GAO Skewers United Launch Alliance Contract Plans | Citizens Against Government Waste

GAO Skewers United Launch Alliance Contract Plans

The WasteWatcher

The Evolved Expendable Launch Vehicle (EELV) program began in 1995 and was designed to allow the Department of Defense (DOD) access to space with the intention of reducing the cost of satellite launches by at least 25 percent while striving for up to 50 percent. Four contractors were initially approved to compete for the contract, but two EELVs were eventually selected: Boeing’s Delta IV and Lockheed Martin’s Atlas V.

In 2005, Boeing and Lockheed Martin announced plans to combine forces on the production, engineering, test, and launch operations on Delta and Atlas launch services. The joint venture was called the United Launch Alliance (ULA), and its supporters claimed that government procurements of launch vehicles for the DOD, National Reconnaissance Office (NRO), and the National Aeronautics and Space Administration (NASA) would be made cheaper and more efficient.

The Federal Trade Commission (FTC) saw things differently. Mergers between firms as large as Boeing and Lockheed Martin routinely raise eyebrows in the private sector, to say nothing of those involving taxpayer dollars. Citing the drastic reduction in contractor competition that would result, the FTC opposed the merger, only to back down from that stance when the DOD claimed that the deal’s national security benefits overshadowed the drawbacks of less competitive sourcing. At the time, Citizens Against Government Waste (CAGW) predicted that sole-source EELV contracting would result in higher costs to taxpayers and less innovation, as has been the case with countless other defense procurement projects.

In September 2008, the Government Accountability Office (GAO) expressed concerns over the lack of clarity and predictability of ULA’s cost estimate of $27 billion over a 12-year period. Many of those concerns stemmed from Boeing and Lockheed’s still-incomplete joint venture agreement. GAO revealed a staggering failure to perform due diligence by DOD, which “eliminated requirements on the program to produce data that would illuminate what impacts the transition is having on the program, what cost increases are occurring and why, and what other programmatic and technical vulnerabilities exist and how they are being addressed.” The same report noted that DOD did not have enough staff to perform “inherently governmental functions related to the expansion of oversight.”

In 2011, the DOD and NRO announced plans to spend $15 billion on EELV launch services between 2013 and 2017. DOD’s plan is to purchase eight booster cores each year for five years, an approach that is aimed at stabilizing the launch industrial base, for which the government is essentially the only buyer. However, a September, 2011 GAO report revealed that engine prices for ULA’s Atlas V and Delta IV launch vehicles are increasing, and that DOD “may lock in current unstable EELV engine prices before it has collected and fully analyzed the cost data it is pursuing.” To make matters worse, DOD’s decision to commission eight cores per year is based on ULA’s own estimate of the “minimum number it needs to keep production steady and maintain mission success,” rather than on actual DOD needs. As a result, DOD may be paying up front for boosters it will never use.

What seems clear is that sole-sourcing a project as important and expensive as EELV was a bad idea from the start, and that more competition should be introduced to the process as soon as possible. At the very least, finalizing contracts for 2013 and beyond should be delayed, since uncertainties surrounding NASA’s launch needs makes price estimation for the necessary boosters extremely inaccurate. According to the GAO, “DOD plans to allow new companies to compete for EELV launches once they can prove their launch vehicles are reliable,” but no DOD rubric exists to allow contractors other than ULA to demonstrate their reliability, despite the fact that President Bush urged more competition as early as 2004. Without changes to the program, taxpayers are likely to have needlessly paid for a lot of very expensive rockets, many of which stand the chance of burning nothing but money.

  -- Luke Gelber

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