A Case Study in NASA-DoD - The Black Vault

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RANGE OF BIDS
Item
Range
($ thousands) Ratio
S-band transmitter 29.1-39.8 1:1.37
Magnetometers 17.7-25.7 1:1.45
Rocket motor assembly 21.2-31.8 1:1.50
Louvers 9.6-28.1 1:2.93
Command decoder and
remote command processor 62.3-1188.0 1:19.1
PCM encoder 21.4-611.0 1:28.6
component price is highly dependent on quantity procured, i.e., the
quantity ordered at one time, not the total quantity over time. The
table below shows what may be an extreme case, but it illustrates a
point on which vendors agree--six S-band transponders bought one at
a time will cost substantially more than six procured in one buy.
INFLUENCE OF SIZE OF BUY ON COST
Unit Price Cost-Reduction
Buy ($) (%)
1 306,000 0
2 294,000 3.9
3 267,000 12.7
4 227,000 25.8
The same principle obtains at the system level, but the cost
there is more a function of production rate than quantity. A manufacturer
may have a fixed, sustaining cost of, say, $1 million per
year whether he builds one spacecraft or four. The hypothetical example
below illustrates the effect of rate in such a situation.
Annual Rate
Sustaining Cost
per Spacecraft
1 1,000,000
2 500,000
3 333,333
4 250,000