Delta Heavy / Image Credit United Launch Alliance

An Innerspace Editorial:

In what seems to be becoming something of an annual affair, it was SpaceX versus United Launch Alliance Round earlier this week in Washington D.C.

Last year, SpaceX’s Elon Musk and ULA’s Michael Gass squared off against each other in a highly contentious Senate Appropriations Committee Hearing. Much of the debate at the time centered on three key issues; the 36 core block buy of ULA rockets, the Russian built RD-180 engine which powers the Atlas V booster, and the billion dollar a year ELC contract (subsidy) which pays ULA irrespective of the number of missions performed.

Just over one year later, both companies were back before Congress, this time on St. Patrick’s day, and before the House Armed Services subcommittee instead of the Senate. In the intervening year, much has changed, but the debate was largely the same, albeit conducted in more measured tones, in part because the personalities have changed.

Michael Gass is gone, replaced as ULA President by the very different Tory Bruno, who since taking the helm has gone out of his way to engage the public in a way his predecessor never did. Meanwhile, SpaceX was represented not by founder Elon Musk, but instead by company President and COO Gwynne Shotwell.

Some background:

It was not long after the first hearing that SpaceX filed suit against the block buy, seeking a temporary injunction against the RD-180 engine on the grounds that it violated sanctions levied against Vladimir Putin’s inner circle in the wake that nation’s seizure of the Crimea. A year later, with the the lawsuit dropped in exchange for a promise of better treatment from the Air Force, the block buy is a matter of fact, but so too is competition. The question is whether or not it will be fair. While SpaceX is now looking forward to certification by the Air Force “by June, ” the issue of the launch subsidy looms larger than ever. So too does the reason the sanctions were levied against Russia in the first place.

A day after the hearing, Russians were celebrating the one year anniversary of that invasion, and by extension, the undeclared war against Ukraine which has cost more than 6,000 lives thus far, including the 298 killed when a Russian missile system shot down Malaysian Airlines Flight 17 in July. With Russia flexing its military muscles in a way not seen since the height of the Cold War, the issue of reliance on the RD-180 for U.S. defense launches was one of the key elements of hearing, as well as a separate panel which followed Tuesday afternoon, but it was never addressed in that context, at least by Congress, ULA or the DOD. Gwynne Shotwell however, did observe that Russian Defence Minister Dmitry Rogozin has openly bragged that U.S. purchases of the engine provide “free money” to the Russian defense establishment.

That oversight was not accidental. At the core of the present problem is ULA’s decision to retire the single stick Delta booster in 2018, keeping only the triple core Delta Heavy for as long as it is needed. The decision according to ULA’s Bruno, was made because the Delta is “not cost competitive” coming in at 30% more than the Atlas V. Finally facing competition from SpaceX for those medium class launches not protected by the block buy, ULA chose to phase out the more expensive of its two lines. That is only part of the story however.

With Delta being phased out, ULA has pushed, and Congress has seemingly accepted the narrative that unless it is allowed to keep purchasing RD-180’s for the Atlas V until it has a new engine, and a new rocket designed, built and qualified, a process which could take into the early 2020’s, the U.S. is simply exchanging one monopoly for another. It is a flawed argument which seeks to change the definition of a monopoly while obscuring the real issue.

Neither the Atlas V nor the Delta IV boosters are cost competitive versus the Falcon 9. The only difference is that the gap between the Atlas and Falcon 9 is a smaller number, than the one between the Delta series and the Falcon. If the Air Force does indeed open up truly fair competition in the EELV program after the Falcon 9 booster is certified this summer, there is little reason to see why the SpaceX product should lose any launch opportunity it is physically capable of performing. How else can one compare the $164 million dollar figure cited by ULA versus the $80-90 million figure cited by SpaceX? Even if overlooking the additional $100 million ELC/subsidy which accrues to the ULA product?

The answer is painfully simple. Until ULA, or any other new entrant produces a booster which is price competitive to the SpaceX product, there isn’t going to be any real competition. Instead, the decision to purchase a significantly more expensive launch service must be made on different grounds entirely, some of which are completely justifiable. It is a disservice however, to call such decisions “competition.”

