Air Force subsidies to ULA to end

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March 27, 2015 9:32 am Robert Zimmerman

The competition heats up: Because it has concluded that they make it impossible to have a fair competition for contracts, the Air Force has decided to phase out the subsidies it has been paying to the United Launch Alliance (ULA).

The specific amounts of these subsidies have been effectively buried by the Air Force in many different contracts, so we the taxpayers really don’t know how much the are.

Nonetheless, this decision, combined with the military report released yesterday that criticized the Air Force’s over-bearing and restrictive certification process with SpaceX indicates that the political pressure is now pushing them hard to open up bidding to multiple companies, which in turn will help lower cost and save the taxpayer money.

3 comments

wodun
March 27, 2015 at 11:17 am
” These payments cover most of ULA’s fixed costs — for example, launch infrastructure, systems engineering and program management, launch operations, mission integration, base and range support costs, transportation costs, capital depreciation, and non-recurring engineering to name a few — for “up to eight launches” per year. ”

Wow, $1b a year in addition to the actual contract awards and these jackwagons still couldn’t work on a RD180 replacement. I am willing to support the launch industry in the ideological battle for funds from congress but crap like this, companies abusing the trust placed in them and acting in bad faith, might change my mind.
ted
March 27, 2015 at 2:09 pm
These were taxpayer subsidies.
Edward
March 28, 2015 at 2:12 pm
I’m not sure that ULA was acting in bad faith, as the government knew that they were financing the fixed costs independent of the per-launch costs.

I *am* sure, however, that ULA will figure out how to reduce their fixed costs (and per-unit costs) in order to compete with other launch providers. This is why competition and free markets are superior to crony capitalism.

The original idea behind giving a sole-source contract to ULA was to get lower launch costs through better per-unit prices on hardware, such as the RD180 engine, through larger orders. It seems that this worked about as well as could be expected (back-fired), because the inefficiencies of sole-source and cost-plus did not overcome the economy of scale side of the equation.

It is through competition that efficiencies are encouraged. When a contract is guaranteed, then there is little incentive to find efficiencies.

Competition will not only help with price, but it will encourage increased quality without the government having to oversee every aspect of the operations, as happens now. The airlines became very safe after deregulation, because they realized that unsafe operations led to loss of passengers and out-of-business (chapter 7 bankruptcy) airlines (e.g. Pan Am did not survive the loss of flight 103).

Air Force subsidies to ULA to end

3 comments

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