Can anyone explain to me what Bolden means when he says that he might have to “bail out” commercial space? Does it mean that he’ll have to keep pouring money into them until they deliver the needed product/service? What else could it mean? And if so, are the current cost-plus Ares/Orion contracts “bail outs”? At least with commercial, we have a chance of getting out of that mode. With the POR, “bail outs” (and very expensive ones — fifty billion for both Ares and Orion, though still not as big as GM/Chrysler) are the default.
47 thoughts on “What Is A “Bail Out”?”
Comments are closed.
> Can anyone explain to me what Bolden means when he says that he might have to “bail out” commercial space?
Just as a reminder, at this point in time we have absolutely no idea what Bolden said. All we have is Cernan’s allegation that Bolden discussed bailouts during his closed door meeting, and Bolden saying that he did not recall making such a statement.
OK, then what does Cernan think he means? I mean, he must have some idea, or he wouldn’t be talking about it as though he knows.
Rand, why do you assume that Gene Cernan needs to _have_ “… some idea [about what Bolden said] or he wouldn’t be talking about it as though he knows”?
The two astros were simply out of touch tools to be exploited by the craven idiots on the committee.
“I don’t recall.”
Why not say, “I didn’t say that!”?
Cernan also said, he had a lot of respect for General Bolden but that his comment, assuring them how commercial could get a bailout as big as Chrysler and GM, maybe the biggest bailout in history, shocked him so much he wrote “Wow!” next to his notes.
Didn’t Bolden himself say that kids don’t really need to dream of being astronauts since tele-presence is also very exciting.
> Didn’t Bolden himself say that kids don’t really need to dream of being astronauts since tele-presence is also very exciting.
Nope, you’re misquoting.
I would suspect it means the firms ending up going bankrupt trying to deliver what they promised on their fix price contracts and so NASA, now desperate to have a means of getting to ISS, has the choice of
1. Giving them enough money to stay in business and fulfilled the contract (i.e a bailout)
2. Buying them out, (nationalization) creating a true government launch option (i.e a bailout in the form of a buyout…)
The third option is letting them fail and picking a replacement, as they did when Rocketplane Kistler failed to achieve its COTS milestone, but that would mean setting them back to zero increasing the Gap.
The fourth option would be to just go back to a traditional cost plus contract system for HSL.
Also I heard big, as in big news story, not in terms of dollars and it would be since it would be seen as a failure of a key element of President Obama’s space policy especially after scattering NASA HSL team to the four winds on the claim that New Space could do it faster, cheaper, better… And yes, that would be a big “scandal” in terms of space policy.
And as regards to ULA, you are still assuming they will bid on it. That is a long way from a certainty given their experience with X-33 and EELV. They have every reason in the world to sit out the RFP for commercial crew and I suspect they may well do so as they have nothing to gain from being a part of it.
Suggesting that bailing out SpaceX, et al is only “just as bad” as Ares 1 is not good enough. The commercial option was suppose to be better than Ares 1. If it is not, then what is the point?
By the way, Cernan was quoting from notes that he had taken contemporainiously. So he was not lying or having a senior moment like some have implied.
They have every reason in the world to sit out the RFP for commercial crew and I suspect they may well do so as they have nothing to gain from being a part of it.
Yes, nothing at all, aside from a lot of Atlas/Delta sales.
Shifting Constellation termination costs onto the aerospace companies might also prove to be a disincentive to bidding fixed price for commercial crew.
I think with the sweetners that Bigelow is also offering, 50 million plus a 750 million contract for future flights and with the memorandum of understanding already signed their is little doubt Lockmart and boeing will enter the market. They know if they can get a half dozen more flights per year it makes their margins better for military sales.
Suggesting that bailing out SpaceX, et al is only “just as bad” as Ares 1 is not good enough. The commercial option was suppose to be better than Ares 1.
It is better than Ares I. Ares I is projected to cost $25B going forward. There is no way that getting commercial crew will be more than 20% of that. And it will give us multiple providers, instead of a single, fragile (like the Shuttle) system.