Ever since it went to a two vendor solution in the early days of the EELV program, the Air Force has promoted the idea that the defense establishment requires separate, redundant launch solutions, in order to ensure that if one product line is discovered to have a serious flaw, the other can take up the slack while problems are addressed. It has never been given serious heed however, as Lockheed Martin declined to produce an “Atlas Heavy” and since the formation of United Launch Alliance, efforts have moved in the opposite direction with manufacturing consolidation in Decatur, Alabama and pursuit of a common upper space engine.

The introduction of the Falcon 9 to the EELV program gives the nation what Shotwell termed, “separate, dissimilar” launch solutions, first in the medium category, and with the introduction and eventual certification of Falcon Heavy, across all categories regardless of what booster ULA is flying. Therein lies the policy solution to the real problem addressed, but not acknowledged by the hearing; the retirement of the Delta rocket.

ULA has cited competitive disadvantage as the reason for closing out the production line, but it is also providing a highly convenient tool for threatening Congress with a “monopoly gap” if it is now allowed what it really wants, unfettered access to the RD-180 for as long as possible. In this regard, it is very reminiscent of the leverage used by its parent companies Boeing and Lockheed Martin to secure the launch subsidies beginning in 2003 which continue to this day.

With SpaceX entering the EELV market, there is no reason to succumb to the pressure. Instead, it is time to revisit a different gap, the one in pricing between the Atlas and Delta. With neither actually cost competitive versus the Falcon 9, it very well may be worthwhile to consider paying more for a certain number of Delta boosters after the block buy expires, as opposed to continuing to support Russian military aggression and undermining the U.S. manufacturing base with the purchase of more RD-180’s. The actual number could be determined by how serious ULA becomes about Delta pricing once management is forced to deal with the reality that the alternative is not in-house orders for the Atlas-V, but purchases of the SpaceX Falcon 9 instead.

Would ULA be happy? Certainly not, but the Aerojet-Rocketdyne employees building the RS-68A engine which powers the Delta IV clearly would, and more importantly the United States could finally extricate itself from a dependency which has gone on far to long, and has become much darker in recent months. As for SpaceX, it might not be particularly thrilled at what would amount to a mini block buy of Deltas for the 2019 -22 time frame either, but it would at least have the opportunity to influence the outcome in how it bids Falcon, and how soon it could certify Falcon Heavy. From that standpoint, it would be quite similar to NASA’s openly competed, but still structured Commercial Crew, CRS-1 and CRS-2 contracts. In the first two instances, SpaceX has offered the lower bid, but not in the expectation of winning everything because the policy benefit of having two providers trumps the cost savings of going only with the lowest bidder.

From a facilities standpoint, ULA is committed to keeping both East and West Coast Delta launch pads operational for the Delta Heavy for years to come anyway. And if a block was necessary to bring down the cost of a mixed fleet, surely a commitment to Delta only model would help its pricing as well.

As for the taxpayer, one element which seems to have been consistently overlooked in EELV purchasing issue is the savings SpaceX is bringing to the table. Roughly speaking, each purchase of a Falcon 9 line launch will result in savings sufficient to “buy down” the gap between it and the Delta. For securing America’s sovereignty over its own defense launch market now, rather than at ULA’s convenience sometime in the future, it may be well worth any additional expense incurred.

In the long run, the U.S. needs at least two independent government launch solutions, with American companies building American products and competing against each other on a level playing field. One hopes that the new launch system under design by ULA will make that possible. In his opening statements, Mr. Bruno certainly paints an optimistic picture of what the company is seeking to become. Hopefully it will. Unfortunately, much of what came afterward, with nearly comical denials that a subsidy is not a subsidy, and is merely a representation of costs that (everybody?) incurs, as well as threats of higher prices for captive products if it cannot have its way, is a retread of its budget busting past. It is time for Congress to set the company free by breaking its addiction to Russian engines once and for all by denying access beyond the 36 core block buy.

The hearing is below, and begins at the 42 minute mark. For a complete breakdown of other major points addressed, also see Marcia Smith’s detailed summary at Spacepolicyonline.