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EELV: The Right to Compete

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On April 28, 2014, SpaceX filed a bid protest in the United States Court of Federal Claims to challenge the U.S. Air Force’s latest Evolved Expendable Launch Vehicle (EELV) contract with United Launch Alliance (ULA), a joint venture of Boeing and Lockheed Martin. The long-term contract, which guarantees the purchase of 36 rocket cores from ULA to be used in national security launches, was granted to ULA on a sole-source basis without any competition from other launch providers.

SpaceX is not seeking to be awarded contracts for these launches.  We are simply seeking the right to compete.

Most Americans have probably never heard of the EELV program.  It was implemented by the Air Force in 1995 to reduce the cost of operational space launch by 25–50%, to improve reliability over the heritage launch system, and to create a more ‘commercial-like’ procurement process.  Initially there were two competitors--Boeing with the Delta IV launch vehicle and Lockheed Martin with the Atlas V.  However in 2006, following the misappropriation by Boeing of thousands of confidential Lockheed pricing documents, the two companies put aside their claims against each other and formed ULA, citing the real issue as competition itself and asserting the new monopoly would save US taxpayers $100-150M per year.

Since the merger, not only have there been no savings but costs have skyrocketed.  Vehicle costs are up from approximately $100M per vehicle to $400M per vehicle—making ULA’s launch vehicles the most expensive not just in the US, but the world.  In addition, the United States pays ULA nearly $1 billion dollars per year just to maintain the ability to launch—regardless of whether or not they launch a single rocket.  The EELV program is now the fourth largest line item in the country’s entire defense budget, with costs now projected at nearly $70 billion through 2030.

This legal action seeks to shine a spotlight on an issue that has gone unchecked since 2006, when the ULA monopoly was formed—the lack of competition in the national security launch market.

The decision to file was not entered into lightly, and made only after all other avenues were exhausted. In a November 2012 Acquisition Decision Memorandum, as part of an effort to fundamentally restructure the EELV program, Under Secretary Kendall directed the Air Force to “aggressively” bring competition into the EELV Program and expressly stated his intent was to “obtain the benefits of competition as quickly as possible.”

Importantly, in a follow-on letter to the Government Accountability Office issued in January 2013, Under Secretary Kendall also expressly made clear that New Entrants would be in a position to compete once three certification launches and the post-flight data from these launches had been submitted: “The Department [of Defense] will allow new entrants to compete for launch contract awards as soon as the new entrant delivers the data from their final certification launch.” By design, certification is meant to run in parallel to the competition—with certification required just prior to the actual contract award. 

On September 29th, 2013, SpaceX successfully completed its first of three required certification flights for the Air Force, followed shortly thereafter by the completion of our second successful certification flight on December 3, 2013.  That same month, with our third certification flight just days away, the Air Force entered into a block-buy contract for the purchase of all 36 rocket cores on a sole-source basis with ULA.

The contract with ULA was negotiated and executed outside of public view and has never been made public. SpaceX has requested the contract using the Freedom of Information Act (FOIA) but has not yet received a response. As a result, to this day, no one except ULA and the government really knows precisely what the document says or what it requires.

What SpaceX did learn, the day after the March 5th Senate hearing on EELV competition, was that the 14 missions the Air Force had said it would compete had been cut to at most 7 (and potentially a few as 1), and that this reduction was required for the Air Force to comply with previously unknown requirements contained in the block buy contract.  SpaceX is qualified to compete today, and the Falcon 9 has demonstrated far more actual flight heritage than was required of either the Atlas or Delta vehicles, which received multiple orders before they ever launched.  Meanwhile, ULA has been guaranteed 36 cores. 

Clearly the block buy contract is in direct opposition with the very notion of competition.  It maintains the ULA monopoly until at least 2018, perhaps well beyond. And it will needlessly cost taxpayers billions of dollars.

The contract is made even more egregious in light of deteriorating US relations with Russia.  The majority of EELV launches are performed by ULA’s Atlas family of launch vehicles, which use the RD-180 rocket engine. The RD-180 is made in Russia by NPO Energomash, which is owned and controlled by the Russian government. The Russian space and defense industries are led by Dmitry Rogozin, the Deputy Prime Minister of Russia.  Rogozin is on the United States’ sanctions list as a result of Russia’s annexation of the Crimea.  As the U.S. contemplates additional sanctions against the Russian defense sector, it is incongruous and damaging that ULA continues to send millions of dollars to Russian controlled entities to support U.S. national security.  

Given  international events, this seems like the wrong time to send hundreds of millions of dollars to the Kremlin – especially considering there are domestic alternatives available and qualified to compete today that do not rely on components from countries that pose a national security risk. 

Each launch by ULA costs American taxpayers roughly $400 million– four times as much as a launch by SpaceX, and at least twice as much as any provider in the world.   It’s a false premise to suggest that a more expensive launch is a more reliable launch. Prices have increased because there is no competition.

SpaceX is better able to control costs because our factory was built in the 21st century and takes advantage of both new design innovations and new manufacturing techniques.  As a private company with no government subsidies, our business only succeeds when we deliver our customers’ payloads safely and reliably to orbit.  SpaceX currently provides launch services for NASA as well as numerous commercial customers—we stand ready and able to reliably provide launch services at an estimated cost savings of 75%.

To be clear, SpaceX is not seeking to be awarded any launch contracts.  We are simply seeking the opportunity to compete—and not just for SpaceX, but for any qualified company.  If we compete and we lose, that’s ok too.  But to not be given the opportunity to compete at all, especially in light of the Air Force’s stated interest in competition and current dependence on Russia for national security launches, just doesn’t make any sense.