WASHINGTON — After a flurry of negotiations, the House Armed Services Committee early Thursday approved legislation that seeks to increase competition in the national security space launch program.
In a deal brokered by committee aides in overnight meetings with rocket companies’ lobbyists, Chairman Adam Smith (D-Wash.) agreed to strike section 1601 of the chairman’s mark of the National Defense Authorization Act for Fiscal Year 2020 and replace it with new language.
Compared to Smith’s original mark, the amended language retained two key provisions that help SpaceX and Blue Origin, and removed two others that were opposed by United Launch Alliance and Northrop Grumman. The four companies are competing to win two slots in the National Security Space Launch Phase 2 Launch Service Procurement.
In remarks during the markup, Smith said the intent of the language is to “maintain the current request for proposals and acquisition schedule for what is referred to as Phase 2. We do not wish to slow down that schedule at all or alter the process.”
In the original section 1601 provisions Smith required: 1) That the Air Force allow other competitors to challenge the two winners of Phase 2 after the first 29 launches are completed. 2) That the Air Force create a $500 million “certification and infrastructure fund” to be made available to SpaceX if it wins a Phase 2 contract. 3) That the secretary of defense ensure all competitors have equal access to materials and suppliers. 4) That launch providers’ pricing bids account for all government investments made in their rockets.
Reps. Doug Lamborn (R-Colo.) and Jason Crow (D-Colo.) on Wednesday were prepared to introduce an amendment to strike Smith’s provisions. Lamborn and Crow sided with the Air Force, ULA and Northrop Grumman in objecting to Smith’s language on grounds that it would disrupt the schedule of the Phase 2 competition.
The amendment was withdrawn after reaching a deal with Smith. The compromise language keeps the first two provisions and removes the last two. Smith’s revised language was offered in an en bloc amendment.
The final deal came after hours of back and forth trades. According to industry sources, Smith drew a hard line with regard to the two provisions that help commercial players SpaceX and Blue Origin, but that the Air Force, ULA and Northrop Grumman fiercely opposed. He has insisted that restricting Phase 2 to just two launch providers is anti-competitive but rather than compel the Air Force to change the strategy, he directed that additional competitors be given an opportunity to bid for Phase 2 missions after number 29. The Air Force estimated the Phase 2 manifest will include approximately 34 launches. This provision would help Blue Origin ramp into the National Security Space Launch program if it’s not selected as one of the two Phase 2 providers. Smith also would not budge on the $500 million fund that he believes would be fair compensation to SpaceX if it won a Phase 2 contract as it was the only company the Air Force did not award a development contract under the Launch Service Agreement program.
Smith gave in on the access-to-materials provision, which was a loss for SpaceX. The company wanted Congress to mandate equal access to materials in order to be able to acquire a composite fairing that RUAG makes for ULA. According to industry sources, a large group of Boeing and Lockheed Martin lobbyists led the charge against that provision on behalf of ULA.
Eliminating the provision that would have required bidders to account for government investments in their prices also was a win for ULA and Northrop Grumman which have received more government subsidies than SpaceX and Blue Origin.
Sources said negotiations over the space launch language started after Smith became aware of the Lamborn-Crow amendment and efforts by the International Association of Machinists — which represents ULA, Boeing, Lockheed Martin and Northrop Grumman workers — to mobilize support. As the NDAA markup progressed through the night, committee staff members began to schedule meetings with industry representatives to hammer out a compromise that would avert having to hold a vote on the Lamborn-Crow amendment.
“Overall, we believe it was a win,” a spokesman for the machinists union told SpaceNews. “We are in a much better situation than before. The fairing language was removed, and ‘total evaluated price’ portion removed. And there was a compromise on the launch cap of 29 and the $500 million still remains.”
An industry source said Smith at the end of the day was able to get what he really wanted: competitive opportunities above the 29 missions to equalize the playing field, and funding for SpaceX.
For any of these provisions to become law, they have to get past the full House and later a House-Senate conference that will reconcile differences and draft a final version of the NDAA. The Senate Armed Services Committee has not challenged the Air Force Phase 2 strategy and in its NDAA proposal calls for the program to stay on schedule.
Sources said ULA will continue to fight back on the provision to open up the Phase 2 competition after 29 launches. One industry source pointed out that the HASC is an outlier on this issue. “The only committee not lining up behind the Air Force is HASC. I don’t think Smith has the votes to carry this through conference.”
Potentially a big winner in all this is RUAG, which makes the coveted fairing that started a political fight. In a June 12 letter to Smith, the company’s CEO Peter Guggenbach makes the case that legislation forcing access to suppliers is unnecessary in this case because RUAG does not have an exclusive arrangement with ULA and is willing to work with SpaceX or any other launch providers.
“For this competition, we are in the process of submitting or have submitted proposals to multiple prime contractors regarding launch vehicle fairings,” the letter said. “In those agreements we share technical data to support a prime contractor’s bid while protecting our intellectual property.”
RUAG vice president Karl Jensen told SpaceNews the company has a “significant partnership” with ULA but is looking to work with others too. “We have an offer to SpaceX,” he said. “We don’t know if they’ll accept it.”
