Competition and the future of the EELV program (part 2)<< page 1: rising costs and NASA Originally conceived as a winner-take-all contest that would result in a single reliable and affordable launch provider for the Department of Defense, the DOD altered the EELV program’s approach to a two-vendor strategy in 1997. The changing rationale was promoted on the grounds of offering assured access to space through two distinctly different launch vehicle families, as well as the benefits of both price competition and competitively-driven contractor innovation. Unfortunately, it was premised on a predicted boom in the commercial satellite launch market that subsequently failed to emerge. That the market collapsed is undeniable, but it was not the only significant event that triggered the eventual switch from competitive procurement to the present environment of an even distribution of launch contract awards.
The original EELV order, Buy I, was placed in 1998, and Boeing and the Delta IV were clear winners, awarded 19 launches compared to nine for Lockheed Martin and the Atlas V. However, a wrongful termination lawsuit led to the disclosure that Boeing was in possession of the more than 25,000 pages of proprietary documents regarding the Atlas V, the rightful property of Lockheed Martin. Included in data was pricing information that likely effected the outcome of the bid. The Air Force subsequently punished Boeing’s malfeasance by rescinding the original launch purchase and subsequently re-awarding seven of the 19 to Lockheed Martin, which went on to receive an additional three launches during a second purchase in which Boeing was forbidden to bid. As Boeing emerged from self-inflicted purgatory, it appeared that open and fair competition would emerge at last. Boeing, though, still faced a massive, possibly crippling lawsuit from Lockheed Martin over the affair, brought under Racketeer Influenced and Corrupt Organizations (RICO) statutes, which held out the threat of potential trebling and punitive damages. The lawsuit was only dropped as a condition of Boeing’s consent to merge its launch effort with that of Lockheed Martin. Thus was born the shotgun marriage which created United Launch Alliance. The immediate outcome of that union was the elevation of the Atlas V to an equal status with the Delta IV through formal enshrinement of an assured access policy, which distributed launches as evenly as possible. Consequently, even the possibility of competition was effectively—and some would say conveniently—eliminated. In justifying the decision, Space and Missile Systems Commander Lt. General Brian Arnold told a skeptical press that the even distribution of launch contracts would only remain through the end of the decade, and “then we’ll have open competition after that.” He apparently meant way after that, considering that the practical result of the proposed block buy would be to secure the ULA monopoly into the early 2020s. Despite assurances to the contrary, and to no one’s surprise, prices continued their climb. The EELV program was the subject of a GAO report in 2008 that pointed out the program was, for the second time (the first being 2004), facing cost increases that would almost certainly trigger a breach of the Nunn-McCurdy Act designed to prevent defense procurement programs from spiraling out of control. Such a breach would essentially put the program on probation, and subject to routine outside scrutiny. The solution to the problem was to simply re-classify the program as in the sustainment rather than development phase and thereby avoid the light of examination that comes with the latter category. The taxpayer would be assured of getting proper value by the use of “should cost” analysis, in which Air Force personnel would verify that the program charged no more than what it reasonably should cost. Among the many flaws with such an approach is the simple fact that assigning hundreds of personnel to review costs is itself an expensive proposition, one that the Air Force promptly neglected by not assigning the necessary staff. The net result, as now reported in the 2011 GAO audit, was that when ULA began its current campaign to secure a block buy based on protecting the industrial base, and then sought to justify much higher prices based on escalating vendor pricing, the Air Force lacked the necessary information to make an informed decision as to the accuracy of the claims. So, too, apparently did ULA, which could not offer GAO a specific reason for the selection of 40 cores as the preferred block buy.
