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Air Force terminates development contracts to ULA, Blue Origin, Northrop Grumman

In awarding ULA and SpaceX exclusive launch rights for all launches through 2026, the Air Force also decided to end prematurely the development contracts to ULA, Blue Origin, and Northrop Grumman aimed at helping these companies develop new rockets.

An issue at hand is the termination of the Launch Service Agreement contracts that the Air Force awarded in October 2018 to Blue Origin and Northrop Grumman, as well as to ULA. The purpose of the agreements was to help Phase 2 competitors pay for launch vehicle development and infrastructure. Blue Origin received $500 million; Northrop Grumman $792 million and ULA $967 million. The funds were to be spread out through 2024, and the Air Force from the beginning said the LSAs would be terminated with those companies that did not win a Phase 2 procurement contract.

Despite political pressure to not end the LSAs, the agreements will be terminated, Assistant Secretary of the Air Force for Acquisition Will Roper said Aug. 7 during a video conference with reporters. “We will work with those two companies to determine the right point to tie off their work under the LSA agreements,” Roper said. The intent of the LSAs “was to create a more competitive environment leading into Phase 2,” he said. “The point is not to carry them indefinitely.”

LSA funds supported the development of Blue Origin’s New Glenn rocket and Northrop Grumman’s OmegA launch vehicle. ULA will continue to receive funds for its Vulcan Centaur vehicle.

Almost immediately after the award of these contracts was announced in 2018, ULA and Blue Origin announced one year delays in the development of Vulcan and New Glenn. Apparently, meeting the additional requirements of military’s bureaucracy in exchange for getting the cash slowed development.

Now they won’t be getting a large part of that cash, making the decision to take it a deal with the devil. The delay in development has definitely hurt both companies in their competition with SpaceX. First, it likely has raised the cost and complexity of their new rockets, making it harder to compete in price. Second, the delay has given SpaceX more time to grab more customers while improving its own rockets.

SpaceX initially protested not getting a share of this development money, but has subsequently chosen to no longer pursue such government money for Starship because it doesn’t want itself hampered by obtuse government officials and their mindless requirements.

Meanwhile, Northrop Grumman’s Omega rocket is almost certainly dead. That company took the old big space company approach, structuring development around government cash. Without it there is no R&D money at Northrop Grumman to continue work. Furthermore, Omega was designed to serve only once customer, the military. Without any launch contracts there are no customers for Omega, especially because it likely has too high a launch price.

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On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.

The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.

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  • mkent

    I don’t think the termination applies to ULA, since they received a launch award. The Air Force is terminating Blue Origin’s and Northrop Grumman’s awards because there’s no point in giving companies taxpayer money for launch vehicles the taxpayers are not going to use.

  • David

    Northrop Grumman had planned to use one of the VAB high bays and one of the mobile launch platforms for Omega. I know substantial work had already been done to configure the MLP for Omega. And now that’s all wasted, and it will probably sit there next to VAB rusting for years.

  • Jay

    I did not know about this Omega rocket. When I first read it was using solid rocket fuel for the first stage, I thought this was the “Liberty” rocket renamed, but this is a different one.

  • Rose

    Not “Omega”, but “OmegA”, presumably styled that way after the “O” and “A” in Orbital ATK, since it was the last (the omega) launch vehicle designed by them before they were acquired by Northrop Grumman.

    Hence Eric Berger’s response when asked what will now happen to OmegA?
    “it probably goes awaY”

  • Ray Van Dune

    It is going to be hard to catch SpaceX, financed and led by an arguably genius-level engineer. Nobody is even working on fully-reusable orbital-class rockets except Blue Origin, and they are seem to be going slower all the time.

    I hope in 10 years we are not talking about how to break up SpaceX! BTW, suggest reading up on the history of Boeing… or Edison.

  • David M. Cook

    Ray, you‘re saying we could have a ”Micro*oft“ in space hardware in just 10 years? If only!!

  • pzatchok

    If you accept money to make advancements you better be making those advancements visible.

    I can not wait until the military gets this attitude for all its projects.

  • sippin_bourbon

    “Hence Eric Berger’s response when asked what will now happen to OmegA?
    ‘it probably goes awaY; ”

    In other words, if they are not gonna pay us to research and develop it, we are not going to make it.

    From a recently posted interview:
    Like Lockheed Martin, where [Robert] Zubrin worked and where he discovered a way for a rocket to carry twice as much weight. When he pitched it to management, they responded, “Look, if the Air Force wants us to improve the Titan, they’ll pay us to do it,” says Zubrin.

    The old school corporations need to get on board, or be left behind.
    They are gonna have to pony up the R&D, and create a product, and then say, “Please buy this”.
    The paradigm is shifting.
    Only a full scale reversal will shift it back to their mode of business.
    Unfortunately, that is a mode a lot of politicians like, so the results of some elections could do it.
    They could write appropriations to force it, while at the same time, decide to tax SpaceX (and others) into oblivion.

