From: gary@ke4zv.uucp (Gary Coffman)
Subject: Re: Let's be more specific (was: Stupid Shut Cost arguements)
Reply-To: gary@ke4zv.UUCP (Gary Coffman)
Organization: Destructive Testing Systems
Date: Fri, 1 Jan 1993 03:06:02 GMT

In article <1992Dec28.202920.5932@iti.org> aws@iti.org (Allen W. Sherzer) writes:
>In article <1992Dec28.172953.26161@ke4zv.uucp> gary@ke4zv.UUCP (Gary Coffman) writes:
>
>>Shuttle's costs were all accounted for too. The customer, the US
>>taxpayer, wanted R&D done to develop a reusable spacecraft.
>
>OK Gary you win. I'll accept that there is nothing wrong with Governement
>engaging in activities which would get you or I put in jail. It's OK for
>NASA to spend $34 billion and then pretend they didn't.

They don't pretend that they didn't. The expenditures are all public
record. Government does use different accounting rules because government
is not a business. I hammer on this because of your constant claims that
NASA is doing something illegal or unethical. They are not. They are operating
exactly as they are chartered to operate. If you have a problem with that
charter, take it up with Congress, don't bash NASA for following the rules.

>Under these rules, let's look at the costs. The follwoing cost are
>from a spreadsheet I put together to evaluate these costs. We get:
>
>
>                                Shuttle       SSTO
>1. Launches per year [1]:         10           10
>2. Amortization years [2]:        30           10
>3. Development costs [3]:          0         $3,000M
>4. Production costs [4]:        $1,500M      $  333M
>5. Amortization costs:          $   66M      $   58M
>6. Launch costs [6]:            $  550M      $   20M
>7. Total launch cost (5 + 6):   $  616M      $   78M
>8. Cost per pound to LEO:       $10,272      $  1304
>
>So even ignoring $34 billion in Shuttle costs AND doubling SSTO
>costs, SSTO comes out ahead. Even if you doubled Shuttle flight
>rates (which not even NASA pretends any more) and quadrupled
>all SSTO costs, SSTO still wins.
>
>[1] I used the number of Shuttle launches scheduled for this year and next.
>    Doubling this number will not change the end result. For SSTO, I assume
>    it takes 80% the domestic MLV market and that the market doesn't grow.
>    I think both of these assumptions are unrealistic but it makes SSTO
>    look worse.

If cost and performance estimates for DC hold up, it may indeed capture
80% of the MLV market, but not right away. I think most potential customers
will want to see a track record of successful launches first. That may take
several years to develop. The competition, especially Arienne and Long
March, may be expected to cut prices sharply in response. That could lead
to long legal battles over dumping. DC's backers may need deep pockets to
keep going until they win that 80% market share.

>[2] Amortization happens over 30 years for Shuttle vs 10 years for SSTO.
>    SSTO must recoup costs faster since competitors can be expected. Allowing
>    SSTO more time will greatly reduce its costs.

Agree.

>[3] Shuttle gets a free ride here. To keep Gary happy we won't worry about
>    the $34 billion Shuttle development costs. To also keep Gary happy, we
>    WILL amortize SSTO development costs and double those costs just in
>    case.

Development costs still look optimistic, but I'll grant this one. The
development *timeline* which you don't include, I think will be longer
than expected. That impacts everything in the short run. I point to
Pegasus as a current example of the effect of optimistic development
scheduling. That causes financial problems for a commercial venture
that government agencies can shrug off.

>[4] Again, we use Gary's number for the cost of an orbiter. I have doubled
>    the cost of an SSTO to add margin for error.

I accept these numbers outright.

>[6] SSTO launch costs are again, double the estimated costs to add a margin.

Here's where I have the most problem with your numbers. I accept that
NASA spends $550 million per launch in total Shuttle program costs.
I further accept that that's very high. But I would point out that 
it's a government launcher, run under government rules, with government
overhead. Estimates of actual variable costs for a Shuttle launch range 
from $37 to $150 million per launch. That makes it look much better in 
comparison to DC numbers. Is this relevant? Yes if we want to compare 
*vehicles*, no if we want to compare *programs*. It's important to realize 
that DC is projected to operate under a completely different set of rules
than Shuttle is forced to use. Thus we have an apples and oranges
comparison. Shuttle will always cost more, even under commercial
operators and commercial rules. But not as much more as your numbers
indicate. And those extra costs buy some capabilities that DC doesn't
offer. Am I saying NASA should sell Shuttle? You bet. Will it happen?
Not a chance.

If DC flies with anything like the performance and costs that are
projected, it will be a big commercial success. I think those 
numbers are still optimistic and that the program risks are still
large, however. Shuttle was a cheap $300 a pound launcher when it
was a paper airplane too. Even with a 3X stretchout of development time, 
and a 3X increase in projected costs, it'll beat government run Shuttle
costs, but would have trouble against actual Shuttle costs if Shuttle 
were run under comparable commercial rules. What I'm saying in a nutshell 
is that the proposed DC is expected to be cheaper than the operating Shuttle 
because they are required to operate in different manners by law and by 
government and corporate culture.  Thus your Shuttle bashing rightfully 
should be government operating methods bashing. I'll happily join you in 
*that*. Government can't do anything as efficiently as the private sector.

Gary
-- 
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