by Jeff Pollard
Orbital Sciences finishes their presentation by unveiling their price-point for an Antares/Cygnus cargo mission at 75 million dollars. These contracts are all “cost-plus,” meaning that the contractor will collect the amount it costs them to deliver the product plus some number of dollars in addition. Cost-plus contracts ensure that the contractor turns a set profit, regardless of whether they go over-budget. The cargo missions are slated to be cost-plus 15 million, and the crew missions cost-plus 20 million. Once they reveal the number, Kingsley starts doing math in his head. The bid includes the cost of the Cygnus capsule. Kingsley estimates that the Cygnus will cost about 20 million dollars, thus the cost of the rocket is at about 55 million dollars. The Antares rocket has a payload to LEO of 11,000 pounds, and the price of 55 million dollars is exactly $5,000 per pound. Kingsley immediately realizes how Orbital Sciences arrived at their price-point. They must be figuring a cost of the Cygnus to be in the twenties and they set their goal at a nice round number of twenty, and they must be setting $5,000 per-pound-to-orbit as a nice round-numbered goal for their Antares rocket.
Kingsley's goal for SpacEx is to get the price-per-pound down to $2,500 in the short term, and with re-usability to get that down below $1,000. At the moment, they are at around $3,000 per-pound, and that's just for the rocket. When they add on a Griffin capsule, the cost rises by about another 30 million dollars. Which means that SpacEx is currently projecting the cost to be around 60 million for the Eagle 9 and around 30 million for the Griffin, coming to a total of about 90 million dollars. The big picture they can't change, but there is flexibility in those rough figures. They hope to get the Eagle 9 down to 50 million, and the Griffin down to perhaps 25 million, but it's hard to project how soon they might get those costs down, or if ever. The price-point they decide on is really just a guess based on their approximate numbers. By appropriately fudging the numbers, they might win the bid. But if they're too aggressive and make too many assumptions about how much they might improve the cost, they'll be going over-budget and making it look like they either were incompetent in making their bid or incompetent in following-through with the contract.
Having spent the last week going over the numbers and trying to decide how low they can reasonably bid, Kingsley easily sees through the Orbital Sciences bid to get back to their logic that led them there. Since they set the price for the rocket and the capsule at nice round numbers, he figures the 20 million they are quoting for the capsule is probably more like 23 or 24 million currently, and the 55 million for the rocket is probably more like 59 million. Listen to a dozen engineers try to project costs for a few weeks and you'll start to understand this obsession with rounding down to the nearest sexy round figure.
Sierra Nevada presents second, showing off the attributes of their Dream Chase space plane. Low-g re-entry, precision landing, easy and fast re-usability, fits on existing boosters, everything you want in a crew shuttle to LEO. But when it comes to telling about their accomplishments so far, they have little to brag about. The presenters focus on engine tests, none of which have taken place with the engine actually inside any Dream Chaser. In fact, they have only done a single flight test of the Dream Chaser, which is shown in a video embedded in the presentation. The video shows the Dream Chaser mock-up being hoisted to 10,000 feet by a helicopter and dropped.
“By mock-up, they mean it's made of balsa wood and looks vaguely like their paper plane,” K whispers to Brittany. Generic inspirational music accompanies the Dream Chaser mock-up as it glides a short distance to a runway. The landing gear come down at the last second before reaching the runway, and one of the three gear fails to come down at all, leaving the Dream Chaser poised to come down on only two of its three gear and send it tumbling into the desert. The video conveniently cuts out before actual touchdown, fading to white and proclaiming that the test was a complete success in proving the aerodynamics of the Dream Chaser, while the presenters make no mention of the landing gear failure.
Kingsley starts laughing hysterically, interrupting the presentation. The presenters try to continue, but Kingsley laughs louder.
“Hey asshole, we're in the middle of something,” a presenter tries to stop K. K's not having it.
“Oh, I'm so sorry, you're in the middle of your presentation, bragging about a perfect flight test in which you crashed the plane. My bad.”
“Okay, so one of the gear didn't come down, that's not the landing gear we're going to use on the actual plane, that gear was just a place holder, the test proved the aerodynamics of the design, and that's what the test was for, not to see if our temporary landing gear would work.”
