Project Constellation Questions

On Sat, 20 Mar 2004 14:22:35 -0600, in a place far, far away, Brian
Thorn made the phosphor on my monitor glow in such
a way as to indicate that:

On Sat, 20 Mar 2004 00:06:11 GMT, h (Rand
Simberg) wrote:

Actually, there's a huge recent precedent, given that a reduction in
orders drove costs *up* by fifty percent...

Can we say with any degree of certainty that the reduction in orders
is responsible, though?

Yes, since that was the reason stated by the contractors for the price
increase, IIRC.

There have been, what... 4 total launches of
EELVs to date? How do we know, for example, that Boeing simply didn't
design another turkey that could never meet its goals, a'la X-32, and
is now blaming the slowdown in commercial space to cover their
collective ass?

Given even a primitive understanding of the economics of launch
systems, it seems obvious to me that it's purely a function of flight
rate. In fact, I'm surprised that it was only fifty percent.

The Pentagon screwed itself by insisting on two EELVs, thus removing
any form of competition.

??

I thought the point was to *maintain* competition. How would having a
single EELV increase competition?

Both Boeing and LockMart know they can
essentially charge whatever they want for Delta IV and Atlas V, and
the Pentagon will pay. Why bother cutting costs to be competitive with
Ariane when you've got the DoD over a barrel?

And having only one EELV contractor would remove the barrel how...?

On or about Sat, 20 Mar 2004 20:27:37 GMT, Rand Simberg
made the sensational claim that:
On Sat, 20 Mar 2004 14:22:35 -0600, in a place far, far away, Brian
Thorn made the phosphor on my monitor glow in such
a way as to indicate that:
On Sat, 20 Mar 2004 00:06:11 GMT, h (Rand
Simberg) wrote:
Can we say with any degree of certainty that the reduction in orders
is responsible, though?

Yes, since that was the reason stated by the contractors for the price
increase, IIRC.

How many times have you bought that bridge in Brooklyn Rand?
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On Sat, 20 Mar 2004 23:25:46 GMT, in a place far, far away, LooseChanj
made the phosphor on my monitor glow in such a
way as to indicate that:

Can we say with any degree of certainty that the reduction in orders
is responsible, though?

Yes, since that was the reason stated by the contractors for the price
increase, IIRC.

How many times have you bought that bridge in Brooklyn Rand?

Never. I'm having trouble understanding why anyone would think that a
dramatic reduction in flight rate wouldn't result in a dramatic
increase in cost (and price).

Rand Simberg wrote:

On Sat, 20 Mar 2004 23:25:46 GMT, in a place far, far away, LooseChanj
made the phosphor on my monitor glow in such a
way as to indicate that:


Can we say with any degree of certainty that the reduction in orders
is responsible, though?

Yes, since that was the reason stated by the contractors for the price
increase, IIRC.

How many times have you bought that bridge in Brooklyn Rand?


Never. I'm having trouble understanding why anyone would think that a
dramatic reduction in flight rate wouldn't result in a dramatic
increase in cost (and price).


Rand,

Have you considered that the previous poster might be thinking that
the launchers are so overpriced now that there is no real relation
between its current costs and its production costs?

On Sat, 20 Mar 2004 16:56:38 -0700, in a place far, far away, Charles
Buckley made the phosphor on my monitor glow in
such a way as to indicate that:

Never. I'm having trouble understanding why anyone would think that a
dramatic reduction in flight rate wouldn't result in a dramatic
increase in cost (and price).

Rand,

Have you considered that the previous poster might be thinking that
the launchers are so overpriced now that there is no real relation
between its current costs and its production costs?

He may be thinking that, but there's little basis for it, particularly
since there is competition. Certainly the price has to be greater
than the cost, and certainly the cost will go up if the rate goes
down. Even if there was a fifty percent markup under the higher
flight rates (unlikely), they'd have to increase the price to keep it
profitable at the lower rates.

Rand Simberg wrote:

On Sat, 20 Mar 2004 16:56:38 -0700, in a place far, far away, Charles
Buckley made the phosphor on my monitor glow in
such a way as to indicate that:


Never. I'm having trouble understanding why anyone would think that a
dramatic reduction in flight rate wouldn't result in a dramatic
increase in cost (and price).

Rand,

Have you considered that the previous poster might be thinking that
the launchers are so overpriced now that there is no real relation
between its current costs and its production costs?


He may be thinking that, but there's little basis for it, particularly
since there is competition. Certainly the price has to be greater
than the cost, and certainly the cost will go up if the rate goes
down. Even if there was a fifty percent markup under the higher
flight rates (unlikely), they'd have to increase the price to keep it
profitable at the lower rates.


