Parsing Griffin

I’m back in town now after our wonderful trip out to Utah last week. I’ve been doing a lot of thinking over the past week or so, and wanted to blog a little about some of the things I’ve been thinking about. In keeping with my so-far relatively space-centric posting habits, I’ll carp on NASA a bit first.

There’s been a lot of NASA Kremlinology going on recently, particularly about what approach the new administrator, Mike Griffin, wants to take in implementing the President’s Vision for Space Exploration. While some of the things that Griffin has been saying actually give me a reason for hope, many of the things he’s been saying are also a little alarming. To clarify a little bit, I’m still don’t have high expectations that NASA’s efforts to implement the VSE will result in the settlement and commercial development of the solar system. My hope was just that the net effect of the VSE on the commercial space community might actually be at least better than the status quo. With some of the newer rumors/revelations, I’m not so sure anymore.

First, why don’t I say something nice about Griffin to start things out. He made some decent comments at the start of a luncheon last month for the Space Transportation Association. Here’s a few quotes:

The grounding principle of US economic growth has been competition…So, for me, as NASA Administrator, the problem is how do we engage that engine of competition more productively so that it can work on behalf of the space business?

While I would quibble that it is private property, the right to free-association, and their offspring, entrepreneurism, that are the grounding principles of US economic growth, competition is also an important part of all that. Encouraging economic competition and free-markets in space development is a good and worthwhile goal.

The other good point he made was that:

[R]eal competitive businesses develop their own business plan, find their own money, they acquire a team, they produce a product, and they try to see if it will sell. That is what real businesses do. They don’t come to the government saying “set aside some money for us – and trust us – and watch us perform.” That’s not how it works…That is not [the] the sprit of American industrial and economic competition.

However, I noticed several times during his talk, he set up and knocked down some alt.space strawmen. For example:

Despite the wishes and entreaties of those who would like me to dump $400-500 million on their enterprise (hopefully) – or on some enterprise – and then just stand back and wait to see if the results come in – that’s not going to happen.

While I’m sure that most people wouldn’t mind the government just giving them a bunch of money up-front, before they’ve proven themselves, on mere trust and without oversight…are there seriously any companies he can name that have seriously been asking for just that? I’d be interested he could name any names, because of all the alt.space companies I know, I can’t really think any that are that way. Most of them that I know of have actually taken a stance not far off from what he advocates here:

[You should] look for us to conduct such a competitive procurement – and [you should] look for us to pick a “leader” with whom we will get started – and also to fund a couple of “followers” at the study level in case the leader falls off the track. Because, the leader is only going to continue to get his money if progress continues to be met. We will set up verifiable milestones, agreed upon in the deal, the way that any commercial deal would be done. When the terms and conditions are met, the money will be provided.

[You should] look for us to conduct our contracting on a fixed price basis. This is the way people buy things out in the world. I don’t go out and buy a car or an airplane or (pretty much) anything else on the basis of “why don’t you build me this car – and tell me how much it costs when you are done.” That’s not the way we are going to do things.

In exchange for that [you should] look to be required to provide a commitment to sell at a specified price if I provide a commitment to buy – at a specified number. Those are the kinds of commercial terms that people insist on. When you close a deal you usually have an option to buy a certain number of units at a certain price. There won’t be balloon payments at the end and there won’t be “get well” arrangements if you screw up. On the other hand, there will be fairly substantial rewards for people who can deliver.

Is it just me, or is this more or less what t/Space, XCOR, and most other alt.space firms have been asking for? He goes on to explain that they would be originally offering to fund development of commmercial cargo delivery to the ISS, followed by crew delivery once the supplier has proven their safety/reliability record. This is substantially better than the status quo, but there are still some problems that I can see with the plan he outlines in the rest of the presentation and in the Q&A afterwards.