“I'm just saying, maybe you shouldn't brag about a test that resulted in your plane tumbling and flipping over. I mean honestly, that was like perfect comedic timing. That music, so inspirational, so much progress being made, and we cut away from the thing crashing to declare mission accomplished. Awesome.”
“As I said, the test went perfectly in terms of proving the aerodynamics.”
“Congrats, your plane you've spent a decade designing didn't just fall out of the sky like a brick. Good job guys. Way to go. Oh I mean, it did crash. But not because it's a brick that can't fly, so you've got that going for you. You've proven that a piece of wood roughly in the shape of your plane can kind of glide back to Earth if you let it go at a few thousand feet. So you've only got like 98 more percent of the flight envelope to demonstrate.”
“If I may return to my presentation and stop dealing with jealous hecklers-”
Kingsley simply laughs harder.
“What's so god damn funny? Say what you want about our landing gear snafu, that test proved our design.”
“What's so funny?” K can't believe the question. “I feel like I have to get all meta to explain why this is absurd. It's like explaining a joke. You ran a test on an airplane, in which you drop it out of the sky to see if it either crashes into the ground and breaks or lands safely. And it crashed and was broken. So declaring mission accomplished is a bit like Wile E Coyote claiming that his plan to get the roadrunner was a success because the rocket and roller-skates combo made him faster than the roadrunner. I mean, he flew right past him and smacked into a wall, but in theory, the plan was proven to be feasible. Mission accomplished.”
Since the Dream Chaser is only in the crew competition, they are not yet bidding on operational contracts, but rather competing for more development funds. So their presentation ends without any dramatic reveal of a price point. But their Dream Chaser will require a ULA Atlas V rocket, which is currently billed out at 195 million dollars per launch, add on the cost of building a couple of reusable Dream Chasers and maintaining them and you're somewhere well above 200 million dollars.
Then it's United Launch Alliance's turn to present. The ULA team brought three times as many people as any other company there. The ULA team features many familiar faces. Former NASA higher-up Tim Bloomington, the man who awarded contracts at the previous conference, was now employed by ULA, along with several other former NASA employees.
Their presentation covers both cargo and crew capabilities. Kingsley awaits the announcement of their price point but the long presentation causes his mind to wander. The presenters talk about the attributes of the CST-100 capsule and Atlas V rocket, especially pointing out the “heritage” of their hardware. This heritage argument rubs Kingsley the wrong way. The Atlas rocket dates back to the '50s as it was developed into an ICBM and later into a commercial rocket. But it wasn't developed by Lockheed-Martin who operates it now, the Atlas was originally developed by Convair, which later folded into General Dynamics, which itself was later folded into Lockheed-Martin. So it's true that the Atlas rocket has heritage, but it's not like Lockheed-Martin has been building them since the '50s.
The presenters brag about the heritage of the CST-100 built by Boeing by pointing out all the space products Boeing has built. The presenters make is sound like Boeing was responsible for the entire Apollo program. In fact, Boeing
manufactured the first stage of the Saturn V rocket. The second stage of the Saturn V and the Apollo Command/Service Module were produced by North American Aviation, which later became part of Rockwell International, which eventually merged with Boeing many years after the Apollo program ended. The third stage of the Saturn V was produced by Douglass Aircraft, which later merged with McDonnel Aircraft to become McDonnel-Douglass, the company which produced the F-15 and F-18 before it was bought by Boeing. The Mercury and Gemini spacecraft were built by McDonnel aircraft, which again, is now owned by Boeing, and the Space Shuttle orbiters were built by Rockwell, which again, is now owned by Boeing. So when Boeing brags about heritage and their experience with manned space travel, they're mostly bragging about how many mergers and acquisitions they've made.
Nearly all the aerospace companies in the United States have been merged into just three companies: Lockheed-Martin, Boeing, and Northrop-Grumman. At least with the other two companies, their hyphenated names reveal their merger based past, but Boeing-North-American-McDonnel-Douglass-Rockwell doesn't quite roll off the tongue (like a double-hyphenated result of a hipster marriage). So is it really any surprise that there wasn't much competition for fighter jets or rockets or spacecraft in the United States up until these new companies like SpacEx and Orbital Sciences and Sierra Nevada popped up? Is it any surprise that without much competition, prices go up and capabilities stagnate?