  • Edward

    sippin_bourbon wrote: “In other words, if they are not gonna pay us to research and develop it, we are not going to make it. … The old school corporations need to get on board, or be left behind.

    This is the whole point. There are plenty of other government contracts that use the old school FAR cost-plus system, so why risk the rest of the company on something that may not sell? Instead, focus on the tried and true business from the other available contracts. A guaranteed profit is better than a speculated future sale. Put another way: a bird in the hand is worth two in the bush, but only if you can find which bush and are capable of killing two birds with one stone.

    They are gonna have to pony up the R&D, and create a product, and then say, ‘Please buy this’.

    The old-school aerospace industry remembers Northrup’s F-20 Tigershark, especially the Northrup side of Northrup Grumman. Northrup did exactly as sippin_bourbon suggested, spending $150 million (1985 dollars) building three prototypes on speculation, because the Government said it was trying to get away from cost plus contracts. Unfortunately, the Air Force lacked follow through on this policy and did not purchase any F-20s. Because it was rejected by the U.S. Air Force, no other country would buy it either, and Northrup lost its investment. No other contractor was willing to invest its own money in this new way of doing things, including making a better Titan. Developing products on speculation for a government customer was a losing proposition. For the most part, it still is. It took a lawsuit for SpaceX to get any Air Force contracts.

    Oh, and look! The Air Force is doing it to Northrup again, even after sending them some earnest money. With experiences like this, I do not blame Northrup Grumman for dumping this product line, too. It is a lesson from the lost cause fallacy — er — sunk cost fallacy. As the saying goes: fool me once, shame on you; fool me twice, gosh darn it, what the hell was I thinking letting the Grumman and Orbital sides of the company talk me into this fiasco? (Or something like that.)

    Notice that it took upstart startup companies (e.g. Rocket Lab and SpaceX) to choose to develop launch vehicles without cost-plus contracts. Providing fixed price launch services seems to work for the commercial market, because commercial satellite operators begged for decades for less expensive launches. These startups were willing to bet the brand-new farm on this paradigm. As Kistler, Armadillo, and a few other startup aerospace companies could have told them, the paradigm is a huge risk. Oh, and Northrup Grumman can tell you this, too, and to them, the risk of losing the rest of the company is not worth the seemingly low probability of a reward. Another example is Space Systems/Loral, which went into bankruptcy after its Globalstar venture went into bankruptcy.

  • sippin_bourbon

    “No other contractor was willing to invest its own money in this new way of doing things”

    It did not help that the US Government was still trying to do it both ways.
    They will subsidizing other manufacturers, who they had to compete against.
    And they were not allowed to market the product directly to the foreign buyers, the primary target consumer.

    If I recall there were a lot of other politics involved as well.

  • pzatchok

    The rules changed and we were no longer allowed to sell to “both sides” as they say. Unless the customer was in NATO they could not sell it to them.
    NATO at the time was trying to standardize on weapons ammo and equipment. The other members could have bought it but they just didn’t want to be different.

    Plus the craft was in development for 10 years. Longer than the military was even looking for a replacement.
    And it lost to the F16. Please.

  • Edward

    sippin_bourbon wrote: “If I recall there were a lot of other politics involved as well.

    There is always politics in any government contract, and the contractors learn how to navigate it (even SpaceX had to sue in order to get any Air Force orders). Politics was not why no old big space company tried fixed price contracting.

    It does not matter what aircraft it lost to, everyone learned from Northrup Grumman’s bad experience. The Air Force did not have to buy many F-20s, just enough for other countries to buy enough to make it worth the investment in order to encourage the aerospace industry to get into fixed price contracts. Instead, cost-plus contracting continues to this day, because the Air Force was not serious about fixed price.

    In addition, as sippin_bourbon pointed out, they also believe that initiative and innovation are not rewarded, either. Otherwise Lockheed Martin would have improved its Titan vehicle, and we would have seen other companies innovate improvements in their own products.

    The defense contracting industry behaves as though it is all one large behemoth headed by the military, as though it is a military-industrial complex. NASA hasn’t been much better, but they seem to be seeing the light, these days.

    Elon Musk founded SpaceX in order to provide the innovation and initiative to improve launch vehicles and reduce costs in order to make it affordable for the rest of us to get into space, either personally or with our own satellites, even if they are cubesats (once advertised as potential personal satellites). Musk needed an inexpensive way to get his own probes to Mars, and he has accomplished that goal. Now he needs to build the probes. SpaceX and Orbital Sciences made fixed price contracts possible.

  • pzatchok

    The old military industrial complex used to use lobbyists more then engineers to build equipment.

    They would build or design something then lobby to get the military to alter requirements to fit what they already had.

    Northrop lost the lobbyist game.

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