An unmanned Falcon 9 SpaceX rocket lifts off from launch complex 40 at the Cape Canaveral Air Force Station, Wednesday, Feb. 11, 2015.

An unmanned Falcon 9 SpaceX rocket lifts off from launch complex 40 at the Cape Canaveral Air Force Station, Wednesday, Feb. 11, 2015. John Raoux/AP

SpaceX's Biggest Military Advantage Isn't Just Cheap Rockets

As the upstart competes for Air Force contracts, it hopes that its competitor's reliance on Russian parts gives it an advantage.

Is SpaceX so successful that it is jeopardizing the US government’s ability to access space? That’s the case its chief competitor in national security rocket launches made yesterday, while asking for permission to purchase more rocket engines from the Russian government.

Tory Bruno, the new CEO of United Launch Alliance, a joint venture between Boeing and Lockheed Martin, and Gwynne Shotwell, the president of SpaceX, took turns making veiled insults at each other in their testimony before the lawmakers charged with overseeing the US military’s access to space.

Previously, ULA held a monopoly on contracts for military satellite launches, thanks to its full suite of light and heavy rockets, and a record of reliability. But SpaceX is forcing its way into the business. It sued the Air Force and garnered a settlement for its troubles that is intended to increase competition, and it is expected to be completely certified to compete for contracts in June 2015. It’s proposed heavy rocket won’t be ready to fly for the Air Force until 2021 or 2022, in the best case scenario.

The reason Congress might be interested is simple: price. SpaceX can launch its standard rocket, the Falcon 9, for $150 to $160 million. ULA’s launch cost is higher: The Government Accountability Office has reported their average cost is more than $400 million a flight, based on actual Air Force contracts. Bruno says the cost is lower—$164 million to $350 million—but it’s not clear how those figures relate to the costs taxpayers actually cover.

Asked why SpaceX rockets are so much cheaper than those built by ULA, Shotwell offered the harshest burn of the night, telling lawmakers “I don’t know how to build a $400 million rocket, I don’t understand how expensive they are.”

It’s that cost disparity that Bruno, who became CEO of the company in August 2014, was put in place to fix: He’s promised to cut costs and create a customer experience, “literally like going to a website and building your own rocket.”

But he’s got one big problem: his most cost-efficient rocket is dependent on engines imported from Russia’s state-owned aerospace company, and Congress has announced that no more rockets should be bought from the company, reacting to Russia’s annexation of Crimea, and Moscow’s support of rebels in eastern Ukraine.

Last year, ULA’s former CEO Michael Gass testified that the company had enough Russian engines saved up to meet all needs through the next two years, that it had invested “hundreds of million dollars” to be able to replicate it in the US and, regardless, that it had “another product that is fully compliant and ready to support any of the missions”—the American-made Delta IV rocket.

Apparently, that’s not quite true: Bruno says the company is going to retire the Delta IV, which can’t compete with SpaceX on price, leaving it with only its limited supply of Russian-engine powered Atlas rockets. He told lawmakers that if ULA can’t fly Russian-powered rockets and retires its expensive American rockets, it would have to charge as much as $1 billion for a single heavy rocket launch.

This is some brilliant jujitsu from ULA. The US government wants to have two different families of light and heavy rockets competing on price, so that it can go always get into space. But defense officials fear that SpaceX could dominate competition in light rockets before its heavy rocket is ready to fly, driving ULA—and its heavy rocket—out of business, and leaving the Air Force without a heavy rocket to use for a window of time. A failure to ensure such access in the 1990s is blamed for a group of failed launches that cost $5 billion, and destroyed three satellites. That’s why ULA wants an exemption from the ban on buying Russian engines.

SpaceX, predictably, thinks ULA’s fears are overstated, and its plans are actually a thinly-veiled attempt to wring subsidies from the government that it couldn’t earn in competition: ULA doesn’t have to retire its Delta IV rocket, and it could try to expand its limited commercial offerings to support its heavy-lift rocket. And when it comes to Russian engines, Shotwell asks “how do we justify buying more, and funding the Russian military?”

But lawmakers do face a tough choice, highlighted by delays in a Falcon 9 launch that was scheduled for this weekend. It’s the old saw that you can pick two of three options: Cheap, fast, and good. While many members of Congress have expressed strong opposition to passing more cash to Russia, ULA and its parent companies have deep political connections in Washington. If past experience is an indicator, lawmakers will choose fast and good over cheap—which might be why the committee’s chair, Rep. Mike Rogers, offered a plea at the hearing’s end: “We are going to keep the cost down, it’s in our nation’s interest, so please hurry and get that Falcon 9 Heavy working and certified!”

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