SpaceX may upset firm’s monopoly in launching Air Force satellites


Entrepreneur Elon Musk and his upstart company SpaceX are on the verge of upsetting a cozy and pricey military deal that for years has given two aerospace giants the exclusive right to launch the Air Force’s most crucial satellites into orbit.

In recent years, those satellite launches have become so expensive under the Air Force’s controversial contract with a joint venture owned by Boeing Co. and Lockheed Martin Corp. that the missions now rank as the nation’s fourth-most-costly weapons program.


SpaceX satellites: In the Nov. 26 Business section, an article about SpaceX said that the Hawthorne rocket maker was challenging the Air Force’s block purchase of 36 rocket launches. It should have said rocket cores. —
Musk has said his company can perform a satellite launch for less than $100 million — a fraction of the price charged by the Boeing-Lockheed joint venture. The average cost for each launch using rockets from Boeing and Lockheed has soared to $420 million, according to a recent analysis by the Government Accountability Office.


To get a share of the business, Hawthorne-based SpaceX — short for Space Exploration Technologies Corp. — must prove it can reliably launch the military satellites, which can take years to build and are crucial to national security.

Air Force officials are in the final stages of a years-long, detailed review of the rocket company’s launches and operations. A decision on whether to certify SpaceX for the launches, they said, is expected next month.

This is huge,” said Marco Caceres, senior analyst and director of space studies at Teal Group. “It would break up a monopoly and has the potential to save the taxpayer an awful lot of money.”

Boeing and Lockheed have faced no competition for the rocket launches since 2006 when they formed a joint venture called United Launch Alliance.

Before that, the two firms had competed against each other for the contracts. After they began working together, the bill for launching satellites skyrocketed, costing taxpayers billions of dollars and leaving less money for other military programs.

The Air Force’s deal with the joint venture has been criticized for years on Capitol Hill. In April, Republican Sen. John McCain of Arizona demanded an investigation into whether the Air Force’s Space Command was retreating from earlier promises by the Pentagon that other companies would be allowed to compete for the lucrative work.

The public denouncements of the deal have put pressure on Space Command officials, who operate from the Los Angeles Air Force Base in El Segundo, to make a decision on whether SpaceX should be certified as a reliable launch provider.

Although the launches by the Boeing-Lockheed venture have been expensive, they have also been dependable.

Tory Bruno, United Launch Alliance’s chief executive, said about the firm’s launch numbers, “We’re now at 89 — a perfect record of mission success.”

The risk involved in space missions became clear last month when two rockets crashed within four days of each other. On Oct. 28, an unmanned rocket bound for the International Space Station exploded in a fireball just seconds after liftoff. No one was hurt when the rocket owned by Dulles, Va.-based Orbital Sciences blew up, but 2 tons of supplies, experiments and equipment were destroyed.

Three days later, Virgin Galactic’s SpaceShipTwo broke apart just after its rocket engines ignited during a test flight over the Mojave Desert. One of two pilots was killed.

The Air Force’s decision on whether to certify SpaceX comes at the same time that Space Command officials are nearing a separate determination of which firm will win a contract to launch a spy satellite for the National Reconnaissance Office. The Pentagon opened that contract to competitive bidding in June — the first true competition for the launches since 1998.

The Air Force said SpaceX was the only company working to be certified for launches, making the competition for the contract between it and United Launch Alliance. Officials said they would award the contract by Dec. 31.

A spokesman for SpaceX said the company does not talk about whether it has bid for a contract before the winner is announced.

Over the last two years, Musk has repeatedly slammed the government’s deal with the Boeing-Lockheed venture. He filed a lawsuit in the U.S. Court of Federal Claims this year, claiming that the Air Force’s block purchase of 36 rocket cores from the joint venture last December was illegal. The case is still pending.

United Launch Alliance executives have defended the deal. They say that by purchasing 36 cores in advance, the Air Force got “stability and predictability” needed for national security, while also “saving the taxpayers money.”


For the Record

Nov. 26, 1:25 p.m.: An earlier version of this article said Elon Musk had sued the Air Force over its block purchase of 36 launches.


But in court, Musk’s lawyers called the contract “dangerous, fiscally irresponsible, and offensive to American values of open competition and fairness.”

SpaceX has been able to keep costs lower by manufacturing its own engines and rocket parts — including the Dragon capsule, which has been used to deliver supplies to the International Space Station for NASA, and the Falcon 9 rocket. Most of the work is done in a sprawling factory near Los Angeles International Airport.

The Boeing-Lockheed venture relies on subcontractors, including to build its rocket engines. It has bought dozens of engines made at a Russian factory — a purchasing decision that has become increasingly contentious with the new tensions between Russian President Vladimir Putin and the West.

The news agency Reuters recently obtained a 2011 audit by the Pentagon’s Defense Contract Audit Agency, showing that the joint venture had proposed paying $303 million for a dozen of the Russian engines, known as the RD-180, or about $25 million each.

The auditors said the subcontract for the purchase of the engines was “not acceptable” because it had failed to negotiate “a fair and reasonable price.”

Jessica Rye, a spokeswoman for the joint venture, said the Russian engines’ price “was thoroughly reviewed and accepted” by the government. She said the engine was “competitively priced” compared with alternatives.

Rye also disputed the GAO’s estimated average launch cost of $420 million. She said the company estimates that each launch costs an average of $225 million.

The threat of competition from SpaceX already has spurred executives at United Launch Alliance’s Denver headquarters to take action.

Bruno, a former Lockheed executive, was unexpectedly named the joint venture’s top leader in August, replacing Michael Gass, who had headed the firm since its creation in 2006.

At a public forum sponsored by the Atlantic Council, a nonprofit think tank, this month, Bruno vowed to slash United Launch Alliance’s costs “by half.” He said the firm was also making plans to eventually stop using the Russian rocket engines.

“ULA is America’s ride to space,” Bruno said, “and it will continue.”

Twitter: @melodypetersen