Space Access Society 6/5/14 Followup to
Space Access
Society Political Action Alert 6/4/14
The full Senate
Appropriations Committee markup of the FY15 CJS Appropriations bill (funding
among other agencies NASA) took place this morning, with no action on the destructive
Commercial Crew & Cargo cost-accounting provisions yesterday’s alert was
about.
Those provisions are
presumably still in the bill that will now go on to the full Senate for
consideration in the coming weeks. (No
bill text has yet been released as of this writing.)
We thank everyone who took
action based on our last-second alert, and we look forward to working with you
all (and with the larger group you all can reach out to now given more warning)
to correct these problems as the process moves forward.
Our next opportunity to get
this fixed will be on the Senate floor, where the bill will be subject to
debate and amendment. This may or may
not prove practical, depending on technical details of how the bill is handled,
but in general the Senate prefers to do such things by “unanimous
consent”, which means that even a small number of dissenting Senators can
influence the process.
In other words, whatever
state you live in, contacting both of your Senators (contact
info webpage) and discussing this with their NASA staffers is a useful
thing to do in the coming days. (See
yesterday’s Alert plus “Deeper Background” below for issue details.) We don’t know when this bill will come to the
floor, but the more Senators aware of the problem at that point, the better.
The next (and final) chance
after that would be in the House-Senate conference on the bill. The House has included no such provision in
their version, but there are House CJS Subcommittee members who will sympathize
with the goals, so removal of the problem provisions in conference is no sure
thing. Start working your Senators.
Deeper Background
Yesterday’s Alert was
necessarily written in some haste, and left out a number of details that may
not be completely obvious to those of us who don’t spend way too much
time dealing with this stuff. In no
particular order…
Motives
A surprising amount of the
feedback we’ve seen on this alert shows considerable anger at Senator
Shelby. We’ve been at this a long time,
and it’s been our experience that most politicians most of the time are trying
to do the right thing. They are often doing
so on incomplete or incorrect information, but in general they mean well.
Anger and vilification can be
fun, but we don’t recommend indulging them in public – they generally get in
the way of reaching a sensible political accommodation.
In this particular case, it
made perfect sense that NASA was the main home of expertise on space
exploration, and thus NASA needed to be given sole (and intensely detailed)
control of developing space hardware – in
1964.
It was still largely so in
1974, by 1984 less so, and declining ever since. In 2014, what used to be the exclusive expertise
of NASA is now covered in standard engineering texts, and many (if not most) of
the people with actual recent successful rocket development experience work at
the commercial rocket companies, not NASA.
Rocket science ain’t rocket
science anymore, and between bureaucratic ossification at NASA and the rest of
the world catching up (and in some cases racing ahead) there are multiple
organizations in the US that are faster and better and cheaper than NASA at the
now-routine work of designing and building space launch vehicles.
Senator Shelby is not evil,
he (and the rest of his coalition) are just stuck in a 1974
NASA-is-the-only-game-in-town mindset.
Getting angry isn’t the answer, education is.
Numbers
We mentioned a NASA study
showing their projected costs for a recent commercial booster done their way
in-house-NASA were over ten times higher than the actual commercial costs –
$300 million actual SpaceX cost for Falcon 9 through first flight (plus $90
million for its Falcon 1 precursor), versus a $4 billion estimate for the same
project done the NASA way.
The story on that is at parabolicarc.com. (The full 40-page paper they quote the final
page of is here.) A later report on that study that redid the numbers
to try to improve the estimates and narrow the gap is here. It’s noteworthy that even then, NASA’s
estimate for the version done via their standard “cost-plus” (open-ended
till the funding runs out) contract came in over three times more expensive
than the “fixed-price” (typical commercial practice; the contract
describes the product and names the price) equivalent.
Certified Cost And Pricing Data
Senator Shelby is on record (here
and here)
that he’s not happy with the available data on how much of their own money the
Commercial Cargo and Commercial Crew companies have put into the
jointly-financed projects. Given that
the overall results have been a huge bargain by NASA standards – two
operational cargo vehicles, plus three crew vehicles positioned to fly by 2017,
for considerably less NASA money than spent so far on SLS which still hasn’t
yet reached Critical Design Review – his concern for protecting the taxpayers
seems questionable.
And given the method he
proposes to collect financial data (described in a press
release as “Certified Cost And Pricing Data”, albeit the actual
bill language is not yet available) the likely result looks more like raping
the companies involved at (considerable) expense to the taxpayers.
“Certified Cost And
Pricing Data” sounds harmless, but it is in fact a term of art in the
Federal Acquisition Regulations (the FARs) with a
very specific meaning. It is an
extremely detailed and quite onerous (and expensive) accounting method
generally used only for “cost-plus” contracts.
“Cost-Plus”
contracts tend to be used for by the government for open-ended R&D
projects. In exchange for extremely
strict cost-accounting, the contractor gets reimbursed for all costs plus a set
profit on top. It’s a way of making sure
contractors don’t go broke on projects where the government customer insists on
a lot of changes. It’s far more
expensive than normal commercial “fixed-price” contracting, and it’s
become a way of life at NASA in many long drawn-out endlessly-revised
incredibly-expensive development projects.
“Certified Cost And
Pricing Data” is a totally inappropriate requirement for commercial
fixed-price vendors, such as the Cargo Resupply
Services companies and the Commercial Crew bidders. As mentioned yesterday, industry
rule-of-thumb is that it can increase costs from 1.5 to 3 times over normal
commercial practice. (NASA’s own
analysis mentioned in “Numbers” above showed Cost-Plus coming in
slightly more than 3x Fixed-Price.)
Still doubt us? Look at the actual FARs
section that Shelby’s “certified cost and pricing data” language
refers to. See here
for FARs subpart 15.4 “Contract Pricing”,
and especially here
for the actual “Certified Cost And Pricing Data” instructions.
A small sample:
Depending
on your system, you must provide breakdowns for the following basic cost
elements, as applicable:
A. Materials and services. Provide a
consolidated priced summary of individual material quantities included in the
various tasks, orders, or contract line items being proposed and the basis for
pricing (vendor quotes, invoice prices, etc.). Include raw materials, parts,
components, assemblies, and services to be produced or performed by others. For
all items proposed, identify the item and show the source, quantity, and price.
Conduct price analyses of all subcontractor proposals. Conduct cost analyses
for all subcontracts when certified cost or pricing data are submitted by the
subcontractor. Include these analyses as part of your own certified cost or
pricing data submissions for subcontracts expected to exceed the appropriate
threshold in FAR 15.403-4. Submit the subcontractor certified cost or pricing
data and data other than certified cost or pricing data as part of your own
certified cost or pricing data as required in paragraph IIA(2) of this table.
These requirements also apply to all subcontractors if required to submit
certified cost or pricing data.
In other words, you not only
have to account for every rivet, you have to separately account for every
subsystem’s rivets, and separately for the rivets used in every subsystem by
your subcontractors. For a normal
commercial operation that has to make money, this is massively intrusive and
massively expensive. And as long as the
government customer is getting a good deal – and they are – this data is none
of the customer’s business. (EG, imagine
the response you’d get, handing the above paragraph to a car dealer while
you’re haggling over price.)
We rest our case.
Space Access Society
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