And by the way, Mark, I have no problems with you disagreeing with me. In fact, I like it when you disagree with me — it means I’m probably on the right track. And it doesn’t “hurt my feelings.” It’s not possible for you to hurt my feelings, because in order to do that, I’d have to give a rat’s what you think. My only problem with your crazy posts is when you make crap up about me (like I’m “enraged,” or “shocked”).
Bill White wrote:
“Shifting Constellation termination costs onto the aerospace companies might also prove to be a disincentive to bidding fixed price for commercial crew.”
It is my understanding the cost is always with them. They include close out costs in the contract and recieve that funding up front. The company can then, as Bolden said, “depending on the risk they want to assume” can either let the money sit in the bank in the event the program gets canceled, or use the money right away instead of saving it. If the program does get canceled and they have already spent that funding they are still liable for that amount.
Thomas Matula wrote:
“I would suspect it means the firms ending up going bankrupt trying to deliver what they promised on their fix price contracts and so NASA, now desperate to have a means of getting to ISS, has the choice of”
The “fixed price” has not been set yet. As of right now Russia is the market setter on price at about 55 million and change per seat. If Lockheed/Boeing or SpaceX can do it for 20 – 30 million a seat, they would be fools to sell it at that rate. All they have to do is under cut the Russian bid and follow it down as the Russians cut prices.
I believe under the international agreement America has to fly the other member’s astronauts. Even though we won’t have the shuttle we will still be paying for their rides. Those are the ones I believe will end up going through Russia for access and ours will ride domestic commercial.
So you have to include Russia in your list of options for America access to LEO, you left them out.
Vladislaw, uhh no. ULA have already said that they doubt they can beat the price of the Soyuz. If NASA goes with them it won’t be for any cost savings, it’ll be for nationalist protectionism. If NASA was actually interested in cost, they’d be buying Soyuz rides forever.
This is why “the gap” is just so much stupid nationalistic posturing.
Rand, “bailout” is a keyword for Obama-is-a-communist remember?
I believe I read that the soyuz factory is at close to max production rates now and they have just approved the funding to start on the replacement.
NASA does not need more that a couple flights a year at the station unless they add to the capacity, rent space from Bigelow or shorten the rotation period from 6 months to 1-3.
I doubt anyone looking long term is thinking that NASA will be the sole or largest consumer of commercial human space access. What it will be is the biggest endorsement for your rocket if it is even safe enough for NASA astronauts.
NASA is obligated, by law, to utilize domestic commercial services. No matter how expensive it may seem for commercial, I doubt they will charge anywhere near 1 billion a flight, something nasa has been doing for how long?
Bigelow has also said he wants a domestic provider so, for me, it is a win win. NASA gets a less expensive seat price and it opens the door for commercial space operations.
Trent Waddington wrote:
ULA have already said that they doubt they can beat the price of the Soyuz.
This makes no sense. An Atlas V and a Delta IV Medium each cost about $150 million on the open market. Boeing and Sierra Nevada are each designing a 7-man commercial crew vehicle that can be launched on an Atlas V and a Delta IV Medium.
To be more expensive than the NASA per-seat cost of the Soyuz, the capsule or DreamChaser itself would have to cost over $200 million per flight. That sounds excessively high.
Mike
Mark R. Whittington wrote:
Suggesting that bailing out SpaceX, et al is only “just as bad” as Ares 1 is not good enough. The commercial option was suppose to be better than Ares 1.
According to Steve Cook, NASA’s former Ares program manager, the development cost of the Ares 1 launch vehicle is $35 billion. Since Boeing’s capsule is designed to launch on an Atlas V and a Delta IV Medium, both of which already exist and can be man-rated for $300 million and $400 million, respectively, are you seriously suggesting that Boeing can’t develop a manned space capsule for less than $34 billion?
Really?
Mike
Mike, ULA are saying $400M/flight, 3 seats.
Orbital Sciences isn’t much better..
http://www.youtube.com/watch?v=cp8Fk0Gvwz0#t=5m57s
Whereas Ms Shotwell says SpaceX will beat the price of the Soyuz, Mr Colbertson says he doesn’t think he can be that optimistic.
Rand,
[[[Yes, nothing at all, aside from a lot of Atlas/Delta sales.]]]
