Author Topic: Aerospace inflation rate? The opposite of Moore's law?  (Read 17646 times)

Offline Namechange User

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #20 on: 01/06/2011 11:18 pm »
I am not familar with any particular "tools" the government may use by they typically have what is called an "Independent Government Assessment" based of their own requirements issued in the RFP on what they believe it will take to execute the contract or a portion of it.

In some cases that number is known and it is up to the prospective bidder if they choose to use this as a guider not.  If lower it, or higher, it is typical to explain the efficiencies the bidder plans on bringing (hence the lower man-hour mark) or why you are higher if you think the IGA is off the mark.

The DCAA also will review the bids to make sure the rates and contract bid makes sense based on the estimated work and duration to meet the requirements.  If it is determined to be "out of range" then it is likely not evaluated further.
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Offline JohnFornaro

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #21 on: 01/07/2011 03:21 pm »
Sorry John ... hard to keep an eye on things ... whilst juggling several monkeys at a time

No problemo.  Shouldn't have gotten sucked in, especially after I commented about the off-topicality.  But.  I gotta wonder.  Juggling monkeys?  That's kinda weird....

Best I can recollect, I said something along these lines:

The CPI is broken.  The methodology is governed by political insiders.  They should simply report the prices, without any "seasonal" or other spurious "adjustments".  The inflation rate would be a jiggly line going up and down and accurately reflecting what was happening in each of the price categories every month of the year.

The best example is the "volatile" energy and food prices that they always mention as excluded on NPR.  Poor people who must drive to work are quite squeezed when gas prices approach four dollars a gallon.  Their household inflation rate, in total, is very high.  The rich don't notice it as a percentage of their wealth, but they complain as bitterly to the minimum wage gas station attendant as the poor people.

I mean really.  Ever noticed how gas prices go up in the summer, when everyone starts going on vacation?  Then up again in the fall when everyone goes back to school.  Up again in winter because of heating costs.  Finally up again in spring because everyone goes back to driving?  It is clear to me that not only are gas prices not related that much to the cost of prospecting, they are neither related to market demands, other than jack the price up til demand drops off; drop the price temporarily until the sheople forget; then jack it up again to see what the new upper price regime will be.  But I digress.

When the real estate bubble was rising, people experienced quite the inflation rate in their cost of living, which tended to coincide with the.  That is, those who didn't succumb to the false promises of the teaser rates.  Don't get me started about food costs.  And have you priced scotch lately?  How much can it really cost to soak some whiskey in peat, and put it in a two hundred year old cask which has got to be fully amortized?

The wool pants example is pertinant:  Wool pants were made by slaves in 1850, by non-union workers in 1900, by union workers in 1950, again by non-union workers in 2000.  What's next, slave made wool pants by 2050?  There will be nothing basic about the function of wool pants which will have changed in those two hundred years; just the price.  Do not compare lightweight summer Old Navy wool pants to double lined winter weight Harris tweed wool pants.  The footnotes should explain exactly what items are being priced.

The car example is pertinant as well.  Who cares about the trunk size and the number of seats, or the mileage, or the number of miles between fillups?  It is the function of a car which remains constant, not the gadgets that it contains.  If today's car has a GPS in it, then that's included in the price of the car.  The footnotes to the inflation statistics will reveal whether Rolls Royces are being compared to Tata Nanos.

Personal computers.  A quick search reveals that there were no personal computers in 1850, 1900, or 1950.  A new category would have to be added in 2000.  It matters little which OS is used in successive years.  It is the basic function of a basic personal computer with basic capabilities which should be properly compared.  Again, the footnotes should be explanatory, the official computer purchase selection criteria should be transparent, and Bill Gates and Steve Jobs and Gordon Moore should not be allowed to choose which machines are compared.

If the future brings us personal rockets in our garages, then yet another new category will have to be added.  Goddard, VonBraun, and Musk would not be involved in the selection process.

Part of the historical data that the CPI should report would be the constant value of a dollar, given a year.  Some comparisons would simply be impossible; the cost of a personal computer in 1850.  We could certainly compare the cost of a car in 1900, 1950, and 2000.  Same with wool pants.

