The Competition that Wasn’t: NRO Launch Swept into ULA Block Buy

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WASHINGTON – A highly anticipated U.S. Air Force launch contract – once thought to be SpaceX’s first chance to break into the national security launch market – has instead been added to the service’s existing $11 billion deal with United Launch Alliance.

The Air Force on Jan. 28 formally canceled a six-month-old competition to launch a payload for the U.S. National Reconnaissance Office, operator of the nation’s spy satellites, according to the Federal Business Opportunities website. Bids for that mission, known as NROL-79, were due in August, and the contest was widely viewed as a two-horse race between longtime incumbent ULA and relative newcomer SpaceX.

About an hour after canceling the bid solicitation, the Pentagon announced a $382 million modification to ULA’s block buy contract. The modification covered three national security launches and included an Atlas 5 rocket for the NRO.

“Canceling the [request for proposal] was determined to be in the best interest of the Government,” said Capt. Chris Hoyler, an Air Force spokesman.

Hoyler confirmed the newly assigned launches were subsumed under ULA’s block buy contract and do not add to the Air Force’s original order of 36 Atlas 5 and Delta 4 rocket cores.

SpaceX, whose Falcon 9 rocket has yet to earn the necessary certification to launch U.S. national security missions, had given strong indications of interest in launching the NRO mission but never confirmed that it actually bid. Credit: SpaceX
SpaceX, whose Falcon 9 rocket has yet to earn the necessary certification to launch U.S. national security missions, had given strong indications of interest in launching the NRO mission but never confirmed that it actually bid. Credit: SpaceX

The Air Force awarded the sole-source contract to its longtime monopoly launch provider, a Boeing-Lockheed Martin joint venture, in 2013 as part of a plan bring down its soaring launch costs, which had become a lightning rod for criticism. The idea was to benefit from economies of scale even as the Air Force introduced competition into its Evolved Expendable Launch Vehicle by putting seven or eight missions up for bid, beginning with the NRO payload.

Industry sources said earlier in January that the NRO contract award was imminent, but there had been indications of late that it might be delayed.

Hawthorne, California-based SpaceX, whose Falcon 9 rocket has yet to earn the necessary certification to launch U.S. national security missions, had given strong indications of interest in launching the NRO mission but never confirmed that it actually bid.  The Air Force had expected to certify the vehicle before the end of 2014 but recently conceded that the certification might take until as late as mid-2015, a delay that triggered an independent review of the service’s processes.

Denver-based ULA thus remains the only company authorized to launch operational U.S. national security satellites, at least for now.

SpaceX in January dropped its lawsuit, filed in April, challenging ULA’s block buy contract after the Air Force apparently agreed to put more launch contracts up for bid. The details of the settlement have not been made public and it is not clear whether the NRO mission was involved.

Although it did not confirm bidding on the NRO mission, SpaceX did submit questions about the competition to the Air Force, including one asking whether ULA would reimburse the government for some costs if it won the contract. ULA receives two EELV funding streams, including one that covers certain overhead costs, a portion of which the company repays the government for missions conducted outside the EELV contract structure.

SpaceX has long argued that the Air Force’s so-called EELV Launch Capability payments to ULA, amounting to nearly $1 billion annually, are a subsidy that could allow the company to offer artifically low prices for competitively awarded missions.

In its response, the Air Force said NROL-79 launch contract would be a stand-alone contract with no “interdependency” with other Defense Department missions, according to acquisition documents.