Jennifer Ogren, a programmer turned legal operations professional, deconstructs the Iridium Satellite’s Contract for Launch Services. In this episode, we go all in about space. Understanding the challenges faced before launching, signing up for strange cross-waiver laws, and some red flags to look out for.
Questions in this Episode
- Why should drafters anticipate launch schedule changes in this contract?
- What distinguishes a force majeure provision in a Launch Services Contract from other contracts?
- What should drafters keep in mind if the launch site changes?
- How should you handle cross-waivers in a launch services contract?
- How do you become a contract solution maker?
Are We Going to Space?
When a person wishes to travel to space, a contract must be signed between the person wishing to travel to space and a launch provider. In this case, Iridium intends to launch multiple satellites into space to provide a unique service to its customers. They wanted a right, and SpaceX gave them one.
Anticipate Launch Schedule Changes
When planning a launch service, the first thing you need to know is when it will be ready. Because you won’t always know. There are numerous challenges involved in the process; things may not go as planned and may change constantly. Some parts could go missing, others could be unavailable, or the supply chain could be disrupted.
Do you have buffer time? Have you spoken with the program schedulers to determine the margin? And where do you believe something might go wrong? All of these are important questions to consider.
Tip: Always be on time. But, if you’re not going to be on time, have you read the rest of the contract to see what happens? Are you going to be fined, penalized, terminated, or taken off the ride? You must be aware of what will happen.
Force Majure for Space: Is it the same?
Section 22 corresponds to the manifest policy for launch providers. A manifest policy is a set of documents in which you have your position and how it will be restructured if something goes wrong.
| 22.1 | Force Majeure |
| Neither Party shall be liable for any delay in the performance of its obligations under this Contract, or a delay or failure of performance of its first-tier contractor(s), if such delay or failure to perform is due to a Force Majeure event and provided that the affected Party seeking to invoke this Article 22 notifies the other Party in writing within five (5) Business Days after the occurrence of a Force Majeure event (or the date the affected Party reasonably became or should have become aware of the Force Majeure event), including a detailed description of the causes thereof and such Parties’ Reasonable Efforts to avoid the Force Majeure event or mitigate the impact thereof, such as establishment of work-around plans, alternate sources, extended operations or other means, including use of alternate viable subcontractors. For the avoidance of doubt, failure by either Party timely to obtain any required governmental license, permit or authorization shall not be deemed a Force Majeure event. |
From what’s commonly seen, a launch or rocket delay is considered a force majeure. That is not typical for most contracts because a pandemic, illness, war, or act of God is usually highlighted as a force majeure. A force majeure in this launch service contract could be a failure to obtain liquid oxygen on time.
In a force majeure clause for a launch services contract, you have to fully understand what’s being called out. - Jennifer Ogren #ContractTeardown Click To Tweet
Changing the Launch Site: What you Need to Know
Section 2.5 explains how you can have a launch provider change the launch site for you. For example, if the launch provider is unable to get you to the floor, they may assist you in launching from California or Alaska, or they may refer you to a different facility.
When it comes to delivering your spacecraft, the logistics team will be crucial. Consider the following questions if you need to move your spacecraft from one location to another:
- Do you need a license?
- Do you require transportation permits?
- Are there any potentially hazardous issues or batteries?
- Are there any items or parts that must be packed in a specific manner?
- How would things differ from one state to another?
Consult with your financial team or the CFO to determine whether you plan to rely on this launch for funding. In that case, if there are delays, millions of dollars are at stake. Can you return to the market? Is it possible for you to get seed funding later?
Customize the Termination Rights
Section 17 is a mover and shaker in the launch industry. The commercial sector is exploding as a result of the government promoting the idea of going to space and making it accessible to everyone. Termination becomes unusual in this contract because it depends on the launch provider you are working with.
To figure things out, you should talk to different teams. Ask the finance department to know what the return on investment is on the money paid. What level of risk are you willing to take? What do refunds look like, and how much do people keep? Ask the legal department about the notice periods.
Don’t Forget to Flag Cross Waivers
If you’re new to the industry, 12 (1) has to be the strangest provision. This is a terrible provision to sign up for, but it is required by the law.
