ULA says Pentagon contracts shouldn't just go to lowest Bidder

[catdlr]

LA Times Article -

http://www.latimes.com/business/la-fi-ula-spacex-20160921-snap-story.html

The recent explosion of a SpaceX rocket should raise concerns about going with the lowest bidder on sensitive national security launch contracts, the chief of the United Launch Alliance wrote in a letter to top Pentagon officials this month.

Tory Bruno, ULA's chief executive, urged the Air Force to postpone the deadline for bids, saying it should take time to explore the impact of SpaceX's rocket failure while also taking into account both companies' experience and past performance.

The Pentagon should have particular reservations, Bruno wrote, given that SpaceX has now had two of its Falcon 9 rockets blow up, which he said "serve as a reminder of the complexity and hazards intrinsic to space launch services."

"This strategy defies both law and logic and puts hundreds of millions of taxpayer dollars and Warfighter mission needs unnecessarily at risk," he wrote.

[docmordrid]

Color me shocked, SHOCKED I tell you!!

/s

Subtlety is not one of their virtues.

[the_other_Doug]

Why, after reading that press release, do I feel like i just got hit over the head by a sledgehammer?

Oh -- yeah.  Right.

Never mind...

[Coastal Ron]

Hasn't ULA always advocated this?

So I don't think this is anything new, just hauled back out and re-advocated due to "current events".

[jongoff]

Hasn't ULA always advocated this?

So I don't think this is anything new, just hauled back out and re-advocated due to "current events".

I think ULA's beef is that the two payloads USAF has competed so far have been ones that the USAF considered to be risk tolerant enough that the bid could be done with price as the primary discrimator, and reliability/schedule/etc only factoring in on a pass/fail basis, not on a basis where they have at least some weighting beyond an up-front pass/fail.

Personally though, I can see where the USAF is coming from here. GPS satellites are in a big constellation, they make many of them, any one launch failure isn't going to jeapordize the constellation that much, so the USAF should be taking a more aggressive risk posture to drive down price. So even if they did provide some weighting for reliability/schedule beyond the "meets minimum requirements" level, I don't think it makes sense for them to be very highly weighted for these specific spacecraft.

On the other hand, there are payloads that are much more irreplaceable, where they are unique or nearly so, the constellation in small or the payload is one of the kind, and where the replacement cost is really high. When the cost of a failed or delayed launch is really high, it is totally understandable to weight reliability/schedule a lot higher in these cases.

~Jon

[Proponent]

Hasn't ULA always advocated this?

So I don't think this is anything new, just hauled back out and re-advocated due to "current events".

Agree -- this is just ULA incorporating recent events into its marketing.  That's what businesses do.

Touting ULA's advantage in reliability is a step up from its ad campaign circa 2010, before Falcon 9 started flying regularly.  Then, if you'll recall, the message was to the effect of "We make noise by launching rockets; SpaceX makes noise by testifying to Congress."  That looked rather desperate, because it was obviously only a matter of (a small amount of) time before SpaceX started to fly more frequently.

The thing is, ULA's reliability appeal looks a little desperate too.  Although it will have a longer useful life than the pre-Bruno "noise" appeal, it's likely that  someday SpaceX's vehicles will have demonstrated comparable reliability.  What's ULA going to do then?  It is not even attempting to compete with SpaceX on cost.

We used to wonder whether SpaceX could survive the failure of a Falcon 9.  Reliability having become its sole marketing advantage, ULA might now be hurt more by a failure than SpaceX would be.

[jongoff]

What's ULA going to do then?  It is not even attempting to compete with SpaceX on cost.

That's part of the problem, even if ULA copied everything SpaceX did, and did it just as well, they couldn't compete on cost alone because their cost of labor is still significantly higher than SpaceX's. SpaceX was able to start from a clean sheet of paper, and keep their labor costs low by hiring mostly promising fresh-outs, paying below market wages, requiring long hours, offering so-so benefits, and not providing much of anything in the way of retirement matching (all in exchange for getting to work at a cool, dynamic, and exciting organization). ULA started from a position where their primary concern was quality assurance, so their labor costs focused on that--they tended to push for low-turnover with an older workforce by offering better pay, more normal hours, better benefits, and up until very recently they had legacy defined-benefit pensions that carried over from the parent companies. Tory has been trying hard to shift labor costs to something more reasonable, but there's only so much you can shift without completely shafting your employees and killing morale.

