Report Urges Pentagon To Reassess EELV Block Procurement Plan

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WASHINGTON — The U.S. Department of Defense said it is moving ahead with block buys of satellite launchers despite a recommendation by government auditors to reassess that procurement strategy.

In a report released Oct. 17, the U.S. Government Accountability Office (GAO) said the Pentagon has insufficient information to press ahead with the strategy and may wind up with too many rockets procured at too high a price. Moreover, the Pentagon has insufficient subcontractor information to fully understand what constitutes a fair price for its rockets, the GAO found.

The U.S. Air Force and the National Reconnaissance Office, which together build and operate the vast majority of U.S. national security satellites, intend to spend $15 billion on space launches from 2013 through 2017 under the Evolved Expendable Launch Vehicle (EELV) program. The GAO review was prompted by cost growth on the program, which government and industry officials say is driven in large part by rocket engine prices.

The Defense Department is pursuing the block-buy strategy as a way to control EELV costs and stabilize the U.S. rocket-manufacturing industrial base, which has been reeling due to the retirement of NASA’s space shuttle and uncertainty about a follow-on vehicle. The Air Force intends to buy a combined eight Atlas 5 and Delta 4 booster cores per year over the next five years, for a total of 40 vehicles.

But the GAO questioned whether the Air Force has the necessary knowledge to move ahead with that plan. The Pentagon’s “analysis on the health of the U.S. launch industrial base is minimal, and officials continue to rely on contractor data and analyses in lieu of conducting independent analyses,” the congressional watchdog agency said.

A report by the Defense Contract Audit Agency said the Pentagon lacks sufficient information about the EELV subcontractors to negotiate “fair and reasonable prices” with United Launch Alliance, the prime contractor on the program, the GAO said. Moreover, the report said pending NASA decisions about its own future launch capabilities could affect rocket hardware prices and that the Pentagon needs to better understand this before it locks in EELV prices that might be too high.

At the direction of Congress, NASA recently announced plans to develop a heavy-lift rocket for space exploration that leverages investment and technology from the shuttle program, including propulsion systems. The GAO said rocket engine prices are expected to spike in the coming years, but the agency’s audit was conducted before NASA unveiled its Space Launch System plans.

The report said the government may buy more booster cores than it needs under the block-buy plan, and having to shelve extra equipment would mean storage costs and refurbishing hardware that is stored for extended periods.

The Defense Department, in its written response to the GAO, said it partially concurred with the agency’s recommendation that it reassess its EELV acquisition strategy. The Pentagon said it expects to finalize  the plan in the next few months, taking into account studies on liquid-rocket engines and the U.S. space industrial base that are expected to be completed by the end of this year.

The decision on specific EELV quantities to be procured over what time period will be “balanced among price, operational requirements, budget realities and the potential for new entrant competition,” the Defense Department’s letter said.

Denver-based United Launch Alliance, a joint venture of Boeing and Lockheed Martin, has a near-monopoly on launching U.S. national security payloads. But the Air Force, the National Reconnaissance Office and NASA recently announced that they would coordinate on standards designed to bring new competitors into that launch market.

That announcement was welcomed by Space Exploration Technologies Corp. (SpaceX) of Hawthorne, Calif., the startup rocket maker that has won substantial NASA business and is positioning itself to compete with United Launch Alliance for defense contracts as well.

In a separate press release issued Oct. 18, SpaceX said the GAO’s findings raise “troubling questions” about the EELV block-buy plan. “The report states that while ULA is pushing the 40-rocket purchase, the methodology and data used by [United Launch Alliance] to justify the purchase were severely flawed, there is no justification for the five-year timeline, and a block purchase could kill opportunities for competition by forcing the government to commit to more boosters than are actually needed,” SpaceX said.

In a written response to a Space News query, United Launch Alliance spokesman Chris Chavez said the company is committed to supporting the U.S. government’s efforts to launch national security payloads reliably and cost effectively.

“The Air Force is seeking final approval of an acquisition strategy that will provide all the necessary data to allow effective decision-making,” Chavez said. “ULA has and will continue to provide all of the detailed information that our customers request to ensure ULA is providing the best value to the government.”

 

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