Seeking a Different Sort of Waiver for ULA

Editorial

The long running drama regarding United Launch Alliance and the use of Russian RD-180 engines for the Atlas V rocket entered a new phase late Friday with the announcement that the Pentagon will not issue a waiver requested by the company allowing it to acquire more engines which it says are needed for competitive bids.

The decision capped a remarkable two week period which saw ULA conduct its 100th successful launch, receive yet another $882 million “subsidy” payment over and above what it charges for launches, this time for FY 2016, and then saw company president Tory Bruno tell reporters “Today I still have no engines to bid” in reference to an upcoming GPS III launch contract.

That bid is the first of up to nine DOD launches which have been opened to competition as a result of SpaceX receiving certification from the Air Force for its Falcon 9 booster, and Bruno’s statement appeared to be a thinly concealed threat to refuse to participate if the waiver was not forthcoming.

Responding in a letter sent to the Secretary of Defense, SpaceX founder and CEO Elon Musk weighed in as well, calling the statement “nothing less than deceptive brinkmanship for the sole purpose of thwarting the will of Congress.”

Now it is time to see who blinks.

Receiving certification marked in some ways the end of a quest which began in 2005, when SpaceX first sued to block the formation of the ULA from partner companies Boeing and Lockheed Martin on the grounds that it would constitute a monopoly and artificially restrict new competition for years to come. The SpaceX suit was dismissed on the grounds that without a viable booster in the EELV category, the company lacked proper standing. Five years later, SpaceX demonstrated that it did have a viable booster with the first flight of the Falcon 9 on June 4th, 2010, but it would be another five years and a hard won certification before it could finally get the chance.

On the other side of the issue, and facing actual competition for a national security launch for the first time since 2004 when ULA co-owner Boeing was sanctioned for a document cheating scandal which saw Delta IV launches punitively stripped and re-awarded to then competitor Lockheed Martin and its Atlas V,  ULA sought to convince the Air Force that a belated ban imposed on the use of RD-180 engines for military missions meant that it could not bid for the upcoming launch. Veering even further into the “brinkmanship,” Bruno suggested that current situation does not constitute a viable business model.

In something of a first, the Air Force wasn’t buying what ULA was selling, at least not right away. In this case it is a narrative which sought to convince the Pentagon that RD-180 engines ordered for commercial and civil launches prior to the date of the ban, could not be re-assigned to national security missions, with the affected non-military launches simply receiving new RD-180’s. The Air Force’s non response, as well as comments made by a spokesperson last week, suggests that it does not believe ULA’s claim.

A strict interpretation of the applicable section of the 2015 National Defense Authorization Act, which banned the import of engines not already paid for at the time of Russia’s invasion of Crimea, suggested that number of engines available was 5, due to the fact that only partial payments were made, whereas a more open interpretation meant a total of 14 would be available. Notably, this all came after a hotly contested “block buy” for which ULA received 28 uncontested, sole source launches was resolved largely in the company’s favor. (It originally wanted 50)

Now a fierce opponent of monopoly, at least after its own monopoly expires in 2018 with the beginning of open competition for most new launches, and not just the few which are currently being set aside, ULA is asking the DOD to believe that lack of unfettered access to RD-180’s risks creating a new monopoly which will last until the Vulcan booster is ready to compete.

Just when that might be is beginning to look increasingly uncertain. With the development of the Vulcan booster subject to a review on a quarterly basis by both Boeing and Lockheed Martin, and the company president saying his business model isn’t viable without more Russian engines, one gets the distinct impression that pile of chips on the table is going to get higher.

If nothing else, the situation underscores just how bad an idea it was to become addicted to Russian engines in the first place, a situation for which the Air Force and Congress are also to blame. From the taxpayer’s point of view, a company which has for more than a decade successfully argued that it requires large public subsidies on top of monopoly privilege on the grounds that it is necessary to protect the U.S. industrial base, is now asking to continue its support of the Russian industrial base at continued taxpayer expense until further notice. And all of it for the purpose of providing “competition” with a non-subsidized, fully American company which has already driven launch costs to historic lows even as it is has engaged in very public campaign to drive prices lower still through developing a reusable first stage.