When a launch provider obtains their license, they must have everyone sign a cross waiver. It means that no one can file a lawsuit. According to the government, space is extremely difficult, and there would be no commercial space providers if everyone started suing each other or putting each other out of business.
| 12.1 | Compliance with Requirements |
| Contractor has executed or, [***…***] months prior to the first Launch Date, shall have executed, agreements with the required United States Government agencies for use of United States Government-owned property and facilities relating to the Launch Site. Customer and Contractor agree that they shall comply with the United States Government’s laws, regulations, policies and directives as they relate to the performance of this Contract. Contractor shall provide to Customer reasonable notice (in writing) of the requirements specific to access and operate at the Launch Site. The Parties shall, before Lauch, execute and deliver the Agreement for Waiver of Claims and Assumption of Responsibility, the execution of which is required by the United States Department of Transportation (14 C.F.R. Section 440.17(c)) as a condition of granting Contractor’s license to conduct Launch Activities and Launch the Satellites (“Government Cross-Waiver”). |
With this in mind, you should consult with your legal team to customize and flag this so that your parent entities are aware. They’ll wonder why you didn’t go after the party and sue them. You should specifically flag that you can’t do so because it’s against the law. It ensures that private-sector innovation continues to keep pace with the space industry.
Section 15 describes how the spacecraft is mounted for launch using a crane after it is delivered to the launch processing facility. What happens if something doesn’t go as planned? Is that your risk of loss or the risk of the other party? It’s a hazy situation. The launch license and cross waiver would come into play here, and you would need to know if there were any pre-hazardous activities associated with the launch.
The distance between the initial and the final draft involves lots of people making lots of decisions. -Jennifer Ogren #ContractTeardown Click To Tweet
You would need an indemnification section for things that happen as a result of third-party claims arising from contract performance. If the launch provider has given you a specification for the launch vehicle itself, you’ve used it, and someone comes after you for using that specification, you’ll need coverage.
Be a Solution Maker
As a legal operation professional, you must be the chief collaborator. Consider the risk factors, the probability of incidents, risk mitigation, and what is best for the company. There is no boilerplate for these kinds of agreements.
Show Notes
THE CONTRACT: Iridium Satellite’s Launch Services
THE GUEST: Jennifer Ogren is a contracts & operations professional with over 11 years of experience within the federal government contracting environment and 5 years of experience with commercial and international contracting, including startups and fast paced research and development organizations. She enjoys “systems whisperer” tasks to find efficiencies and make technology more accessible in legal disciplines. You can find her on LinkedIn.
THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.
If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.
Transcript
Jennifer Ogren [00:00:00] Hey business, there’s a risk over here, finance, what do you think about this science, people? What do you do?
Intro Voice [00:00:05] Welcome to the contract teardown show from Law Insider, where legal experts tear down contracts from some of the most well-known companies and high profile executives around the world.
Mike Whelan [00:00:17] In this episode, contracts and legal ops professional Jennifer Ogren tears down Iridium Satellite’s contract for launch services. Now I could make a bunch of jokes about this contract being out of this world, but I won’t because there are some serious red flags in this thing. So let’s tear it down. Hey, everybody, welcome back to the contract tear down show from LA Insider. I’m Mike Whelen. The purpose in this show is exactly what it sounds like. We take contracts, we beat them up. We are mean. We are generally mean, occasionally nice. And today we’ve got sort of a cool one. I hang out with smart friends, as you know, like Jennifer Ogren here, Jennifer, how are you today?
Jennifer Ogren [00:00:56] I’m doing well. How about yourself?
Mike Whelan [00:00:58] Cool. So we’re doing something. We’re doing something weird and cool and fun, and we are going to space and I will try not to make nonstop Star Wars jokes, but we are looking at a document. I’ll share it with you guys. Here it is the contract for launch services as between Iridium Satellite and Space Exploration Technologies Corp. So we are we are legit talking about going to space in contracts. You want to like all the universes combining and colliding. So Jennifer, what is this document? When are we going to see this kind of thing?
Jennifer Ogren [00:01:31] Any time you want to go to space, you’re going to have a contract that’s between you as a space person, you have a spacecraft, you have something you want to get space and somehow you’ve got to get a right for that. So you’re going to go on a launch provider, you’re going to select a launch provider. So in this case, Iridium had a satellite or multiple satellites. They wanted to put up into space to do something cool for the consumers, and they needed a right to get their space. X has given them the right there.