Kingsley thinks about all these takeovers, how many jobs must have been lost because they were redundant, how much political influence was concentrated, and how much progress was lost by turning a dozen capable companies into three monsters.
As the presentation winds down, going well over their allotted time, the ULA presenters finally come around to the price-point reveal. The SpacEx team had decided on a price-point for the cargo missions at 90 million dollars. They figured they might reasonably bid as low as 85 million, but since the ULA bid was probably going to be in the 200+ million dollar range, that 5 million dollars didn't seem worth the risk. So as the presenters prepare to unveil their price-point, Kingsley hopes it doesn't come in under 200 million.
“This price-point is competitive, though admittedly will probably be higher than our competition, but we think our heritage, our experience, our safety record, and our decades of proven success make our bid more valuable than simply a dollar figure. Having said that, we are proud to offer the Atlas V/CST-100 cargo mission at a price of 90 million dollars.”
“Whoa, whoa, whoa, 90 million? Are you kidding, is that a joke?” K asks.
“On what fucking rocket do you get that price!?” The CEO of Sierra Nevada shouts. His space plane has been hampered mostly by the high price of the Atlas rocket it requires to be launched, putting them at risk of losing to the cheaper Griffin. The room erupts in chaos.
“I got this,” K says calmly to the CEO of Sierra Nevada. He stands up, takes a drink of water and then shouts,“they're lying!”
“We're not lying!”
“They know it's cost-plus,” Kingsley rants. “We all know that. So they bid low, lying, and then when you hand them the fat contract, they'll suddenly be over-budget and behind schedule, and you'll pay them anyway. I mean look at the goddamn F-35! So you guys are either going to make them prove they can do that, or you're going to assume they are lying. That or you're corrupt and they've paid you off. Or this is all a charade and you are just trying to kill any cheaper alternative to your Orion Space Slush Fund System so you can keep the pork flowing. So which is it?”
“Kingsley, relax,” the new NASA Administrator, Hugh Jennings says.
“Oh sure, I'll relax, I'm sure this new bureaucrat has this all under control,” K says.
“Thank you for the presentation,” Jennings says to the ULA team. “SpacEx, you're up.”
Brittany gets up and walks towards the front of the room.
“I'd like a ten minute recess,” Kingsley says.
“Oh come on, Kingsley, just tell us about your genius rocket and get this over with,” the heckle comes from Aaron Granderson, the project manager at ULA.
“Well the ULA presentation did run a little long, let's go ahead and break for lunch now,” Jennings says.
The conference breaks for an hour and the reps leave the small meeting to converse with their support teams and allegedly to grab lunch. But Kingsley and his team are far too nervous to actually eat. The SpacEx team takes over an empty conference room, sitting for a moment. K is silent, thinking hard as Hammersmith relays the information to the rest of the team which wasn't in the room.
“They haven't really cut costs have they?” Kingsley wonders aloud. “I mean, their prices are artificially high because of cost-plus contracts and their monopoly. They haven't had to reduce prices because of the monopoly. Does this mean they have gotten costs down this far? Have they just been lying about how expensive these things are for so long that we didn't see this coming?”
“They're trying to put us out of business,” Brittany replies. “If they can win the contract, we'll be in trouble, and by the time it comes out how over-budget they are, we'll be long dead, so what will it matter?”
“And how the hell did they price it exactly at our price-point?” K asks. “Are we being spied on? Do we have a leak?”
“It could be a coincidence,” Brittany replies.
“That ain't no coincidence. They knew that was going to be our price. Now it's not a decision of pros and cons, a cheaper bid by a company with less experience versus a more expensive bid by a company with decades of experience. No, now we have no advantage at all.”
“We could go down to 85, that was our agreed on lower-limit,” Brittany says.
“But if we have a leak, if they knew we were going to 90 and maybe dropping to 85, we might be walking into a trap here. Maybe we predictably cut to 85 and then they whip out a tape recording of us saying that 85 is the absolute cheapest we could go.”