As to the aerospace inflation rate:  It seems more to be a device to artificially raise prices before the fact, rather than a report of actual prices after the fact.  Look at some of the reports:  The aerospace inflation rate is added after they calculate the "price".  If the CPI, which would naturally include the aerospace industry, would simply reflect the actual prices in the actual dollars, the industry would calculate the prices for their customers, and the CPI would report on that.  Instead, what happens is that this artificially calculated, politically manipulated price is simply added to the "cost", and lo: The price prophecy of aerospace inflation is miraculously proven true.  The same with "costing tools".  That's the way I see it.

Just watch.  The BP executives and the ATK executives will post on this site, explaining how they only make "pennies" on the dollar.  Poor, unfortunate them.  Starving in the land of plenty.
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Offline go4mars

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #22 on: 07/18/2011 03:11 pm »
The wool pants example is pertinant:  Wool pants were made by slaves in 1850, by non-union workers in 1900, by union workers in 1950, again by non-union workers in 2000.  What's next, slave made wool pants by 2050?  There will be nothing basic about the function of wool pants which will have changed in those two hundred years; just the price.

That's an interesting thought.  I agree that hedonic adjustments are generally lunacy. 

Here's another question about the aerospace inflation rate:

Do you think it is affected more than the general rate because it makes so much more use of rare earth elements, precious metals, you know; stuff like osmium, niobium, silver, etc.?  The prices of many rare metals have outstripped the inflation rate of almost everything else you can point to over the last decade.  Is the input metals cost a significant factor? 
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Offline DarkenedOne

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #23 on: 07/18/2011 06:56 pm »
I've heard it said by a number of people smarter than me that the one problem with space flight is the chronic lack of Economy of Scale. It's sort of an industrial Catch-22: only a handful of people can afford to put things into space because the cost is so high; the cost is so high because only a handful of payloads are ever flown each year.

Aerospace inflation is certain to reverse if and when the flight rate increases; unfortunately there's no way to make that happen except for government subsidies to private launchers to artificially depress the cost of payloads into a range that can be affordable to universities and/or smaller laboratories, not to mention space startups like Bigelow and Rocketplane Kistler. At a certain point, you could reduce costs enough that, say, Virgin Galactic starts chartering Falcon-9/Dragons for some of its high-roller space tourists with possible stopovers at a Bigelow station or even the ISS. A launch manifest of, say, two Falcons a week would both reduce the costs of each launch AND increase the company's profits.

And I note that the exact opposite is happening to Ariane Space right now; at only six launches a year, they're having a hard time staying in the black. Turn that into sixty launches, they'd have all the work they could ever wish for.

That is true and not true.  Due economic growth, especially in places like China, there are definitely more entities with the money to launch things into space than ever before.  That includes government and commercial entities.

The thing is that there is a reverse trend as well.  Space systems are lasting longer and longer.  Most recently ion engines were introduced resulting in satellites with design lifetimes of 15 years or more.  Systems that last longer do not need to be replaces as frequently.
 

Offline DarkenedOne

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #24 on: 07/18/2011 07:05 pm »
No incentive to reduce costs.  Space access is a limited field.  Limited fields equal higher prices.  No incentive to solve price hurdles.

Same thing was true of computers through the 1950's and 1960's.  It was only with the rise of the minicomputer, such as the PDP-1, did you see prices start to migrate lower, as there was now an incentive.

I believe this is the best explanation.

Producers want to get the highest profit they can for their product.  Revenue of course is quantity times price.  Investing in ways to make something cheaper almost always costs money.  They are willing to make that investment only if they feel cheaper prices will result in more customers.

In many parts of the space industry there is just no incentive to lower costs.  Take take producers that supply the Shuttle.  Since decreasing the price they charge NASA will not result in NASA buying more parts than they will only lose money by making prices cheaper.
« Last Edit: 07/18/2011 07:08 pm by DarkenedOne »

Offline BeanEstimator

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #25 on: 07/20/2011 09:23 pm »
No incentive to reduce costs.  Space access is a limited field.  Limited fields equal higher prices.  No incentive to solve price hurdles.

Same thing was true of computers through the 1950's and 1960's.  It was only with the rise of the minicomputer, such as the PDP-1, did you see prices start to migrate lower, as there was now an incentive.

I believe this is the best explanation.

