More crony capitalism attempts in the space business?

October 19, 2011

A report was recently issued by the Government Accountability Office, the closest thing to a nonpartisan watchdog arm of the Federal government we have. It found a number of problems with a recent proposal from United Launch Alliance (a joint effort of Boeing and Lockheed Martin) to sell 40 rocket cores to the Department of Defense over the next five years as a package.

The GAO found no basis for the rationale that the block buy period should be five years. ULA officials had to admit that the data used to determine the number of boosters that would be needed was determined using “faulty inputs.”

The GAO also pointed out that the proposal could commit the DoD to purchase more boosters than it would need, and that it would stifle competition in the marketplace. (The USAF, NRO and NASA just completed a memo of understanding outlining the strategy to allow new companies to compete for launch services.)

The GAO further pointed out that competition would further present an opportunity to lower launch costs – in fact, the report used the term “unprecedented.”

The GAO also criticized the information provided by ULA on pricing, saying it was inadequate” and did not provide a basis upon which to negotiate launch contracts.

As we all know, Lockheed Martin and Boeing are two of the Department of Defense’s biggest suppliers. (The last information I saw had LockMart as the largest.) The F-35 Joint Strike Fighter program (principal contractor: Lockheed Martin) is in big trouble, taking longer and costing far more than originally planned. The military has put all its eggs in one basket on this fighter, and the stopgap in many respects is the F/A-18 Super Hornet, built by Boeing (originally built by McDonnell Douglas). Boeing just got the big new tanker aircraft contract, after a year of legal manuevering after it was originally awarded to EADS.

Boh companies can see the future. Somehow, the Federal budget is going to get slashed in the coming years, no matter who is President or who is in Congress. Both companies are doing everything they can to maintain their income streams. To do anything else would be stupid. However, in this case they got caught with a proposal that might have made it through fifteen years ago. Today there is competition, there are fewer dollars to throw around, and even the GAO is under scrutiny.

I’m not against big business, and I’m not against either of these companies. I just think there should be a level playing field. I think a lot of Americans, including those camped out in a park in New York City, are tired of back room deals. This looks like a “wink, wink, nudge, nudge) deal ULA is trying to score with the DoD. ULA already has a leg up with substantial infrastructure no one else has, both in launch facilities (provided by the government) and in production lines for boosters. If Orbital Sciences or SpaceX can compete successfully it will be a major feat of capitalism and technology. They should at least have the chance to try.

SpaceX press release

GAO document


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