Citing “unfair” competition from a rival with a captive solid rocket motor business, Boeing Co. [BA] this week walked away from a potentially $25 billion Air Force contract to build the Ground Based Strategic Deterrent (GBSD): the next generation of nuclear-tipped, intercontinental ballistic missiles.
In a July 23 letter to an Air Force acquisition official, Leanne Caret, Boeing’s chief executive officer, said the company “does not intend to submit a prime offer” in response to the Air Force’s July 16 request for proposals for a GBSD engineering and development manufacturing contract.
It is a gamble Boeing has kept up its sleeve for more than a year, when the Chicago-based company privately lodged its first formal complaint with the Air Force about the GBSD competition: a fight in which Boeing believed it faces an insurmountable financial disadvantage compared with its sole rival for the work, Northrop Grumman [NOC].
Northrop Grumman in 2016 acquired the solid-rocket business of the former Orbital-ATK.
“Boeing has repeatedly informed the Air Force, beginning with our response in April 2018 to the Air Force’s first Request for Information (RFI), that the GBSD EMD competition must address the unfair advantage that Northrop holds as a result of its control of Solid Rocket Motors (SRMs), the essential component of the GBSD missile system,” Leanne Caret, Boeing’s chief executive officer, wrote in a July 23 letter to Will Roper, assistant secretary of the Air Force for acquisition, technology and logistics at the Pentagon.
Caret also alleged that U.S. antitrust authorities at the Federal Trade Commission are not ensuring that Northrop Grumman is charging fair prices for its solid rocket motors — equipment Boeing would have to procure to build GBSD. Defense Daily and other outlets obtained Caret’s letter, which was first reported on Wednesday by Inside Defense.
With Boeing’s die cast, the Air Force — which did not reply to a request for comment — has choices to make.
The service could rejigger the GBSD procurement to give Boeing a fighting chance to beat, or at least not dramatically exceed, the price Northrop Grumman can afford to pitch.
But rewriting the GBSD solicitation could delay the system’s planned deployment beyond 2030: well past the date the Pentagon wants to start replacing aging, Boeing-made, Minuteman III silo-based missiles.
Alternatively, the Air Force could sole-source the second GBSD contract to Northrop Grumman. That would force a tight-rope act, where the service would somehow have to maintain the cost-advantage Northrop Grumman brings to the table without doing long-term financial damage to Aerojet Rocketdyne [AJRD]: the only other supplier of big, solid rocket-motors in the U.S.
Pentagon policy is to maintain two suppliers of solid rocket motors, which are used in missiles of every type, to keep prices for future missile procurements lower through competition.
Aerojet Rocketdyne has so far been on both the Boeing and Northrop GBSD teams. The company was integrated with the primes during the three-year competition to design GBSD, which the Pentagon funded under contracts worth about $350 million and $330 million respectively. Aerojet Rocketdyne was also the prime contractor on the Minuteman III refurbishments that will keep the missile on duty through the 2020s.
It was not clear Thursday whether Aerojet-Rocketdyne would get any work on a Northrop Grumman-only GBSD build, or if it did, whether the work would be enough to keep the company’s solid-rocket business afloat through the planned 50-year GBSD duty cycle. Neither Aerojet Rocketdyne nor Northrop Grumman replied to requests for comment.
One wild card in the deck is Congress. Lawmakers ordinarily do not force federal agencies to pick certain suppliers for major procurements, though there is some precedent for such drastic action from the civilian space realm: as part of the NASA Authorization Act of 2010, a group of Senators effectively forced NASA to use solid rocket motors manufactured by ATK Technologies for a future crewed space-launch vehicle.
No lawmaker had signaled a willingness to go that far as of Thursday, and only two contacted by Defense Daily would weigh in at all on GBSD.
Through an an aide, Senate Armed Services Chair James Inhofe (R-Okla.), said he “looks forward to seeing the [GBSD] program proceed without delay.”
Aides for Rep. Adam Smith (D-Wash.), the House Armed Services Chairman, said they were “working to get more information from Boeing and DoD to help Mr. Smith decide the next steps.” Smith has spent the whole year railing against the estimated $100 billion lifecycle of the GBSD program.
The influential Sen. Richard Shelby (R-Ala.), the Senate Appropriations Committee chair whose home state includes Boeing facilities and personnel central to the company’s GBSD work, did not reply to a request for comment.
Rep. Bruce Westerman (R-Ark.), whose district includes Aerojet Rocketdyne’s Camden, Ark., solid rocket motor facility, also did not reply to a request for comment.
Meanwhile, an analyst with the Washington-based consultancy shop Capital Alpha Partners speculated that Boeing’s defense business might be financially constrained because of its troubled commercial aircraft business.
“The no-bid by Boeing may also signal that Boeing’s issues on the 737-MAX and future commercial airplane investment needs are crimping its ability to make strategic bids on programs,” Capital Alpha’s Byron Callan wrote in a widely distributed email.
Fatal crashes of the 737-MAX in October 2018 and March 2019 have brought regulatory scrutiny and no end of bad press to Boeing, but the first of those fatal crashes happened months after Boeing initially complained to the Air Force about Northrop Grumman’s unfair advantage in the GBSD competition.
The Air Force planned to award the GBSD manufacturing contract by September 2020. The service has said it will acquire more than 600 missiles and deploy about 400, beginning around 2030.
GBSD would remain in service into the 2080s, carrying the W87-1 nuclear warhead provided by the Department of Energy’s National Nuclear Security Administration. The National Nuclear Security Administration estimates W87-1 will cost between $10 billion and $15 billion, excluding the cost of necessary upgrades to the U.S. civilian nuclear-weapons complex.