WASHINGTON — The U.S. Defense Department has settled on a way forward on its primary satellite launching program that includes a controversial multiyear purchase of rockets from the incumbent contractor but offers a clear path for new competitors to break into the market.
In a decision that appears to have mollified at least some critics of the Evolved Expendable Launch Vehicle (EELV) program, Frank Kendall, undersecretary of defense for acquisition, technology and logistics, authorized the Air Force to purchase up to 50 rocket cores in the next five years, including 36 from( ) on a sole-source basis. The remaining launches would be awarded on a competitive basis to so-called new entrants in the national security market, Kendall said in a Nov. 27 acquisition decision memorandum.
The first of these competitive awards is expected in 2015 for a mission launching in 2017, according to the memo, addressed to Air Force Secretary Michael B. Donley and Christine H. Fox, the Pentagon’s director of cost assessment and program evaluation.
“My intent with this decision is to maintain required mission assurance, obtain the positive effects of competition as quickly as possible, and also reduce the cost of the launch services we must procure from ULA,” Kendall wrote in the memo, a copy of which was obtained by SpaceNews.
In a written response to questions, Air Force spokesman Maj. Eric D. Badger said the strategy approved by Kendall will allow the service to stabilize the rocket-propulsion industrial base and lower its launch costs by “allowing the ULA to make economically efficient orders with their suppliers and spur the growth of competition for national security launches.”
The memo allows the Air Force to hedge its bet on the new entrants, however. The service will retain an option to negotiate with ULA for the 14 cores currently subject to the competitive procurement in the event that no other contractor is able to meet the mission requirements, according to the memo.
EELV prime contractor ULA, a Boeing-Lockheed Martin joint venture, enjoys a virtual monopoly in the U.S. national security launch market with its4 and Atlas 5 rockets, the latter of which is also NASA’s workhorse vehicle for scientific payloads. The Denver-based company has come under fire in recent years due to the skyrocketing costs of the EELV program, which government and industry officials attribute in large part to rising propulsion costs following the retirement of NASA’s space shuttle and to ULA’s absence from the commercial launch market.
The Air Force’s strategy for reining in its launch costs is to pursue the so-called block buy strategy with ULA while laying the groundwork for renewed competition in the military market. The block buy is intended to stabilize the rocket-making industrial base and reap the cost benefits typically associated with buying in bulk.
But that strategy has been criticized by U.S. lawmakers and ULA’s prospective competitors, who argue that that the block buy would lock the Air Force into high prices while making it more difficult for new entrants to break into the market.
In a report issued last year, the U.S. Government Accountability Office, a congressional watchdog agency, urged the Air Force to hold off on the block buy until it has a better handle on what the EELV program should cost. The block buy strategy could lead the Air Force to buy more rockets than it needs at higher-than-necessary prices, the report said.
Cristina T. Chaplain, director of acquisition and sourcing management at the Government Accountability Office and the report’s principal author, called the latest plan “a good step as there has been uncertainty about opportunities for competition.” In an emailed response to a query, she said her office will keep an eye on the Air Force as it implements Kendall’s directive.
Among the most vocal industry opponents of the block buy strategy had been upstart launch services provider Space Exploration Technologies Corp. () of Hawthorne, Calif., builder and operator of the low-cost Falcon 9 rocket. SpaceX, which has successfully launched the medium-lift Falcon 9 four times to date, has won substantial NASA and commercial business and recently received a pair of Air Force contracts to launch experimental satellites (See related stories below). In a prepared statement emailed to SpaceNews, SpaceX Chief Executive Elon Musk called the decision a milestone for the U.S. government’s national security launch program.
“The United States Air Force should be commended for opening launches to new entrants and restoring competition to the EELV program, which benefits the American taxpayer and provides the American warfighter with the best possible solution for true assured access to space,” he said. “SpaceX looks forward to providing the safest, most reliable and affordable solution for Air Force launches as soon as possible.”
In a written statement, ULA spokeswoman Jessica Rye said the company is encouraged by the decision to go ahead with the block buy that will save money while stabilizing the launch vehicle industrial base. “ULA is uniquely positioned to continue to provide the lowest launch risk for critical, multi-billion dollar space investments and is honored to be the trusted launch provider for past, current and future missions in the most efficient and cost effective acquisition manner,” the statement said.
Badger said Kendall’s memorandum authorizes the Air Force to begin contract negotiations with ULA for launches to be ordered from 2013 through 2017 and taking place through 2019. “The authorization signed by Mr. Kendall sets the parameters within which Air Force may negotiate,” he said via email. “It does not authorize the award of the contract.”
Warren Ferster contributed to this report.