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SpaceX’s Musk lobbies against Lockheed and Boeing in bid for satellite launches

By Brendan McGarry | Bloomberg Government,

As House lawmakers voted on stopgap legislation to keep the U.S. government running, Elon Musk was in a meeting room down the hall in the Capitol.

The chief executive of Space Exploration Technologies, or SpaceX, was making his pitch for competition in space launches, a development pivotal to his company’s future.

At issue is an Air Force proposal to award a bulk buy of 40 launches over five years to United Launch Alliance, a joint venture of Lockheed Martin and Boeing that is now the government’s sole provider of medium- and heavy-lift rockets for civilian and military satellites. The Air Force has budgeted about $10 billion for the program during that period.

Musk casts his campaign as a David-vs.-Goliath struggle in which SpaceX, which has completed only two launches of satellites, would bring innovation and potential savings.

“We’re just engineers here,” he said, as he walked out of a meeting Oct. 4. “We’re trying to make a case for a fair competition, but we’re up against the two biggest defense contractors in the world. They’re ganged up against us.”

The Air Force calls its rocket initiative the Evolved Expendable Launch Vehicle, or EELV program. The service plans a procurement strategy that will commit the Defense Department to a minimum of eight launches a year for a total of 40 through fiscal 2016, yielding a projected savings of about $830 million from earlier cost projections. The average for the past four years has been about six launches a year.

Jessica Rye, a spokeswoman for ULA, said the company “has been consistent in our message,” which supports the government opening about 20 percent of its launch needs to competition while reserving the rest for a “block buy.”

The split would “be a prudent buying practice to protect against any potential satellite delays,” Rye said in an Oct. 6 e-mail.

‘Monopolistic state’

In his attempt to spur more competition, Musk has supporters on Capitol Hill.

“The block buy was intended, in part, to reduce launch costs but it is not clear whether this contract will actually save the taxpayers’ money when compared to a full and open competition,” Sen. Dianne Feinstein, a Democrat from California, where SpaceX is based, wrote in an Oct. 4 e-mail.

The Senate intelligence committee, of which Feinstein is chairman, said in a report accompanying the 2012 intelligence authorization bill that the “monopolistic state of EELV providers” was “particularly troublesome” and recommended that the Air Force reduce the launch quantity to, at most, five a year for no more than four years.

The Air Force’s budget for the EELV program, excluding spending for the Navy and the National Reconnaissance Office, which manages the nation’s spy satellites, is projected at $9.88 billion from fiscal 2012 through fiscal 2016, according to service figures. That’s $3.48 billion, or 54 percent, more than a projection made last year covering the same period.

Rep. C.A. Dutch Ruppersberger (D-Md.) said he is troubled by those figures.

“The system we have now is way too expensive and is getting more expensive and is forcing American space companies to go to other countries to get launched,” he said in an Oct. 4 interview. “That’s unacceptable to me.”

Ruppersberger, the ranking member on the House intelligence committee, said the system does not provide incentives to possible new entrants such as SpaceX, based in Hawthorne, Calif., and Orbital Sciences of Dulles.

“I’m really happy there are entrepreneurs out there like Elon Musk who have taken the risk and see an opening to do something that will be helpful to our country — if they can continue to perform,” he said.

Launch histories

SpaceX, formed in 2002, is the brainchild of Musk, who also co-founded PayPal, the online payment service, and Tesla Motors, which builds high-
performance electric cars and went public in June 2010. The company has attempted seven launches using its Falcon family of rockets, three of which failed after liftoff or during the mission. Its next flight of the Falcon 9 is scheduled for January 2012.

ULA, established in December 2006 and based in Centennial, Colo., has completed 54 missions. Its Delta and Atlas families of rockets date to the 1950s and 1960s and have flown a number of high-profile missions, from astronaut John Glenn’s inaugural Earth orbit to the Mars rovers for NASA.

“The money that ULA receives from the Defense Department is slated to be $2.5 billion to $3 billion a year,” Musk said. “For the same number of launches, SpaceX would be under a billion.”

Rye of ULA said the EELV forecast “reflects an increasing launch rate” and does not take into account the proposed improvements in buying practices.

Rye said the company has received, on average, less than $2 billion a year in Defense Department revenue during the past five years. Three-quarters of the company’s total sales come from the Pentagon and the National Reconnaissance Office, while NASA and commercial business make up the rest, she said.

SpaceX has secured more than $3 billion in contracts from government and commercial customers such as Iridium Communications, which makes satellite phones. The national-security business is critical for the company going forward, making up half the total market for space launches, SpaceX officials have said.

Opportunity to compete

Musk argues that there should be no sole-source awards without the opportunity to compete.

“But that is the objective of ULA. ULA has decided that they can’t win a fair fight and they can’t even win an unfair fight, so the only way for them to win is for there to be no fight at all.”

Rye, the ULA spokeswoman, said the Federal Trade Commission mandates a full-time oversight team “to ensure that ULA remains independent and a fair merchant supplier.”

The Air Force has commissioned multiple studies highlighting the cost advantages of block buys, said Tracy Bunko, a spokeswoman for Air Force Secretary Michael Donley. The reports contain proprietary information and have not been publicly released, she said.

SpaceX is not certified to launch military and spy satellites. The Air Force plans to publish a certification guide for aspiring launch providers this month, Bunko said.

“The certification process will include the standard or specification the contractor must meet, the documents or data the contractor must provide, and the evaluation process the government will employ,” she said in an Oct. 6 e-mail.

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