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Contents Intoroduction Preliminaries Chapter 1 Chapter 2
Chapter 3 Chapter 4 Appendix Index

Annex II Princing Comparability Factors for Commervial Launch Services to GEO

Both parties agreed to the following six factors for comparing or evaluating launch services in the international market. Such factors can often explain legitimate distinctions in the price offered for the launch of a particular payload relative to market economy providers of commercial launch services.

For each factor, a brief description is provided, along with average ranges representing the impact that the factor could have on the ultimate price to the customer when applied in a competition. These cost ranges represent the values associated with the factors for contracts involving PRC launch providers in the international commercial launch services market. The particular value associated with a given comparability factor may be higher or lower than the ranges discussed below for a specific case. Such a value can be used if it can be definitely established after examination of the actual circumstances in that case.

During annual consultations, the ranges for each factor shall be evaluated to determine if they have changed.

Intended Orbit: Based on delivery orbit for launch provider, and provider of Perigee Kick Motor (PKM).

Resolution: Both sides agreed that recent contracts involving the purchase of a PKM by the customer have resulted in additional costs of $6 to $7 million (USD) for the purchase of the PKM alone. Integration and risk management costs for the payload/PKM will be included in this factor, when appropriate. To the extent that integration and risk management costs for the payload/vehicle and PKM/vehicle exist, they already are included in the "additional costs" and risk management factors discussed below. In some cases this factor may also reflect certain discounts representing customer preferences for GTO delivery, rather than LEO delivery.

Risk Management: Addresses potential differences in insurance prices for the customer (and different forms of risk management, such as political risk insurance).

Resolution: Both sides agreed that the basic risk management insurance rates for PRC vehicles can be 1 to 4 percent higher than the rates for market economy vehicles, depending upon the particular vehicles in question (relative rates can also vary greatly on the basis of a vehicle's recent performance). However, this difference in rates does not always result in significantly different absolute premiums for the customer, depending on the difference in launch service prices and satellite costs. It was also agreed that (in addition to differing vehicle characteristics) factors such as political risk may be considered in this calculation, if appropriate.

Additional Costs: Integration costs address different types of payload/vehicle, and/or PKM/vehicle integration costs, and mission software/hardware modification costs. Launch support costs involve extra transportation expenses, security costs, extra equipment, and personnel support.

Resolution: Both sides agreed that the total costs for this factor range between $4 and $6 million.

Vehicle Lift Capability: Ensures comparison of vehicle classes providing similar performance.

Resolution: Both sides agreed that lift capability may sometimes be applied as a comparability factor due to differences in vehicle prices from one class of performance to the next.

Payment Conditions and Terms: Relates to various payment and financial conditions or incentives.

Resolution: The issue centers on the economics of the customer's financial position. A lower total cost is determinate in instances where a customer is cash-rich. On the other hand, a launch provider's ability to offer favorable credit terms, which would produce a favorable payment schedule, may be more important in cases where the customer has credit limitations. In cases where favorable credit terms are not possible, a flexible payment schedule still can be a powerful incentive. Since both sides have the capability to offer credit, they agreed that both payment conditions and terms should be considered as comparability factors, when appropriate.

Lifetime: Addresses impact of different satellite lifetimes resulting from launch services.

Resolution: Both sides agreed that the use of some PRC launch vehicles can result in satellite lifetimes that are 1 to 2 1/2 years less than launches on a market economy vehicle, though in some cases there may be no impact on satellite lifetime. Evaluation of this factor is complex and must be done on a case-by-case basis. Additional elements such as intended (or desired) satellite lifetime, cost per transponder, number of transponders, etc., must also be considered.

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