WASHINGTON – Elon Musk, the rocket market upstart who has filed a bid protest against the U.S. Air Force alleging anticompetitive practices, says there is room for an out-of-court settlement with what he hopes will become a solid customer for his company, (SpaceX).
“If there is some settlement to be attained, I am all for it,” Musk told Aviation Week during a May 4 interview. “Our goal is not to be obstructionist.” At issue for SpaceX is the Air Force’s December contracting action with United Launch Alliance (ULA), which holds a monopoly for large military and intelligence satellite launches. SpaceX is in the midst of being certified by the Air Force to launch national security and intelligence payloads based on three launches – one each in September, December and January.
SpaceX's suit was filed April 28. The Air Force has declined to comment on the case, citing the pending litigation.
The service reached terms for ULA’s sole-source deal of 36 rocket cores last December (intermediate and medium launches require one core apiece while Delta IV Heavy launches require three cores each). The deal was negotiated by Scott Correll, the program executive officer for space launch, who retired in December after 30 years of service. Termination liability has been listed as low as $370 million but as high as “in the billions,” according to Mark Bitterman, a ULA spokesman.
What began as a plan to buy 50 cores from ULA over five years was outlined in 2011 when pressure over the rising cost of the– the Atlas V and Delta IV – grew from Congress and the Office of the Secretary of Defense. But negotiations took longer than thought and the Air Force siphoned 14 of those cores/launches for potential competition, leaving 36 remaining for the bulk buy. Those 14, however, were reduced to seven in the fiscal 2015 budget request from the Air Force, which concerns Musk. “Our fear with future launches [is] these seven launches are very much in question,” he says.
The $531 million contact modification was awarded to ULA on Dec. 16, 2013, for the first of the 36 cores over five years. The service has boasted that the deal achieves $4 billion in savings over procuring the launches one at a time, as was done prior to the block buy. But the Pentagon’s selected acquisition report lists a per-launch cost of $400 million for ULA, while Musk boasts he can deliver a payload into orbit on a Falcon 9 v1.1 for $100 million, including a $30 million premium for the due diligence paperwork and reviews required for the Air Force’s “assured access” requirement.
The Dec. 16 deal includes two Air Force Atlas Vs (one 501 and one 511 configuration), two Air Force Delta IVs (one 4,2 and one 5,4 configuration) as well as a National Reconnaissance Office Delta IV Heavy. ULA already has begun issuing contracts to its long-lead suppliers for 50 cores; the company has opted to take the financial risk for those 14 launches to secure lower pricing in the near term, according to a company official. If a settlement is reached and the Air Force buys fewer than the 36 planned, there will be cost implications. “If they want to buy less during the period [of performance], the cost will vary,” the official says.
At issue for Musk is that the December arrangement with ULA guarantees the company a sale of no less than 36 cores for launches well into the future, when he feels his company should be allowed to compete. He claims this guarantee is not only anticompetitive but counter to direction from Pentagon procurement chief Frank Kendall, who in a Nov. 27, 2012, acquisition decision memorandum approved a strategy to sell “up to” 36 cores to ULA while holding 14 aside for competition. “The fundamental mistake with the contract is that the 36-core number cannot go below 36,” Musk says. “This is the fundamental mistake Correll made … If we are fully able and capable … we still would not be able to compete if ULA has not gotten their 36.”
Already SpaceX won twocontracts in 2012 that were put up for new-entrant bidding; ULA was excluded from competing. The company bested and will be launching the Deep-Space Climate Observatory (Dscovr) and a Space Test Program payload. Dscovr is slated for launch as soon as November.