SpaceX and ULA win military launch competition worth US$653 million

A SpaceX Falcon heavy rocket stands ready for launch on pad 39A at the Kennedy Space Center in Cape Canaveral, Fla., Monday, June 24, 2019. (AP Photo/John Raoux)

Elon Musk's SpaceX and Boeing-Lockheed Martin joint venture United Launch Alliance are the big winners in a stiff competition to secure military launch contracts, teeing up the companies to dominate the lucrative market for launching US national security satellites for years to come.

The initial awards will give US$316 million to SpaceX for one launch and US$337 million to ULA for two launches. But the total value of the deal could be worth far more, as the military will ask one or the other company to launch additional missions.

SpaceX is expected to handle 40% of all national security satellites slated to go up over the next five to seven years, while ULA will handle the other 60%. Military officials did not say exactly how many launches that might enetail, nor did they provide a total contract value.

Exactly what the companies will launch will remain secret. The United States' security apparatus regularly launches spy satellites and other spacecraft into Earth's orbit, and the missions are highly classified.

The contracts for launching such satellites are a core part of the rocket industry's revenue stream.

The long-awaited and hotly contested contract awards announced Friday solidify SpaceX and ULA as the go-to launch providers for the US military. The companies faced competition from Blue Origin, the rocket venture founded by Amazon billionaire Jeff Bezos, and Northrop Grumman, a longtime government contractor.

Bezos' Blue Origin and Northrop Grumman — along will ULA — all received funds under an earlier round of awards under the military's contracting program called the National Security Space Launch, or NSSL. But that money was meant to help aid the development of new launch vehicles under development by each of the companies. It did not guarantee any of the award winners would receive actual launch contracts.

SpaceX and ULA have already held a duopoly on existing national security launches for years.

SpaceX filed a lawsuit against the federal government in 2014 for the right to compete for those awards, and ultimately ended ULA's decade-long monopoly on them. SpaceX's rockets are typically priced at a fraction of the cost of ULA's, and it was not immediately clear why the value of the contract awarded to SpaceX Friday was far higher than ULA's per-launch price. SpaceX's contract also put the price of its one mission at more than three times the $90 million sticker price of its Falcon Heavy rocket.

Will Roper, the Air Force's assistant secretary for acquisition, declined to comment to reporters on Friday, citing the confidential nature of the missions.

SpaceX did not immediately respond to a request for comment Friday.

The NSSL awards were intended to encourage more competition, with the ultimate goal of reducing the amount of money the military spends on launches. But the price points were roughly in line with what the military has been spending.

Roper added that the price may ultimately come down, and the Air Force said in a press release that newer contracting strategies have saved the military about $7 billion since 2013.

Both Blue Origin and Northrop Grumman will be able to compete for additional business in the third phase of contract awards, which are expected to be doled out in 2025. ULA's contracts will have spillover benefits for Blue Origin, which is building the massive engines that it will use on its new line of Vulcan Centaur rockets.

Blue Origin CEO Bob Smith said in a statement Friday that the company is "disappointed" to be left out of the awards, though it will continue to develop its New Glenn rocket to fulfill other commercial contracts, and the company is looking "forward to supporting ULA's long-standing role in launching national security payloads."

Northrop Grumman also said in a statement that it was "disappointed" by the outcome.

Though SpaceX was expected to be a recipient of this batch of awards, the company fought back after it was left out of the awards the military handed out for new rocket development in 2018.

Like the other companies, SpaceX is developing a new launch vehicle, known as Starship, and Super Heavy, a rocket and spaceship system that Musk has described as the technology that will allow humans to colonize Mars. Theoretically, the rocket also could be used to help launch heavy military payloads into orbit.

A complaint the company filed last year against the federal government states that the SpaceX's proposal asked for money to support all three of its rockets — the Falcon 9 and Falcon Heavy, which are already operational, as well as Starship.

But officials determined that including Starship would render "the entire SpaceX portfolio the 'highest risk'" of all the options. SpaceX called that claim "unreasonable," according to the complaint.