EELV Competition vs. Block Buy: It’s Not One or the Other

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In the debate over how best to acquire launch services for our nation’s critical payloads, two options are sometimes cast in opposition: Buy economically from the current supplier, or compete. This characterization is a false choice that leads to misunderstanding and obscures the facts. The fact is that the Air Force acquisition strategy includes both options; the difference is timing.

The Air Force has stated, “By examining a range of contract options and terms for EELV [Evolved Expendable Launch Vehicle] procurement, and by examining progress by new entrants in the coming months, the Air Force will be well-positioned to identify the best balance of these priorities and the best value for the taxpayer.”

In the near term, the focus is on buying better and smarter from the only fully certified and capable launch service provider that was selected in the original program competition. At the same time, new entrants will have the opportunity to earn certification and to demonstrate capability on selected missions. In the long term, the Air Force will have the information needed to fulfill its responsibility to deliver cost-effective access to space.

The nation is facing flat or declining budgets, a situation that is not likely to change in the foreseeable future. While the EELV program is a tremendous technical success, increased attention has focused on controlling cost. To this end, a new EELV acquisition strategy was approved on Nov. 24 to restructure the EELV procurement approach. The guiding principles of the new strategy are to maintain mission success, reduce costs, allow competition, stabilize the industrial base, prevent or mitigate any cost or redesign impacts to current satellite designs, and sustain the program to assure access to space for the future.

The strategy consists of two complementary elements:

  • An efficient buy to reduce cost in the near term.
  • An onramp for new entrants to offer products that could be a cost-effective solution to meet customer requirements.

The EELV program is in the spotlight for the Air Force’s efficiency efforts as a result of significant growth in the EELV budget line. The growth is attributable to increasing launch requirements (additional mission requirements that were previously programmed to launch earlier in the last decade), uncertainty in the industrial base (NASA’s retirement of the space shuttle and cancellation of the Constellation program), inefficient government buying practices, and depletion of original EELV launch vehicle inventory purchased in the late 1990s. Causality aside, increasing efficiency in acquisition — while continuing the unprecedented recent record of mission success — is imperative.

The Air Force acquisition strategy aims to significantly reduce the cost of launch in the near term through economies of scale achieved by choosing a production rate and commitment period that, taken together, constitute an efficient “block buy” of launch vehicles.

The current forecasted need is in excess of 50 launch vehicle cores over the next five years. The block buy would be sized to balance cost savings, operational requirements, budget realities and potential for competition.

The economies of scale of the block buy will result in significant near-term savings for the government as compared with the current one-at-time acquisition approach. In addition, a commitment to the new approach will significantly help stabilize the industrial base and help suppliers optimize staffing and production capacity needed to cost-effectively meet the government’s needs.

It is important to note that the block buy does not require multiyear procurement authority or advance appropriations, or limit the prerogatives of Congress or the Department of Defense to alter quantities or funding levels in subsequent years. In addition, the contract under the new acquisition strategy will adopt incentives to further reduce costs and motivate suppliers to find additional efficiencies.

The second feature of the new EELV strategy is to promote competition by establishing a clear path and criteria for new entrants to become certified to compete for EELV-class missions. To this end, the Air Force, the National Reconnaissance Office and NASA have developed a certification strategy to evaluate new entrants’ ability to meet national security mission needs. While there are near-term costs to certify new entrants and potential added costs to satellite programs for reintegration or redesign to a new launch vehicle, it is hoped that potential savings in the future will offset this investment. In addition, the Air Force will identify risk-tolerant launch opportunities for new entrants to demonstrate reliability and capabilities as part of the onramp process for new EELV entrants.

No entrant is available today for competition on EELV-class missions. Aside from developing the extensive technical capability required to meet the full suite of EELV requirements, the entrants also will be faced with stringent government oversight, accounting and reporting requirements — none of which is part of a commercial business plan.

To aid in bringing new entrants along, the Air Force has identified two risk-tolerant missions (the Deep Space Climate Observatory and Space Test Program-2) as candidate missions on which new entrants can cut their teeth. While this is consistent with the Air Force’s proactive approach to certifying new entrants, it comes with an unknown level of increased risk to launch these payloads. For operational EELV missions, a new entrant will certainly be allowed to compete, so long as it can meet the qualification criteria.

The facts are clear. The Air Force acquisition strategy includes buying more economically and enabling new entrants to offer new, cost-effective and capable solutions. It’s not one or the other.

 

Michael Gass is president and chief executive of United Launch Alliance.