The year 2011 ended for the EELV program with President Obama signing a fiscal year 2012 defense authorization bill that notably included amendments from Sen. McCain that gave the Secretary of the Air Force the option of essentially reversing the 2007 decision and re-classifying the EELV program as a defense development program, or, alternatively, subjecting it to similarly equivalent scrutiny as if it had been anyway. This appears is a New Year’s resolution McCain intends to keep. Following the January 19 announcement of a ULA “bridge” procurement of nine launch vehicle cores for 2013, the Senator issued a letter questioning the Air Force’s intended next step, a much larger purchase based on a matrix provided by ULA with different prices for different purchase levels. Specifically, McCain questioned both the reliability and apparent conflict of interest on the part of ULA in providing the information from which it stands to benefit. As the history of the EELV program suggests, McCain’s suspicion is well justified, and it has direct relevance for the future of space launch. In the first place, the market, as currently represented by a commercial manifest for the SpaceX Falcon 9 of nearly 20 launches, is a far more effective indicator of what a basic intermediate EELV class launch “should cost” than an army of calculator-wielding military accountants. While new layers of oversight and quarterly reporting requirements as contained in the McCain amendment may prevent additional cost increases, they are not going to be able to address the underlying problem. The specific line of reasoning offered by ULA that should be of concern is that price increases are blamed on a certain set of conditions that seem likely to reappear. What is euphemistically called uncertainty in the wake of shuttle closeout is more accurately an assessment that lingering overhead and imbedded inefficiencies, once charged to the shuttle program, have nowhere else to go. Presumably now that SLS is underway at least some of this overhead will be covered once again. But what happens if the critics are correct and SLS is cancelled? It seems likely that the conditions cited in the current rationale for the block buy will re-occur: ULA will claim once again that the costs of its EELV components are increasing beyond its control and that it has no choice but to raise prices or to seek enhanced subsidies regardless of whatever matrix it offers at the moment. NASA’s deep space ambitions, nebulous as they are, would face a moment of truth in such a scenario. If the Orion Multi-Purpose Crew Vehicle (MPCV) implausibly survived the financial collapse of its second launch vehicle, the only remaining currently flying alternative would be the EELV Delta IV Heavy, which would presumably resume spiking in price as the constantly swinging pendulum of legacy overhead settled once more on EELV side of the ledger. The result would be to undercut the benefits of other exploration architectures based on multiple EELV launches, such as orbital fuel depots, despite the fact that various studies have indicated that such architectures offer the decided advantage of considerably lower development costs. One proposed solution, a mixed fleet scenario, might hinge on the availability of the Falcon Heavy, which would, in fact, present a moment of clarity that seems destined to occur at some point anyway. Assuming the Falcon Heavy lives up to expectations, at twice the performance and one third the cost of the Delta IV, any rational mixed fleet allotment between the Falcon Heavy and the Delta IV would present a serious challenge for offering the latter the high flight rate it apparently requires. Within the context of a NASA budget that will likely remain constrained for many years to come, an attempt at a irrational EELV-style “equitable” distribution would be particularly cruel from the perspective of the Science Mission Directorate, leaving the equivalent of a Discovery-class mission lying on the table with every other overpriced launch. Despite pleas to avoid internecine battles pitting various space exploration interests against each other, increased debate over the merits of such tradeoffs seem both necessary and unavoidable. National space programs are both a projection of the way a nation would like to present itself to the world as well as a reflection of the realties that the nation has created for itself. After decades of denial from virtually every aspect of the political spectrum, the United States in 2012 is on the event horizon of a fiscal black hole, with the rate of spending and mounting obligations relentlessly outpacing the growth of its resources. For the nation’s space program, that means wrenching decisions that threaten to bring to an effective close one of the single greatest eras of scientific discovery in human history. Nevertheless, it is also quite possible that a solution is in reach.
