Questions about RD-180 Price Provide New Ammo for SpaceX

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WASHINGTON — U.S. Sen. John McCain (R-Ariz.) has asked the Pentagon’s acquisition czar whether the Defense Department is overpaying for the Russian-made main engine that powers its workhorse Atlas 5 rocket.

In a June 20 letter to Frank Kendall, undersecretary of defense for acquisition, technology and logistics, McCain asked for clarification on claims that RD-Amross earns profits of more than 200 percent on each RD-180 engine it sells to U.S. rocket maker United Launch Alliance.

Space Exploration Technologies Corp., which is suing the government to halt the U.S. Air Force’s $11 billion planned purchase of 36 Atlas 5 and Delta 4 rocket cores from ULA, included the letter in an amendment to its complaint filed June 25.

The RD-180 is built by NPO Energomash of Russia and sold to Denver-based ULA by RD-Amross, a joint venture between Energomash and United Technologies Corp. of Hartford, Connecticut. Its key role in launching U.S. national security satellites has come under intense scrutiny and criticism amid the downturn in Washington’s relation with Moscow.

McCain, writing in his capacity as the ranking member of the Senate’s permanent subcommittee on investigations, posed nine questions to Kendall about space launch, the majority of which focused on the acquisition process and price of the RD-180. McCain also is a senior member of the Senate Armed Services Committee.

“On information and belief, ULA — and ultimately the Air Force — buys the RD-180 for a price that is significantly more than how much NPO Energomash sells that same engine to RD Amross, resulting in the U.S. taxpayer essentially giving a Russian company a profit by perhaps more than 200 percent,” McCain wrote. “Is this allegation accurate?”

ULA is RD-Amross’ only customer, company officials have said.

In an interview with SpaceNews in 2013, RD-Amross President Bill Parsons declined to divulge price of the engines, which are sold to ULA under a firm fixed-price contract.

“Based on what I’ve seen, it’s a good price,” Parsons said. “For a rocket engine, the RD-180 is priced pretty darned well.”

McCain also reiterated that the Senate Armed Services Committee has passed a defense authorization act that prohibits renewing contracts with Russian space hardware suppliers. The Senate bill must be reconciled with counterpart legislation drafted in the House and signed by the president to become law.

Some organizations, including the Satellite Industry Association, oppose the language, in part out of fear that it would be applied too broadly across the space business, which relies on other Russian technologies.

ULA currently has 15 RD-180 engines in its inventory and has worked to accelerate delivery of the remaining engines ordered under its existing contract with RD-Amross. The last of those engines, previously slated to arrive in 2018, is now expected in 2017.

“The Russian procurement process is rife with inefficiency and corruption that benefits insiders while boosting retail prices,” McCain said.

McCain also asked Kendall what it would cost to develop a domestic version of the RD-180 or a brand new engine. Defense bills working their way through Congress are recommending spending substantial sums next year on a new U.S. rocket engine.

SpaceX used the letter to press its case that the Air Force’s so-called block buy contract with ULA should be voided.

“It appears that ULA failed to provide certified cost and pricing data for the RD-180 engines and/or the Air Force failed to rationally assess whether it was paying a fair and reasonable price for the engines,” SpaceX said in its June 25 court filing.

SpaceX argued that had ULA provided RD-180 cost data, the Air Force would have been so discouraged by that price it would not have awarded the contract.