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NASA told to slow down CRS payment schedule for Orbital's cargo runs
by
Chris Bergin
on 17 Jun, 2013 19:15
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#1
by
sdsds
on 17 Jun, 2013 19:31
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Good article, Chris! The timing of this OIG investigation/report seems strange. With the next F9 still in qualification testing, having a nice Antares inventory seems like a good thing!
The article states, 'OIG claimed they have concerns the next launch still holds the “possibility” of incurring issues.' Is the OIG concerned with Antares issues, or with potential Cygnus issues? The latter interpretation is at least understandable. If future Dragon missions are delayed by its launcher's teething pains, a lot might hinge on the early success of Cygnus!
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#2
by
RocketmanUS
on 17 Jun, 2013 19:58
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This only proves we should have used the Atlas V and Delta IV as the commercial cargo supply launch vehicles. It would have increased the funding for the space craft as there would not have been a need for the new launch vehicles. New commercial launch vehicles could have been developed later with less risk to resupply missions. Or we could have had a third or even a forth supplier funded up throw demonstration flights ( might have canceled one or two of them if two suppliers were able to complete their demonstration flights before the other(s).
Either way if the delays are on the launcher or in space craft it is a bad image for Orbital. Their delay to 1st CRS is bad enough and NASA ( American people ) are paying for other flights without seeing the first one.
Nice reporting and Article Chris.
So ISS is or might be decommissioned in or around 2020?
Possible replacement(s) by commercial station(s) that might have something to do with this? Would be good for both NASA and CRS.
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#3
by
Chris Bergin
on 17 Jun, 2013 20:13
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Thanks!
Yeah, very strange timing.
And RS - no chance the ISS will be deorbited in 2020. They just need to make 2025 or 2028 official.
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#4
by
spectre9
on 17 Jun, 2013 20:17
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Seems fine to me.
NASA isn't allowed to "keep" money. They're not a bank.
Having to pay later would be very bad for NASA.
I think the report being referenced is hogwash.
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#5
by
RocketmanUS
on 17 Jun, 2013 20:21
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Thanks!
Yeah, very strange timing.
And RS - no chance the ISS will be deorbited in 2020. They just need to make 2025 or 2028 official.
That's cool. That will give commercial plenty of time to get their stations up and running along with commercial cargo and crew. Also a transition time for government to use commercial stations as well.
So from sdsds question, is the problem with Antares issues, or with potential Cygnus issues?
Seems fine to me.
NASA isn't allowed to "keep" money. They're not a bank.
Having to pay later would be very bad for NASA.
I think the report being referenced is hogwash.
It would be better for the government agency to pay latter. Less interest on the money borrowed and if the company can't launch then the money can be better spent else were.
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#6
by
spectre9
on 17 Jun, 2013 20:28
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NASA is effectively investing in Orbital. Putting faith in them.
That's a good thing.
Just saying "ah well just give all the money to ULA" was never acceptable for this administration.
Spending money elsewhere? I'm not sure that's possible, it's still CRS money. The implication here is that NASA could just withhold the cash. I didn't think NASA was ever allowed to do that.
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#7
by
Chris Bergin
on 17 Jun, 2013 20:40
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So from sdsds question, is the problem with Antares issues, or with potential Cygnus issues?
I have no information that shows any issues to either. I would assume the OIG are using a weak "what if" scenario.
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#8
by
manboy
on 17 Jun, 2013 22:51
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And RS - no chance the ISS will be deorbited in 2020. They just need to make 2025 or 2028 official.
Woot! That's good news!
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#9
by
yg1968
on 18 Jun, 2013 02:10
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#10
by
joek
on 18 Jun, 2013 02:38
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Good article, Chris! The timing of this OIG investigation/report seems strange. With the next F9 still in qualification testing, having a nice Antares inventory of seems like a good thing!
The article states, 'OIG claimed they have concerns the next launch still holds the “possibility” of incurring issues.' Is the OIG concerned with Antares issues, or with potential Cygnus issues? The latter interpretation is at least understandable. If future Dragon missions are delayed by its launcher's teething pains, a lot might hinge on the early success of Cygnus!
Part of the timing appears to be that the recommendations will have a significantly reduced effect if delayed for much longer.