It doesn't take much for this to occur though. Competitive
pricing is based off coming close to what your competition is
managing. Both look at the rough price range of the other company's
offering, then aim for the same ballpark figure. If you develop
a vehicle that costs $20 million to build, but your competitor is
selling the same class vehicle for $100 million, what price would
you think someone would put on it? Go off the NASA cost estimator and
sell it at that price, then streamline production costs.

With only two companies and both assured sales, there is
little incentive to drop prices. There is only one customer and
they are only going to be buying a set number of flights per year.
Lowering price does nothing to affect demand or sales. Only profit.
Heck, a decrease in flight rate might actually mean more profit,
if there is a huge disjoint between production costs and sale
price.

It really isn't a competition or competitive pricing at this point.
Both are assurred sales and income on par with each other. And the
government has indicated that it will pay to keep it that way. I
would even go as far as say that the odds of either one of them pointing
out the NASA cost estimator is garbage is effectively zero.

Case in point. A friend of mine is a jeweler. Does nice custom work.
Decided to check out watches thinking it would be interesting to
offer it. He checks out the pricing for the mechanics of those
self-winding watches.. And he then finds out that *all* of the
mechanisms commercially available fall into a price range of under
$1000 dollars. Yet, no one making watches will sell this type of
watch for less than a 1000% markup. They ones who did were accused of
making substandard knockoffs, even if they were using the exact same
mechanisms. There is a certain buyer mindset that does more to determine
the cost of an item than anything the manufacturer can do. And, the
larger the markup, the less likely anyone is to break the cost model.

On or about Sat, 20 Mar 2004 16:56:38 -0700, Charles Buckley made the sensational claim that:
Rand Simberg wrote:

On Sat, 20 Mar 2004 23:25:46 GMT, in a place far, far away, LooseChanj
made the phosphor on my monitor glow in such a
way as to indicate that:


Can we say with any degree of certainty that the reduction in orders
is responsible, though?

Yes, since that was the reason stated by the contractors for the price
increase, IIRC.

How many times have you bought that bridge in Brooklyn Rand?


Never. I'm having trouble understanding why anyone would think that a
dramatic reduction in flight rate wouldn't result in a dramatic
increase in cost (and price).
Have you considered that the previous poster might be thinking that
the launchers are so overpriced now that there is no real relation
between its current costs and its production costs?

Actually I was wondering why in the hell we should be expected to recognize
statements by the contracters as anything but, well, statements by contracters.
--
This is a siggy | To E-mail, do note | Just because something
It's properly formatted | who you mean to reply-to | is possible, doesn't
No person, none, care | and it will reach me | mean it can happen

On Sat, 20 Mar 2004 17:21:56 -0700, in a place far, far away, Charles
Buckley made the phosphor on my monitor glow in
such a way as to indicate that:

Have you considered that the previous poster might be thinking that
the launchers are so overpriced now that there is no real relation
between its current costs and its production costs?


He may be thinking that, but there's little basis for it, particularly
since there is competition. Certainly the price has to be greater
than the cost, and certainly the cost will go up if the rate goes
down. Even if there was a fifty percent markup under the higher
flight rates (unlikely), they'd have to increase the price to keep it
profitable at the lower rates.


It doesn't take much for this to occur though. Competitive
pricing is based off coming close to what your competition is
managing. Both look at the rough price range of the other company's
offering, then aim for the same ballpark figure. If you develop
a vehicle that costs $20 million to build, but your competitor is
selling the same class vehicle for $100 million, what price would
you think someone would put on it? Go off the NASA cost estimator and
sell it at that price, then streamline production costs.

With only two companies and both assured sales, there is
little incentive to drop prices. There is only one customer and
they are only going to be buying a set number of flights per year.
Lowering price does nothing to affect demand or sales. Only profit.
Heck, a decrease in flight rate might actually mean more profit,
if there is a huge disjoint between production costs and sale
price.

All of this seems to ignore the fact that both vehicles were
commercial launchers, competing with the market (including the
Russians, to the degree that the quotas would allow them), until
Boeing recently dropped out.

On Sun, 21 Mar 2004 00:52:38 GMT, in a place far, far away, LooseChanj
made the phosphor on my monitor glow in such a
way as to indicate that:

Have you considered that the previous poster might be thinking that
the launchers are so overpriced now that there is no real relation
between its current costs and its production costs?

Actually I was wondering why in the hell we should be expected to recognize
statements by the contracters as anything but, well, statements by contracters.

In general, we shouldn't, but in this case Occam's Razor would
indicate that the statement is probably true.