SpaceX to increase price of cargo delivery to space station by 50%

[testguy]

SpaceX can not charge as much as the market will bear on a government contract.  SpaceX's bid is to the Government Statement of Worknad (SOW) its bid must be consistant with the requirements in the requirements within the government Specification.  It is the provided government documents that will drive the price along with a resonable profit.  The government sends in an audit team, prior to a cvontract award, to do fact finding on the contrctor bid.  SpaceX must justify its bid and/or negotiate a price.  The best way to lower costs is to adjust the SOW and Specification.  ...

In this case, yes they can.  CRS-2 is a commercial goods and services contract.  Providers of such do not have to justify squat; there is no concept of "reasonable profit" for such contracts (unlike, e.g., sole source or cost+X).

All the providers need to win an award is show that they can meet the contract requirements at lower cost than the competition; see Federal Acquisition Regulations (FAR) Part 12 (among others).

And they will not be hounded by packs of auditors.  FAR is quite specific on what evidence the Government can demand, and what providers must provide, in these situations.  From a FAR perspective, CRS-2 is marginally different than USG contracts for buying toilet paper, hotel rooms, or airplane seats.

I stand corrected.

[DistantTemple]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

The Investor is being rewarded for their confidence and financial support at crucial (earlier) stages in the companies' development. I know SX is private, but isn't this the basic picture? Any spare cash SX has, after operations funds their developments, not "dividend" payments to the investors.
However my comment was not well informed... But I still maintain that through SX more of NASA payments end up on developing valuable new technologies, than dollars spent on Orbital ATK do.
Now adding to that I suggest NASA is achieving its goal of developing a private space industry more effectively by spending money with SX, as not only does it receive the contracted service, but SX then creates a second (general) benefit to NASA (as well as space industry in general and SX) by using some of that payment for research of the BFR etc. In contrast Orbital spends less on research, and some of that value leaks out of the space industry as dividends.

[Coastal Ron]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

Venture capital doesn't work that way.

SpaceX is a private company and Google and others are investing in them. The only way venture capital investors get a return on their investment is if SpaceX goes public or SpaceX is sold. That's it. Sometimes employees are allowed to sell their equity in private companies through what's known as a secondary market, and that rewards early employees in companies that don't plan to have an exit soon (i.e. IPO or get bought).

Orbital ATK is a public company, with public shareholders that can buy or sell their shares on a public market. Paying dividends is a choice by the management to encourage shareholders to buy & hold shares, and/or to distribute excess funds the company has. Or, instead of paying dividends, Orbital ATK could be investing that money in products and/or services that will increase the company's value in the future. Which is the conundrum of public companies - do they reward the current shareholders or the future ones?

[envy887]

But it’s not the same service: the risk premium is now much smaller than it was.

So it's less risky, but charged at more?

Of course. Lower risk is more valuable to NASA, since they self-insure.

[Oli]

The company supposed to allow people to go to Mars for peanuts increasing their prices by 50pct? Pretty significant.

Yep. They're now charging ~$230m for a cargo and ~$400m for a crewed flight (excluding launch), BFR will cost several times that much, everything else is wishful thinking.

I don't think that's accurate excluding launch. Launch (on a new booster every time) is part of the package, separate costs are not detailed anywhere that I know of.

Crew Dragon only has 2 flights per year. If BFR only flies twice per year, it will cost at least that much, but that rate is not sustainable - it will either fly much more (and lower cost per flight), or not at all.

Crew Dragon only has 1 flight per year, and it's more in the $200-230M range including launch if you look at the amount on the task orders for the flights.  The cost of passenger flights to Mars on BFR is unknown and irrelevant right now, that's far in the future.

The recurring price for crewed Dragon (including ops, excluding launch) is $308m, not $400m. My mistake. The source (page 10): https://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/20170008893.pdf

A testable prediction.
If BFR costs "several" times as much, excluding launch, then SpaceX will quickly go out of business at 3/4ths of a billion or more per shot testing BFR and using it to launch their Skynet constellation.
I really, really do not think Musk and Shotwell are that stupid.

Do we know for certain Starlink will be launched with BFR? Does it even have enough volume to launch 150t of smallsats?

Comparing this to the BFR, or worse projecting costs for the BFR based on this is comparing apples to oranges, there's not much to add.

Apples and oranges indeed. Dragon 2 is a small LEO capsule. BFR is a gigantic deep-space and Mars-return capable lifting body.

[rayleighscatter]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

Venture capital doesn't work that way.

SpaceX is a private company and Google and others are investing in them. The only way venture capital investors get a return on their investment is if SpaceX goes public or SpaceX is sold. That's it. Sometimes employees are allowed to sell their equity in private companies through what's known as a secondary market, and that rewards early employees in companies that don't plan to have an exit soon (i.e. IPO or get bought).

That's not correct. Actual equity in a private company can nearly always be sold. The most control the company may have over these is right of first refusal.

[DistantTemple]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

Venture capital doesn't work that way.

