How bad things happen to bad space programs

The Pentagon appears to have a loose construct of time and savings when it comes to the Evolved Expendable Launch Vehicle (EELV) program. Originally intended to give the United States guaranteed access to space, it instead has done in its seven painful years of existence nothing more than give government regulators a giant headache. An excellent op-ed by Jim McAleese in this week’s Space News (“U.S. Air Force Can Lead by Example On ULA,”) gives the context for EELV’s snafu, although he rather optimistically still believes it can work out.

The EELV’s Buy 3 contract, intended to divvy up 23 space launches to the primary contenders (Boeing and Lockheed Martin), was intended to have been announced by the end of this year. But then that deadline got moved up to the beginning of October, which it clearly has not met.

According to McAleese, when EELV costs incurred a Nunn-McCurdy re-structuring in December 2003,

[T]he U.S. Air Force agreed to a $12.8 billion increase in EELV launch infrastructure sustainment payments through 2020. This was a significant increase, given that as recently as 2002 the Air Force estimate for EELV “Assured Access” had been $1.1. billion.

He goes on to say,

Now the EELV sustainment subsidies represent 63 percent of all costs for 95 U.S. Air Force launches, and 44 percent of the total costs of all 137 planned EELV launches for U.S. Air Force, National Reconnaissance Office and NASA/commercial customers. The total EELV sustainment payments from 2004-2020 average $818 million per year on a straight-line basis.

How did this grand program that would save so much money end up costing so much more?

Love and optimism can be blind, especially when it comes to bidding for government contracts.

The original launches were bid at fixed prices of $72 million (Lockheed Martin) and $73 million (Boeing) each. Except…

Ultimately each EELV launch has an average unit-procurement cost of $226 million over the 137 total planned EELV launches. The average unit cost is $232 million per launch, once the $834 million of U.S. Air Force research development, testing, and evaluation expenses are also allocated.

Well, it’s a good thing then that those helpful defense contractors came up with a way to cut corners.

Even though Boeing was officially punished for having illegally used Lockheed Martin’s proprietary information when bidding for the original EELV contract back in 1998, somehow the two companies decided back in May to let bygones be bygones and establish an uber-company called the “United Launch Alliance.” The ULA ostensibly would allow the contractors to save redundant spending on overhead costs to the tune of $150 million annually.

How this is going to work is unclear, as McAleese points out:

Even day-to-day program management, and actual launch costs themselves, are excluded from the EELV launch service contracts. Instead, all of the recurring overhead costs, plus all infrastructure costs have been consolidated into the sole-source EELV launch capability contracts. The Air Force is funding virtually all of the annual working capital, long-term capital expenditures and recurring overhead for all of United Launch Alliance’s EELV launches, including both commercial customers and NASA launches as well.

Maybe this is why the FTC still won’t okay the ULA, which Lockheed Martin and Boeing double-pinky-swear isn’t a monopoly. Supposedly Buy 3 is being put aside until the ULA’s future is certain. I wouldn’t bet on it.

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