As part of its efforts to reform its procurement of space systems, the Air Force has looked at a number of strategies, including the concept of “block buys”, where a relatively large number of items—satellites, rockets, etc.—are purchased at a time, allowing for lower per-unit prices. A plan to do a bulk buy of EELV-class launch vehicles, though, is facing new scrutiny after the release of a Government Accountability Office (GAO) report this week.
Under what the GAO calls the “leading proposal” for a launch vehicle acquisition strategy, government agencies would agree to acquire eight EELV boosters cores a year for five years. This would, DOD officials argue, provide some stability for the the industrial base and help contain costs over the current approach of effectively buying one launch at a time. A block buy today of EELV-class booster cores, though, would effectively be a sole-source award to United Launch Alliance (ULA), which manufactures the Atlas and Delta rockets. A long-term award could effectively lock out emerging competitors like SpaceX, even as the Air Force, NRO, and NASA are developing criteria for certifying new vehicles, as those agencies announced just last week.
“We do have a bit of a challenge with the Air Force,” SpaceX CEO Elon Musk said last month at the National Press Club, citing the proposed block buy. One of the rationales for the block buy, he said, was preservation of the nation’s industrial base, “although for some reason, oddly enough, we’re not included in the industrial base.”
The GAO report concluded that while the DOD was gathering data to support its decision on an EELV procurement strategy, it still had “critical gaps” in its knowledge, including limited data on the health of the industrial base. It also noted that the planned buy might be too large, creating an oversupply of booster cores that would have to be stored, incurring additional costs if those cores are stored for a year or more.
The report also addressed the potential for competition, with the DOD sounding conflicted about whether to encourage competition. “Some DOD officials acknowledge competition offers potential benefits, but others believe that competing for EELV launches will endanger the program’s stability and threaten its long history of launch successes,” the report stated. The Program Executive Office (PEO) for Space Launch in the Air force, Roger Correll, told the GAO that “he believes competition will benefit the program, and intends to work with ULA and potential competitors to incentivize cost efficiencies while maintaining mission success.”
Because of the potential for competition and other uncertainties, the GAO report recommended, among other items, that the DOD “reassess” the length of the planned block buy in order to incorporate the additional data it’s collecting about its procurement strategy. That recommendation was the only one of seven that the DOD did not fully endorse in its response, included in the GAO report. “The decision on specific contractual quantity and period of commitment will be balanced among price, operational requirements, budget realities and the potential for new entrant competition,” Deputy Secretary of Defense Ronald Jost wrote in a letter to the GAO.
SpaceX played up that the GAO report’s conclusions in a press release Tuesday, saying it “raises troubling questions for taxpayers” about the proposed block buy. On the other hand, the Lexington Institute’s Loren Thompson, no fan of SpaceX, argued that ULA’s rockets might be a better deal even at higher prices, given their track record of successful launches versus SpaceX’s limited history. “Once risk is factored into the comparisons, it’s hard to see how federal officials could justify placing a billion-dollar spy satellite, or for that matter astronauts, on Falcon 9 or any other SpaceX launch vehicle until there was much more evidence of their reliability,” he wrote.
Musk, in his National Press Club speech, played up SpaceX as an underdog to the much larger aerospace primes, who, he said, devote far more resources on lobbying than his company. “If this decision is made as a function of lobbying power,” he said of a proposed block buy, “we are screwed.”