The commerical battle over U.S. surplus ICBM’s

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Link here. The article provides a good summary of the conflict between Orbital ATK and Virgin Galactic over the Defense Department’s possible sale of surplus ICBM’s for commercial use.

While Orbital has been lobbying to get Congress to lift the ban on the Pentagon selling its surplus rockets to the private sector, Virgin Galactic has been harnessing the industry lobbying arm to convince Congress to keep the ban. They fear that if the missiles become available, their as yet unflown LauncherOne will not be able to compete.

I find it very revealing that Virgin Galactic wants to use regulation to hinder their competitors. To me, this is another sign that they are not very competitive or competent in actual rocket building. Rather than build and launch their rocket at a competitive price, they want to stifle an opportunity to lower launch costs.

A hearing on this issue is taking place today. Stay tuned.


  • Brendan

    I usually don’t disagree with anything you say – but this might be the first. We all want commercial to succeed. It won’t help the commercial market if its killed off early with basically a government handout – which are what these rockets are. If Orbital ATK had to pay the real cost for them, would they be cost competitive? Unlikely. Instead they will pay bargain basement prices on government surplus. We all love surplus, but its not exactly fair to a young developing industry to basically make the competition free.

    Other than that, as I said, love your work, and your time with John B is my favorite podcast. Even my 6 year old son loves it, and always asks a lot of questions after.

  • Yeah, I was thinking the same thing as Brendan. I’m trying to think about now is how this value (spare ICBMs) could be used in such a way so as to stimulate rather than impede the development of the private launch market.

  • A. Feit

    How many would be up for sale? Of those, how many would actually work? Of those how many could conceivably make it to space? So is there really a problem?

  • Wayne

    Totally out of my bailiwick (& have not pondered this greatly);
    Q: What if the Pentagon auctioned them off?? Would that be more in line with helping foster a competitive market? And discovering how much this surplus is actually worth to a private concern?
    Fully agree that it is unfair & ultimately uneconomical, for the Feds to pick winners & losers by employing back-door subsidies and/& restrictions that skew the playing field one way or the other.

    They have already been built so it’s a sunk-cost from the Governments perspective. (Which is us, we’re still paying for them in reality.)
    Cost/price, only gets things built originally– the “value” they have is more determined by their replacement cost in a more open-esque market.

  • jburn

    If the rockets are sold by competitive bid, couldn’t Virgin Galactic also place a bid to buy up the surplus and deny a competitor easy and cheap access? His airline was recently sold; he now has extra time and money to play with.
    Then again, rumor has it that Congress can be bought for cheap …

  • Edward

    Jburn asked: “If the rockets are sold by competitive bid, couldn’t Virgin Galactic also place a bid to buy up the surplus and deny a competitor easy and cheap access?”

    Young companies are not flush with cash (most old ones aren’t either). Whoever buys these surplus rockets needs to use them in order to get their money’s worth (and they likely will be the one to pay for storage costs during the years that it takes to use up each batch that they buy). This sets a limit on the number of potential bidders, as there are not many companies in the launch business, and even fewer that are set up to use rockets such as these — Virgin Galactic is among those that are not set up to use them. Thus, the bidding would not take the price high enough to guarantee that their use remains competitive with other startup companies.

    I would hate to see these rockets go to waste, but I don’t think that the government is competent enough to find a price that ensures that Orbital would remain a competitor, as opposed to the cheapest vendor that kills an industry in its infancy. I am torn and ambivalent on this topic.

    From the article: “It’s like I have a tractor-trailer, and I’m going to move your box of donuts … It’s just a completely different market.”

    Consider the scenario in which the alternate mover charges twice what the trucker will charge to move the box of donuts, then the market is not so different as being advertised.

    Who would you call to move your box of donuts, the inexpensive, oversize tractor-trailer or the expensive Virgin Galactic guy?

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