The Commercial Orbital Transportation Services (COTS) program, and the follow-on Commercial Resupply Services (CRS) contracts were designed from the outset to foster new commercial launch vehicle development with NASA and the ISS playing the role of anchor tenant. As such, it was a major departure from both the concurrent (at the time COTS started) Ares 1 program as well as the consolidation to monopoly that was underway in the EELV program and would be formalized later that year. After six years and an initial investment of $500 million—approximately the cost of one very suborbital and partially failed test flight of a mockup of the now-cancelled Ares 1—the agency stands to gain the service of two entirely different launch vehicles with minimal direct investment and an operational cost well below that of either the Delta II or Atlas V. For those accustomed to criticizing the agency for its various shortfalls, it should come as something of a pleasant surprise that offers a “teachable moment” for all. Of the two launch vehicles produced to compete for the COTS program, the OSC Antares (formerly Taurus II) clearly represents the more conventional approach, and indeed is vulnerable to a number of the limitations and criticisms that are plaguing the EELV program. It is primarily outsourced, utilizing renovated 40-year-old Russian engines and a first stage tank structure built in the Ukrainian factory that also builds the Zenit first stage. As such, it is hardly a triumph of American engineering. The solid-fuel second stage is produced by ATK and vulnerable to the type of legacy overhead transfer issues that has affected EELV pricing. Furthermore, like almost all new launch vehicles, it is experiencing growing pains and the first launch has been repeatedly delayed. And yet, the Antares offers the potential of Delta II-type performance at a substantial cost reduction over what ULA states Delta II pricing would now be, despite the latter vehicle’s lengthy production history and pre-existing launch pads on both coasts. Most importantly, its initial development cost to NASA, though the COTS program, was all of $170 million. In fact, the very presence of the Antares, which replaced the Rocketplane Kistler K-1 as a COTS winner after the latter could not secure private funding, speaks to the benefits of a milestone-based development process that minimizes the likelihood of large cost overruns that have plagued both NASA and DOD for years. Finally, in stark contrast to both EELV entrants which based proposals on wildly optimistic launch rates that never materialized, OSC’s modest goal of profitability, based on two or three launches a year, seems quite achievable. The agent of change, however, is clearly SpaceX and the Falcon 9. With two successful launches under its belt, the SpaceX Falcon 9 is one launch away from meeting NASA’s NLS contract stipulation of three successful launches, including two consecutive launches in a common configuration. Assuming a successful COTS launch later this spring, the Falcon 9 will have passed the first critical milestone of the Aerospace Corporation’s “3/7” reliability rule, which suggests that any failure in a rocket’s first three attempts is a result of a design problem, whereas a failure in attempts four, five, or six are the result of a presumably more correctable production problem. With over 30 flights on the manifest the Falcon 9 would appear to be well on its way to becoming the robust and cost-effective alternative NASA requires. It is by no means a mature system, though, and the coming introduction of both the Block II version and as well as satellite-capable payload fairings are non-trivial stepping-stones along the way. Furthermore, larger planetary payloads await either the Falcon Heavy or a new high-energy upper stage.
In short, it is way too early to take anything for granted, but it is possible to at least draw some preliminary and encouraging conclusions about the unique milestone-based procurement that has brought the system this far. More to the point, anticipating the predicted financial implosion awaiting the current program of record, it is time to quickly begin formulating alternatives that build on the type of progress which COTS has produced to date. Of critical importance is finding a means to incorporate and harness the energies released by genuine competition. Monopolies are not conducive to efficiencies no matter whose name is on the side of the rocket. Many recent proposals on this subject understandably reference the Kelly Air Mail Act of 1925 and its role in sparking the birth of civil aviation. It is important to not lose sight of the fact that one of the greatest enduring legacies of the act was not merely the subsidy itself, and dozens of small airlines that emerged, but the first spark of a roaring competition between United Airlines and Transcontinental and Western Air (TWA). That United-TWA competition gave birth, in turn, to the Boeing 247 and then, as a countermove, the airplane that changed everything: the Douglas DC-3. Fifty years after John Glenn became the first American to orbit the Earth—launched by an Atlas booster, no less—the US has the right to expect, and to demand, a space program that is progressively improving access to space and not simply increasing the cost of accessing space. The difficulties encountered in the EELV program reflect the fact that although the United States has become adept at accessing space with a relatively high degree of reliability, we are still a long way from doing so regularly and affordably, both of which are necessary preconditions to establishing a either a permanent presence in space or a sustainable program of deep space exploration. The tragedy of the SLS program is that, fifty years into manned spaceflight, and threatening to consume the next thirty, it addresses neither. Based on the progress of a very different NASA/industry relationship developed as part of the COTS/CRS programs, we have an “existence proof” of a far more affordable alternative. We do not yet know whether this alternative is scalable to the level of the former, or reliable to the degree of the latter, though it seems that SpaceX at least, is determined to find out. If and when the day arrives that the nation’s desire to seize the moment, and actually explore a solar system that is regularly revealing itself to be more interesting than we ever imagined, overcomes the need to protect entrenched political and industrial interests, then a better path forward has already been revealed, and with the next Falcon 9 launch, we will be taking another step along that path. Maybe it won’t be such a bad year after all. Home |
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