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#80 by clongton on 24 May, 2014 03:27
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Ok Dr Sowers. Let me ask my question again in a different way (this is my 4th try).
1. If the annual $1 billion capabilities contract goes away, how much will the per-launch cost for DoD payloads increase, on average?
2. Why is ULA entitled to a $1 billion dollar annual capabilities contract for launching DoD payloads and, when also launching DoD payloads, SpaceX is not? That appears to be a real bone of contention here that you keep side-stepping.
I'm not Dr. Sowers, but it seems to me that one obvious difference between SpaceX and ULA is that ULA can launch every payload that the DoD wants to launch but SpaceX can't.
That difference is pretty obvious but if you read the question in the context of the original questions it's apparent that I was speaking of SpaceX future capability, not present. Dr. Sowers doesn't seem to think SpaceX will be entitled to a similar arrangement when they become so certified and I want to understand why he thinks that. Perhaps there's a good reason, perhaps not. I don't know. What I do know is I've asked that question, respectfully, 4 times now with no response. -
#81 by Linze on 24 May, 2014 04:30
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The capabilities contract likely dies completely after the current block buy is done. Just my opinion on what is likely to happen.
Which gets interesting if the courts invalidate the block buy and stipulate that SpaceX be given an opportunity to bid.
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#82 by georgesowers on 24 May, 2014 13:05
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Ok Dr Sowers. Let me ask my question again in a different way (this is my 4th try).
1. If the annual $1 billion capabilities contract goes away, how much will the per-launch cost for DoD payloads increase, on average?
2. Why is ULA entitled to a $1 billion dollar annual capabilities contract for launching DoD payloads and, when also launching DoD payloads, SpaceX is not? That appears to be a real bone of contention here that you keep side-stepping.
I'm not Dr. Sowers, but it seems to me that one obvious difference between SpaceX and ULA is that ULA can launch every payload that the DoD wants to launch but SpaceX can't.
ULA is not "entitled" to anything. As is any contractual arrangement, the capability contract is a mutual agreement between the parties. The benefit the USG obtains from it is worth the price (to them). Will brings up an important point. The original EELV competitors had to provide the capability to launch the full range of USG missions up through the heavy. Some of those missions are infrequent, but the capability needs to be maintained nonetheless. The capability contract provides a lot of flexibility in how the government can move missions around to meet their needs without having to worry about contract changes and delay penalties.
Should the USG have a capability contract with SpaceX? That would be up to them and if they think there would be value in such a contract. My expectation is that in the next phase of EELV there will be no capability contract for anyone and the USG will return to a more commercial-like buying practice. That was how the EELV program started in the late 1990's. ULA is comfortable either way.
My advice to SpaceX fans is focus on launching, certification and improving the capability of your system. The USG has a wide range of mission needs that only ULA is capable of meeting. Unless your price is less than ULA's incremental price, the USG will not save a dime switching a mission. And, OBTW, the USG can not tolerate month long delays every mission. -
#83 by kevin-rf on 24 May, 2014 13:44
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And, OBTW, the USG can not tolerate month long delays every mission.
Dr. Sowers, While I admire your willingness to answer questions head on, that is sinking to a bit low.
While you launch vehicle are mature and the recent launch rate shows it. Did not the recent RL-10 leak, the Centaur valve leak a few years back, the Delta IV Heavy cavitation on the first flight, the cracked Delta IV pad due to a LOX leak, and the Delta IV's past anemic launch rate impact the EELV launch schedule?
One thing I have admired is ULA's taking the high road to date.
One thing you seem to imply is the USG has not been reliable getting payloads to the pad on time and the capability contract really is covering this uncertainty. Hence is it a late fee not labeled a late fee?
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#84 by clongton on 24 May, 2014 15:37
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Thank you Dr. Sowers for answering my questions.1. If the annual $1 billion capabilities contract goes away, how much will the per-launch cost for DoD payloads increase, on average?
