd like to introduce or goalposts you'd like to move before we return to the discussion at hand?

ISS falls out of the sky?  Alien invasion?  Congress retroactively modifies FAR contract rules so they can order that OSC and SpaceX get "more money for jam".  An uncharacteristically prescient NASA today conspires to push funds down OSC's and SpaceX's throats years in advance of those ominious events towards some nefarious end?

Online QuantumG

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As I just said, there's no "nefarious end" required.

Human spaceflight is basically just LARPing now.

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.
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.
Again, an even more expensive proposition to government. If OSC can borrow at 6%, their investors would want at least a 12% return. That's why leverage exists. Thus, you're proposing that the government should pay a 12% interest (embedded in the "fixed" price) instead of the 0.5% that they actually pay. In 3 years you are talking about 40% extra. But it gets worse! If the price is fixed, the contractors will have to put financial margins at a 12% rate. And cover for the worst case delay scenario.
In other words, at fixed prices, the difference between government and capital investment on the final price would have been more than 50%. That's money the government would have to pay. Commercial financing would be closer to 25%. And going to the LM/boeing solution would have mutated to a cost- plus contract in little time.

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.
Again, an even more expensive proposition to government. If OSC can borrow at 6%, their investors would want at least a 12% return. That's why leverage exists. Thus, you're proposing that the government should pay a 12% interest (embedded in the "fixed" price) instead of the 0.5% that they actually pay. In 3 years you are talking about 40% extra. But it gets worse! If the price is fixed, the contractors will have to put financial margins at a 12% rate. And cover for the worst case delay scenario.
In other words, at fixed prices, the difference between government and capital investment on the final price would have been more than 50%. That's money the government would have to pay. Commercial financing would be closer to 25%. And going to the LM/boeing solution would have mutated to a cost- plus contract in little time.
No.
If the funds are coming from investors they are only payed back if the project goes throw. The company would not be borrowing the money so there would not be any interest. The dividends payed to the investors would not increase the cost of the CRS services.

With private funding the company would have less red tape to go throw. Only the mile stones and final demo flights. Their schedule would be answerable to their investors not NASA.

With private funding we could have seen more than two companies trying to complete their demo flights by 2008 ( no later than 2009 ) to get CRS contracts to start some time after 2009 when needed.

With a fight to the finish and not on the government dime they companies would have been motivated to completer their demo flights on time in order to get a CRS contract.

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.

What challenges? The complete lack of a sensible industrial base? Hmm.. what's the cause of that?
Cause is the enormous /natural/ barrier to entry (with very little opportunity for screw-up and redo, unlike software, basically almost anything else) combined with the intrinsically strategic nature of space launch technology. Oh, I mean "gubmint."
« Last Edit: 06/19/2013 05:27 PM by Robotbeat »
Chris  Whoever loves correction loves knowledge, but he who hates reproof is stupid.

To the maximum extent practicable, the Federal Government shall plan missions to accommodate the space transportation services capabilities of United States commercial providers. US law http://goo.gl/YZYNt0

Offline baldusi

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No.
If the funds are coming from investors they are only payed back if the project goes throw. The company would not be borrowing the money so there would not be any interest. The dividends payed to the investors would not increase the cost of the CRS services.
Don't spread lies when you obviously lack the most basic understanding of finance, much less of corporate finances and venture capital. I won't go into the why, because you can go to wikipedia and read about it. It's that basic.
But investors ask for NPV and IRR. The riskier the project, the higher the rate. Call it profits, call it return, whatever. Private investors ask for much more than the lending rate, else, they would put it on the bank. Who, btw, has priority over the stock owners in the case of bankruptcy, and might even put conditions on dividend distribution. That's why borrowing is cheaper, because is less risky.


Quote
With private funding the company would have less red tape to go throw. Only the mile stones and final demo flights. Their schedule would be answerable to their investors not NASA.
Under what sort of pretense do you think that NASA would allow anything close to their 100B and crewed ISS without the oversight and testing that they had under COTS? Really, now you're just arguing for the sake of it.

Quote
With private funding we could have seen more than two companies trying to complete their demo flights by 2008 ( no later than 2009 ) to get CRS contracts to start some time after 2009 when needed.
With a fight to the finish and not on the government dime they companies would have been motivated to completer their demo flights on time in order to get a CRS contract.
Under what you propose NASA would have got 0 serious bids, unless they were betting on doing a bait and switch to "cost-plus". And they would have had no cargo services after Shuttle retirement.
No venture capitalist would have taken a contract to be paid after delivery while having to pass all the NASA requirements that they creatively decided midway. And that contract would have been closer to 6B to 10B instead of the current 3.6B. And even then they would have been late, and since Shuttle would have be retired they would have needed a "bail out". That's how it works.
Having to advance a little money (which, btw, is pretty customary in this industry, just look into the NLS payment schedule) is the lesser or many evils.
« Last Edit: 06/19/2013 05:28 PM by baldusi »

Offline arachnitect

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The report is available here.

http://oig.nasa.gov/audits/reports/FY13/IG-13-016.pdf

Includes Gerstenmaier's response.

