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Falcon 9 launch
A Falcon 9 v1.1 carrying a Dragon cargo spacecraft lifts off from Cape Canaveral on April 18. SpaceX, which has already won considerable NASA and commercial business, is looking to the courts to help it be eligible for contracts with the Defense Department. (credit: NASA/KSC)

SpaceX escalates the EELV debate

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There’s nothing like a mysterious press conference, called on short notice, to pique a reporter’s attention. Shortly after midnight Eastern time on Friday, a PR firm representing SpaceX sent out a cryptic email. “Elon Musk will make an important SpaceX announcement today, Friday, April 25th at 1:00PM ET at a Washington, DC venue to be announced shortly,” it stated (emphasis in original), offering no details on the subject of the announcement.

“National security launches should be put up for competition, and they should not be awarded on a sole-source, uncompeted basis,” Musk said.

Speculation, of course, rapidly fills the vacuum created by the absence of information. One logical possibility was that he would make an announcement about SpaceX’s efforts to recover the first stage of its Falcon 9 rocket after launch a week earlier on a NASA cargo resupply mission: the company had been quiet on the topic since the launch, other than a couple of tweets by Musk several hours after launch that suggested the test was largely successful. Others wondered if the company would be making news about the progress the company has made towards certification by the Air Force, allowing it to compete for national security launches.

Both answers were partially right. When Musk took the podium at the National Press Club—the location to be named later in the original announcement—Friday afternoon, he started off by talking about the efforts the company was making to develop a reusable version of the Falcon 9, including the test the previous week. And, later in the press conference, he briefly touched upon the company’s progress towards achieving Air Force certification. The big news, though, was a surprise to most: SpaceX was escalating its dispute with the Air Force and its current main launch supplier, United Launch Alliance (ULA), about a contract SpaceX believes will make it more difficult for to compete for lucrative military launches.

“SpaceX has decided to file suit to protest the Air Force EELV block buy,” Musk said about halfway through the half-hour press conference. “That essentially blocks companies like SpaceX from competing for national security launches. Essentially, what we feel is that this is not right. National security launches should be put up for competition, and they should not be awarded on a sole-source, uncompeted basis.”

What Musk was referring to was a contract between the Air Force and ULA for the bulk purchase of 36 rocket cores for future launches. (The Atlas V and Delta IV Medium vehicles use a single first stage, or core, while the Delta IV Heavy uses three cores. The 36 cores in the contract cover 24 “single-stick” launches and 4 Delta IV Heavy launches.) Both the Air Force and ULA argued that the block buy of those cores would save money through economies of scale versus the past practice of buying vehicles in smaller lots, or individually.

However, to Musk and SpaceX, the block buy contract appeared to shut out SpaceX, at least for a few years, even as its vehicle was making its way through the certification process. “Since this is a large, multi-year contract, why not wait a few months for the certification process to complete, and then do a competition?” he asked. “That seems very reasonable to me.”

The Air Force had anticipated that SpaceX or other “new entrants” would seek EELV launch contracts, and had originally set aside 14 launches, separate from the 36-core block buy with ULA, for competition among any certified providers. However, over time the number of launches available to competition had been cut in half, primarily as the payloads to be launched on them were delayed.

At the press conference, Musk said that the suit, to be filed in the US Court of Federal Claims, was a move of last resort by the company. “We tried every avenue” to understand the rationale for the block buy contract, he said, without success. “It seems like we’re left with the only option, which is to file a protest.”

Musk added that the company informed the Air Force of the protest just before the press conference, but didn’t think that it would adversely affect its relations with the service. “It’s not as though we’re battling the whole Air Force; that’s not the case at all,” he said. “We’re on very good terms with the vast majority of the Air Force. Our concern is really related to a handful of people in the procurement area of the Air Force.”

Musk said he only learned of the block buy deal last month, although it had been widely discussed in the industry for month.

Musk’s announcement, though, raised a number of questions, including the timing of the protest. While the EELV block buy contract was common knowledge in the space industry for months, he said the company formally heard about the contract last month, just after a March 5 hearing before the Senate Appropriations Committee’s defense subcommittee, where Musk and ULA CEO Michael Gass testified about launch contracts.

“We actually only learned about the big sole-source award in March,” Musk said. “The agreement was signed in December, but it only came to light, interestingly, one day after the Senate hearing on EELV launch costs, which seems remarkably coincidental. I don’t think that’s an accident.” However, there was no EELV contract award announced by the Defense Department on March 6, yet there was a notification of a contract modification to cover the block buy on December 16.

