WASHINGTON — The US Air Force is looking at early termination of a controversial arrangement the service holds with United Launch Alliance (ULA) after the company pulled out of a Pentagon space launch competition last year.

ULA, a joint venture of Boeing and Lockheed Martin, in November pulled out of the Air Force's GPS III space launch competition in response to Congress' ban on the use of Russian RD-180 rocket engines to power military space launches. ULA had threatened for some time to skip the competition unless it got relief from the ban on the RD-180, which powers the company's Atlas V rocket.

The GPS III launch services solicitation is a crucial part of the Pentagon's Evolved Expendable Launch Vehicle (EELV) program to send satellites into space.

Air Force Secretary Deborah Lee James told the Senate Armed Services Committee during a Wednesday hearing the service is considering early termination of the current EELV Launch Capability (ELC) contract, a unique arrangement set up in 2006 to fund the cost of maintaining ULA launch infrastructure. At the time, the arrangement made sense because ULA was the Pentagon's sole source for military space launch.

"I was very surprised and disappointed when ULA did not bid on a recent GPS competitive launch opportunity," James said. "And given the fact that there are taxpayer dollars involved with this ELC arrangement I just described to you, I've asked my legal team to review what could be done about this."

The ELC arrangement has become a point of controversy, especially after Elon Musk's SpaceX was certified for national security launches last year using its Falcon 9 rocket. Since SpaceX became a competitor for space launch services, the Department of Defense has made an "adjustment" in the ELC contract to ensure there is no "unfair advantage" to ULA, Frank Kendall, the Pentagon's top acquisitions official, told the committee Wednesday.

During the hearing, Sen. John McCain, R-Ariz., chairman of the Senate Armed Services Committee, blasted the ELC arrangement, which provides ULA $800 million a year to stay in business.

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"That's astronomical that — that sum of money of taxpayers' dollars. And after paying them $800 million a year for my calculation nine or 10 years, then they don't even compete on a launch," McCain said. "Is that the appropriate use of the taxpayers' dollars?"

James' legal team is looking into how such an early termination could impact the re-pricing of the remaining block buy launches, she said.