Space Exploration Technologies (SpaceX) President Gwynne Shotwell recently issued a challenge to rival United Launch Alliance.
“I bet I beat ULA on marginal cost,” Shotwell said in response to a question whether the Defense Department’s rocket launch subsidy of ULA would be an obstacle SpaceX could overcome now that DoD is opening Evolved Expendable Launch Vehicle (EELV) launches to competition. Shotwell spoke at a Washington Space Business Roundtable lunch in Washington.
“They’re going to have to figure that out,” Shotwell said regarding ULA’s subsidy. “Either they roll in full cost accounting on each launch when they compete it or they get rid of the subsidy. I don’t know exactly how they’re going to work it, but they’re going to have to fix that.”
Full cost accounting is a concept that supports full disclosure and reporting on programs and an improved matching of costs with related program performance. Full cost reporting also ties all agency costs (including civil service personnel costs) to major activities (programs) and budgets, accounts, reports and manages programs with a full cost perspective. The full cost accounting concept centers around “no resources are free.” NASA underwent a full cost accounting initiative in the early 2000s to help provide agency managers with better information to support decision making.
The leaders of the House Permanent Select Committee on Intelligence pushed Defense Secretary Leon Panetta in August to eliminate the infrastructure subsidy DoD provides ULA to reduce barriers to space launch and EELV competition for the likes of SpaceX and Orbital Sciences [ORB]. Committee Chairman Michael Rogers (R-Mich.) and Ranking Member Dutch Ruppersberger (D-Md.) said the United States has developed over the last two decades a government heavy launch capability that lacks domestic competition and is unable to compete internationally due to high costs.
ULA is a joint venture between Lockheed Martin [LMT] and Boeing [BA].
EELV is the Air Force’s program to launch satellites into orbit and guarantee the U.S. government access to space. SpaceX said because the U.S. government is currently ULA’s only customer, DoD and the National Reconnaissance Office (NRO) are forced to pay over $1 billion per year to ULA to sustain the EELV capability, which includes subsidizing virtually all of the venture’s fixed costs for facilities, support costs and launch operations.
Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) Frank Kendall authorized the Air Force in a Nov. 27 Acquisition Decision Memorandum (ADM) to no-compete a “block buy” of 36 EELV “cores” to ULA over a span of five years while competing up to 14 cores to other companies. Kendall’s memo said the Air Force could sole-source those 14 cores to ULA if “competition is not viable at time of need.”
Ruppersberger hailed the Air Force’s decision to compete those 14 cores as “progress,” because the U.S. can’t continue to use ULA unless costs decrease.
“ULA, they do the best, (and) probably have the best launch operation in the world, but it’s also the most expensive and we can’t continue to move forward with such an expensive operation,” Ruppersberger said.