Producers want to get the highest profit they can for their product.  Revenue of course is quantity times price.  Investing in ways to make something cheaper almost always costs money.  They are willing to make that investment only if they feel cheaper prices will result in more customers.

In many parts of the space industry there is just no incentive to lower costs.  Take take producers that supply the Shuttle.  Since decreasing the price they charge NASA will not result in NASA buying more parts than they will only lose money by making prices cheaper.

add to that the impact of heritage on costs.

http://www.dunnspace.com/leo-4-6.pdf

when we launch SLS, assuming we ever do, a large portion of it's costs will be due to the heritage factor.  attempts to optimize or increase efficiencies are often futile in government space because of heritage.  we do things today because of the way we did things yesterday.  we end up with costs today because of how much it cost us yesterday.

oh, and our flight rate assumptions always suck.  they'll suck tomorrow just like they did last week, last year, etc.  so when we accept higher dev costs or higher o&m costs (often in the name of performance or reliability), it'll ultimately hurt us terribly in the long run because we won't be able to amortize like we thought we could. 

we love to overestimate need/requirement/demand.  we do it on facilities, tooling, technology, etc. 

the models that estimators use to estimate costs (like NAFCOM) are actually quite versatile.  you would be surprised how when you have good technical inputs, you end up with fairly accurate estimates.  the challenge being, of course, good technical inputs.  that and a desire from management to allow the estimator to use realistic assumptions and ground rules, in lieu of rosy/optimistic assumptions. 
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Offline Patchouli

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #26 on: 07/20/2011 10:08 pm »
Actually, space launch has gone down in price slowly in real terms on a $(year)/kg basis.  Looking at the last few years is really missing the forest for the trees in observing trends.  In the past we were flying heavy payloads on Titan IV instead of Atlas V 531 (comparable payload), and the Titan cost $400m in 1985 $, which is >$800m in today's dollars.  With the retirement of STS, the fleet average cost/kg will again drop significantly as less expensive vehicles pick up the slack.

If there were a rule of thumb on launch costs over time, it would be about a 50% reduction every 20 years (~-2%).  This is mainly due to the development of more cost effective systems (in the US), which results in a pretty chunky plot rather than a smooth decline.  Total commercial mass launched and payload size both have upward trends of about 3% (http://www.faa.gov/about/office_org/headquarters_offices/ast/media/launch_forecasts_051810.pdf). 

So the market is expanding slowly while the cost is going down slowly, resulting in relatively flat total spending on LVs.   If everything keeps pace, the $500(2010)/lb point will come in about 40 years, as will payloads in the VHLV class.  That's not great news for the Mars crowd, but at least things are moving slowly in the right direction.  Of course a trend doesn't predict the future, but it does give us a baseline for reasonable expectations. 


The biggest problem keeping prices from coming down quicker is government red tape and lack of volume.

An increase in red tape and dumb lawsuits almost killed civil aviation during the 70s and 80s.

We do need the launch vehicle equivalent of the PDP-1 to really change things and a massive streamlining of the government oversight.

ITAR for example needs reformed along with range safety rules which are still stuck in the 1950s.
Maybe Falcon 9 and Heavy will turn out to be the equivalent of a PDP-1 for launch vehicles.

Someone will eventually build a low cost launch vehicle but the real danger here is the US could miss out on an opportunity to have a  lead role in a new industry.
« Last Edit: 07/20/2011 10:12 pm by Patchouli »

Offline hydra9

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #27 on: 07/21/2011 12:10 am »

There are too many different types of launch vehicles and rocket engines in the US and  around the world with too little government and commercial demand for their services. So there's never really been enough demand to take advantage of serial mass production of rocket components because there are just too many types of rockets and rocket engines around the world. 

At the beginning of the space race, space launches were monopolized by the US and the former USSR. But now, Russia and the US have many other government subsidized competitors launch rocket:  Europe, China, India, Japan, and even Israel and Iran.

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Offline Robotbeat

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Re: Aerospace inflation rate? The opposite of Moore's law?
« Reply #28 on: 07/21/2011 12:57 am »
If NASA wants to solve this problem, the solution (instead of paying directly for the building of a new expendable launch vehicle) is to manufacture demand... more payloads using the existing launch vehicles (or whatever launch vehicle the market produces). It's not like people are running out of ideas as far as manned or unmanned spacecraft.
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