Mike Whelan [00:01:55] Very cool. So we’re going to talk about that. But I’m also sort of twisty on your background. Tell me about your background because it’s super interesting for the conversation we’re about to have.
Jennifer Ogren [00:02:06] Right. So I came out of school as a programmer, a nerd, bits and zeros, and somehow I’ve moved into the legal world. So well, I’m not an attorney. I cannot give licensed attorney advice. I work for fabulous attorneys in my organization and I do a more different generally set when I get a contract. So I’m their senior contracts manager. I take it a shred, the contract myself, much like you do on your show. And then I get all the points out to the relevant stakeholders in my organization. So, hey, business, there’s a risk over here finance. What do you think about this science, people? What do you do? Does this concern you that space extend this or that the launch provider has done that over there? And I get to consolidate all that feedback. So we go in with a fully shredded document back to our other partner.
Mike Whelan [00:02:49] Yeah. And it’s so interesting because in in in reality, in the wild, there’s a big conversation in legal right now in in-house teams about legal operations, about trying to, you know, turn the legal department into a business unit that works like a business. And one of the things that they they often do in these scenarios is find ways to leverage staff and tools that didn’t go out and get a J.D. and borrow hundreds of thousands of dollars, but can add a ton of value to these environments. So part of what I want to do with you, Jennifer, as we go through this is think about the way that you think, the way you’re looking through these documents not necessarily as the first filter, but as one of the early filters to go through and do the issue spotting that is so common in legal training. So we’re going to do that. We’re going to start right up at the beginning. I’ve got a list of issues that you think about when you go into a document like this, I’m going to lead you through them and feel free to just tell us how you think about these particular sections. Let’s start with the schedule and the rides. This is in Section five. Tell us about that section, right?
Jennifer Ogren [00:03:56] So whenever you’re getting ready, you’re getting super excited about space. You guys have probably a spacecraft there in the lab. They’re tinkering, they’re building. They put piece parts together. But the first thing you’ve got to know whenever you’re setting up for a launch service is What am I going to be ready? Do I know when that thing in the lab is going to come out of the lab? And oftentimes you don’t. You’re going to come up with different challenges. Things are going to happen. Things are going to change that piece. Parts not available. All of a sudden, there’s supply chain disruption. Do you have buffer in your schedule? Have you talked to the program schedulers to know what the margin is and where you’re thinking something’s going to come out? Because the minute that you sign up for that launch provider agreement, they’re going to pick a launch window, they’re going to pick a launch period, a launch schedule. It’s going to keep getting refined down and down until you actually have a launch day, but you’ve got to know what that big window is. Is it a three month window? Is it a six month window? So when you’re reading that launch provider contract, you really want to make sure to know where you’re going to be and where getting the land because you want to pick the right ride that you want to go on. So I think one tip is to always be on. But if you’re not going to be on time, have you read the rest of the contract to see what happens? Are you going to get the late fees? Are you going to be penalized or you can be terminated or you can be taken off the right? You got to know what happened. So that’s the first question I ask myself. What’s going to happen if I’m late? And I think everybody should know that as well, right?
Mike Whelan [00:05:15] And pulling from that, I mean, you know, the information about the delays comes from twenty two and two point five. So you you’ve done that initial thing where you’ve seen this being a problem enough that you, as you know, one of the principal reviewers of this document are asking those questions. What are you seeing in twenty two and two point five that answer that question for you?
