Why Elon Musk Is Suing The USAF; Asymmetric Risks In Space Growing

Why Elon Musk Is Suing The U.S. Air Force

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Alex Brown had an article in DefenseOne.com, yesterday, June 5, 2014, with the title above. He writes that “Elon Musk believes he can save the U.S. taxpayer billions of dollars, — but, he’ll have to win a lawsuit against the USAF to do it.” Mr. Brown adds that Musk is suing the Air Force “over the way it awards private contracts to launch satellites. There’s big money at stake.” adds Mr. Brown, “contract awards for a single launch can fetch hundreds of millions of dollars – but, Musk contends the military’s unfair bidding process has created a de facto monopoly for a rival contractor, United Launch Alliance (ULA).”

Musk’s lawsuit is aimed at breaking this monopoly; and, his lawsuit in the Federal Court of Claims “aims to reopen all future launches to competition, stripping ULA of billions in guaranteed money; and, allowing companies like SpaceX to make their pitch for more cost-effective rockets.”

Mr. Brown notes that “in 2012, the USAF awarded 36 launches over 5 years to ULA, a combined venture of Boeing and Lockheed Martin.” But, there are an additional “7 [planned]launches between 2015-2017 (was originally 14 launches) — which were set aside for competitive bidding.” With launches being cut, or reduced to single digits over the next few years, the advantage goes to ULA and their major Defense Industrial Base competitors — potentially putting future satellite launch contracts out of reach for SpaceX for potentially a half decade, according to Mr. Brown.

“If Musk’s suit is successful,” Mr. Brown writes, “ULA’s current contracts for 36 planned launches are thrown into question.” SpaceX and Mr. Musk state that the company has “the rockets to compete for 60 percent of the planned launches. Even if it doesn’t win the suit outright,” notes Mr. Brown, “SpaceX has said it is open to an out-of-court settlement.”

SpaceX claims it can successfully launch such satellites — hundreds of millions of dollars cheaper than the USAF’s current contractors; but, ULA has pushed back claiming that “SpaceX is an unproven competitor — making overstated claims — that don’t account for the nuances of the situation. “The company likes to use the term “assured space access,” adds Mr. Brown, “highlighting its track record and arguing that [SpaceX’s] cost-per-launch argument is oversimplified. ULA provides two rocket systems, the Delta and Atlas rockets, as failsafe — in case one of them runs into problems. To meet the government’s demand for continued launch readiness, ULA lacks the flexibility of a company competing for such launches.” “What drives our price cost is because I am funding two systems,” said ULA CEO Michael Gass, in an April 2014 interview. “The question is, will our national security interests be served properly? — What we’ve provided the nation is be ready 24 hours a day, 7 days a week. You tell us when you want to launch.”

“Essentially, ULA says “the company’s costs are dictated by the government, shich include redundant systems and on-call readiness, — so it’s unfair [they say] to compare prices with a company not [yet] held to those requirements [standards]. At the moment, ULA claims to be “the only certified launch provider that be trusted to provide take the military’s satellites to space — citing its 80-plus consecutive, successful launches.

Houston, We Have A Market: Privatizing Space Launches Pays Off Big

Last October 2013, Greg Autry, an Adjunct Professor with the Lloyd Greif Center For Entrepreneurial Studies at the Marshall School of Business at USC, and Laura Huang, an Assistant Professor of Management and Entrepreneurship at the Wharton School, Pennsylvania, had an article in Forbes with the title above. They write that “the Commercial Orbital Transport Services Program, (COTS), has been the Federal Government’s best kept secret. Starting in 2006, under the flexibility of the Space Act Agreements, our national space agency subsidized the development and testing of commercial replacements for the aging and expensive Space Shuttle by rewarding firms for attaining certain milestones. The program was a resounding success. More than 20 businesses applied for the program, three were selected, and, one of those was quickly eliminated. The total COTS investment of approximately $700M is about half the estimated (fixed and operating) $1.5B cost of a Space Shuttle flight. The payoffs from this public investment include two American companies capable of launching NASA’s Earth orbit payloads, critical redundancy for U.S. military launches, and the first entirely, commercial options for non-government customers.”

“When it comes to the International Space Station resupply business,” the authors note that “these firms are competing with governmental operations from Russia and Japan;” not to mention, that China is also moving into the space launch domain in a big way.

Asymmetric Risks In Space

Last month (May 2014), the American Security Project (ASP), posted an article with the title above. They argue that, “the U.S. needs an innovative, resilient, and economical way to assure space access — particularly for military and government launch programs. The ASP wrote that “for the adversary who seeks to rob U.S. [military] forces of their ability to precisely target an urban area, know the location of friendly forces, or disrupt sharing of up-to-the-minute intelligence gleaned during an ongoing operation — there is no better weak link than space assets. The ASP contends that the U.S. needs to: 1) Overhaul its military space-launch capabilities, in order to be able to rapidly respond — if satellites are damaged or destroyed during a crisis;” 2) military and intelligence satellites are vulnerable to attack and disruption, be it declared or deniable; 3) Air Force efforts to improve competition in military space launch need to be sped up by leveraging, commercial-sector suppliers and business models; 4) the DoD should encourage entrepreneurship within the commercial and military segments of the space launch market to give the DoD innovative and cost-effective space access; 5) the U.S. must set a national security strategy for space that prioritizes resilience, including the ability to rapidly, and affordably replace damaged or destroyed military and relevant civilian space assets.

So, to me the bottom line to all this is that whether it is SpaceX, or whoever, we need a blend of both governmental/military space launch capabilities — along with a robust, innovative private-sector space launch genre. One can benefit from the other. V/R, RCP

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