ULA is not "entitled" to anything. As is any contractual arrangement, the capability contract is a mutual agreement between the parties. The benefit the USG obtains from it is worth the price (to them). Will brings up an important point. The original EELV competitors had to provide the capability to launch the full range of USG missions up through the heavy. Some of those missions are infrequent, but the capability needs to be maintained nonetheless. The capability contract provides a lot of flexibility in how the government can move missions around to meet their needs without having to worry about contract changes and delay penalties.
2. Why is ULA entitled to a $1 billion dollar annual capabilities contract for launching DoD payloads and, when also launching DoD payloads, SpaceX is not? That appears to be a real bone of contention here that you keep side-stepping.
Should the USG have a capability contract with SpaceX? That would be up to them and if they think there would be value in such a contract. My expectation is that in the next phase of EELV there will be no capability contract for anyone and the USG will return to a more commercial-like buying practice. That was how the EELV program started in the late 1990's. ULA is comfortable either way.
I appreciate it. -
#85 by rcoppola on 24 May, 2014 17:13
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My advice to SpaceX fans is focus on launching, certification and improving the capability of your system. The USG has a wide range of mission needs that only ULA is capable of meeting. Unless your price is less than ULA's incremental price, the USG will not save a dime switching a mission. And, OBTW, the USG can not tolerate month long delays every mission.
I heartily agree with launching. Certification is out of their hands now. And while I fully respect and appreciate the incredible work ULA has done with regards to implementing successful years long launch services, the reason SpaceX has so many proponents is exactly because of their current and future planned capabilities. i.e..Their vertically integrated domestic engine, structures and systems design and production, F9R, Cargo Dragon, Crewed Dragon, etc...
As for what the USG will and will not tolerate...It would seem they are becoming much less tolerant of the use of a non-domestic engine for NS payloads. You're client is no longer satisfied with a key part of your product. Will you invest and develop an alternative? Or do you expect the USG to pay for that? Because the last time I looked, your future main competitor is doing a next generation engine development program on their own. So yes, there are many such tolerance metrics to go around. (Honest question btw, not trying to score points. And lest we point out the efforts with domestic RD-180 production, that solution would still need to be licensed, a non-starter from various voices in the USG but maybe they'll warm to it. I doubt it though.) -
#86 by Jim on 24 May, 2014 18:59
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As for what the USG will and will not tolerate...It would seem they are becoming much less tolerant of the use of a non-domestic engine for NS payloads.
Not all are concerned. There seems to be all of handwaving. Also, there are many non NS govt payloads and they have no issue with RD-180's -
#87 by RocketGoBoom on 24 May, 2014 19:16
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As for what the USG will and will not tolerate...It would seem they are becoming much less tolerant of the use of a non-domestic engine for NS payloads. You're client is no longer satisfied with a key part of your product. Will you invest and develop an alternative? Or do you expect the USG to pay for that? Because the last time I looked, your future main competitor is doing a next generation engine development program on their own. So yes, there are many such tolerance metrics to go around. (Honest question btw, not trying to score points. And lest we point out the efforts with domestic RD-180 production, that solution would still need to be licensed, a non-starter from various voices in the USG but maybe they'll warm to it. I doubt it though.)
I think eventually the political RD-180 issues gets resolved long before ULA runs out of their 2 year supply of engines. ULA will likely be able to keep using those as long as they want. Two years from now Ukraine and Crimea will likely be forgotten.
The issue really comes back to ULA prices in a competitive environment.
1) Will ULA be competitive without the $1 billion annual capability subsidies?
2) Let's say hypothetically in the future (2017-2020 time frame) that ULA gets 50% of the USG launches and SpaceX gets 50% of the USG launches. Then ULA has to spread those fixed capability costs over fewer launches per year, perhaps only 4-6 annually. What happens to Atlas and Delta pricing if ULA only has 50% market share of USG launches? My guess is that average cost per launch increases by a significant amount.
