Aerospace Corp Background and Messages: Commercial Crew Financial Feasibility/Reliability White Paper
Summary:
* In late 2009, The Aerospace Corporation conducted an internally funded project to develop a model of the business-case of commercial crew space transportation. NASA’s Independent Program & Cost Evaluation department subsequently asked for, and funded, an expanded and refined analysis of Aerospace’s initial work.
* A summary of the tool was presented February 28th. The audience of 20-25 people included NASA Administrator Charlie Bolden, Deputy Administrator Lori Garver, and Associate Administrator Chris Scolese.
* The Aerospace white paper and presentation were informally and formally presented to Congress during the week of March 28, 2011.
Messages:
* Aerospace was asked to develop a tool that would be helpful in assessing the business case for commercial crew.
* Aerospace developed a simple spreadsheet-based parametric tool to explore several factors to estimate total cost to the government of commercial crew transportation systems.
* Aerospace did not survey NASA or industry for input data. The inputs used historical data as a starting point in order to demonstrate the capability of the tool. The results were not intended to reflect what the commercial community has been developing.
* We continue to review the material. NASA has informed Congress that other tools and analyses exist and will be provided shortly.
* Aerospace can model many other possible cases and assumption sets to produce significantly different results. Three other cases are illustrated in the attached appendix.
* The intent of this report was not to pass judgement on the economic feasibility of a commercial crew transportation provider, but rather to illustrate the ability of the tool to conduct parametric sensitivity studies.”
Questions and answers:
Q. Why did Aerospace do this study?
A. In late 2009, The Aerospace Corporation undertook an internally funded project to develop a tool to examine the business-case viability of a commercial crew space transportation system provider. This research is in keeping with Aerospace’s longstanding commitment to stay abreast of trends in space development. We are continually evaluating trends.
Q. What exactly did Aerospace produce for NASA?
A. We produced a modeling tool that could be applied to a variety of data sets to produce conclusions about the costs associated with scenarios for a commercial crew transportation system.
Q. Why is this “tool” needed?
A. In order for NASA to invest wisely in commercial crew transportation systems, a tool is necessary to understand the viability of the resultant government-commercial partnership. This tool is much like any other sophisticated tool used in business analysis. As part of the demonstration of the tool’s viability, we analyzed many scenarios based on hypothetical data sets. Those hypothetical data sets produced varying results which may or may not be applicable in real world scenarios for the use of commercial crew transportation system.
Q. So the results are to determine what?
A. We produced a modeling tool that could be applied to a variety of data sets to produce conclusions about the costs associated with scenarios for a commercial crew transportation system. The results shown to NASA and Congress recently were not intended to represent any specific real world scenario. We modeled a scenario utilizing data from as long as 10 months ago in order to demonstrate the tool’s viability, not the viability of any specific commercial crew transportation system.
Q. So Aerospace misappropriated funds to conduct research that would undermine NASA’s position?
A. Absolutely not. We began internal work in 2009 funded independent of our contracted programs. Subsequently, NASA’s Independent Program & Cost Evaluation department asked for, and funded, an expanded and refined analysis of Aerospace’s initial work in developing a tool to assess the business case scenarios for a commercial crew transportation system.
Appendix Commercial Crew Business Case Example
Background
Aerospace was asked to provide a series of roundtable workshops to NASA HQ starting in the spring of 2010 on various aspects of human rating existing launch systems, and issues associated with commercial crew. One of the topics discussed was that of the cost to NASA for use of commercial launch and capsule systems for ISS crew transportation.
Aerospace developed a simple spreadsheet-based parametric tool to explore the sensitivities around several factors affecting the potential viability of the commercial crew business case in order to estimate total cost to the government. Inputs included flight rate, fixed and variable cost projections, government and commercial investment levels, internal rate of return to the commercial service provider, and the possible demand for private pay passengers. Outputs included total cost to the government and price per seat estimates required to achieve the internal rate of return for the commercial service provider. The purpose of the tool was to generate alternative cases that would stimulate discussion among senior NASA officials at the roundtables. Example results from the tool were presented at a Feb 28th meeting with the NASA Administrator, Deputy Administrator, and other senior mangers within the Agency.