Sales don’t always equal profit. And they have been burned before on the idea there was a huge commercial market for EELV. NASA will have to show them the money, or anyone else wanting them to be a partner in the bidding.
Vladislaw,
Actually under the newest contract the price is up to around 80 million a seat. The Russians know NASA needs those seats 🙂
Only the second of these two statements is true. Therefore they don’t have to undercut the Russian price. Once a US commercial provider is available, it will be used even if it’s more expensive than Soyuz. It’s only after two US commercial providers are available that they actually have to start competing on price.
Bailout = throwing money at a company in such a way as to enrich the owners. Basically, a government scheme that guarantees profit or at least a break-even.
By that standard, I suspect that Boeing and Lockheed have been getting bailouts for years if not decades on their NASA business.
According to Cernan (at http://spaceflightnow.com)
“Because we did have a briefing last week and it was in that briefing that Charlie expressed some concern over the potential of the commercial sector to be successful in any reasonable length of time. He indicated we might have to subsidize them until they are successful.
“And I can say with authority, because I wrote this down and I put the word ‘wow’ right next to it, because Charlie did say it may be a bailout like GM and Chrysler. As a matter of fact, it may be the largest bailout in history”
———————-
Whether or not Bolden actually used the term “bailout” seems up in the air. Evidentally, he was trying to make the point that NASA was committed to commercial space, even if commercial space didn’t provide any savings to NASA, and even if the cost of that subsidy over some period (10 years? 20 years?) amounted to as much as a major bailout. Prompting Cernan’s WOW.
At least, that’s what make sense to me.
“And I can say with authority, because I wrote this down and I put the word ‘wow’ right next to it,”
Well hell, if that’s all it takes I’m gunna start saying EVERYTHING with authority.. someone get me a cocktail napkin and a pen.
The word bailout is really misleading, regardless of whether Bolden used it and if so what he meant by it. Developing crew transport vehicles will be expensive and it may turn out to be difficult to give low-sigma estimates of the total cost. This means that there is going to be a large amount of financial risk, no matter who gets the contract or contracts.
The question is how much of that risk should be borne by NASA. Logically, that would be most of the risk, since it is NASA that wants to do exploration. That doesn’t mean NASA cannot shop around and look for the best deal. From the perspective of taxpayers it would make sense if it did and if it used proper instruments to manage that risk: performance bonds, intellectual property rights and other assets as collateral, the right to take over operations if milestones aren’t met etc.
Under the current system NASA doesn’t use these instruments and operates under a single source cost plus regime. This is why I think all the talk of the risk of commercial suppliers is fundamentally dishonest. The essence of what’s being proposed is a new contracting mechanism, one that would allow much better management of risk. Opponents of this new regime point to the risk of bailout when that’s exactly what’s happening to the current regime.
Similarly there is dishonest talk of giving “commercial space” a seat at the table, but not the whole table. Commercial space is not a group of companies, it is a contracting mechanism. All potential suppliers, including current ones could compete on a level playing field.
It is only when you distort the truth by portraying commercial space as a specific group of companies (SpaceX, XCOR, Armadillo, Masten) that you can start portraying commercial space as risky. Changing the contracting mechanism means less risk, not more. Relying on unproven companies would be risky, but that’s not what’s being proposed.
By and large I think it’s dishonesty that’s behind it, but to a degree it will be projection. Some look at the Shuttle workforce with tribal passion, much as they might have a favourite soccer team. They want a place for Team Shuttle and are willing to admit that Team Armadillo etc might have a small place too. This is a total misunderstanding of the new proposal.
It’s not about giving Team Armadillo or Team Masten a place at the table, it is not even mainly about giving those teams a level playing field. It is about effective procurement and hopes of synergy with emerging commercial spaceflight.
Can anyone explain to me what Bolden means when he says that he might have to “bail out” commercial space?
Change “might have to” to “wants to” and I think you’ve probably got ObamaSpace in a nutshell.
RE: Cernan (and you can take the standard “he’s a great American for his service” stuff as read). I have yet to see him pass up a opportunity to a) talk way more than he needs to and b) do that talking out of his ass. But, seriously, you’re talking about a Senate hearing and you’re outraged that witnesses are bullsh*tting and grandstanding? Are you kidding me?
