LMT Lockheed Martin Corp

By Doug Cameron 

The U.S. Air Force's first space-launch competition in a decade threatens to turn into a dud, as the United Launch Alliance joint venture that has dominated sensitive satellite work said it had pulled out because it can't buy enough Russian-made engines.

The decision by ULA, a joint venture between Boeing Co. and Lockheed Martin Corp., leaves Space Exploration Technologies Corp. as the sole entrant when bids close Monday for the launch of a new satellite for the Air Force-run GPS in 2016.

A final contract award is expected in March 2016, unless ULA supporters in Congress manage to postpone a deal until there is more than one bidder.

The GPS-3 satellite is the first of nine that the Pentagon has selected for competitive bidding after relying on multiyear deals with ULA to send sensitive military and intelligence equipment into orbit.

The Pentagon started competitions this year in an effort to lower average launch costs of more than $200 million for sensitive missions. It was spurred by a lawsuit from SpaceX that aimed to break ULA's long-standing monopoly on such deals, arguing that the firm owned by entrepreneur Elon Musk was a cheaper option.

The suit was settled in January. In May, the Pentagon cleared SpaceX to compete for its business, only to have one of the company's Falcon 9 rockets explode during a launch in June.

SpaceX plans to return the rocket model to service in late November or December.

ULA said in October that it wouldn't be able to compete for some upcoming Pentagon launches unless the Defense Department granted a waiver to circumvent Congress and buy more Russian-made RD-180 engines.

The Pentagon declined to grant an exemption, and lawmakers have limited ULA's purchase of the Russian engines and want to phase out their use completely by 2019, a response to Russia's actions in Ukraine.

"I'm very disappointed that we're not able to participate," said ULA Chief Executive Tory Bruno in an interview Monday.

Pentagon officials said in October that ULA could redirect engines destined for nonmilitary use or wait for pending congressional relief from the existing ban, which would allow it to buy five more engines, enough to compete in the nine upcoming launch contests.

Mr. Bruno said ULA's board hadn't signed off on acquiring additional rocket engines because of the uncertainty over the congressional ban, while ULA's existing motors had already been modified for commercial customers.

Mr. Bruno said two other elements of the GPS contest made it tough for the joint venture to compete. ULA was unable to separate funding it receives from the Air Force to operate launch facilities from its bid, as the contract requires.

The contract stipulated that the GPS deal be selected using a Pentagon system called the "lowest price, technically acceptable" bid, he said. SpaceX would undercut ULA on price, but ULA said its unblemished record of successfully launching sensitive satellites should be taken into account.

Separately, ULA and SpaceX are also pursuing Pentagon funding for a U.S.-made rocket engine to replace the RD-180, with the Defense Department expected to select two or more projects by the end of the year. ULA is teamed with two of the entrants-- Amazon.com founder Jeff Bezos' Blue Origin LLC and Aerojet Rocketdyne Holdings Inc., with Orbital ATK Inc. also offering its own new rocket design.

Write to Doug Cameron at doug.cameron@wsj.com

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(END) Dow Jones Newswires

November 16, 2015 18:15 ET (23:15 GMT)

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