By Andy Pasztor
Seeking to combat rising launch costs for U.S. military and spy
satellites, senior Senate Democrats are prodding the Pentagon to
give Space Exploration Technologies Corp., headed by businessman
Elon Musk, its first opportunity to compete for such contracts.
Outlines of that effort emerged Wednesday at a Senate defense
appropriations subcommittee hearing, with two high-ranking
Democrats challenging prices charged by a joint venture between
Lockheed Martin Corp. and Boeing Co., currently the Air Force's
sole launch provider for big satellites.
Eight years after the Pentagon effectively gave the venture a
monopoly to blast national-security satellites into orbit,
congressional investigators told the panel overall launch costs
have more than doubled to $1.6 billion annually.
In extreme cases, the total bill for blasting a particularly
heavy and complex Pentagon satellite into a challenging orbit can
be around $500 million, according to industry officials.
While average launch costs run in the $300 million to $380
million range, according to these officials and congressional
investigators, that still amounts to a significant long-term
financial burden at a time of shrinking military budgets and
escalating pressure to keep a lid on spending for space
projects.
SpaceX, as the Southern California company is commonly called,
has said its price to launch a typical Pentagon satellite would be
under $100 million.
Against the backdrop of such financial considerations,
Wednesday's session also amounted to a dramatic turnabout and
personal vindication for Mr. Musk, the former Internet entrepreneur
who founded and continues to lead fast-growing SpaceX, based in
Hawthorne, Calif.
As recently as a few years ago, many generals, Pentagon
acquisition officials and lawmakers on both sides of the aisle were
privately dismissive of the idea that Mr. Musk's startup could ever
challenge the entrenched joint venture, called United Launch
Alliance. Until 2012 there was no mechanism for SpaceX to bid
against ULA for military launch contracts.
But now, Mr. Musk and SpaceX have become the favorites of many
military budget-cutters, inside and outside the Pentagon. Boasting
a series of successful orbital launches for the National
Aeronautics and Space Administration--and buoyed by an
international backlog of more than four dozen civilian and
commercial launch contracts totaling about $5 billion--Mr. Musk and
his company are poised to challenge ULA for Pentagon business.
"If our rockets are good enough for NASA, why aren't they good
enough for the Air Force?" he asked at Wednesday's hearing. "It
makes no sense."
Without changing the way the military shops for launches, the
Pentagon's own experts project that funding for the joint venture
is likely to average more than $4 billion annually.
Emphasizing that "we are ready to compete," Mr. Musk told the
panel he hoped "robust competition will begin this year."
The Pentagon's top acquisition official previously told the Air
Force to solicit competitive bids for as many as 14 future
launches, but Mr. Musk and some of his Capitol Hill supporters
worry the decision will be delayed and the amount of potential
business put out for bid will shrink.
As a result, they are ratcheting up pressure on the Air Force to
usher in meaningful competition as a way to slash prices.
"We do have concerns about the acquisition strategy, cost and
future" of ULA's rockets, said Sen. Richard Durbin, the Illinois
Democrat and majority whip, who is also the panel's chairman.
The joint venture relies on Atlas V and Delta IV boosters
developed independently by the two giant contractors. In 2006,
Defense Department officials blessed the creation of the joint
venture to provide assured access to space, essentially agreeing
the Pentagon also would cover certain fixed costs regardless of how
many satellites the new entity launched per year.
Michael Gass, ULA's president and chief executive, testified
that the joint venture, along with the cost-plus contracting
arrangement to cover its overhead, evolved after fixed-price
contracts resulted in significant losses for each rocket supplier.
In return for higher costs, he said, the Pentagon benefits from
maximum flexibility, transparency about ULA's costs and assured
readiness.
Responding to questions about competition, Mr. Gass said UAL is
moving to trim costs, adding "I'm all for the pendulum moving to
the right spot" to balance costs with guaranteed availability.
But Sen. Dianne Feinstein, the California Democrat who heads the
Senate Intelligence Committee, said the joint venture hasn't lived
up to its original pledges to save Pentagon dollars by pooling
assets. Further, she said, "it appears the Air Force is going to
delay and reduce" the number of competitively bid launches.
Write to Andy Pasztor at andy.pasztor@wsj.com
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