SpaceX is a private company and Google and others are investing in them. The only way venture capital investors get a return on their investment is if SpaceX goes public or SpaceX is sold. That's it. Sometimes employees are allowed to sell their equity in private companies through what's known as a secondary market, and that rewards early employees in companies that don't plan to have an exit soon (i.e. IPO or get bought).

That's not correct. Equity in a private company can nearly always be sold. The most control the company may have over these is right of first refusal.

SO basically investors get little or no money back from Spacex, until they sell (part or all) of their stake or investment. (likely to another investor - apparently there are people waiting in line to invest in SX) Then they will make a massive profit, assuming SX has prospered and increased in value (which it has). That is their reward.
My comment stands that SX is not handing out dividends etc, but investing all it can in progressing space technologies, that are intended to benefit mankind, such as reuseability, lower launch costs, and getting to Mars etc.

[rayleighscatter]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

Venture capital doesn't work that way.

SpaceX is a private company and Google and others are investing in them. The only way venture capital investors get a return on their investment is if SpaceX goes public or SpaceX is sold. That's it. Sometimes employees are allowed to sell their equity in private companies through what's known as a secondary market, and that rewards early employees in companies that don't plan to have an exit soon (i.e. IPO or get bought).

That's not correct. Equity in a private company can nearly always be sold. The most control the company may have over these is right of first refusal.

SO basically investors get little or no money back from Spacex, until they sell (part or all) of their stake or investment.

Possible but unlikely, most major investors (especially rapid growth tech companies) want something in return (money, IP, Board seats, etc.) in exchange for patience. But as the terms are only known to Google and SpaceX I won't try to rebut it.

[AncientU]

SpaceX has already said it is going to fund BFR/S largely from profits generated from Falcon 9 & Heavy flights.  This is nothing new.

I think the $14 Billion dollar crew transport contract they won from NASA might also contribute a few bucks to the pot.

Depending on profit margins the SX flight schedule to date may have raised a $Bn in profit.

You're not going to build a whole new factory and build and flight test a vehicle the size of 2 A380's (and considerably heavier) with new engines, new construction methods and beyond anything this industry has seen in size for that kind of money. 

Issuing that contract to SX may have insured NASA's long term HSF future.

It is incorrect that BFR/BFS are to be funded from launch revenue of Falcon 9 and Heavy flights.

SpaceX has specifically stated that the Starlink constellation is the funding source of BFR/BFS and the Mars plans.  In fact, BFR/BFS is supposed to replace those vehicles -- at some appropriate point. 

BFR/BFS will likely contribute to it's own funding by lofting the constellation and doing other 'odd jobs' like delivering the Lunar Village and a bit of Mars exploration.

[DAZ]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

Venture capital doesn't work that way.

SpaceX is a private company and Google and others are investing in them. The only way venture capital investors get a return on their investment is if SpaceX goes public or SpaceX is sold. That's it. Sometimes employees are allowed to sell their equity in private companies through what's known as a secondary market, and that rewards early employees in companies that don't plan to have an exit soon (i.e. IPO or get bought).

That's not correct. Equity in a private company can nearly always be sold. The most control the company may have over these is right of first refusal.

SO basically investors get little or no money back from Spacex, until they sell (part or all) of their stake or investment.

Possible but unlikely, most major investors (especially rapid growth tech companies) want something in return (money, IP, Board seats, etc.) in exchange for patience. But as the terms are only known to Google and SpaceX I won't try to rebut it.

Google and Forbes could also get a share of the profits, and that’s how they could make back their investment.  In the case of Google, they are probably going to make back many times their investment just from an expanded market for their primary business.  An example of this is why they have been fronting things like project loon.  The amount of money that Google has invested in the SpaceX Starlink project likely represents only a small amount of their investment.  Google is one of the premier network companies and runs probably the world’s largest network laboratory.  A large part of their investment probably has to do with the networking side of Starlink.

[Ronsmytheiii]

https://arstechnica.com/science/2018/04/nasa-to-pay-more-for-less-cargo-delivery-to-the-space-station/

From the Ars Technical story:

SpaceX and Orbital ATK are expected to fly 31 supply missions between 2012 and 2020, the first phase of the supply contract. Of those, the new report states, SpaceX is scheduled to complete 20 flights at an average cost of $152.1 million per mission. Orbital ATK is scheduled to complete 11 missions at an average cost of $262.6 million per mission.

So even with a 50% increase in the new contract, SpaceX may still be the lowest cost supplier of the three.

Maybe Per launch, but a Dragon has a pressurized volume area of 10 m3 versus Cygnus Spacecraft's 27.0 m3 in the Extended version (standard from now on). So it costs $9.7259 million/m3 on Cygnus to deliver ISS cargo vs $15.21 million/m3 on Dragon. Now of course this doesn't take into account cargo weight, which ends up at 12.185kg/$1million for Cygnus and 85.470kg/#1million for Dragon.

So as you can see, both craft are optimized for two different "sweet spots", Dragon is great for upmass/downmass while Cygnus is optimized for volume. Either way, not really fair to compare them apples-to oranges.

