The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Rocket Monopoly

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact

In the private sector, monopolies can charge consumers as much as they like due to a lack of competition.  When the government creates a monopoly through the use of a sole source contract, the taxpayers get stuck with the tab.

In December 2013, the U.S. Air Force finalized a five-year, $11 billion deal with the United Launch Alliance (ULA), a combined venture of Boeing and Lockheed Martin, to purchase 36 rocket cores.  These cores will be used to produce boosters for a variety of capacities, including military navigation beacons, communications relay stations, and spy satellites.

The problem with the contract is the apparent lack of action being taken to suppress costs.  In April 2014, SpaceX filed a lawsuit challenging the deal.  In the words of SpaceX founder Elon Musk, “What we feel is that this is not right, that the national security launches should be put up for competition, and they should not be awarded on a sole source, uncompeted basis.”

The government claims that SpaceX was aware of its intention to award a sole-source contract, and failed to object.  Musk has asked that the government cancel the original contract and recompete following the certification of his company’s Falcon 9 v1.1 rocket, which is expected to occur before the end of the year.

The government’s decision not to wait for SpaceX to be certified is perplexing, considering the company’s experience with other high profile projects.  SpaceX currently has a $1.6 billion contract with the National Aeronautics and Space Administration to fly 12 cargo missions to the International Space Station.

The best case for recompeting the contract is that SpaceX would likely substantially undercut ULA’s bid, saving taxpayers a significant sum of money.  According to a March 31, 2014 Government Accountability Office report, the ULA’s Evolved Expendable Launch Vehicle program has a unit cost of $420.6 million.  SpaceX has claimed that its Falcon 9 rocket would cost $90 million per unit, or approximately 80 percent less than its competition.  The company has argued that its involvement could result in annual savings of $1 billion, and that if it had been awarded the ULA contract initially, taxpayers might have saved a total of $11.6 billion.

Beyond the increased cost, ULA also faces potential difficulties with its supply chain.  With the retirement of the Space Shuttle program in 2011, the U.S. no longer maintains manned spaceflight capacity, and is reliant upon Russian rockets to transport astronauts to the International Space Station, among other missions, such as those to be performed under the existing ULA contract.  The Atlas 5 rocket utilized by ULA requires an RD-180 engine manufactured in Russia.  Recent tensions between the U.S. and Russia has stoked fears that this supply could disappear.  In fact, Russian Deputy Prime Minister Dmitry Rogozin, who is in charge of the country’s defense industry, threatened in May 2014 to ban sales of the RD-180 engines to the U.S.  On July 16, 2014 the Obama administration announced expanded sanctions against Russia, targeting the Russian defense industry, among other areas of the country’s economy.

Congress might also endanger the ULA’s access to RD-180s.  Members of Congress, including Sens. Ted Cruz (R-Texas), Dianne Feinstein (D-Calif.), and John McCain (R-Ariz.) have objected to the reliance on a foreign supplier for national security missions.  With the ongoing conflict in Eastern Ukraine, the appetite is growing for increased sanctions.

In a Senate Subcommittee on Science and Space hearing on July 16, 2014, General William Shelton, Commander of the Air Force Space Command, advised that the U.S. seek alternatives to Russian-made rocket engines used in military satellites: “If you look at what has happened to us now in the past few months, it points to a vulnerability … current uncertainty highlights the need to consider other options for assured access to space.”  Gen. Shelton also indicated that if Russia eliminates RD-180 sales to the U.S., vital national security satellite missions could be delayed up to four years.  As of July 2014, ULA had only 15 RD-180 engines; the military goes through approximately six or seven per year. 

Responding to this escalating pressure, in June 2014 ULA signaled its intent to drop the RD-180 engines and develop a domestic alternative for launches.  However, this undertaking would likely take a minimum of eight years, according to Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics Alan Estevez.

Director of National Intelligence (DNI) James Clapper, speaking at the 30th Space Symposium in May 2014, stated, “The way to drive down cost, typically, is through competition.”  DNI Clapper is correct; the UASF and the Department of Defense would be well-served to allow as much competition as possible when accruing bids for contracts.  Considering the ULA contract’s long-term nature, extraordinary cost, and uncertain supply, the 36-rocket core buy should be opened to all bidders in order to protect both national security and the taxpayers.


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