But, seriously, you’re talking about a Senate hearing and you’re outraged that witnesses are bullsh*tting and grandstanding? Are you kidding me?
Only senators are allowed to tell lies in the Senate…
@ Martijn — Tell that to Boldin.
Here’s a question: WHy can’t NASA cut out all the OTHER bullcrap in their budget and just focus on HSF? I mean, Holdrin was up there yesterday talking about blah blah climate monitoring and blah blah green aviation and blah blah next-gen air traffic control and saying all of it is essential. WTF!? Last I checked, NASA was supposed to be a SPACE agency, not a garbage pail for science grant money. Cut all that nonsense out and see if we can’t afford to finish what we started with Ares I and Orion.
And by the way, what did Holdrin mean when he said “Senator, I can’t discuss the specifics of the budget pre-negotiations, for reasons you and I both know”? WTH is THAT supposed to mean? Isn’t this a public hearing?
Here’s a question: WHy can’t NASA cut out all the OTHER bullcrap in their budget and just focus on HSF?
Because that’s not its charter.
Last I checked, NASA was supposed to be a SPACE agency, not a garbage pail for science grant money.
In case you never noticed, the first “A” in NASA stands for aeronautics. It’s not just a space agency and never has been. The aeronautical technology development by NASA directly benefits American companies for both civilian and military applications and sometimes benefits space as well, such as their pioneering work on lifting bodies being used to help develop the Shuttle.
Only senators are allowed to tell lies in the Senate…
LOL. Fair enough.
WHy can’t NASA cut out all the OTHER bullcrap in their budget and just focus on HSF?
I have to agree w/Rand and larry j. If you were to ask, “Why is GISS still funded as it dumps out pails of politicized garbage about AGW?”, I’d agree with you.
Because that’s not its charter.
Bolden himself said in the hearing that deep-space HSF is NASA’s primary task, everything else is secondary. So cut the secondary crap and focus on the primary task. It was Holdrin, not Boldin, that argued “EVERYTHING is essential, we can’t cut any of it.” Which fits nicely into the pattern of this porkulus administration. Cancel Constellation after $9B sunk cost so you can continue to fund AGW research and a whole host of stuff that should rightfully belong to other agencies anyways. I mean, seriously — shouldn’t FAA be doing next-gen ATC? Why is that a NASA program? etc.
Bolden himself said in the hearing that deep-space HSF is NASA’s primary task, everything else is secondary. So cut the secondary crap and focus on the primary task.
Bolden is wrong. And even if he were right, the fact that a task is secondary doesn’t mean that you completely ignore it.
Cancel Constellation after $9B sunk cost so you can continue to fund AGW research and a whole host of stuff that should rightfully belong to other agencies anyways. I mean, seriously — shouldn’t FAA be doing next-gen ATC? Why is that a NASA program? etc.
Look up the “sunk-cost fallacy.” And NASA has always done aeronautics research. Its predecessor, NACA, did little else. FAA will implement it, but NASA usually does the basic research for things like that.
“Bolden himself said in the hearing that deep-space HSF is NASA’s primary task”
I believe at the end of that Bolden predicated it on that was his personal opinion and what NASA means to him, not how, as Administrator he performs his duties.
txhsdad,
You must understand that Dr. Holdren was a Charter “member” of the Limits to Growth gang and co-authored with his mentor, Paul Ehrlich the I=PAT equation which illustrates how population, affluence, and technology result an increased human impact on the environment. So what would expect but that NASA, a national symbol of technology, would be turned to the climate change monitoring, green aviation, green spaceflight agency? And why the increase in the NASA budget is not the result of increasing spending on HSF, but on increased spending on climate monitoring?
Yes, the commercial crew taxi also fits into this model since it doesn’t really involve any radical advances that will either increase access to space or advance technology. I know, New Space advocates expect a boom in commercial projects, but I suspect they don’t believe it will occur, or that New Space firms will be so busy making money as New Space contractors they will forget the private markets, as Orbital did when it started down the government “services” path to close its early business model… And I am sure there is also a hidden hope that the commercial firms, or even ISS, will fail allowing a natural end to HSF.