The OIG's concern is the system; both Antares and Cygnus. A large part of the report is devoted to a history of problems and delays with the COTS and CRS programs to emphasize the attendant risk, both programmatic and financial, of funding too far in advance of the systems being baked.
Part of the concern on NASA's part appears to be possible delays or disruption of other providers. Specifically, the report mentions "Launch on Need" and "to ensure a second private company was financially “healthy” enough" as reasons for aggressive OSC payments.
Short version:
CRS: We need to hedge our bets.
OIG: We think you've hedged more than enough.
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#11
by
QuantumG
on 18 Jun, 2013 02:41
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It's just NASA rewarding failure.. as usual.
Oh, you're behind schedule? Here's some more money.
SpaceX got the same deal.
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#12
by
yg1968
on 18 Jun, 2013 03:25
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It's just NASA rewarding failure.. as usual.
Oh, you're behind schedule? Here's some more money.
SpaceX got the same deal.
It has nothing to do with failure. It's something similar to a percentage of completion contract.
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#13
by
QuantumG
on 18 Jun, 2013 03:37
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It's just NASA rewarding failure.. as usual.
Oh, you're behind schedule? Here's some more money.
SpaceX got the same deal.
It has nothing to do with failure. It's something similar to a percentage of completion contract.
Yes, exactly. It
should have something to do with failure. That's the OIG's point.
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#14
by
macpacheco
on 18 Jun, 2013 05:19
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It's just NASA rewarding failure.. as usual.
Oh, you're behind schedule? Here's some more money.
SpaceX got the same deal.
The CRS program has several goals that are hit without a launch, achieving them trigger some payments. This has nothing to do with failure.
It's a simple reminiscent of the real sweetheart cost plus funding structure that most military development contracts get. We (NASA) are asking you (SpaceX/Orbital) to go through all of those hoops to satisfy us that you're on the right track, and as you manage to jump each hoop, here's some money.
The opposite would have been to only pay them per payload actually delivered to the ISS, requiring each CRS contractor to invest in the ballpark of a billion USD plus before getting any payment back.
Doing that would make it so much easier for ULA to get those contracts since they have deep pockets.
The amounts paid to SpaceX for all the benchmarks plus 3 CRS missions amount to far less than the real costs of a single shuttle launch. With money left to send 3 astronauts with the Russians in the meantime, and there's still money left.
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#15
by
RocketmanUS
on 18 Jun, 2013 05:45
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It's just NASA rewarding failure.. as usual.
Oh, you're behind schedule? Here's some more money.
SpaceX got the same deal.
The CRS program has several goals that are hit without a launch, achieving them trigger some payments. This has nothing to do with failure.
It's a simple reminiscent of the real sweetheart cost plus funding structure that most military development contracts get. We (NASA) are asking you (SpaceX/Orbital) to go through all of those hoops to satisfy us that you're on the right track, and as you manage to jump each hoop, here's some money.
The opposite would have been to only pay them per payload actually delivered to the ISS, requiring each CRS contractor to invest in the ballpark of a billion USD plus before getting any payment back.
Doing that would make it so much easier for ULA to get those contracts since they have deep pockets.
The amounts paid to SpaceX for all the benchmarks plus 3 CRS missions amount to far less than the real costs of a single shuttle launch. With money left to send 3 astronauts with the Russians in the meantime, and there's still money left.
However why would NASA pay Orbital for some of flight 3 and 4 when they haven't even had demo flight 1 yet.
This is part of the problem that a company is getting paid to do work on a launch flight that might not even work. This is why they should have waited till after the demo flights before starting the CRS contracts.
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 )
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#16
by
QuantumG
on 18 Jun, 2013 07:17
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Yep. "Demonstrate before contract" was a bluff. The partners called.
NASA's claim that it would have taken longer to get to first delivery is nothing but alternate history science fiction. If they had stuck to the plan, it's just as likely that one of the COTS partners would have pulled out and the sole remaining partner could have gotten the additional funding.. and a strong motivation to actually deliver on schedule. Or a million other things...
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#17
by
john smith 19
on 18 Jun, 2013 08:03
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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.
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#18
by
sdsds
on 18 Jun, 2013 08:20
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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?
in the event the contract needs to be terminated for cause, all CRS payments are recoverable.
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!