Musk also claimed there was no reason provided by the Air Force for making the sole source award to ULA. “Normally when there’s a sole source, huge, multi-billion-dollar procurement, there’s a justification given. In this case, there was no justification provided for this,” he said at the press conference. While a December 2013 procurement document related to this award provided no detailed justification, an earlier EELV-related contract in January 2012 did provide one, arguing that ULA (operating under the business name of United Launch Services, or ULS) was the only certified provider—as is the case today.

“It would be an inefficient use of Government resources to hold a competitive source selection before a new entrant (a contractor other than ULS) has fully demonstrated they can meet the SPRD [System Performance Requirements Document] requirements,” the 2012 document stated, which estimated would not be until at least fiscal year 2016.

Late Friday evening, SpaceX announced it would release its formal protest documents to the Court of Federal Claims on a special website, called “Freedom to Launch,” on Monday. The website initially had a countdown set to reach zero at noon Eastern time Monday. As this article was prepared for publication on Monday morning, though, the countdown had been replaced with a “Launching Soon” message, and the documents were not available as of noon Eastern time.

An intensifying debate

While Musk’s announcement of a suit against the Air Force on Friday took many by surprise, it was, in the bigger picture, simply the latest step—albeit a big one—in a long-running debate between SpaceX and both the Air Force and ULA over access to a large and lucrative launch market that, for now, is primarily unavailable to SpaceX.

At the March 5 Senate hearing, Musk and Gass sparred with each other indirectly on EELV issues, through questions posed by committee members. Sen. Dianne Feinstein (D-CA) pressed Gass on the high costs of the EELV program, while Sen. Richard Shelby (R-AL) questioned Musk on the reliability and performance of SpaceX’s boosters.

SpaceX’s primary argument then, and subsequently, has been primarily that SpaceX offers the Air Force, and by extension taxpayers, with a less expensive solution than ULA’s vehicles. At Friday’s press conference, the company provided reporters with a one-page handout arguing that SpaceX was significantly less expensive than ULA: less than $100 million for a Falcon 9 launch (once government-specific services were added to the base Falcon 9 price of about $60 million) versus more than $400 million per ULA launch, a price that accounts for both the vehicle and support services.

“With SpaceX, the Government could generate at least $1B in savings annually, even under the most conservative estimates,” SpaceX claimed in the document. It went on to compare that cost savings—more than what would be realized under the new block buy contract, it added—to the operations costs of a number of other Defense Department programs, from the A-10 attack aircraft (which the Air Force has proposed retiring in its latest budget proposal) to the Minuteman III ICBM fleet.

“Internet pricing is for advertising, not for defining the cost of mission success for national security,” stated ULA, referring to SpaceX’s practice of publishing its launch prices on its website.

At the March 5 hearing, the subcommittee chairman took the unusual step of asking Musk and Gass to submit questions to each other, with their answers to be submitted for the record. Last week, Space News obtained those questions and answers, where the two companies reiterated their arguments of cost versus performance and reliability.

ULA, in its responses to SpaceX questions, said it was skeptical that SpaceX’s launch costs were as low as they claimed. “Although SpaceX openly advertises ‘internet’ prices, it is worth noting that the Air Force did not get the internet prices when they contracted with SpaceX for DSCVR [sic] and STP-2,” ULA responded, referring to Air Force contracts for two missions awarded to SpaceX in December 2012, the first (and, to date, only) EELV-class contracts SpaceX has received from the Air Force. “Internet pricing is for advertising, not for defining the cost of mission success for national security.”

SpaceX, in response to ULA’s questions, claimed that it was prepared to meet the more demanding requirements of national security launches. “SpaceX designed the Falcon 9 and its follow-on, the Falcon Heavy, from the outset to meet the EELV design specifications,” it stated. SpaceX also argued that the Falcon 9 vehicle was 100 percent successful in its missions to date, despite the failure of a first-stage engine on an October 2012 cargo mission for NASA: “the Falcon 9 corrected its trajectory and delivered the Dragon spacecraft to its intended orbit, resulting in mission success.” (The answer doesn’t note that a secondary payload on that launch, a demonstration satellite for ORBCOMM, was left in a low orbit in order to ensure the rocket’s second stage did not pose a hazard to the space station, and as a result deorbited after just a few days. However, ULA also considers the first Delta IV Heavy launch a success, despite underperformance by the main engines that resulted in the loss of several CubeSat-class secondary payloads.)

