Lawmakers Seek To Curb EELV Block Buy

[JohnFornaro]

ULA has around 3500 people for two launch sites, 5 pads, 3 launch vehicle families and integration efforts for around 30 different spacecraft.

The comment here is that ULA recieves a yearly $650M launch assurance contract that would cover the cost of all of ULA's employees salaries and overhead.

$650M / 3500 = $185K/yr.

Whether they launch or not?  And launch costs are added to this?

So the term "launch assurance" means keeping ULA going regardless of whether it is used.  The EELV block buy would institutionalize ULA, since "maybe" those EELV's would be used, therefore this $650M line item would be a part of the new ULA contract, over the years of the block buy.

Moving up the thread:

Which sounds a pretty expensive bill for things the business *should* be doing to improve its products anyway + archiving it just in case.

Isn't this $650M an expensive bill?

The new challenge to the company came this month when leaders of the U.S. House intelligence committee wrote Defense Secretary Leon Panetta opposing a new five-year "no compete" government launch contract with ULA.

...

"We welcome the competition," ULA production manager Daniel Caughran told Brooks. However, Caughran and other ULA executives cited factors including reliability and capacity to meet launch needs they said must be considered. Those are ULA assets, they said.

I don't want to receive BlackStar's ire again for asking questions of my "betters", but when there is competition on a contract, isn't "reliability and capacity" part of that competition?  If ULA "welcomes" competition, why would they fight it so vigorously?

Why is it necessary, other than from ULA's parochial viewpoint of profitability, to grant them a monopoly for more than three years?

[john smith 19]

$650M / 3500 = $185K/yr.

Whether they launch or not?  And launch costs are added to this?

Yes. But as Jim said it's also to keep all that hardware in a *useable* state. Keeping all that launch pad plumbing in good condition is *very* important. Some of those analysts with esoteric skillsets would *have* to be let go otherwise etc.

Isn't this $650M an expensive bill?

This is the DoD you're talking about. $650m here, $650m there, pretty soon we're talking real money. That's just personnel and infrastructure support costs.

Why is it necessary, other than from ULA's parochial viewpoint of profitability, to grant them a monopoly for more than three years?

I'm sure they would argue it is *not* a monopoly. The logic is roughly

"You (the USG in this case) want us to stay in the launch business. But we can't *afford* to do that at the launch rate and in the way that we do business (which as you know is *essential* to ensuring your payloads don't become flaming fireballs in the upper atmosphere rather than perfectly orbiting satellites) that you (DoD, NRO, NASA) order them.

So unless you give us a little something to cover our running expenses *between* launches we'll just have to let *most* of those people go and perhaps sell off a pad or too to real estate developers.

Obviously we don't want to do this. It's just the costs of doing business (with us)"

[JohnFornaro]

Whoah. I wish I got $185K for keeping the Fornaro compound going.  Cooking meals, fixing the gutters, mowing the grass, keeping the car running...

But seriously, the 3500 employees to keep the hardware in a "useable" state whether or not they launch has got to be an excessive cost.  Is it the case that if they do launch something, they must hire additional people, since the 3500 are maintaining this hardware are kept employed full time at that effort?

That cannot be.

If this is not a sort of economic blackmail, then what would it be called?

[john smith 19]

But seriously, the 3500 employees to keep the hardware in a "useable" state whether or not they launch has got to be an excessive cost.  Is it the case that if they do launch something, they must hire additional people, since the 3500 are maintaining this hardware are kept employed full time at that effort?

That cannot be.

that's a bit of an exaggeration. IIRC that is the *whole* internal company staff IE including all their factory staff. Obviously some can be put on maintenance tasks, factory restructuring or training, but I guess there are limits on how much you can actually do until a new order for an LV comes in.

As to weather  $650m is fair or not it seems the USAF waived its right to detailed cost data at certain stages (GAO 12-822, 11-641, 08-1039) so it's a bit difficult to tell, although this appears to be changing. One of the key drivers of the ULA merger was that Lockheed agreed to drop its lawsuit on how Boeing acquired about 5000 pages of its internal proprietary documentation. DoD had the choice of having its 2 key LV suppliers tear themselves to pieces in the courts or join hands and let bygones be bygones. They chose the latter and got the FTC agree.

If this is not a sort of economic blackmail, then what would it be called?

If you're an organized crime family in New Jersey you blackmail people.

If you're a defense contractor you're playing the "loss of capability/jobs" card and having a "negotiation." BAe Systems are *very* familiar with this tactic in the UK.

[mrmandias]

The support cost multiplier decreases somewhat as the salary increases (some support costs are fixed costs that do not increase).  Your 2x sounds eminently reasonable.

What the problem is?  Seems like he made an effort to suggest an industry average, already including the costs you mention.

The source of my numbers was

http://www.bls.gov/oes/current/oes172011.htm#top

but if we go with the cost for the *top* 10% of aerospace engineers
$71.06/hr. *doubling* that to account for benefits and support costs gives $142.12. A 40 hr week at that rate gives $295609.6 [edit] per year.

so (assuming you're team is *exclusively* composed of aerospace engineers at the top 10% of the industry pay scale on *nothing* but "mission assurance" $100m gets you 338 engineers a year.