For instance, he talks a lot about competition in the commercial world, but his solution doesn’t really help spur much competition. If UPS for instance were only competing against the US Post Office, and not also FedEx, DHL, and others, how good would their service really be? Commercial passenger carriers do sometimes carry military personel or government employees instead of them flying on military planes, but if Delta only had to compete against the Air Force (and if there wasn’t any market other than flying government employees and cargo to and fro), and not against SouthWest, United, Continental, etc, etc, how much of an air travel industry would there be? One commercial provider and one government run system does not an industry make.

Also, in this article, and more recent rumors around the net, Griffin has expressed his desire to fund the development of two Shuttle-Derived heavy lift vehicles. The smaller of the two, also known as “the stick”, would be a modified 5-segment version of the Shuttle SRB, with a large LOX/LH2 upper stage stacked on top, whose primary mission would be to launch the new CEV. It’s secondary mission though would be to deliver crew and cargo to the space station. Griffin wants to see whichever alt.space firm they decide to bestow their graces on “put some skin in the game”, but how easy is it really going to be to get private capital when NASA’s already developing a government subsidized competitor? Can NASA really be trusted to buy flights on a commercial alternative when they will be sinking several billion per year into maintaining the infrastructure/payroll for their own launcher? Or is private industry going to get shafted by the “stick” when inevitable cost overruns start piling up? Since they’ll already be sinking several billion a year into paying for maintenance of the infrastructure, and the payroll for their launchers, will they be able to resist the temptation to spend most of their money on flying those instead of buying commercial flights? If a commercial alternative to the “stick” was developed, that provided the same capabilities at a lower cost, would they be willing to close down the production on the stick and fire off the contractors? I doubt it.

Griffin’s heart may be in close to the right place, but if they go ahead with their plans for the “stick”, I think it will kill any chance of them being able to help spur commercial development in the manner he outlined.

A better solution might be if NASA actually acted like a customer, posting their crew and cargo delivery requirements, and buying flights from the lowest bidder, payment on delivery. Might be worth adding in a firm legal restriction that if a commercial supplier of crew or cargo delivery does appear that they will have to buy flights from them instead of flying on their own booster.

That said, it appears that Griffin fully intends to try pursuing the two Shuttle Derived Vehicles, while trying to fund the development of one commercial competitor. Even though I think this is unlikely to work the way he intends, there is still hope for commercial space development. It just doesn’t lie with NASA.

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Jonathan Goff

Jonathan Goff

President/CEO at Altius Space Machines
Jonathan Goff is a space technologist, inventor, and serial space entrepreneur who created the Selenian Boondocks blog. Jon was a co-founder of Masten Space Systems, and is the founder and CEO of Altius Space Machines, a space robotics startup in Broomfield, CO. His family includes his wife, Tiffany, and five boys: Jarom (deceased), Jonathan, James, Peter, and Andrew. Jon has a BS in Manufacturing Engineering (1999) and an MS in Mechanical Engineering (2007) from Brigham Young University, and served an LDS proselytizing mission in Olongapo, Philippines from 2000-2002.
Jonathan Goff

About Jonathan Goff

Jonathan Goff is a space technologist, inventor, and serial space entrepreneur who created the Selenian Boondocks blog. Jon was a co-founder of Masten Space Systems, and is the founder and CEO of Altius Space Machines, a space robotics startup in Broomfield, CO. His family includes his wife, Tiffany, and five boys: Jarom (deceased), Jonathan, James, Peter, and Andrew. Jon has a BS in Manufacturing Engineering (1999) and an MS in Mechanical Engineering (2007) from Brigham Young University, and served an LDS proselytizing mission in Olongapo, Philippines from 2000-2002.
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6 Responses to Parsing Griffin

  1. Dan Schrimpsher says:

    If you read his question and answer session afterward, he made the statement:

    Second question first: No, of course not. Competition is competition – everybody gets to play. Our business terms are going to be “business terms” and whoever wants to wander in the door and raise their hand and say “I want to play” is welcome to do it. Anybody who can meet the business terms, by definition, will be doing the kinds of things we want. If I fail in setting forth my business terms to specify what I want, then shame on me – not shame on the provider.

