SpaceX Fighting for USAF Launches

The legal challenge Space Exploration Technologies (SpaceX) has mounted against the creation of United Launch Alliance follows a string of related protests by the start-up rocket company against Boeing's and Lockheed Martin's lock on U.S. Air Force launch business.

SpaceX filed a lawsuit Oct. 19 in U.S. District Court alleging a pattern of anticompetitive behavior by Boeing and Lockheed Martin that is intended to prevent SpaceX from entering the government launch market. The civil suit, filed in the Central District of California, seeks unspecified monetary damages, an admission of wrongdoing and an injunction against the creation of United Launch Alliance, the proposed Boeing-Lockheed Martin joint venture to consolidate production and operations of the Delta and Atlas families of rockets.

U.S. federal regulators reviewing the proposed merger let an Oct. 23 deadline expire without reaching a decision and instead asked Boeing and Lockheed Martin to respond to a new round of questions about the deal.

Months before SpaceX filed the lawsuit, it took its complaints about Boeing's and Lockheed Martin's domination of the Air Force launch market directly to the Air Force itself.

When the Air Force announced in April that it intended to forgo a price-driven competition and instead divide its third batch of Evolved Expendable Launch Vehicle (EELV) missions--some 23 launches in all--between Boeing's Delta 4 and Lockheed Martin's Atlas 5 rockets, SpaceX cried foul.

SpaceX, founded by Internet entrepreneur Elon Musk in 2002, already had spent nearly $100 million on the development of a new family of low-cost rockets, including a then still unannounced Falcon 9 rocket designed to compete head-to-head against the better-established Delta 4 and Atlas 5 rockets.

SpaceX contended that the Air Force's plan to split a batch of 23 unawarded missions planned for 2008 through 2011 between the Delta 4 and Atlas 5 would effectively shut the Falcon 9 out of a major segment of the launch market for six years.

SpaceX announced this year that it has a contract from an unnamed U.S. government customer to conduct the first Falcon 9 launch in 2007 out of the company's launch site on the Kwajalein Atoll in the Pacific Ocean. The medium-lift version of the rocket is expected to be capable of putting 9,500 kilograms of payload in low Earth orbit for $27 million to $35 million.

Musk acknowledged that being shut out of Buy 3 would be a setback for the Falcon 9's market prospects but would not dissuade SpaceX from building the rocket and going after Air Force business.

"It will take us a few years longer to win," Musk said. "Boeing and Lockheed may succeed in delaying our progress, but they will not stop us from delivering much lower cost access to space."

SpaceX has yet to conduct its first launch. But the company has over a half-dozen contracts, including a $100 million indefinite delivery-indefinite quantity launch deal with the U.S. Department of Defense. The company has two smaller Falcon 1 rockets nearly completed and a third in production.

The maiden Falcon 1 is sitting on the launch pad at the company's Kwajalein launch site. It is being prepared for a flight later this year when it will launch an experimental satellite built by the U.S. Air Force Academy.

SpaceX also is slated to launch a Falcon 1 from California's Vandenberg Air Force Base carrying the Pentagon's experimental TacSat-1 satellite.

Although SpaceX acknowledges that it currently does not have a vehicle qualified to launch high-priority military satellites, the company complained to the Air Force that the length of Buy 3 would lock the Falcon 9 out of the lucrative Air Force launch market through the end of the decade and possibly longer.

SpaceX filed a formal protest in June with Air Force Space and Missile Systems Center in Los Angeles. The Air Force denied SpaceX's bid protest in early August explaining in official documents obtained by Space News that the Air Force only was allocating launches for 2007 and beyond, not actually making firm awards.

SpaceX considered that a superficial distinction since--as the Air Force's EELV program director Col. John Insprucker has pointed out--Pentagon satellite programs would generally start planning more than two years ahead of actual launch contract awards for either a Delta 4 or Atlas 5 launch based on the initial Buy 3 allocations.

The company promptly took its bid protest to the U.S. Government Accountability Office (GAO), a watchdog agency that also referees government contracting disputes.

Daniel I. Gordon, GAO associate general counsel and head of the agency's bid protest unit, said the GAO received SpaceX's bid protest Aug. 15 and, after rejecting requests from the Air Force, Boeing and Lockheed Martin to dismiss the protest, agreed to consider the SpaceX protest on its merits. "The case moved forward," Gordon said.

Once the bid protest had been filed, the Air Force was required to put Buy 3 on hold for the time being. In September, however, the Air Force amended its Buy 3 solicitation to clarify that launches would be awarded annually. At that point, the Air Force could override the automatic stay and proceed with the initial Buy 3 awards and allocations.

Before that could happen, SpaceX exercised its right to move its protest to the U.S. Court of Federal Claims. Gordon said the GAO closed its file on the bid protest Oct. 4 without issuing an opinion on its merits.

The complaint SpaceX filed with the Court of Federal Claims Sept. 30 covered the same ground as the protests it filed with the Air Force and GAO. According to SpaceX officials, the Court of Federal Claims dismissed the case Oct. 26 primarily on the grounds that because SpaceX did not actually submit a bid for the initial Buy 3 launches, the company had no legal standing to protest.

SpaceX could still appeal the decision. "We are currently considering all of our legal options," said Tim Hughes, the company's in-house counsel.

For now, SpaceX is claiming a partial victory in its Buy 3 battle. On the one hand, the company says it is pleased that the Air Force amended the Buy 3 solicitation to make clear that it is making the launch contract awards annually. On the other hand, SpaceX still thinks that allocating all 23 launches upfront will make it difficult for the Air Force to change course down stream.

As SpaceX's Buy 3 protest played itself out, the company had begun preparing the broader reaching lawsuit it filed Oct. 19 with the U.S. District Court for the Central District of California, just days before the Federal Trade Commission's Oct. 23 deadline for reaching a decision on the United Launch Alliance merger.

In addition to an injunction against the merger and unspecified monetary damages, SpaceX's suit also seeks a judgment from the court declaring that Boeing and Lockheed Martin conspired to corner the market on Air Force launches. The lawsuit alleges a pattern of collusion and anticompetitive behavior by Boeing and Lockheed Martin dating back to the beginning of the EELV program.

The suit also relates in detail the bidding suspension the Air Force imposed on Boeing in 2003 after the company admitted to having obtained proprietary Lockheed Martin information, including Atlas pricing data, during the competition for the first round of EELV awards. Boeing won 19 of those initial 28 awards, but was stripped of seven of those when the ban was imposed. The Air Force, which lifted Boeing's suspension in March, plans to decide the Buy 3 launch allocations on factors other than price.

Boeing and Lockheed Martin officials say SpaceX's suit is "without merit."

SpaceX has taken legal action before to prevent competitors from gaining an unfair advantage selling services to the government.

SpaceX achieved a rare protest victory in 2004 when it protested to the U.S. Government Accountability Office a sole-source award NASA made to Kistler Aerospace Corp. for flight data from the company's reusable K-1 rocket. NASA rescinded Kistler's $234 million award after the GAO informed the space agency it would likely rule in favor of SpaceX.