“We don't have a leak, you're being paranoid,” Brittany says.
“Everybody destroy your cell phones,” Kingsley says seriously, reaching for Brittany's cell phone.
“Okay, nobody destroy your cell phones,” Brittany pulls her phone away from K. “We can figure this out. Do we go to 85? Could we go down to 80?” Kingsley takes the titanium flask from his pocket. “Since they're willing to go so low, maybe we need to do the same. Even if it means going way over budget, it would at least keep us in business. We need to think about how low we could go and still be able to reasonably claim that we theoretically could get that low. So what's that number? 75 million?”
“Wait, you want us to come up with the worst lie we can tell and still theoretically be able to claim it's not completely a lie?” Travis asks.
Kingsley slams his Titanium flask down on Brittany's cell phone, banging it repeatedly, utterly destroying it.
“You're buying a new one,” Brittany replies.
“Congratulations, you just got a 200 dollar bonus,” K says. “Alright everyone, phones out.”
“K, just stop, we don't have a leak. Even if we did, even if they caught us saying something, what are they going to do? Submit an illegal recording of us as evidence?”
“That's a fair point,” K replies.
“So what do we do, how low do we go?” Brittany asks the team.
“I need to call their bluff,” Kingsley mutters.
“And how do you plan to do that?” Hammersmith asks.
“I don't know, but they're bluffing, and if we're the short-stack and someone bluffs us and we know they're bluffing, we call them on it or we'll be wasted away by the blinds. We're backed into a corner, we have to act.”
“Really? More American Football metaphors?” Brittany asks.
“That's not football,” Kingsley replies.
“Jesus Hammer,” Travis adds, “haven't you ever played poker?”
“Yeah, sure, didn't I ever tell you, I was a card shark in Vegas for a year, right after getting my masters in aerospace engineering a
nd before doing my PhD in space policy.”
“Well sorry, I didn't get a PhD in space policy, I was too busy going to space,” Travis replies.
“Enough of the dick measuring contest,” K interrupts. “See, this is also what I'm talking about with the sexual harassment stuff,” Hammersmith replies.
“You're just one of the guys to him, it's completely non-sexual,” Travis says.
“Guys, come on, we've got about forty minutes to come up with something, let's stop with the argle-bargle,” K says.
“Argle-bargle?” Travis asks.
“Somebody's been talking to Scalia too much,” Brittany replies.
“What can I say, I like making prank calls,” K says.
“My mother was right. Business isn't a men's club, it's a boy's club.”
“Enough,” K says. “How do we call their bluff?”
“Go ahead SpacEx,” Jennings says to restart the meeting. Brittany gets up and begins her presentation. After thirty seconds of her prepared speech, Kingsley gets up and interrupts her.
“What are you doing,” Brittany whispers through gritted teeth.
“Sit down, I got this,” K says.
“Oh dear lord,” Brittany mutters and sits down anyway. “Why do I listen to him?”
“We had a nice presentation,” Kingsley begins. He takes the clicker and snaps through their presentation slides in about forty seconds. “Some good artwork, plenty of snappy little phrases to communicate confidence. But you guys already know everything that we were going to say. Everything but the price. And ULA already knew the price. So really no new information. So instead of all that, I figured I'd come up here and say something actually meaningful.”
“Then do it already,” Granderson says from the ULA side of the table.
“I've spent ten years trying to lower the cost to orbit. I studied the reasons why it remains so expensive, and those reasons are frankly in this room right now,” K glances over to the ULA team. “We can talk about higher unit production or consolidating manufacturing into a single facility, but the biggest driver of cost, in my opinion, is the fact that the government buys rockets on cost-plus contracts that are long and inflexible. There's no incentive to keep costs down because cost overruns never eat into the bottom line, and the bottom line is all that these companies care about. If there was viable competition, then going over budget could hurt them. That's why they've gone out of their way to eliminate all competition through takeovers and mergers and now cooperation between the two giants. So if they go over budget, there's no option. It's not like NASA can take their business down the road to a Chevy dealer if Ford screws them over too many times.
