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 21:21:00 GMT

In article <STEINLY.92Dec23121415@topaz.ucsc.edu> steinly@topaz.ucsc.edu (Steinn Sigurdsson) writes:

>A gliding body with no engines and no heat shield is comparable
>to the operational system? 

It's called a structural test article. They are frequently built to test
aspects of an aircraft design.

>Really, did Boeing pay for the development of winglets (those little
>dinky wingtip things the latest models have)? ...

Look, if your trying to say that research has been done in the past and
that research should be treated as a sunk cost, then you are partly
correct. The concept is correct but the word is 'depreciated'.

Sure there is lots of depreciated costs going into airliner development.
Much of that does come from government funded research. I have no problem
with that. You will note that I didn't say the money used to build the
X-24, an important vehicle for Shuttle, should be charged to Shuttle.

The fact remains however that we did spend $34 billion to develop Shuttle
and that cost should be accounted for. If we are going to pick and choose
what costs we include and which we don't then why not say Shuttle is
free?

>for the development costs of the basic jetliner airbody designs
>or did they sink it to military contracts? 

To some extent I'm sure they did. This happens all the time however
in the civilian world. The first signal processing chips where built
for customers willing to pay development. They where then sold to
whoever. The point is that unlike Shuttle, all costs where accounted
for.

>I thought you quoted a (Pike?) study saying $500 M per flight
>charging all costs to shuttle, $750 M if (sunk) development costs
>were included. Apologies if it was Dennis...

That was Dennis misquoting Pike. Pike said that if you add up all the
manned costs you get a figure of ~$750M. I claim the cost of a Shuttle
flight to be $500M plus the then year development costs amortized over
say, 20 years. I don't remember what that comes to but it is easially
over a billion. 

This is the formula American uses to sell most tickets so I think
Shuttle should do the same. I also insist on DC doing the same, I'm
not giving it a free ride.

>   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

>Over how many flights??? At the moment, with zero flights the DC is
>inifintely more expensive than the shuttle! 

Please let's be resaonable here. By your arguement every new vehicle
is infinitely more expensive than existing ones and so shouldn't be
built.

>What flight rate and amortization period are you using?

I just looked up the exact numbers. At 10 flights per year (roughly 80%
the US MLV market) a DC-1 should (if it works) cost $2700 per pound. This
is a third the cost of Shuttle and about 25% less than existing expendables.
If flight rate goes to 12 a year then costs drop to about $2300 per pound.
This assumes a $3B (twice McD's estimate) DDT&E cost over 10 years.

Now if we amortize over 25 years we get $1890 (10 flights) to $1658 (12
flights) per pound. Again, this compares to $3900 for Titan III and
$10,000 for Shuttle. This still leaves plenty of room for error.

After development is amortized (which can happen with the existing market)
costs drop to $100 to $500 per pound.

    Allen

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