Air Force to end deals with Blue Origin and Northrop Grumman, gears up to launch contract protests

The selection of SpaceX and ULA was expected. What was surprising was the great value of the contract awarded to SpaceX for its first Phase 2 mission.

WASHINGTON – The Air Force called stay with SpaceX and United Launch Alliance as launch suppliers for the next five years. Now he must decide if and how to continue working with the companies that lost the National Security Space Phase 2 launch competition – Blue Origin and Northrop Grumman.

One issue to be resolved is the termination of the Launch service contract contracts that the Air Force awarded in October 2018 to Blue Origin and Northrop Grumman, as well as ULA.

The purpose of these agreements was to help Phase 2 competitors pay for the development and infrastructure of the launchers. Blue Origin received $ 500 million; Northrop Grumman $ 792 million and ULA $ 967 million. The funds were to be distributed until 2024, and the Air Force said early on that LSAs would be terminated with companies that had not won a Phase 2 supply contract.

Despite political pressure not to stop LSAs, the agreements will be terminated, Air Force Assistant Secretary for Acquisition Will Roper said on August 7 in a video conference with reporters.

“We will work with these two companies to determine the right point to tie their work under the LSA agreements,” said Roper. The intention of LSAs “was to create a more competitive environment leading up to phase 2,” he said. “The point is not to wear them indefinitely.”

LSA funds supported the development of Blue Origin’s New Glenn rocket and Northrop Grumman’s OmegA launcher. ULA will continue to receive funds for its Vulcan Centaur vehicle. SpaceX did not get an LSA contract.

Before LSAs end, said Roper, “we need to determine what work has been done and what data rights the government has. We want to make sure we keep them. “

Roper said that one of the main reasons LSAs couldn’t continue for the three companies is that the Air Force doesn’t have enough money in the budget.

A RAND report commissioned by the Air Force warned that the end of LSAs could leave fewer industry competitors able to challenge ULA and SpaceX in 2024 when Phase 3 of the National Security Space Launch Program is expected to begin.

RAND said the removal of financial support could lead companies to abandon certification efforts to qualify the commercial launcher for the national security launch. The report says this has national security implications because if a US startup company abandons the market, a foreign competitor is likely to emerge to try to fill the void.

Roper said the Air Force plans to continue supporting U.S. industry but the details have yet to be worked out, Roper said. “We will discuss this with Capitol Hill for phase 3.”

Roper said he agreed with RAND’s view that it would be “in the best interest of the government to have three or more viable systems to compete for Phase 3.”

Both lodge and Senate The 2021 versions of the National Defense Authorization Act include provisions for the Air Force to create new launch industry partnerships similar to LSAs.

Possibility of legal claims

Before the Air Force can move forward and start planning Phase 2 missions with SpaceX and ULA, it is preparing for the possibility of a legal protest over the August 7 awards.

Blue Origin and Northrop Grumman released statements on Friday expressing disappointment with the Air Force selection. Any decision to lodge a protest would be taken after the companies were informed by the Air Force of the reasons why their bids were not successful.

“We have submitted an incredibly compelling offer to the national security community and the US taxpayer,” said Bob Smith, CEO of Blue Origin. The New Glenn offering was a “very competitive one-stop introductory service price for any assignment during the entire order period.”

The company intends to stay in the launch market regardless, Smith said. “We continue to develop New Glenn to fulfill our current commercial contracts, pursue a large and growing commercial market and secure new civil space launch contracts.”

Northrop Grumman said the company was “confident that we have submitted a strong proposal reflecting our extensive space launch experience and providing added value to our client, and we look forward to our client debriefing.”

Surprising price tag for the SpaceX mission

The choice of SpaceX and ULA was not surprising given their experience. “It ended exactly as everyone expected,” an industry source said.

What no one expected was the prize for SpaceX’s first Phase 2 mission awarded on August 7.

SpaceX was awarded a $ 316 million contract to launch USSF-67, a mission slated for the fourth quarter of fiscal 2022. ULA was awarded a $ 337 million contract to launch two missions – USSF-51 and USSF- 106 – scheduled for the second and fourth quarters of fiscal 2022, respectively.

Roper on the call with reporters was asked to explain why SpaceX is paid roughly the same amount for one mission that ULA receives for two missions. Roper declined to comment on this issue and said these launches were classified missions.

The US Space Force’s Space and Missile Systems Center, which oversees launch purchases, said in a statement to News that both contracts include the funding of support costs in addition to the price offered by the companies for the launch services.

“The assigned task order includes the first year of launch service support and the prices of the individual missions ordered from each respective company,” said SMC. “These prices were offered by the companies as part of the Phase 2 acquisition, and they reflect significant savings over historical prices from previous NSSL launch acquisitions.”

The additional payout for introductory vendors – which an industry source estimated at around $ 100 million per company – was unexpected. This recalls the “ELC” financing that the Air Force paid ULA and was criticized by SpaceX in the form of government grants that business enterprises do not get.

ELC is the abbreviation for “Evolved Expendable Launch Vehicle Launch Capabilities,” which the Air Force awards annually to the ULA for its infrastructure and technical support. ELC was discontinued in 2019 and the Air Force announced it would switch to commercial pricing.

Based on the value of the August 7 contract, the SpaceX contract is likely for a Falcon Heavy launch. An industry analyst who asked not to be cited by name said the $ 316 million launch deal, even though $ 100 million is for support costs, is very significant given the price SpaceX is offering. for Falcon Heavy. The company won a Falcon Heavy contract for a 2022 NASA asteroid mission in February worth $ 117 million, which includes the launch itself and other mission-related costs.

SpaceX has not commented on social media or released any statement following the Air Force’s announcement of its selection as a Phase 2 supplier.

The Air Force has assigned 60% of the Phase 2 missions to be completed over five years to ULA, and 40% will go to SpaceX. According to several sources, SpaceX believes it should have won the 60% share because it has operational and certified vehicles, while ULA’s Vulcan Centaur is still in development and is expected to fly for the first time in 2021.

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