From: aws@iti.org (Allen W. Sherzer)
Subject: Re: Stupid Shut Cost arguements (was Re: Terminal Velocity of DCX?
Organization: Evil Geniuses for a Better Tomorrow
Date: Wed, 23 Dec 1992 19:13:06 GMT

In article <STEINLY.92Dec23102952@topaz.ucsc.edu> steinly@topaz.ucsc.edu (Steinn Sigurdsson) writes:

>   You left out the $34 billion (in 86 $$) development costs which must
>   be amortized.

>Does this include the cost of the Enterprise? 

When Boeing built the first 747 it was a non-flying test aircraft just
like Enterprise in most important respects. Since Boeing didn't count
this first 747 as a sunk cost (they would be bankrupt if they did) I
don't think Enterprise should be considered a sunk cost.

>If so, why is it not a
>sunk cost as you argue the DC-Y should be? 

DC-Y is a proof of concept for a very limited market (SDI deployment). The
DC-1 will likely be a very different vehicle and will be a new one for all
practical purposes. That cannot be said for Enterprise.

>Does it include
>construction of wind tunnels, the (Grumman?) glide simulator and
>operations thereof? 

Since Boeing charges those things to development and passes those on to
customers, I think NASA should as well for its operational vehicles.

>What about the software development costs for
>doing a lot of the aerodynamic simulations, 

Boeing also writes software for aerodynamic simulations when it developes
aricraft. The cost of this is included in development and is passed on
to customers. NASA should as well for its operational vehicles.

Fair enough?

>You've said you want to bill all manned space program costs to the
>shuttle, 

No, that is not what I said. That is what Dennis put into my mouth.

>does that include suit development? If so, what are the DC
>personnel going to wear for EVA?

Well, I think they should pay their fair share of the development costs
for whatever suit they use.

>I think you are quite inconsistent in how you assign costs to
>the DC and Shuttle. 

I disagree. However, it is a minor point since if you use the same rules
(pick any you like) DC comes out far far ahead of Shuttle. In fact, you
could amortize DC-Y development, DC-X development, and DC-1 development
and it STILL comes out cheaper than the operational costs of Shuttle
(~$6,000 per pound for DC vs $10,000 per pound for Shuttle). All three
efforts cold be funded with the interest you would get by putting Shuttle
development money in the bank at 5%.

>For instance you explicitly said tank farm
>operation for LOX and LH2 should not be included, only the marginal
>cost of loading each DC 

No, I have never said that. I think DC will get fuel from the same
source that airliners get fuel. American Airline doesn't produce its
own fuel, not do they get it at marginal cost. Instead they buy it
from suppliers who include the cost of tank farms in the price they
charge. DC will be no different.

   Allen

-- 
+---------------------------------------------------------------------------+
| Allen W. Sherzer | "A great man is one who does nothing but leaves        |
|  aws@iti.org     |  nothing undone"                                       |
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