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#19
by
john smith 19
on 18 Jun, 2013 08:26
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It's a simple reminiscent of the real sweetheart cost plus funding structure that most military development contracts get. We (NASA) are asking you (SpaceX/Orbital) to go through all of those hoops to satisfy us that you're on the right track, and as you manage to jump each hoop, here's some money.
Not so. COTS was the
development programme, where they were supposed to by doing the R&D. It was under Space Act Agreements and it was a case of "No milestone, no payment."
The opposite would have been to only pay them per payload actually delivered to the ISS, requiring each CRS contractor to invest in the ballpark of a billion USD plus before getting any payment back.
Well that's what the COTS programme was for.
Doing that would make it so much easier for ULA to get those contracts since they have deep pockets.
The amounts paid to SpaceX for all the benchmarks plus 3 CRS missions amount to far less than the real costs of a single shuttle launch. With money left to send 3 astronauts with the Russians in the meantime, and there's still money left.
True. Spacex comes out streets ahead of Orion and even Antares has managed a launch of a "Cygnus simulator," which right now is more than Orion has managed (or will for a couple of more years).
And RS - no chance the ISS will be deorbited in 2020. They just need to make 2025 or 2028 official.
That would excellent news. It would eliminate a lot of doubt. 8-11 of years of CCiCAP astronaut transport.
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#20
by
john smith 19
on 18 Jun, 2013 08:44
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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.
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#21
by
kkattula
on 18 Jun, 2013 09:28
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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.
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#22
by
QuantumG
on 18 Jun, 2013 10:01
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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.
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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#23
by
QuantumG
on 18 Jun, 2013 10:05
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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.
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#24
by
spectre9
on 18 Jun, 2013 12:02
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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.
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#25
by
Jim
on 18 Jun, 2013 12:33
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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.
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#26
by
Jim
on 18 Jun, 2013 12:34
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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.
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#27
by
Jim
on 18 Jun, 2013 12:44
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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.
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#28
by
Lurker Steve
on 18 Jun, 2013 14:23
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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 ??
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#29
by
kkattula
on 18 Jun, 2013 15:19
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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.
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#30
by
RocketmanUS
on 18 Jun, 2013 16:20
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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.
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#31
by
Prober
on 18 Jun, 2013 17:58
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A contract is a contract. The contract should be locked in and followed.
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#32
by
baldusi
on 18 Jun, 2013 20:02
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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.
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#33
by
RocketmanUS
on 19 Jun, 2013 02:30
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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.
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#34
by
QuantumG
on 19 Jun, 2013 02:32
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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.
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#35
by
Robotbeat
on 19 Jun, 2013 03:15
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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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#36
by
QuantumG
on 19 Jun, 2013 03:19
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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?
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#37
by
macpacheco
on 19 Jun, 2013 03:25
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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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#38
by
QuantumG
on 19 Jun, 2013 03:36
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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.
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#39
by
joek
on 19 Jun, 2013 04:12
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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."
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#40
by
QuantumG
on 19 Jun, 2013 04:26
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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.
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#41
by
joek
on 19 Jun, 2013 06:15
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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?
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#42
by
QuantumG
on 19 Jun, 2013 07:29
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As I just said, there's no "nefarious end" required.
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#43
by
baldusi
on 19 Jun, 2013 14:21
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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.
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#44
by
RocketmanUS
on 19 Jun, 2013 16:33
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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.
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#45
by
Robotbeat
on 19 Jun, 2013 17:26
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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."
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#46
by
baldusi
on 19 Jun, 2013 17:28
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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.
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.
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.
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#47
by
arachnitect
on 19 Jun, 2013 20:36
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#48
by
kkattula
on 20 Jun, 2013 00:32
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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.
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...
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#49
by
QuantumG
on 20 Jun, 2013 00:47
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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.
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#50
by
RocketmanUS
on 20 Jun, 2013 01:42
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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.
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.pdfYes 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.
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#51
by
QuantumG
on 20 Jun, 2013 01:46
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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.
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#52
by
RocketmanUS
on 20 Jun, 2013 01:53
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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.
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#53
by
QuantumG
on 20 Jun, 2013 01:59
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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.
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#54
by
RocketmanUS
on 20 Jun, 2013 02:06
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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?
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#55
by
ChrisWilson68
on 20 Jun, 2013 02:27
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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!"