3) SpaceX costs per launch likely decline somewhat because they can spread their fixed costs over many more customers including commercial, NASA and USG.
4) Is there a solution for ULA if SpaceX takes 50% of the USG launch market? If so, what?
Many companies that loose 30% of their revenue can start hemorrhaging money on a cash flow basis. It typically requires a significant restructuring in order to get costs back in line with new revenue projections. We are not talking about nibbles around the edges to save money by adjusting the employee health plan. We are talking cutting headcount by a hefty amount.
Now I am going to guess that the current block buy mostly goes into effect and that ULA can continue mostly with business as usual for another 3-4 years. Maybe a bone is tossed to SpaceX and they get somewhere between 7-14 of the next 50 launches with SpaceX likely starting in 2017 with their first USAF/DOD launches.
But come 2017-2018.... ULA needs to have a new game plan. Because this train looks ugly. The pricing power of ULA looks compromised in the absence of a new game plan. I don't think they can fix this with just minor efficiency improvements in the single digit percentage range. If there were a pure play way to short the stock of ULA, I would do so. (don't mention BA or LMT, not a pure play) -
#88 by Coastal Ron on 24 May, 2014 19:45
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My advice to SpaceX fans is focus on launching, certification and improving the capability of your system.
SpaceX fans, as well as fans of all other launch systems, play no part in launching, certification or anything else. That's why we're "fans", and not employees like you. As such we can indeed cheer on whoever we want, regardless what stage they are at or roadblocks they may have hit.
But I do want to point out that "SpaceX" fans might also be "ULA" fans too, since when it comes down to hardware there is a lot of great hardware out there to admire. Personally I have a long-term fondness for the Atlas family, for a number of reasons, and I think Lockheed Martin made a gutsy call in using the RD-180, and it's only now that politics is interfering with an elegant business arrangement.
However there is a difference between admiring hardware and admiring business tactics, which is really the crux of the debate regarding ULA. From that standpoint, I would imagine some are cheering on SpaceX not so much because they prefer the Falcon family, but because they prefer the competition and innovation SpaceX leadership is providing.
Just thought I'd point that out.QuoteThe USG has a wide range of mission needs that only ULA is capable of meeting.
No doubt true, but that is also part of the debate - providing enough opportunity for a new entrant to show what they can do. And the upside for the U.S. Taxpayer is pretty big if it turns out they can do the job, which is why this is so important.QuoteUnless your price is less than ULA's incremental price, the USG will not save a dime switching a mission.
That is assuming the Block Buy stays in place. Coming from a manufacturing operations background, which includes low and high volume government contracts, I have no doubt ULA could have been ordering material in advance of contracts using demand forecasting, which is what companies do in a commercial marketplace. And ULA would have had far less risk than other companies, since you have been the sole-source provider for the Air Force till now. In other words, I think you could have been offering lower prices based on volume pricing without a formal Block Buy contract, but chose not to.
So the real question is not whether SpaceX has to beat the incremental price that you would offer for the incremental 37th core (I think they would), but whether ULA would be able to offer competitive pricing if the Block Buy quantity is reduced or is not approved. We have to take the long view here, and it remains to be seen what ULA's future will be beyond this current Block Buy - and THAT is what everyone is waiting to see.QuoteAnd, OBTW, the USG can not tolerate month long delays every mission.
Hoping that an up-and-coming competitor stumbles can be business strategy, but we're all hoping that ULA has a more proactive plan for being more competitive in the future than that...
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#89 by Linze on 24 May, 2014 23:51
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As for what the USG will and will not tolerate...It would seem they are becoming much less tolerant of the use of a non-domestic engine for NS payloads.
Not all are concerned. There seems to be all of handwaving. Also, there are many non NS govt payloads and they have no issue with RD-180's
That you believe Putin's going to honor the non NS exception is just adorable.
There won't be any more RD-180's shipped, for any reason, for any payloads until the US lifts sanctions, IMHO.