Offline kkattula

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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.

COTS Demo 3 was originally scheduled for September 2009 and C2/3 flew in May 2012. So a 2.5 year slip not 4 years as you suggested.
 
IIRC, NASA added some additional milestones that contributed to the increased development timeline.
 
Quote
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.

And they would have had to offer far more than they paid for COTS to get anyone to take the risk. Good plan...
 
 

Online QuantumG

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Quote from: RocketmanUS
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.

And they would have had to offer far more than they paid for COTS to get anyone to take the risk. Good plan...

More importantly, a promise from NASA is not bankable.
Human spaceflight is basically just LARPing now.

Offline RocketmanUS

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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.

COTS Demo 3 was originally scheduled for September 2009 and C2/3 flew in May 2012. So a 2.5 year slip not 4 years as you suggested.
 
IIRC, NASA added some additional milestones that contributed to the increased development timeline.
 
Quote
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.

And they would have had to offer far more than they paid for COTS to get anyone to take the risk. Good plan...
 
 
NASA COTS contract with SpaceX
www.nasa.gov/centers/johnson/pdf/189228main_setc_nnj06ta26a.pdf

Yes that does show 3Q 2009.
From what I remember the public was lead to believe 2008 for the test flights. They still were far behind for their final needed demo flight.

I don't believe NASA would have had to offer more money per mission if the commercial companies had to use all private funding. Keep in mind Antares rocket and Falcon 9 both had/have the ability for other payload launches outside of CRS launches. That could/would bring in added return for the investors.

We needed/need more commercial side to space launches/travel and less of government if we are to move forwards and at a much less cost.

Online QuantumG

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I don't believe NASA would have had to offer more money per mission if the commercial companies had to use all private funding. Keep in mind Antares rocket and Falcon 9 both had/have the ability for other payload launches outside of CRS launches. That could/would bring in added return for the investors.

There's better investments than launch vehicles.
Human spaceflight is basically just LARPing now.

Offline RocketmanUS

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I don't believe NASA would have had to offer more money per mission if the commercial companies had to use all private funding. Keep in mind Antares rocket and Falcon 9 both had/have the ability for other payload launches outside of CRS launches. That could/would bring in added return for the investors.

There's better investments than launch vehicles.

No argument there. It could be a small ( most likely ) part of their portfolio.

Online QuantumG

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There's better investments than launch vehicles.

No argument there. It could be a small ( most likely ) part of their portfolio.

It never has. The only reason Elon was able to attract capital for SpaceX is that he sold it has not a launch company. If your vision is we're going to launch commsats, you're going to attract zero investors. If your vision is we're going to service NASA, you're going to attract zero investors. The way to attract investors is: we're going to create a new multi-billion dollar industry and we're going to own it.
Human spaceflight is basically just LARPing now.

Offline RocketmanUS

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There's better investments than launch vehicles.

No argument there. It could be a small ( most likely ) part of their portfolio.

It never has. The only reason Elon was able to attract capital for SpaceX is that he sold it has not a launch company. If your vision is we're going to launch commsats, you're going to attract zero investors. If your vision is we're going to service NASA, you're going to attract zero investors. The way to attract investors is: we're going to create a new multi-billion dollar industry and we're going to own it.

I like that  :).
And that looks like what SpaceX is trying to do.

So what would have been a good slogan for Orbital?

Online ChrisWilson68

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So what would have been a good slogan for Orbital?

"We might not be the best at launches, but we're definitely best at negotiating favorable contracts with NASA!"

Online QuantumG

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That's some good snark.

A lot of people forget that Orbital Sciences started out much the same as SpaceX. When their enthusiasm wore off there was different opportunities that kept them alive, so we got a different result.
Human spaceflight is basically just LARPing now.

Offline RocketmanUS

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So what would have been a good slogan for Orbital?

"We might not be the best at launches, but we're definitely best at negotiating favorable contracts with NASA!"
excellent, that is great for what started this thread in the first place  ;D.

Online ChrisWilson68

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A lot of people forget that Orbital Sciences started out much the same as SpaceX. When their enthusiasm wore off there was different opportunities that kept them alive, so we got a different result.

Yeah, I remember when Pegasus was very exciting.  I think if external circumstances had been different, Orbital might have been a lot more successful than it has been so far at shaking things up.

Offline joek

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So what would have been a good slogan for Orbital?
"We might not be the best at launches, but we're definitely best at negotiating favorable contracts with NASA!"
Because OSC left $12M of COTS money on the table, or because they ate an 8 month delay to COTS PDR, or what?  Can you describe those "favorable" contract terms and how do they differ from others?

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