Yes, its a strange alliance between New Space advocates who see space exploration and exploitation as generating great advances in population, affluence, and technology and a science advisor who sees those as negatives. Hopefully a modern Daniel Webster will be around when the bill comes due 🙂
I PAT link for the Google impaired:
http://en.wikipedia.org/wiki/I_PAT
Trent Waddington wrote:
Mike, ULA are saying $400M/flight, 3 seats.
This makes even less sense than the previous post. How and why would ULA restrict the number of passengers their customers would carry? Are they going to count the passengers before launch and refuse to press the big red button if more than three people board the spacecraft? Why would they do this?
Mike
Mike, I don’t know if you understand this, but manned spacecraft have seats in them. The astronauts don’t just pile into the can.
txhsdad, I think there’s something wrong with your keyboard, it seems to occasionally replace ‘e’s with ‘i’s.
Trent,
I expect their spacecraft will probably be limited to one row, 3-4 seats, to allow rapid egress on the pad in case of an Apollo 1 type of accident. In short they may be anticipating NASA human rating requirement.
If you have one seat for the pilot then that leaves three.
Tom
Tom, I think you’re laboring under false expectation of how “taxi” services will operate. It’s understandable as the analogy is seriously lacking. In a terrestrial taxi there’s a driver in the front who you pay when you get to your destination, and he goes off to find another fare once you egress. Just as we dont expect NASA astronauts to keep sufficient large denomination notes in their space wallets so they can pay the fare, we shouldn’t expect there to be a dedicated pilot hired by the taxi owner and we should expect the vehicle will hang around for the return trip, or at least there should be a guarantee that another vehicle will be available when that leg begins. This is why some have been throwing around the term “rental car” as an alternate analogy.
I don’t know, Trent. If they go ahead with the Orion Lite lifeboat concept, there is little need for the commercial spacecraft to stick around after delivering the passengers/payload. Given that each commercial company will have their own spacecraft design, you’d either have to have astronauts qualified on several different vehicles (difficult and expensive from a training perspective) or have the commercial vehicles flown to and from the ISS by a company astronaut. Either that, or the bulk of the “flying” is actually done by company ground controllers.
Trent,
You are the one thinking in the old NASA model (instead of the new commercial one you are calling for….) that the Astronauts must fly themselves to the ISS. Why?
Tell me, do U.S. astronauts “fly” the Soyuz or do the Cosmonauts fly it?
Do you think Astronauts will be flying any of the Sub-Orbital tourist vehicles if NASA buys seats on them for “training flights”?
Keep in mind that the vehicles will be owned by the commercial firm so there are now a number liability issues involved. If a NASA astronaut is flying the vehicle and there is an accident who would have liability, NASA or the commercial firm, for the vehicle? It would of course depend on who is found at fault. If its NASA, then NASA would pay, but keep in mind that NASA is also likely to be assisting with the accident investigation so don’t you think that would set up the appearance of a conflict of interest?
Now if the FAA is given responsibility and has the National Transportation Safety Board do the investigation the big question is do they have the in-house expertise to do so? I suspect not, so they likely would want to bring in NASA experts…
That is why, to keep things simple legally the firms will likely have their own pilots fly the vehicles.
Also keep in mind the presence of a CRV is to eliminate the need for the commercial vehicles to spent long idle periods in orbit. So there is no need for the “taxi driver” to hang around.
Trent Waddington wrote:
Mike, I don’t know if you understand this, but manned spacecraft have seats in them. The astronauts don’t just pile into the can.
I don’t know if you understand this, but Boeing has stated that their capsules will have seven seats in them, and Sierra Nevada has stated that the DreamChaser will also have seven seats.
So, again, why would ULA refuse to launch the Boeing capsule or the DreamChaser if more than three people board the spacecraft?
Mike
I=PAT looks like total crap. A pseudo equation for a pseudo science. What is the unit of measure for Impact?
(T: environmental impact per unit of consumption)
What the hell does that mean? What unit of measure is Technology?