The selection of SpaceX and ULA was expected. What was surprising was the sheer value of the contract awarded to SpaceX for its first Phase 2 mission.
WASHINGTON – The Air Force has made the call to stay with SpaceX and United Launch Alliance as its launchers for the next five years. Now it has to decide if and how to continue working with the companies that lost the National Security of Phase 2 National Security Launch – Blue Origin and Northrop Grumman.
An issue at hand is the termination of contracts for launch services that the Air Force will award to Blue Origin and Northrop Grumman in October 2018, as well as to ULA.
The purpose of the agreements was to help Phase 2 competitors pay for the development and infrastructure of launched cars. Blue Origin received $ 500 million; Northrop Grumman $ 792 million and ULA $ 967 million. The funds were to be distributed through 2024, and the Air Force said from the outset that the LSAs would be terminated with those companies that did not win a Phase 2 purchase contract.
Despite political pressure not to end the LSAs, the agreements will be terminated, Air Force Assistant Secretary for Purchase Will Roper said Aug. 7 during a video conference with reporters.
“We will work with these two companies to determine the exact point to bind their work under the LSA agreements,” Roper said. The intent of the LSAs “was to create a more competitive environment leading in Phase 2,” he said. “The point is not to wear them indefinitely.”
LSA funds supported the development of Blue Origin’s New Glenn rocket and Northrop Grumman’s OmegA launch vehicle. ULA will continue to receive funding for its Vulcan Centaur car. SpaceX did not receive an LSA contract.
Before the LSAs are terminated, Roper said, “We need to determine what work has been done and what rights to the data the government has. We want to make sure we keep that.”
Roper said an important reason why the LSAs are unable to continue for all three companies is that the Air Force does not have enough money in the budget.
A RAND report commissioned by the Air Force warned that ending the LSAs could leave the Air Force with fewer competitors from the industry that could challenge ULA and SpaceX in 2024 when Phase 3 of the National Security Space program launches is planned.
RAND said cutting back on financial aid could drive companies to abandon certification efforts to qualify commercial launch vehicles for national security launches. The report said that this has national implications for security, because if a U.S. launcher falls out of the market, a foreign competitor is likely to emerge to try to fill the gap.
Roper said the Air Force plans to continue with support from U.S. industry, but the specifications have yet to be worked out, Roper said. “We will discuss this with Capitol Hill for Phase 3.”
Roper said he agreed with RAND’s take that it would be “in the best interests of the government to have three or more viable systems to compete for Phase 3.”
Both the House and Senate versions of the National Defense Authorization Act of 2021 include provisions for the Air Force to make new partnerships with the launch sector similar to the LSAs.
Possibility of legal protests
Before the Air Force can move forward and begin planning Phase 2 missions with SpaceX and ULA, it is preparing for the possibility of a legal protest over the August 7 awards.
Blue Origin and Northrop Grumman on Friday expressed statements that were disappointing in the Air Force selection. Any decision to file a protest would be made after the companies were informed by the Air Force as to why their bids did not make the cut.
“We have submitted an incredibly compelling offer to the national security community and the U.S. taxpayer,” said Blue Origin CEO Bob Smith. New Glenn’s bid was a “highly competitive single base launch service award for any mission over the entire order period.”
The company intends to stay in the launch market nonetheless, Smith said. “We are continuing with the development of New Glenn to pursue our current commercial contracts, pursue a large and growing commercial market, and create new contracts for civilian space launches.”
Northrop Grumman said the company is “confident that we have submitted a strong proposal that reflects our extensive space launch experience and value to our customer, and we look forward to our customer debriefing.”
Surprising price tag for SpaceX mission
The selection of SpaceX and ULA was not surprising considering their experience. “This ended exactly as everyone expected,” said one source from the sector.
What no one expected was the prize ticket for SpaceX’s first Phase 2 mission released on August 7th.
SpaceX was awarded a $ 316 million contract to launch USSF-67, a mission planned for the fourth quarter of fiscal year 2022. ULA was awarded a $ 337 million contract to launch two missions – USSF-51 and USSF-106 – plan for the second and fourth quarters of fiscal year 2022, respectively.
Roper during the interview with reporters was asked to explain why SpaceX is paid about the same amount for one mission that ULA receives for two missions. Roper declined to comment on that issue, saying these launches are mission.
The Space and Missile Systems Center of the US Space Force, which oversees the purchase of launches, said in a statement to SpaceNews that both contracts include support costs in addition to the price the companies offer for the start-up services.
“The outreach assignment includes the first year of Launch Service Support, and the awards for the individual missions ordered from each respective company,” SMC said. “These prices were proposed by companies as part of the Phase 2 acquisition, and they reflect significant savings compared to historical prices from previous NSSL purchases.”
The extra pay for offering providers – which one source in the sector estimates at about $ 100 million per company – was unexpected. It is reminiscent of the “ELC” funding that the Air Force uses to pay for ULA and was criticized by SpaceX as a subsidy from governments that do not receive commercial companies.
ELC is short for Evolution Expendable Launch Vehicles Launch Capabilities, which the Air Force distributes annually to ULA for infrastructure and technical support. ELC was terminated in 2019 and the Air Force said it would transition to commercially based pricing.
Based on the value of the August 7 contract, the SpaceX contract is likely for a Falcon Heavy launch. A sector analyst who asked not to be named stated that the $ 316 million launch contract, even if $ 100 million is for support costs, is very large considering the prices SpaceX has offered for Falcon Heavy. The company won a Falcon Heavy contract in February for a NASA asteroid mission in 2022, valued at $ 117 million, which includes the launch itself and other mission-related costs.
SpaceX has not commented on social media or released on the Air Force announcement that it has been selected as a Phase 2 provider.
The Air Force assigned ULA 60% of the Phase 2 missions that will be flown over five years, and 40% will go to SpaceX. According to various sources, SpaceX believes it should have won the 60% stake because it has operational and certified cars, while ULAs Vulcan Centaur is still in development and is expected to fly for the first time in 2021.