Jennifer Ogren [00:05:36] Yeah. So Article 22 is going to be about force majeure, and this fits in with your launch providers manifest policy. So the launch provider, you’re not their only customer. I mean, you want to be, but newsflash, they actually have a business to run so you can make a good Star Wars joke there. They’ve got to have an advertising problem. Yeah, an Empire Galactic. Sure, something like that. So when they think about the Manifest policy, they’ve got these set of documents on where your spot is and how they Russian roulette move you around if something happens. So in Article twenty two, you’re looking at force majeure and you’re really making sure that you understand what’s called out in force majeure or something that I see frequently is that it’s a lunch or a rocket delay is considered force majeure. That’s not a standard for most people. You’re like, Oh, pandemics, illness is war act of God. All these good things, and all of a sudden it sneaks in here that you’ve got a manifest policy in the manner of its policies. Sorry, we couldn’t get liquid oxygen in time. You’re delayed. That’s a force majeure, so you’re not going to get your money back. What are you going to do? Other parts that I think that you could look in in section two point five is if your launch provider would change the launch site on you. So most people say, Well, we couldn’t get you to Florida. Now let’s launch maybe out of California or Alaska, or we’ll go look to a different facility. You’ve got to be able to know when you have to deliver your spacecraft. And so to me, that brings in my logistics people. I’m going to start querying them if I have to get my spacecraft from here to there. Don’t need a license. Do I need some permits? Do I have Department of Transportation hazardous issues as their batteries? Are there things that I have to pack in in certain parts where if I were going to California, I wouldn’t worry about for going to Florida, maybe or vice versa. So I think you have to be very careful about understanding if you get delayed what Pandora’s box opens up changes to your launch site. Changes to your schedule. What happens if your science mission, you’re banking on it to go get your fundraise. All of sudden, you’re delayed. Can you go back to the market? Can another city? So I’m also talking to my financial folks and maybe my CFO to say, we’re not banking on this ride to go get millions from investors, right?
Mike Whelan [00:07:47] Right? Yeah, no. You know, we’ve talked about force majeure, obviously, over this last year. And oftentimes there’s the question of can we just rely on common law force majeure? Like, do we even need to say anything in the document? But in this kind of document, I mean, you really are the wind blows westerly and you’ve got millions of dollars at stake. It’s fascinating. Well, thinking about things that might be under the control and making decisions about what to do if you’ve got to end the flight, what do you see in 17 on termination?
Jennifer Ogren [00:08:15] So Section 17 is. I think it’s a mover and shaker in the launch industry have been in the industry for about eight years now, and they’ve seen different things happen. I’ve seen from where we’ve gone from more of a government based launch to the commercial sector is really exploding and that’s thanks to the government. They’ve really promoted this thought of let’s go to space, let’s make it accessible for everybody. So termination starts to get weird and it’s going to be probably dependent launch provider you’re working with. There’s different things in different ways. Whereas in the past, I may have seen a liquidated damage that it would have flagged for my legal team. And knowing when to be late, I’m actually starting to see that it’s just delay rights or termination rights. It’s not actually going after each other for a fee. It’s not about money anymore. It’s more about getting to space. Mm-Hmm. So. I guess from my side, I’m looking at two different points, I’m looking for the termination for convenience, if for some reason the wild ride is just too much and I need to move to a different launch provider, do I have a way to get out? And if I do, what? What am I paying or what can you refund or what does everybody keep? So in that part, in talking to my science team for what happens if we needed to go procure something else, I’m also talking to the finance side to say I’ve paid all this money. What’s the return on investment? What are we out? What’s the risk you’re willing to take? And I’m talking to my legal team of what are the notice provisions that you guys will take? Can you do 30 days, 60 days, 90 days? What are your notices that are going in there? But I’ve probably already meet payments. I’ve looked at a schedule, so I don’t think that there’s one right approach. I think everyone’s going to customize what termination rates are right for them. Of course, you’ve got the normal termination for material. Default things don’t happen. Well, parties, shall I say, blow up at each other. Dare I say things go wrong? And so you do want that material default provision in there?
Mike Whelan [00:10:12] Yeah. Speaking of people going at crossways with each other, looking at 12:01, the cross wavers, there’s a lot of people with feelings. You know, how do you manage that? What is 12:1 showing you?
