The propulsion company Aerojet Rocketdyne, formed in 2013 by two of America's most storied rocket engine manufacturers, has been working a new engine, known as the AR1, since 2014. Almost from its outset, however, the AR1 has faced two primary questions: who would pay for its development, and who would use the new engine.

In recent years, Aerojet has sought funding from the US Air Force to design and build the AR1, which has approximately 20 percent more thrust than a space shuttle main engine. The Air Force, in turn, has pledged as much as $536 million in development costs provided that Aerojet puts its own skin in the game—about one-third of research and development expenses.

According to a new report in Space News, Aerojet is now saying that even this modest investment is too much, and the company is seeking to reduce its share of the development costs from one-third to one-sixth. “As we look to the next phase of this contract, we are working with the Air Force on a smart and equitable cost-share,” Aerojet spokesman Steve Warren told the publication. “We are committed to delivering an engine in 2019.”

AR1’s purpose

According to the report, the Air Force is not inclined to renegotiate the agreement. The Air Force's hesitation to increase its investment is probably because the military may not really need the AR1 rocket engine any more due to the emergence of Blue Origin, the rocket company founded by Amazon founder Jeff Bezos.

The original funds to develop the AR1 were spent by the US military as part of a "Rocket Propulsion System" program to ensure continued access to space for communications and spy satellites. The AR1 funds were paid in part because the military's primary launch provider, United Launch Alliance, needed a new rocket engine for its next-generation rocket, Vulcan. The Colorado-based rocket company has instead indicated its preference for a different rocket engine being manufactured by Blue Origin, the BE-4. This engine is further along in development and will almost certainly cost less than Aerojet's AR1 engine. It's not at all clear whether any customers exist for the AR1 if it does not fly on the Vulcan booster.

From the military's perspective, the BE-4 is also attractive because it was developed largely through private investment—in this case from Bezos. Increasingly, the US military has recognized the potential of privately developed engines and rockets like those built by SpaceX and Blue Origin as a means to reduce launch costs in the 21st century. Paying Aerojet more money for the AR1 engine now, at a time of rapid commercial expansion in the aerospace industry, would harken back to an era of sole-source providers in which the government paid for most, if not all, of launch development costs.