17 June 2014
Rivals in ‘knife fight’ for Pentagon cash
By Megan R. Wilson
The Hill

The United Launch Alliance is caught in a “Beltway knife fight” with SpaceX for some of the most lucrative contracts at the Pentagon.

The alliance, which is made up of Boeing and Lockheed Martin, now has sole dominion over contracts with the Defense Department to launch military and spy satellites into space, as they are the only companies certified to provide the services.

But that could soon change.

SpaceX, a relatively new aerospace company founded by billionaire Elon Musk, argues that Boeing and Lockheed have engineered the system in their favor, and is demanding certification.

The financial stakes couldn’t be higher, as one of the projects contracted out to the Alliance — the Evolved Expendable Launch Vehicle (EELV), used to send government satellites to the stars — is reportedly the fourth most expensive project at the Pentagon, with a price tag of around $70 billion through 2030.

The competition between the rival companies is becoming one of the biggest lobbying battles in all of Washington.

The United Launch Alliance (ULA) has hired three K Street firms to lobby on its behalf, all in the past month.

Van Scoyoc Associates, which already represents Lockheed, and Shockey Scofield Solutions, which works for Boeing, both retained ULA as a client on June 4. 

Both firms have deep ties to appropriators in Congress who hold the keys to the Defense Department’s budget.

J.R. Reskovac of lobby firm Capitol Decisions, a former staffer on a House Armed Services panel, will also be working for ULA in a contract with Van Scoyoc.

One observer said the alliance’s decision to hire up on K Street is an acknowledgment that SpaceX’s bid poses a serious threat.

“I do think the incumbent companies’ leadership was taken aback initially by the aggressiveness and scale of SpaceX’s advocacy. Contrary to impressions, this is no naïf when it comes to D.C. influence, not to mention the boldness — ULA would say mendacity — of the public claims about cost and performance,” said someone in the industry with knowledge of the ULA defense contract.

“Before, all [ULA] had to worry about was keeping the Air Force, their client, happy,” he added. “All of the sudden, they find themselves in this Beltway knife fight.”

SpaceX, meanwhile, is fighting aggressively to gain a slice of the contracting pie, spending more than $1.1 million on lobbying last year alone.

The company has hired Patton Boggs, Heather Podesta + Partners and the Nickles Group, among other firms; their representatives include members of the lobbying elite, such as former Sens. Trent Lott (R-Miss.) and John Breaux (D-La.).

“Lockheed and Boeing are used to trying to stomp on new companies, and they’ve definitely tried to stomp on us,” said Musk during an event at the Newseum in Washington earlier this week that gave members of Congress a chance to step inside a SpaceX spacecraft. 

SpaceX already has a $1.6 billion contract with NASA to take items to and from the International Space Station. It has been unable to break into the defense space and has taken the Air Force to court over what it calls an unfair contractor monopoly.

In the latest round of EELV buys, the Pentagon decided to purchase the vehicles in bulk sets of 36, which the Defense Department says will save billions, rather than one by one.

But SpaceX is pushing the Pentagon to open up the bidding process, saying the contract is anti-competitive. The Air Force is spending $60 million to get the company certified despite the lawsuit, according to Bloomberg.

“If we’re given a chance to compete for this contract, we will deliver value to the American taxpayer. It’s not that we think we should get every part of this program, but we should be able to compete,” John Taylor, a spokesman for SpaceX, told The Hill. 

“Not only is this an un-level playing field, it’s a playing field we’re not even allowed to enter.”

Those associated with the established contractors argue SpaceX has a troubled launch record that includes performance issues in its contract with NASA. 

The billion-dollar NASA deal, signed in 2009, requires SpaceX to take 12 trips to the International Space Station and back by the end of 2016. As of June of this year, only three have been completed, with the fourth scheduled to take place in August.

“The concern on the ULA side is that SpaceX is going to get their nose under the tent, and the same thing will happen with the Air Force that happened with NASA — where the leadership has become vested in the success,” said the person familiar with the ULA work. “Then, they will get into the ‘too big to fail’ category, and ULA will get stuck cleaning up the mess.”

Large defense contractors argue that higher costs are required to assure quality and dependability, and say Pentagon officials know their product will be delivered as promised and on time.

SpaceX dismisses that claim and say the alliance’s exclusive deal has allowed the companies to fleece taxpayers.

“Each launch by ULA costs American taxpayers roughly $400 million — four times as much as a launch by SpaceX, and at least twice as much as any provider in the world,” SpaceX said in a release about its lawsuit. “It’s a false premise to suggest that a more expensive launch is a more reliable launch. Prices have increased because there is no competition.”

Boeing and Lockheed Martin combined in 2006 to form the United Launch Alliance, and the venture’s chief executive, Michael Gass, argued in March that the program needs the stability of one provider. 

“ULA was formed to enable assured access to space with two separate launch systems, with recognition that the market demand was insufficient to sustain two competitors,” he told a Senate panel.

“We went from two competing teams with redundant and underutilized infrastructure to one team that has delivered the expected savings of this consolidation,” Gass said.