Garbage in, garbage out: An Air Force commissioned RAND study released yesterday has confirmed the Air Force’s desire to restrict the award of launch contracts for the next decade to only two companies.
“We asked RAND to independently double check the assumptions we used to build our acquisition strategy,” said Col. Robert Bongiovi of the Air Force’s Space and Missile Systems Center in California. “What we found was that our acquisition strategy encompasses RAND’s recommendations as we are already making prudent preparations for a market that will only sustain two providers with our phase two contract structure.”
…Part of the RAND report also recommended that the military closely watch companies over the coming years to see which are the most stable. “The U.S. Space Force should make prudent preparations for a future with only two U.S. providers of NSS-certified heavy lift launch, at least one of which may have little support from the commercial marketplace,” RAND Corporation said of its first main recommendation.
Though the report does suggest that the military continue its development program to help three companies through 2023, it reiterates the military’s belief that there simply isn’t enough business to support more than two companies.
For this reason, the Air Force space division, now the Space Force, had wanted to restrict bidding in the 2020s on its future satellite launches to only two companies out of the four (ULA, SpaceX, Northrop Grumman, Blue Origin) that hope to compete for this business. This report is their attempt to justify that decision.
However, the decision has been repeatedly delayed, partly because of a protest of the plan by Blue Origin and partly because a lot of political pressure in the background from those four companies, none of which want to be excluded from future bidding. It was originally going to be made last year, and is now delayed to later this year.
With the release of the report, the military also suggested that if Congress gives it more money, it might be able to open up bidding to more companies. How typical. Instead of trying to trim costs by allowing competition, the Space Force is now maneuvering elected officials to pump up its budget so that these companies all get more cash while picking the pockets of the taxpayer.
This is the same thinking that caused Boeing and Lockheed Martin to merge their launch operations into ULA and for the Air Force to give that new company a monopoly on launches in 2005. The Air Force assumed then that there wasn’t enough launch business for both companies. Rather than compete to lower costs so that both the Air Force and the private sector could afford more launches, the two companies agreed with this Air Force conclusion and teamed up with the Air Force to form a cartel to control the bulk of the U.S. launch market, while charging the Air Force $200-$500 million per launch.
Then SpaceX comes along and proves them completely wrong. It not only gets more than enough business to make a lot of money (in the billions), it charges only $60 million per launch. When the Air Force tried to deny it the right to bid against ULA for military launches, SpaceX sued, and won.
Now the Space Force wants to do the same thing in the 2020s, limiting to two the number of companies that can bid on contracts. All this will do is raise launch costs, and limit competition.
In the end, I doubt seriously if the Space Force effort here will work. All four companies are developing rockets, and all four should have the right to bid on all future launches. If the military tries to exclude any, they will sue, as SpaceX did, and win. Moreover, the military’s assumption that all four companies cannot survive because it doesn’t have enough business for all four is patently false. SpaceX proved them wrong. All these companies have to do is what SpaceX did, keep their launch costs low enough so that other private customers can buy their services.
There will then be more than enough business to go around, for all.