The U.S. Air Force and U.S. Space Force are continuing negotiations with Northrop Grumman [NOC] and Blue Origin over an appropriate time to end the companies’ Launch Services Agreement (LSA) funding, as they lost out in the Phase 2 launch service procurement (LSP) National Security Space Launch (NSSL) awards on Aug. 7.

“The U.S. Space Force acknowledges the hard work and significant efforts of all the offerors,” the Air Force acquisition office wrote in an Aug. 26 email. “The government has not yet terminated the LSAs. The U.S. Space Force is working with Northrop Grumman and Blue Origin to determine a logical stopping point to end their existing LSAs.”

Air Force acquisition chief Will Roper has said that the Air Force does not want to “carry” the companies “indefinitely” under the LSAs and that the LSA goal “was to create a more competitive environment leading into Phase 2.”

Service acquisition officials want to document vendors’ activities, determine what data is government proprietary and retain rights to that data, and engage with Congress on a possible acceleration of Phase 3, which, like Phase 2, is to be an open competition.

On Aug. 7, the U.S. Air Force Space and Missile Systems Center (SMC), in partnership with the National Reconnaissance Office (NRO), awarded United Launch Alliance (ULA)–a Lockheed Martin [LMT]/Boeing [BA] partnership–a $337 million contract for two classified mission launches and Space X a $316 million contract for one classified mission launch under Phase 2 of LSP (Defense Daily, Aug. 7).

Despite its loss, Blue Origin retains a stake in Phase 2, as Blue Origin’s BE-4 engine will power ULA’s Vulcan launch vehicle.

Under the Phase 1 LSA awards in October, 2018, Northrop Grumman, Blue Origin and ULA received up-front contracts of $109 million. Northrop Grumman was eligible for $792 million under LSA, while Blue Origin was eligible for $500 million.

The first three Phase 2 missions are to launch between FY ’22 and FY ’24, and SMC is to order launch services annually from ULA and Space X for up to 34 launches over five years. ULA is to receive 60 percent of the launch orders, and SpaceX will receive the remaining 40 percent.

Congressional appropriators are concerned with the cost of NSSL, as the Evolved Expendable Launch Vehicle (EELV) program, the predecessor to NSSL, had as its paramount goal a dramatic reduction in launch costs through lower cost commercial launch providers. Space X’s Falcon 9 and Falcon Heavy launches start around $60 million but will cost no more than $150 million, Space X founder Elon Musk has said.

Blue Origin is owned by Amazon [AMZN] founder Jeff Bezos, who also owns The Washington Post and who has engaged in a public war of words with President Donald Trump.

The NSSL effort is to allow the Air Force to end reliance on the Russian-made RD-180 engine by leveraging U.S. commercial launch capabilities. The service has 12 RD-180 engines it can use, if a catastrophic failure arises in the NSSL program, but the service is prohibited by law from buying new RD-180s after 2022.

ULA said on Aug. 26 that one of the final four Delta IV Heavy rockets is ready for launch at 2:12 a.m. EDT on Aug. 27 with a classified National Reconnaissance Office (NRO) payload, NROL-44, at Cape Canaveral Air Force Station, Fla. The launch was scheduled for Aug. 26, but the weather has been problematic in the area.