Business, Economics, Media Criticism, Political Commentary, Space

Shelby’s Antics

20 Comments

The Houston Chronicle weighs in.

I don’t think this is quite correct, though:

Under the current Commercial Crew Development program, SpaceX contracts with NASA for a flat payment. If SpaceX comes in under cost, it gets to keep the profit. If it goes over budget, SpaceX has to make up the difference. This system gives SpaceX more flexibility to operate as it sees fit.

Shelby has inserted language in a Senate appropriations bill that would instead force SpaceX to work on NASA’s old cost-plus model. This would require the private company to track every step of its development, assign a cost to those steps and charge it to NASA, plus an additional fee. This stilted payment model forces engineers to be accountants and removes disincentives for bloated budgets.

Shelby isn’t forcing the company to cost plus. He’s doing something worse (and stupid), forcing them to account for it as though it were cost plus, but on a fixed-price contract.

20 thoughts on “Shelby’s Antics”

  1. Even selling Fixed Price to the Government, you have to give the Feds “Best Available Pricing”.
    It’s black letter law. If you sell gasoline to the US Government, you have to give them the same
    price you give your best commercial customers. If you want to charge a different price,
    you have to show why the price is different.

    That’s why the big computer companies always had a “Federal” division. IBM Federal (Now Lockheed)
    would buy Mainframes at the best commercial price ( GM’s price) and then layer on overhead
    and accounting that way. That’s why Apple maintains a federal division office in Reston,
    etc..

    SpaceX wants to sell Falcon 9’s cheap to get commercial sat launches, particularly, internationally.
    But they want to charge NASA top dollar. SpaceX has to then say “A NASA launch is different from a
    commsat launch because of the Dragon” and then show why a dragon costs 160 million.

    This is why ULA, and macdac’s delta or the titan were never commercially viable. To get the cheap international price, they’d have to give up those fat checks from NASA and USAF.

    Elon want’s it both ways, he wants fat checks from NASA, and he wants to be able to go fetch International business competing with the russians, japanese, chinese and europeans.

    NASA was willing to ignore this because it was so much cheaper then SLS.

    Shelby is forcing the issue.

    Elon needs to form a “Federal” division, put a fence down the middle of the factory floor and
    have the “NASA” birds vs the commercial birds and let the accountants figure out how to book keep all that.

    It’s the curse of the NASA contract. You get a big check but you lose control of your accounting.

      1. I’d suggest FAR Part 12, and FAR 2.101

        Given the Feds are 90% of SpaceXs business, they aren’t really meeting the definition
        of market price.

        1. Perhaps if you looked at the company’s launch manifest, you wouldn’t say such stupid things.

          2. There is no reason to expect that ratio to hold considering they have a lot more flights booked to other clients. Also none of the Falcon 1 launches were done for NASA.

          3. 7 of 9 launches to date have been for NASA.

            I guess you’re too lazy to look at the next 20 or so launches in the pipeline. Hint: they aren’t 90% for NASA, not even close.

      1. And all this time I thought the Rules of Acquisition were merely a plot device on Star Trek.

      2. “acquisitions at or below the simplified acquisition threshold.”

        Try reading the rules.

    4. If you have a customer like the government that adds a lot of expensive requirements onto your operation, you have a right to demand a higher price. Doing business with the government is expensive because of all their stupid bureaucray and bureaucrats. In those cases, it’s reasonable to charge the government more than you would to a customer that doesn’t levy all the extra costs. Or do you think companies should either eat the extra cost of doing business with the government or pass those costs on to the other customers, which effectively would be subsidizing government waste and inefficiency?

      1. Yes, doing business with the Feds often layers cost on, and, it’s why companies
        with large commercial business will actually have a Federal division,
        but they do work to segregate them.

        1. Perhaps if the government was so mind bogglingly stupid about its acquisition processes, it wouldn’t take so long and cost so much to buy stuff. No, that’ll never happen. We wouldn’t need so many useless bureaucrats and there wouldn’t be so many opportunities for graft and corruption.

          1. The government could do a lot of stuff more efficiently, but,
            it’s just the way things are.

            Of course in the last administration we used to see multi-billion dollar
            no bid contracts to Halliburton, so, the rapid acquisitions are not
            particularly efficient.

          2. This is a problem with any large bureaucracy. As transparency becomes more difficult to achieve the acquisition processes becomes more and more codified as a response until it takes forever to get anything. I have seen this happen in large corporations as well.

          3. “no bid contracts to Halliburton”

            LOL, Halliburton. The same company that got no bid contracts from Bill Clinton and Obama but is somehow a uniquely Republican company. There are very few companies that can perform the role that Halliburton does. One reason why is the complexity of the federal government. Halliburton has the structures in place to deal with the federal government and it is a huge barrier of entry to potential competitors.

            It isn’t like the no bid contracts Obama gave to his donors to build a web site. Web design is ubiquitous and requires neither the scale nor complexity of a company like Halliburton.

    1. Ok, my question is if the information gathered through the change in reporting requirements will either be public knowledge or be passed discretely onto SpaceX’s competitors?

      For years we have heard complaints about the lack of knowledge of SpaceX’s costs and how they can have such a low price. The competition seems to not have much of a clue and opening SpaceX’s books would give them a lot of insight. Perhaps this is less about putting a roadblock up for SpaceX than doing a solid for ULA and Boeing to help them with their market research.

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