[envy887]

https://arstechnica.com/science/2018/04/nasa-to-pay-more-for-less-cargo-delivery-to-the-space-station/

From the Ars Technical story:

SpaceX and Orbital ATK are expected to fly 31 supply missions between 2012 and 2020, the first phase of the supply contract. Of those, the new report states, SpaceX is scheduled to complete 20 flights at an average cost of $152.1 million per mission. Orbital ATK is scheduled to complete 11 missions at an average cost of $262.6 million per mission.

So even with a 50% increase in the new contract, SpaceX may still be the lowest cost supplier of the three.

Maybe Per launch, but a Dragon has a pressurized volume area of 10 m3 versus Cygnus Spacecraft's 27.0 m3 in the Extended version (standard from now on). So it costs $9.7259 million/m3 on Cygnus to deliver ISS cargo vs $15.21 million/m3 on Dragon. Now of course this doesn't take into account cargo weight, which ends up at 12.185kg/$1million for Cygnus and 85.470kg/#1million for Dragon.

So as you can see, both craft are optimized for two different "sweet spots", Dragon is great for upmass/downmass while Cygnus is optimized for volume. Either way, not really fair to compare them apples-to oranges.

The OIG report gives the usable pressurized volume of Cygnus at 12.7 m^3 and that of Dragon 2 Cargo at 8.6 m^3. Stretched Cygnus is an option but there are currently no NASA orders for it.

[Robotbeat]

It’s not a cost-plus contract. That means SpaceX can charge higher prices.

Nor did I say it was.

So what's the problem?

But it’s not the same service: the risk premium is now much smaller than it was.

So it's less risky, but charged at more?

Hmm....

Correct. Less risk means the same service is more valuable to NASA. Less loss of mission risk and less schedule risk.

[AncientU]

The set of three quite different vehicles adds robustness to NASA's ISS logistics.  This same approach -- let the commercial providers innovate, and select from the menu of solutions -- will serve Lunar planning well if it is employed.  Simply comparing the price paid doesn't account for the value of this innovation for future endeavors.

COTS model needs to be the first choice for BEO activity; the counterpoint to LOP-G/SLS/Orion first and only.

[Coastal Ron]

Google and Forbes could also get a share of the profits...

1. "Forbes" is not an investor in SpaceX
2. Venture capital investors don't get a "share of the profits".

...and that’s how they could make back their investment.

3. Investors only get money from an investment if the company they invest in does an IPO or the company is bought.

In the case of Google, they are probably going to make back many times their investment just from an expanded market for their primary business.

4. It is not unusual for a company to invest in another company that can help them. So the expectation is not "profit sharing", but that the investment will increase the market conditions for the investor company. So increasing internet usage benefits Google overall, but not Google specifically.

The amount of money that Google has invested in the SpaceX Starlink project...

5. Investors don't invest in projects within companies, they invest in the company itself. The company may say they will use the funds for a particular use, but unless they have a contractual agreement that defines that, the investment could be used for anything the company wants to use it for.

[Ronsmytheiii]

Huh, according to the table 2 of the OIG report, SpaceX was the most expensive and OrbitalATK was the least

[Robotbeat]

google/etc didn't invest in the cargo delivery portion of SpaceX, anyway. They invested in Starlink.

[Robotbeat]

Huh, according to the table 2 of the OIG report, SpaceX was the most expensive and OrbitalATK was the least

Looks like it was calculated based on (pressurized?) upmass alone.

OrbitalATK would be even cheaper if they used F9R and the Super-extended variant of Cygnus.

Sierra Nevada would provide a similar service to SpaceX (minus the unpressurized upmass), but the vehicle is totally new to orbital flight and is relatively high risk, so makes sense that they felt they had to bid lower.

[Robotbeat]

It is offensive that Orbital ATK is paying dividends instead of working on reusability.

SpaceX is paying its investors as well, they just use private investing instead of public. The billion dollars from Google wasn't a gift, they're getting something in return, either a fixed rate or a share of profits (the same goes for their other investors).

They are getting neither; investors in SpaceX only see equity appreciation (presumably substantial given current valuation).  If there are any outstanding note-holders, they may be seeing interest payments, but they are not usually considered investors.

I believe the overlooked issue with the CRS pricing increase is: what might the actual BFR "public" pricing really be in light of the ~$7m/flight claim that was made upon unveiling the current BFR?  For example, we might consider early SpaceX announcements of pricing for the initial F9 ($18m, circa 2005) with the current reality.

Omnia quae mercatus feret.

I expect BFR to be about the same as Falcon is now. UNLESS you have a bunch of payloads or UNLESS there is more competition (i.e. from New Glenn, etc).

As far as the original F9, the public prices per kilogram for the 5 meter fairing have stayed essentially unchanged, adjusted for inflation. If you got a sweetheart deal behind closed doors, I expect you could do a similar one today if you had bargaining power (again, a bunch of payloads to launch and a competitor to go to).

[docmordrid]

>
5. Investors don't invest in projects within companies, they invest in the company itself. The company may say they will use the funds for a particular use, but unless they have a contractual agreement that defines that, the investment could be used for anything the company wants to use it for.

StarLink may be different since Google is the patent assignee of the meshed constellation, and its inventor moved from Google to SpaceX shortly after the Google/Fidelity investment.