Jennifer Ogren [00:10:23] 12. One has to be the weirdest provision if you’re new to the launch industry. So if you’re a lawyer and you get a launch services agreement and you start at twelve point one with the crossover, it’s like, Heck, no, I’m not signing up for this. This is terrible for me. Why on God’s green earth would you sign up for this? And I would say, Well, you have to, because it’s regulation. The FAA publishes the cross waivers that are in the Code of Federal Regulations, and so it is required when that launch provider gets their launch license. But they make everybody sign a cross waiver, meaning nobody can have a suing party. So the government is telling us all that space is really hard and there would be no commercial space providers if everyone just started suing each other, putting each other out. Business right? Right. So the crossover’s is the government’s way to step in and say, Hey, guys, play nice with each other, you’re all going to wave. Once that launch license starts, you’re all going to waive the claims against each other. So sorry, if the launch doesn’t go well, if it terminates on the the pad itself or what we call in the rocket industry, a ride, a rapid and scheduled disassembly, somehow in space, it just terminates or for the safety they’ve terminated something. I think you’ve seen that with a couple of failed launches regularly lately. And so there is no sueing party. You go your own ways and say, sorry. Space is hard. So what I bring into here in, usually with my legal team, there’s not a lot you can customize here, but it’s something that you want to flag so that your parent companies or entities are saying, Well, wait a second, why did you just wave? Why didn’t you go after them with full force? Is said I can’t. It’s the law. It’s regulation. So we want to make sure that we keep the private sector and the innovations going on within the space industry. And so that’s why I bring it up here. It directly impacts what you’re saying.
Mike Whelan [00:12:10] I mean, and yet there’s an indemnification section in 14, what’s the relationship between, Hey, we’re just going to all work together and deal and the indemnification section and a document like this.
Jennifer Ogren [00:12:22] So there’s going to there might actually be two indemnification sections, and this is what I’ll fight for my legal team immediately. I’ll say there should be an indemnification provision for the cross waiver itself because again, that’s pulling from the waivers. But you’re also going to see perhaps an indemnification section on things that happen for third party claims that happen because of the performance or arising out of the performance of the contract itself. So let’s take the pieces apart here and go more about the indemnification on the cross waivers. Not much you can do. You’re going to indemnify each other, the government’s going to identify you, and then you’re going to push all that indemnification down to people that are riding along into space with you on the contract side. What I’m flagging and what I’m looking out for our third party claims that might come from infringement if the lunch provider providers given me a spec of their launch, their launch vehicle itself. And I’ve used it and somebody comes and sues me because I use that spec. I want coverage there, but normally when my legal team is is negotiating on the contract, some sells, they’re looking for that and indemnification for the third party claim.
Mike Whelan [00:13:25] Hmm. Speaking of everybody sharing all kinds of really expensive IP, what about licensing? Take me back to 12. What do you see in that section?
Jennifer Ogren [00:13:32] Yeah. 12 is going to be in multiple places, so it’ll be not only on IP licenses. So you have the ability to use that spec that we talked about from the launch provider. But you’ve also now that you have your spacecraft, you have licensing with other government agencies as well. So your spacecraft probably beeps and bloops up there once it’s in that black void. And those beeps and loops are very well regulated. So you may have some licensing terms. You may be going in front of the Federal Communications Commission, the FCC. You may be going in front of the Federal Aviation Administration. The know who. When you’re taking pictures of the Earth, no is actually regulating. So you may have different licenses that sit to or talk to how your spacecraft works, and of course, this is what I’m talking about in United States space based launcher. So the people that I’m working with in the not just the legal team on licensing, I’m actually working with people that might be radiofrequency engineers. My engineering teams telling me how it beeps or how it loops, what sort of bands that it’s talking about and what it’s doing. And the launch vehicle to launch vehicle has antennas. You’ve all seen Space X launch and got all those pretty pictures. Well, they had to be licensed by the right regulations to beam those pictures down to us and stream it to us. The other thing I want to talk about a little bit is you have licensing potentially on export control. That’s a big part of our industry. So if you haven’t been in the launch world for a little while. Rockets are missiles there on the United States munitions list, pretty obvious there. And so information or data about them can be export controls. There may be licenses if you’re a customer that might be in Europe or you might be in a different place for the launch provider to talk to you. You may have to get some sort of export licenses in place. Now, of course, there are not only that munitions list, but you can also think about the Export Administrative Administration regulations, the ear where some things are somewhat controlled, but there might be some carve outs just depending on how our government has gone through and classified them.
Mike Whelan [00:15:38] Mm-Hmm. And finally, before we get to the big picture about how you guys are processing contracts, which I find fascinating. Tell me about 15 the risk of a loss, the insurance section. What are you seeing there?