A secondary issue that gained prominence only with the onset of the Ukraine crisis two months ago is ULA’s use of the Russian-manufactured RD-180 engine that powers the first stage of the Atlas V. At the March 5 Senate hearing, Musk went so far as to argue that the Air Force should stop using the Atlas V and instead use the Delta IV—and, of course, the Falcon 9. “In light of Russia’s de facto annexation of Ukraine’s Crimea region, and the formal severing of military ties, the Atlas V cannot possibly be described as providing assured access to space for our nation when supply of the main engine depends on President Putin’s permission,” Musk said at the hearing.

Musk continued that argument at Friday’s press conference, suggesting that continued purchases of the engine could be considered a sanctions violation since the Russian official with oversight of the space industry, deputy prime minister Dmitry Rogozin, is on the list of officials sanctioned by the US government in response to the Ukraine crisis.

“How is it that we’re sending hundreds of millions of US taxpayers’ money at a time when Russia is in the process of invading Ukraine?” Musk asked. “It would be hard to imagine that Dmitry Rogozin is not benefiting personally from the dollars that are being sent there. On the surface of it, it appears that there’s a good probability of some kind of sanctions violation.”

(Rogozin himself offered a blunt reply to that allegation, which he tweeted Friday: “Do they think that I keep the money from sales of our engines from state enterprises for myself? Morons.”)

ULA has argued since last month that it has a large stockpile of RD-180 engines, enough to accommodate at least two years’ worth of launches should the supply from manufacturer NPO Energomash be disrupted. “We are not at any risk for supporting our national needs,” Gass said at the March 5 hearing.

“This is not SpaceX protesting and saying that these launches should be awarded to us,” Musk said. “We’re just protesting and saying that these launches should be competed. If we compete and lose, that’s fine.”

However, last week ULA officials acknowledged that they were changing the way they received engines from Energomash. A company spokesperson told The Hill that, instead of receiving engines in one large batch each year, it will split the shipments into two smaller batches. ULA emphasized, though, that it saw no threat of a disruption of engine supplies despite the ongoing tensions in US-Russia relations.

While neither Gass nor Musk have testified since the March 5 hearing, several Congressional hearings have asked questions about EELV issues—regarding competition as well as reliance on the RD-180 engine—of government officials, including Secretary of the Air Force Deborah Lee James and Seretary of Defense Chuck Hagel. Regarding the RD-180 engine, James and Hagel have said the military is studying its reliance on the engine, but that there would be no quick fix, such as starting domestic production of the engine, should supplied be cut off.

At a March 14 hearing of the House Armed Services Committee, Rep. Loretta Sanchez (D-CA) asked James about new entrant competition, including the cut of launches set aside for competition from 14 to 7. James said that the near-term launch manifest was dominated by “heavy duty, militarily significant” launches that the Air Force was not prepared to open for competition. Less significant ones, meanwhile, had been deferred, in part because the satellites they would replace are lasting longer than predicted in orbit. “Those launches are going to happen, they’re just going to happen later in the five-year plan,” James said of the launches open for competition.

On Friday, Sen. John McCain (R-AZ) reacted strongly to similar testimony James provided to the Senate Armed Services Committee earlier this month. McCain, in a letter to James published on his website, argued that her explanations for the block buy and reduced number of launches open to competition “appear to be specious” since no missions have been formally assigned to the rockets covered by the new contract, making it difficult to determine which missions are too heavy or otherwise unsuitable to be launched by a new entrant. He added that companies are allowed to compete for launches after submitting data for their “final qualifying launch” under the certification process, even before any decision on certification is made. For SpaceX, that would have been the early January launch of a commercial communications satellite on the third Falcon 9 v1.1 mission.

McCain, in the same release, also included a letter to Defense Department Inspector General Jon Rymer, asking him to “independently review recent developments in the EELV program,” including whether the block buy contract “put at risk competitive launches” in order to satisfy the award.

At Friday’s press conference, Musk said he wasn’t seeking to have the Air Force award to SpaceX all of the launches covered by the block buy agreement, only open to competition those launches that SpaceX is capable of supporting. In SpaceX’s answers to ULA’s questions, the company estimated that it can support 60 percent of current EELV-class missions with the Falcon 9. The introduction of the Falcon Heavy, it added, would allow it to cover all of those missions. With the Falcon Heavy’s first launch now scheduled for early next year, though, it be several years before that vehicle completes the certification process and is eligible for competing for those missions.

“This is not SpaceX protesting and saying that these launches should be awarded to us,” he said. “We’re just protesting and saying that these launches should be competed. If we compete and lose, that’s fine.” Whether a formal contract protest and suit—which can be a long, involved process—will actually accelerate the time when SpaceX can compete for those launches remains to be seen.