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#90 by Jim on 25 May, 2014 14:20
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There won't be any more RD-180's shipped, for any reason, for any payloads until the US lifts sanctions, IMHO.
It is even more naive that you think this, they would miss the cash -
#91 by jg on 25 May, 2014 14:38
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There won't be any more RD-180's shipped, for any reason, for any payloads until the US lifts sanctions, IMHO.
It is even more naive that you think this, they would miss the cash
If Putin et. al. were only concerned about money, they would not have chosen their recent courses of action.
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#92 by ncb1397 on 25 May, 2014 14:53
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There won't be any more RD-180's shipped, for any reason, for any payloads until the US lifts sanctions, IMHO.
It is even more naive that you think this, they would miss the cash
8 launches in 2013 at 10 million per engine is about 80 million in revenue. Russian GDP is 1.86 trillion and so this represents a ratio of 1:23250 of national income. It is roughly equivalent to a middle class person buying a candy bar. -
#93 by Jim on 25 May, 2014 15:02
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8 launches in 2013 at 10 million per engine is about 80 million in revenue. Russian GDP is 1.86 trillion and so this represents a ratio of 1:23250 of national income. It is roughly equivalent to a middle class person buying a candy bar.
Not for EnergoMash -
#94 by Lar on 25 May, 2014 15:14
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Putin's motivations? veering off-topic just a bit. Word to the wise.
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#95 by Will on 25 May, 2014 15:16
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There won't be any more RD-180's shipped, for any reason, for any payloads until the US lifts sanctions, IMHO.
It is even more naive that you think this, they would miss the cash
8 launches in 2013 at 10 million per engine is about 80 million in revenue. Russian GDP is 1.86 trillion and so this represents a ratio of 1:23250 of national income. It is roughly equivalent to a middle class person buying a candy bar.
There's some reason to think that the most recent contract is for more than $10 million an engine. -
#96 by edkyle99 on 25 May, 2014 16:02
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An enlightening story at fool.com includes this tidbit:
"... the launch of payloads into space is worth a significant amount for both Lockheed and Boeing -- in 2013, ULA accounted for 29% of Lockheed's $1.04 billion space systems' operating profits; and in 2013 Boeing reported $171 million in equity earnings from its ULA joint venture share. Obviously, SpaceX wants a piece of that pie."
http://www.fool.com/investing/general/2014/05/25/why-elon-musks-in-hot-water-with-the-head-of-air-f.aspx
The story also suggests that SpaceX has ticked off a four star general with its lawsuit, among other things.
- Ed Kyle -
#97 by clongton on 25 May, 2014 17:09
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An enlightening story at fool.com includes this tidbit:
"... the launch of payloads into space is worth a significant amount for both Lockheed and Boeing -- in 2013, ULA accounted for 29% of Lockheed's $1.04 billion space systems' operating profits; and in 2013 Boeing reported $171 million in equity earnings from its ULA joint venture share. Obviously, SpaceX wants a piece of that pie."
http://www.fool.com/investing/general/2014/05/25/why-elon-musks-in-hot-water-with-the-head-of-air-f.aspx
The story also suggests that SpaceX has ticked off a four star general with its lawsuit, among other things.
- Ed Kyle
Ed, a small but not insignificant nit.
SpaceX did not file a lawsuit. They filed a bid protest, which is a *completely* different thing.
Many, many MANY companies file bid protests all the time. It is sop.
LM & Boeing have both filed their own fair share of them themselves.
A lot of things have spun out of control sense then, mostly because of the way the media has stirred the pot.
But SpaceX filed a standard protest - not a lawsuit. -
#98 by rayleighscatter on 25 May, 2014 18:11
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If it's filed in court, it's a lawsuit.
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#99 by Lar on 25 May, 2014 18:46
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If it's filed in court, it's a lawsuit.
I'm not sure that's correct. Also, whether a bid protest is a lawsuit or not is off topic anyway.