    That sounds to me like it will be more than one commercial provider.

  2. Jon Goff says:

    Dan,

    He would like more than one commercial provider, that’s true enough. But how likely is it (without some other big market) that a second commercial provider will be able to raise funds for development? Especially when they’re up against a government run service and a subsidized commercial competitor who has been picked by Griffin to be funded as the “leader”. It’s not impossible, it just requires a separate market, or something other way of amortizing the development costs.

    Because, if t/space for instance gets the contract that Griffin was talking about, they’d get several hundred million, just broken-up over several hardware milestones. By the time they go into operations though, they’ll only be amortizing a tiny part of the development costs (whatever amount NASA required for “skin-in-the-game”), and mostly just paying the marginal cost + overhead.

    A competitor though won’t have gotten paid much if anything for development, so they would have to sell seats expensive enough that they could cover development amortization, plus marginal costs, plus overhead. It will be very difficult for them to charge a lower price than t/space unless their development costs were very low.

    Now, it is true that something like the America’s Space Prize could make such a thing possible. Whoever wins the non-traditional funding from NASA is disqualified for ASP. So, one of their competitors could go after the ASP system, and get much or all of their development cost amortized through winning that prize. At that point, they’d be able to compete on cost with whoever gets picked as the non-traditional leader. So there is hope for a real competitive earth-to-orbit crew and cargo delivery market. It just isn’t going to come about from how Griffin wants to do things. It’ll only work with the help of outside groups like Bigelow Aerospace.

  3. Dan Schrimpsher says:

    My understanding of what he was saying was that everyone who mets the requirements would get the same milestone payments. So the new guy would have the same development. There is no “leader” as such. Maybe I misunderstood what he meant.

  4. Michael Mealling says:

    Dan,
    My reading was that he was going to pick a single leader now and then sprinkle “study money” pixie dust on the 2nd and 3rd in line (as determined by NASA). This sets up the exact disincentive to investment that Jon talks about.
    Mike talked a good game but the question will be whether or not he can get any of it by NASA itself or by the congress since a good bit of it requires legislative action to allow. And you know what comes out of that sausage grinder…

  5. Jon Goff says:

    Dan, the relevant part from his comments would be:

    [You should] look for us to conduct such a competitive procurement – and [you should] look for us to pick a “leader” with whom we will get started – and also to fund a couple of “followers” at the study level in case the leader falls off the track. Because, the leader is only going to continue to get his money if progress continues to be met. We will set up verifiable milestones, agreed upon in the deal, the way that any commercial deal would be done. When the terms and conditions are met, the money will be provided.

    So, it appears to be more or less what Michael and I have been saying. His “alternative” option will be funding one “leader” on a firm, fixed-price basis, with payments depending on hardware milestones. He will also give some study money to some competitors. His comment about anyone being able to play seems to me to mean that he’ll buy flights from whoever can deliver for the best price, but he’s going to subsidize one group that he deems to be the “leader”. So, if a secondary group can really manage to develop a vehicle for so much less that it can offer a per/seat price less than the NASA appointed “leader”, they could make money. It’ll just be very tough for them to raise money to give it a try. Nobody wants to compete with hundreds of millions of dollars from NASA.

  6. Kelly Starks says:

    I think his dabling with the Alt.space companies will be little more then window dressing. on other topics he talks a lot about recentralizing knowledge, experence, control, at NASA, and how he can’t rely on commercials that could just go out of busness.

    Nike seems to be a NASA groopy. If he won’t consider going outside the NASA box so far as to consider EELV rather then the stick ::shudder:: no way hes going to go to T/Space in a significant way.

    Remember, CATS and the Alt.space groups are a MAJOR threat to NASAs existence and power base. They will not foster their growth in any significant way.

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