Caveats. I'm not an American so I cannot confirm that the "fully burdened" cost of an employee is 2x their annual salary. I can't remember where I saw that figure as a rule of thumb and I could be wrong. Increasing the multiplier (the direction I would *expect* it to go) would reduce the number of engineers.

but that is still one *hell* of a lot of variance between launches needing *all* this one off attention. 

[JohnFornaro]

As to whether [heh] $650m is fair or not it seems the USAF waived its right to detailed cost data at certain stages (GAO 12-822, 11-641, 08-1039) so it's a bit difficult to tell, although this appears to be changing. One of the key drivers of the ULA merger was that Lockheed agreed to drop its lawsuit on how Boeing acquired about 5000 pages of its internal proprietary documentation. DoD had the choice of having its 2 key LV suppliers tear themselves to pieces in the courts or join hands and let bygones be bygones. They chose the latter and got the FTC agree.

Who's got the time to read 45+36+32=113 pages of this stuff?  May the citizen rely on the summary?

What GAO Recommends (September 2008)

GAO recommends the Secretary of Defense take actions to: ensure the regular reporting of key information on program status, produce an independent life-cycle cost estimate, and ensure the program’s staffing meets its needs. DOD concurred with the recommendations. ...

The EELV program currently faces uncertainties in the reliability of the vehicles used to launch military and other government spacecraft as well as its budget for future years and in the merger of its two principal suppliers. Taken together, these unknowns require careful monitoring and oversight to ensure a fairly long track record of launch successes can continue.

What GAO Recommends (September 2011)

Among other things, GAO recommends DOD assess engine costs and mission assurance activities, reassess the length of the proposed block buy, and consider how to address broader launch acquisition and technology development issues.
DOD generally concurred with the recommendations. ...

What GAO Found
DOD officials believe the launch industrial base is unstable and plan to implement an acquisition strategy they believe will help stabilize it. The leading proposal would commit the government to a block buy of eight common booster cores—the main component of a launch vehicle—each year, for a 5-year term. However, this approach may be based on incomplete information and although DOD is gathering data that it needs as it finalizes the new acquisition strategy, some critical knowledge gaps remain.

What GAO Recommends (08-13-12)

GAO is making no new recommendations in this report. DOD reviewed and concurs with this report. ...

Ensure launch mission assurance activities are sufficient and not excessive, and identify ways to incentivize the prime contractor to implement efficiencies without affecting mission success as DOD develops a new contracting structure for the EELV program

Some action taken; more action needed

So, in 2008, "The EELV program currently faces uncertainties in the reliability of the vehicles used ..." By 2012, "some action had been taken on the first priority of 2008.  Apparently, the incentive for the prime contractor to "implement efficiencies without affecting mission success" amounts to $650M.  Nice work if you can get it.  So the incentive has been accomplished, correct?

But we still don't know if "launch mission assurance activities are sufficient and not excessive", do we?  After four years of round the clock work, by one guy:  the Program Executive Officer for Space Launch.  "More action needed."  Sheesh.

My immediate reaction to this plexor hammer is to turn on the sarcaso-meter:

"Reform" ITAR.  Give them $1.2B, doubling their incentive.  Then they'll move all those jobs to China so fast that it would suck today's storm surge out of Manhattan.  Problem solved.

Sarcaso-meter off.

[john smith 19]

But we still don't know if "launch mission assurance activities are sufficient and not excessive", do we?  After four years of round the clock work, by one guy:  the Program Executive Officer for Space Launch.  "More action needed."  Sheesh.

He *might* have a few assistants.

[JohnFornaro]

But we still don't know if "launch mission assurance activities are sufficient and not excessive", do we?  After four years of round the clock work, by one guy:  the Program Executive Officer for Space Launch.  "More action needed."  Sheesh.

He *might* have a few assistants.

You are confusing a sarcastic statement, with the salient point, thereby overlooking the salient point: 

After four years of work on launch mission assurance, more action is still needed, and launch mission assurance is by no means guaranteed by the corporation.  So far, it appears that that action will cost more than $650M/yr.   Since the work is still not complete, and the issuance of a deadline is assiduously avoided by the PEV in question, it is not yet clear how much more money is needed to "incentivize" the private corporation in question.

[john smith 19]

After four years of work on launch mission assurance, more action is still needed, and launch mission assurance is by no means guaranteed by the corporation.  So far, it appears that that action will cost more than $650M/yr.   Since the work is still not complete, and the issuance of a deadline is assiduously avoided by the PEV in question, it is not yet clear how much more money is needed to "incentivize" the private corporation in question.

Agreed. A suspicious person might get the idea the DoD was not trying very hard to find out exactly how this money is being spent.

[JohnFornaro]

A suspicious person might get the idea the DoD was not trying very hard to find out exactly how this money is being spent.

Sometimes I channel Alfred E. Neuman.

What, me suspicious?