Jennifer Ogren [00:15:50] This is really the hardest section as a legal professional to actually take on and read because much like you did the cross, we were above where you said nobody gets to sue each other. You have to take a hard gulp and say, I can’t go after anything. I am taking the full risk of loss. The things I do flag. You probably won’t have much success negotiating on, but what I will tell my legal team is there are parts in here and risk of loss of when does it happen? So we go through some hypotheticals. If you are delivered your spacecraft to a launch processing facility, they pick it up off their dock and then they put it on a crane and they get it ready and they get it mounted and they’re going to get ready to put it on that launch vehicle. And something happens. Is that your risk of loss or is that there’s. Right. It’s a gray area. Now, of course, the cross waiver and the launch license is going to step in and say, were you doing pre hazardous activities that were associated with the launch? OK? Maybe, yeah. But maybe they weren’t either. So it’s going to be really, really hard to say. Is it a risk, of course we’re willing to take? Or do we just want to go to space so bad that that’s going to be the way it is? So you probably won’t win the battle?
Mike Whelan [00:17:04] Yeah. And it’s so interesting because like thinking of the big picture and stepping back a little bit, what’s interesting to me about this operations environment that you’re in is maybe there is some argument objective argument that a lawyer wants to make about all these risks and doing a bunch of issue spotting. What’s interesting about the layer of having someone with your background, which is a mix of the legal and, you know, feed in the business is that you’re looking at all those things through the prism of what’s the business trying to accomplish? What are we trying to do? And I’m just sort of fascinated in the way that that you’re looking at these documents that might be different from the way that the lawyer is doing it, especially with the way that you’re dealing with all the stakeholders inside the business to sort of pre make some of the decisions before it goes through what someone might call a strictly legal analysis. So to talk a bit about that, about how you fit in into the machine of your company contracting and what kind of impact that you’re having on some of those decisions that are being made that the lawyers will end up grappling with when you know, they start going back and forth with documents?
Jennifer Ogren [00:18:09] Yeah, absolutely. Maybe I’ll give you an example for insurance here. So let’s pick an insurance provision if you want to do pre-launch insurance. If you want to have during the launch insurance or you want on orbit insurance, that’s a very custom product to what your organization takes is a level of risk. So inside my organization, I get to be, I would say, the chief collaborator I to bring everyone together for discussion, and I usually will put two together. SUMMARY Here’s the highlight here’s the summary Here’s the risk here’s the probability here’s the mitigation What are we as a company willing to do? What fits with our values? And does this make sense in what we’re trying to do? Or is this a no go? Every once in a while, you’ll find something that’s just an absolute no go and say great. That’s the part we need to negotiate together. Let’s pick a legal position. Let’s pick a business position and let’s have a backup plan. So actually get up, bring everyone together, take the first whack. And then you say, What do you guys think? Do you think we should try over here or do you think we should try here? And I’m going to be the solution maker that works with the legal team. So I work out of the business operations organization. I don’t report to the lawyer team. I’m dotted line to my general counsel, but the phone is always, always open. She’s a phenomenal person that I work with.
Mike Whelan [00:19:25] So interesting. Well, I, you know for lots of reasons which you and I have talked about separately. I’m really interested in this. You know how contracting happens and the distance that it’s between that initial draft and the final draft and how in the middle it’s lots of people making lots of decisions collaboratively. Really interesting environment. I would also point out, I think that during this conversation, we identified launch companies as the evil empire, which would make Elon Musk Vader, which is funny because I think he might be too eccentric for anybody to take him seriously as a Vader character, which I just find fascinating. Anyway, thank you, Jennifer, for the insights for people who want to reach out to you and learn more about this context and the operations side. How you guys are managing contracts, what’s the best way to connect with you?
Jennifer Ogren [00:20:14] Find me on LinkedIn. I am called the Legal Systems Whisperer. So Jennifer Ogren or you can also find me most of the time working in the Consortium for Legal Operations. It’s called Cloc. It’s another organization. Or I’m sure they can contact you, Mike, and in your past my information along.
Mike Whelan [00:20:32] Absolutely. We’ll make sure to have that information in the blog post for this episode over at lawinsider.com/resources. And if any of you want to be on the show and beat up contracts and be mean and accuse, you know, rich people of being evil empires. All you have to do is email us. We are at Community@LawInsider.com. We will connect with that. Thank you again, Jennifer. You guys have a great day and we will see you next time on a contract down show. Thanks.