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#56
by
QuantumG
on 20 Jun, 2013 02:30
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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.
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#57
by
RocketmanUS
on 20 Jun, 2013 02:41
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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
.
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#58
by
ChrisWilson68
on 20 Jun, 2013 02:43
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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.
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#59
by
joek
on 20 Jun, 2013 02:48
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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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#60
by
QuantumG
on 20 Jun, 2013 02:52
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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.
Well, that was eight years after the company was formed. Their initial business plan was to encourage others to develop cheap launch by making satellites available for cheaper. The launch providers never arrived so they had to do it themselves. All the time getting fatter and slower.
That said, they still do awesome satellites.
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#61
by
ChrisWilson68
on 20 Jun, 2013 02:57
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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?
I was referring mainly to the report that started this thread. For example,
Under the current payment schedule, 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.
Also, there's the fact that for CRS Orbital managed to get NASA to pay $1.9 billion for 8 flights while SpaceX's contract, awarded simultaneously gave them only $1.6 billion for 12 flights. Both contracts are for the same total mass, 20 metric tons.
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#62
by
joek
on 20 Jun, 2013 03:35
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I was referring mainly to the report that started this thread...
The OIG's concern is contract
execution, "that NASA has leaned too far forward", not the contract itself. There is no indication that OSC has received more favorable terms than SpaceX.
Also, there's the fact that for CRS Orbital managed to get NASA to pay $1.9 billion for 8 flights while SpaceX's contract, awarded simultaneously gave them only $1.6 billion for 12 flights. Both contracts are for the same total mass, 20 metric tons.
Agree that it appears lopsided. However: (1) OSC started late (after the RpK debacle); (2) OSC received significantly less COTS funds than SpaceX; (3) the capabilities of Cygnus and Dragon are dissimilar and the value/price per flight is not directly comparable; and (4) the CRS contracts are nominally for up to 20 metric tons for which there are a number of factors that can modify that requirement and render it dubious as primary basis for comparison.
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#63
by
Robotbeat
on 20 Jun, 2013 12:51
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I don't get the venom aimed at Orbital. Orbital isn't SpaceX and isn't trying to be. But Orbital launched 7 times in 2011 (the last year for which I have full numbers right now), which is far more than the max of 2 per calendar year that SpaceX has been able to do so far. And this is for a company that doesn't sell themselves as primarily a launch company, unlike SpaceX.
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#64
by
Jim
on 20 Jun, 2013 12:59
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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.
Well, that was eight years after the company was formed. Their initial business plan was to encourage others to develop cheap launch by making satellites available for cheaper. The launch providers never arrived so they had to do it themselves. All the time getting fatter and slower.
The same pattern that Spacex is going to follow
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#65
by
Jim
on 20 Jun, 2013 13:02
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I was referring mainly to the report that started this thread. For example,
Wouldn't be surprised if a report will come out on Spacex with the delays coming up.
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#66
by
Lar
on 20 Jun, 2013 14:50
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I don't get the venom aimed at Orbital. Orbital isn't SpaceX and isn't trying to be. But Orbital launched 7 times in 2011 (the last year for which I have full numbers right now), which is far more than the max of 2 per calendar year that SpaceX has been able to do so far. And this is for a company that doesn't sell themselves as primarily a launch company, unlike SpaceX.
I think OSC is awesome. But they aren't driven by the fire in the belly of a charismatic leader the way SpaceX is.[1] They're in business to make money, and if there are awesome things that come of it, great!!
I see SpaceX as existing to do awesome things that its founder wants to do, and making money is the fuel to get there. And yes, that makes me a kool aid drinker. It may not work out, but I truly believe Elon isn't in it just for the money.
I would think most people here see that too... they might not think he is going to succeed, they might not agree with his decisions, but do they doubt his sincere desire to go that way rather than money as the motive?
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.
Well, that was eight years after the company was formed. Their initial business plan was to encourage others to develop cheap launch by making satellites available for cheaper. The launch providers never arrived so they had to do it themselves. All the time getting fatter and slower.
The same pattern that Spacex is going to follow
Jim, I hope you're wrong. But I acknowledge and fear that you may be right. I think working with government does that to companies.
