ULA has more skin in the EELV cost game as company underwrites some production
In an unprecedented move, the United Launch Alliance (ULA) is planning to resource its industrial base at a level beyond the number of rocket orders placed by the .
As the monopoly supplier and operator of the Atlas V and Delta IV boosters to the Pentagon and intelligence community, ULA has typically built rockets based on the number of missions manifested. And the Pentagon has ordered them one at a time—the least efficient and most costly method of purchasing hardware and services. The Defense Department typically spends about $2 billion annually on the(EELV) program.
Since its inception more than a decade ago, the focus for the EELV program has first been on mission assurance, or not losing a payload owing to a booster problem. The program began in the wake of several launch disasters in the 1990s that resulted in billions of dollars wasted on hardware.
Bloated costs of the EELV program, coupled with heavy pressure on the defense budget as the war in Afghanistan winds down, are forcing the service to demand lower pricing on launches without compromising mission assurance.
Negotiations are nearly final for the Air Force's first ever “block buy” of 36 cores from ULA. As part of the terms, ULA is providing pricing for up to 50 cores. The final 14 of that order, however, are set aside for possible competition if a new entrant to the market—most likely(SpaceX)—is certified to vie for defense and intelligence missions. If SpaceX is unable to compete when one of those missions is manifested, it would automatically be sourced by ULA.
ULA, however, has directed its massive supplier base to size operations assuming all 50 cores will be purchased, says Michael Gass, the company's CEO. This unusually aggressive strategy reflects a move by the company to attack cost in the face of not only budget pressure but in order to maintain a foothold in the rapidly changing launch market. Company officials did not outline specific pricing, citing concerns over competition.
SpaceX could be certified to compete with ULA as early as 2015 in preparation for the fiscal 2016 budget delivery to Congress, says Scott Correll, the Air Force's program executive officer for launch. SpaceX is the first company to apply for certification to go head-to-head with ULA, and is undergoing a rigorous process to validate the capabilities of its Falcon 9 v1.1 booster (see page 42).
In contrast to its upstart rival, ULA has a record of 64 EELV launches that have placed payloads within 3 sigma of their intended insertion points, Correll says. And since taking office in 2010, Correll says, his team has managed to eliminate or avoid $2.9 billion of cost, thanks to a series of efficiencies and cost-reduction measures already implemented before the block buy is set.
For example, as Atlas V—the most frequently used EELV—has racked up its launch record, the Air Force has relaxed costly requirements owing to an increased confidence in its effectiveness. Wet dress rehearsals for Atlas V have been eliminated on the East Coast, reducing by roughly a week the processing time needed for most satellites, says Lt. Gen. Ellen Pawlikowski, commander of the Air Force Space and Missile Systems Center.
While pushing for reduced pricing, ULA's operational tempo dramatically increased. Production has increased from eight per year to 12, in lockstep. And, as an example of the surged operations tempo, the company recently executed four missions in 60 days—all successful insertions—a first for the program, Correll says.
Correll, who is retiring on Dec. 16, intends to wrap up negotiations for the block buy before then.
If SpaceX is certified and manages to win some of the 14 launches up for competition, ULA will be forced to find a commercial buyer for the launchers—a rarity given global competition in the market—or assume the financial risk of building them ahead of need.