OpEd: A Monopoly of Cosmic Proportions

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  Space News Business

OpEd: A Monopoly of Cosmic Proportions

By JESSICA SHOEMAKER

posted: 12 December 2005
01:39 pm ET


The Evolved Expendable Launch Vehicle (EELV) program was established by the Air Force in 1995 to design, build and launch new rockets to lift medium and heavy satellites into space. Since the beginning of the program, the Air Force has been awarding launch contracts to Boeing and Lockheed Martin on a competitive basis. However, starting in the spring of this year, everything changed.

In April 2005 , the Air Force issued a Request for Proposals for the next five years’ worth of anticipated launch missions. Rather than awarding the contracts competitively based on price, the missions were instead individually assigned “in order to keep both rocket makers viable.” In addition, the Air Force provided Boeing and Lockheed Martin with non-competitive, cost reimbursement contracts, which constitutes an annual multimillion-dollar taxpayer-financed subsidy of the companies’ rocket businesses.

Just one month later Boeing and Lockheed Martin proposed merging their government launch businesses to form the United Launch Alliance (ULA) with the Air Force’s support.

This major shift away from competition was in part due to Boeing’s suspension for unethical behavior.

During the 1998 EELV contract competition, Boeing had extraordinary knowledge about Lockheed Martin’s proprietary data. In July 2003, the Air Force suspended three of Boeing’s Integrated Defense Systems business units for possessing 66,000 stolen pages of Lockheed’s EELV rocket cost information, although the ban was twice lifted to allow Boeing to receive contract awards. In January 2005, President George W. Bush announced his space transportation policy, which directed the Department of Defense to maintain two contractors in order to have “assured access” to space.

However, since Boeing had Lockheed’s rocket cost data, Lockheed insisted that it could no longer compete. Meanwhile, Boeing’s suspension was lifted in March. Although the Boeing scandal soaked taxpayers for an estimated $230 million in extra costs, its punishment amounted to no more than a slap on the wrist from the government.

The Government Accountability Office recently concluded that the EELV program is on track for cost overruns of $13.2 billion, 70 percent above the approved budget of $18.8 billion. If the creation of ULA is approved, the venture will have a virtual lock on all the government medium- to heavy- satellite launches for at least the next five years. With a unit cost growth of 81 percent since 1995 and little possibility of competition, the EELV program has shortcomings that will be exacerbated by the anti-competitive ULA merger.

In late October, the Federal Trade Commission delayed the ULA approval process by asking for more information, indicating that the contractors are struggling to convince federal officials about the long-term merits of the proposal.

Widening the playing field to companies outside the defense contractor oligopoly is the best way to protect both the government and taxpayers from spiraling costs and decreased innovation.

The Government Accountability Office cautioned the Defense Department in 1998 to devise a way to maintain competitive pressure in its acquisition programs. If the Pentagon does not heed this warning for the EELV program, the government will be saddled with a monopolistic entity that will both ensure high costs for taxpayers and stifle innovation.

Jessica Shoemaker is a media associate with Citizens Against Government Waste. This article appeared in the November 2005 issue of Wastewatcher, the organization’s monthly newsletter.