1 - today. Perhaps they were at one point but they've mutated. Not good, not bad, just is And OSC's very own NSF posting rocket scientist certainly IS charismatic
(Hi, Antonioe)
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#67
by
Jim
on 20 Jun, 2013 14:54
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Jim, I hope you're wrong. But I acknowledge and fear that you may be right. I think working with government does that to companies.
a. It is not just working with the gov't that causes it.
b. It happened to Spacehab too.
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#68
by
Antares
on 20 Jun, 2013 17:00
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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.
Naive. What's the alternative? Delaying delivery capability another two years, the time that it takes to integrate a mission. Sorry, this is space operations. We don't have time for that.
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.
kkattula is spot on. QuantumG is in a la-la land we all wish existed. It'd be great to plunk down 100% of the mission price only upon accomplishment of a successful mission, but so far no rocket provider is willing to stand up for that (at least with the unique spacecraft requirements of a government mission).
later on NASA "decided" they wanted a "risk reduction flight" and paid OSC about another $300m
False. Orbital and SpaceX went to Congress with tin cups out during the 2009 stimulus porkfest. Congress appropriated additional money in the stimulus for COTS (and other NASA programs), and the COTS partners proposed what those funds should go to with NASA's agreement.
To NASA the contractors can do no wrong. To Congress, they can do no right.
Sir, you were just hidden.
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#69
by
john smith 19
on 28 Jun, 2013 16:59
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Naive. What's the alternative? Delaying delivery capability another two years, the time that it takes to integrate a mission. Sorry, this is space operations. We don't have time for that.
what capability? True they started around 18 months behind Spacex but instead of making up that they have just fallen further behind.
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.
kkattula is spot on. QuantumG is in a la-la land we all wish existed. It'd be great to plunk down 100% of the mission price only upon accomplishment of a successful mission, but so far no rocket provider is willing to stand up for that (at least with the unique spacecraft requirements of a government mission).
Actually I know enough about how 1 off contracting work is done to expect stage payments. Work is done, work is paid for. Fair enough. But hold on. NASA is paying for launch 3 and 4 when the
development programme is not complete and the system is not fully verified. Have the Russians threatened to break up the tooling? Because there's an old rule of aerospace thumb that says "He who owns the tooling owns the programme."
False. Orbital and SpaceX went to Congress with tin cups out during the 2009 stimulus porkfest. Congress appropriated additional money in the stimulus for COTS (and other NASA programs), and the COTS partners proposed what those funds should go to with NASA's agreement.
I wondered about this. so OSC weren't that confident their design would work first time.
My problem with OSC is from an outsiders perspective they have approached this as a typical cost plus government contract.
COTS seemed to have a clear goal of avoiding having any
major non US supplier in its supply chain, although (for some reason) that was not specifically written into the programme terms.
Which OSC interpreted as "The Russians are cheap and have great engines we'll use them." Re-creating
exactly the situation this programme was designed to address.
My 2c is they will make the launches (or not) and sell additional flights either to resupply the ISS (or not) and any other payloads they can get till the supply of engines runs out and can the programme as "mission accomplished."
Let's now return to the topic of this thread.
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#70
by
marsman2020
on 05 Sep, 2013 17:08
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I think OSC is awesome.
I think you must have missed the part where they put $700 million in taxpayer hardware at the bottom of the Pacific ocean.
And we paid them over $100 million to do it.
Ask the folks who put their time and effort into OCO and Glory how "awesome" they think Orbital is.
How hard is it really to cobble together different stages that other people make like a real-life version of KSP? Lots of people have tried it. Orbital has just...failed less. And the one part of the entire vehicle that is uniquely Orbital's to engineer and not a government leftover (how come no other companies get to use these leftover stage to make launch vehicles? Shouldn't there be some bidding process to receive them?) or provided by a subcontractor, they managed to have 2 failures in a row.
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#71
by
Jim
on 05 Sep, 2013 18:06
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1. And the one part of the entire vehicle that is uniquely Orbital's to engineer and not a government leftover (how come no other companies get to use these leftover stage to make launch vehicles?
2. Shouldn't there be some bidding process to receive them?) or provided by a subcontractor, they managed to have 2 failures in a row.
1. Taurus doesn't use any leftover stages. The Castor 120 (stage 0) and the Pegasus motors (Stages 1, 2 & 3) are all commercial stages.
2. Yes, there was. See OSP and OSP-II for Minotaur.
.