If not for the first ever catastrophic loss of a Falcon 9 on June 28th of this year, it would be easy to conclude that despite its record of launch success, it is time to end the ULA experiment once and for all. Some want to see the company broken up, a tempting solution in some ways, but one which seems both unlikely to happen, and even more unlikely to produce either a Boeing or Lockheed Martin launch solution which would be competitive with SpaceX and the Falcon family. More importantly however, the failure did take place, and it serves as stark reminder that the U.S. needs at least two potential vendors in the EELV category. For that to happen, both need to be economically viable. But do they both have to be American?

ULA has long sought to convince the American taxpayer that the market will not support two domestic launch vehicle providers, thus making the case for subsidy on national security grounds. In successfully entering the commercial and civil space segments before it penetrated the defense segment, SpaceX demonstrated that argument to be both incorrect and wildly self-serving. The fact is that the market will accept two competitors, provided both are actually competitive. Why else would ULA’s own business partner and future engine supplier Blue Origin be planning its own orbital launch vehicle?

The policy question is how to respond to ULA’s implied threats, and whether or not to take the chance that if it doesn’t eventually receive the waivers its wants, it might actually pull the plug on Vulcan, leaving the U.S. with one domestic provider until another emerges.

One possible solution is to take ULA’s caution regarding a SpaceX monopoly seriously, but to respond by granting a very different sort of waiver than the one Tory Bruno is seeking.

Currently U.S. law, specifically the Space Transportation Policy of 2013, requires that U.S. government payloads be launched on domestically built rockets.

“United States Government payloads shall be launched on vehicles manufactured in the United States unless an exemption is coordinated by the Assistant to the President and National Security Advisor and the Assistant to the President for Science and Technology and Director of the Office of Science and Technology Policy through an interagency process.”

The wording represents a slight softening from the previous policy, that of 2005, which also allowed an exemption to be granted, albeit through a more complicated process. Both documents sensibly seek to promote the health of the U.S. launch industry, but in contrasting ULA’s  ongoing dependence on Russia with SpaceX’s very different approach, it is now reasonable to ask if that goal would not be better served by calling the former’s hand and securing an insurance policy in the form of purchasing foreign launchers if they are needed.

After all, the single most expensive single automated spacecraft in American history, NASA’s James Webb Space Telescope is being launched not by ULA, but by Arianespace aboard the market leading Ariane V. In the case of JWST, the Ariane launch was arranged as part of a “no exchange of funds” cost swapping provision which does not require a waiver, but it speaks to the confidence NASA has in Arianespace all the same.

ULA has long justified its astronomical pricing on the grounds that it launches the most expensive national security payloads, some of which it likes to point out “cost billions of dollars.” Others do not, but to the company’s credit, it has launched them all successfully. Still, at somewhere north of $8 billion dollars, the James Webb Space Telescope eclipses them all, (at least the ones we know about) and by a pretty good large margin. If Ariane V is good enough for JWST,  and with a success record that rival’s ULA’s,  it clearly is, then Europe’s booster is also good enough to serve as a hedge against the very unlikely event that going against all its stands for, SpaceX will begin raising its own prices the minute the company believes it can.

But what of the extra security precautions which have to be in place for defense satellites? Here is what Arianespace said on the subject in 2011 in reference to two hosted payloads launched on commercial satellites:

” With the responsibility of launching these payloads comes the expectation—and the absolute necessity—for significant security provisions. In the case of Arianespace’s French Guiana facility, the French Navy, Army and Foreign Legion, and the Gendarmerie (national police) form several impenetrable security layers around any launch campaign that occurs within the CSG.

Other tight security protocols strictly control access to any spacecraft resident within the base’s preparation facilities and provide 24 hour monitoring of sensitive technologies. Badging check-points are a must, and when needed, an enhanced security regimen is also part of the overall launch plan.

These activities are an integral part of being a trusted partner in the satellite launch industry. Moreover, all of these steps are taken in order to practice strict adherence to U.S. export control laws, rules and regulations.”

It is time to seriously consider rethinking America’s formal aversion to foreign launchers, particularly when the alternative is more Russian engines and a counterproductive disincentive to fully commit to Vulcan. Boeing, Lockheed Martin and ULA need to decide whether they are they committed, or whether they are not. If they are not, then perhaps it is time to consider forcing a breakup. In the meantime, one can think of no greater actual incentive for SpaceX to keep its prices in check than the prospect that it would lose U.S. government launches to Arianspace.