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#171
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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...? |
#172
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Project Constellation Questions
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? -- 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 |
#173
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Project Constellation Questions
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). |
#174
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Project Constellation Questions
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? |
#175
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Project Constellation Questions
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. |
#176
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Project Constellation Questions
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. |
#177
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Project Constellation Questions
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 |
#178
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Project Constellation Questions
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. |
#179
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Project Constellation Questions
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. |
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