Summary of Tool Results
Aerospace did not survey NASA or industry for input data, as the purpose of this activity was to demonstrate a tool that could accommodate a range of scenarios and input conditions. Aerospace used the allocation of costs between the commercial service provider and NASA, parameterized on inputs as shown in Table 1 for the examples presented to NASA. These assumptions were based on information gleaned through informal conversations with knowledgeable stakeholders in the space launch community.
Figure 1 shows two of the many parametric plots that were presented at the Feb. 28th meeting at NASA Headquarters and illustrate the results of the two key output parameters, price per seat and total cost to the government.
Using the aforementioned input assumptions, the model was recently exercised to illustrate additional sensitivities associated with more or less aggressive cost assumptions. The purpose of this exercise was to provide a framework for thinking about the problem and determining sensitivities. The results of these analyses are shown in Table 2, below. Consistent with the previous results shown to NASA, each of the new scenarios assumed no launch failures. The new scenarios also assumed two NASA flights per year.
Scenario 1 was represented in the brief to NASA Headquarters and is based on aggressive cost assumptions, which include a Theoretical First Unit variable cost (TFUC) of $175M (with a learning curve to arrive at 50th unit cost of $97M), a seven-passenger crew capsule, a ground system (fixed annual) cost of $400M per year born by the commercial service provider, total NASA development cost of $1.4B plus $140M from the commercial service provider, and a commercial service provider internal rate of return (IRR) of 25%.
Tool Output: Price per seat (PPS) for transporting seven crew members twice a year for 10 years to ISS is $49M, with an overall total cost to the government of $8.1B. (Investment in development plus total price per seat times number of seats flown).
Scenario 2 is based on less-aggressive cost assumptions, which include a TFUC of $175M (with a learning curve to arrive at 50th unit cost of $97M), a four-passenger crew capsule, ground system (fixed) cost of $400M year, total NASA development cost of $3B plus $300M from the commercial service provider, and a commercial service provider IRR of 25%.
Tool Output: The PPS for transporting four crew members twice a year for 10 years to ISS is $129M (FY10), with an overall total cost to the government of $10.6B. (Investment in development plus total price per seat times number of seats flown).
Scenario 3 assumes a commercial service provider IRR of 0%. Additional assumptions include a TFUC of $175M (with a learning curve to arrive at 50th unit cost of $97M), a four-passenger crew capsule, ground system (fixed) cost of $400M year paid for by the government, and a total development cost of $3B plus $300M from the commercial the service provider.
Tool Output: The PPS for transporting four crew members twice a year for 10 years to ISS is $36M (FY10), with an overall total cost to the government of $9.6B (investment in development plus total price per seat times number of seats flown plus the annual fixed operating costs).
Scenario 4 assumes equal development investment by the commercial service provider and NASA, with a modest return on investment. Additional assumptions were a TFUC of $175M (with a learning curve to arrive at 50th unit cost of $97M), a four-passenger crew capsule, ground system (fixed) cost of $400M year paid for by the government, total development cost of $3B ($1.5B from commercial service provider, $1.5B from government), and a commercial service provider IRR of 10%.
Tool Output: The PPS for transporting four crew members twice a year for 10 years to ISS is $123M (FY10), with an overall total cost to the government of $12.4B (investment in development plus total price per seat times number of seats flown plus the annual fixed operating costs).
Scenario 5 assumes equal development investment by the commercial service provider and NASA, and a commercial service provider IRR of 0%. Additional assumptions include a TFUC of $175M (with a learning curve to arrive at 50th unit cost of $97M), a four-passenger crew capsule, ground system (fixed) cost of $400M year paid for by the government, and a total development cost of $3B ($1.5B from commercial service provider, $1.5B from government.
Tool Output: The PPS for transporting four crew members twice a year for 10 years to ISS is $51M (FY10), with an overall total cost to the government of $9.6B (investment in development plus total price per seat times number of seats flown plus the annual fixed operating costs).
These scenarios are not reflective of all potential trades and are only a small sample of the possible outputs that could be obtained by exercising the tool.