Which is why ULA isn't trying to make this a race only about cost, but also about reliability, schedule dependability, flexibility, creative mission capabilities, etc.

Do they have to keep pushing to be more cost competitive? Definitely! Should they be working their butts off to keep their amazing reliability rating while lowering costs? Absolutely! Unlike SpaceX, ULA can't afford to lose its ability to play the reliability card.

But is the launch market battle one they can win if cost is the only metric, and if all customers really would fly on just the single lowest cost provider? Probably not.

Fortunately for ULA, I don't think all customers care only about cost, and I don't think all customers are comfortable putting all their eggs in one basket (especially a basket that likes competing with them in the satellite telecoms world).
 
~Jon

[savuporo]

I bet all government employees aren't flying Spirit Airlines either.

[vapour_nudge]

Is SpaceX making a profit? I don't want to see either company fail. I can't see how ULA could ever compete. I suspect that Musk would bail them out if needed because he hopes to one day get to Mars. I don't follow the market and hence I'm only going by what I've heard. So if someone can show proof they are making a profit that would be both interesting and appreciated.

Ford Explorer got a bad name in Australia and was referred to as Ford Exploder. People stopped buying them. If SpaceX lost another rocket in the next couple of years then if I was a company executive needing to launch my $200m satellite I would head to Arianespace. Likewise, ULA is reliable. Lose that and they're totally stuffed. They can drop their prices but they better not move past equilibrium

I have no shares in ULA or Arianespace. I need not comment on SpaceX there

[Rocket Science]

Well this was predictable... If they didn't use this opportunity I would have said "shame on them"... Nothing personal, it's just business...

[Robotbeat]

1) ULA is kind of right. Shouldn't be PURELY lowest bidder.
2) ULA should be careful. SpaceX is doing this with fairly new rockets. They introduced full thrust (stretched tanks) and deeply subcooled propellants less than a year ago. How many failures did Atlas and Delta have in the early days? Vulcan will reset ULA's launch reliability clock. ULA has never fielded a new rocket. Vulcan will enter the field just as Falcon 9 has racked up enough of a launch history to be quite formidable.

[jongoff]

Vulcan will reset ULA's launch reliability clock. ULA has never fielded a new rocket. Vulcan will enter the field just as Falcon 9 has racked up enough of a launch history to be quite formidable.

This is a solid point. Humility can be voluntary or forced in this business.

~Jon

[docmordrid]

Is SpaceX making a profit? I don't want to see either company fail. I can't see how ULA could ever compete.
>

Most recent info I can find.

The Information...

>
SpaceX shares recently sold at a price 24% higher than the last fundraising round, a securities filing by Fidelity Investments indicates, a price that would value the firm at close to $15 billion. It suggests that SpaceX shares have continued to rise in the secondary market and likely explains why Fidelity marked up its stake in the company to that level in February.

We reported in April that Fidelity had marked up its stake in SpaceX to $96.42 a share in February, which is the equivalent of about $15 billion for the whole company...
>

[Proponent]

[In response to nothing in particular]

Just for perspective, note that Falcon 9's record is no worse than and in fact arguably better than Ariane 5's was after a similar number of vehicles.

[brickmack]

1) ULA is kind of right. Shouldn't be PURELY lowest bidder.
2) ULA should be careful. SpaceX is doing this with fairly new rockets. They introduced full thrust (stretched tanks) and deeply subcooled propellants less than a year ago. How many failures did Atlas and Delta have in the early days? Vulcan will reset ULA's launch reliability clock. ULA has never fielded a new rocket. Vulcan will enter the field just as Falcon 9 has racked up enough of a launch history to be quite formidable.

ULA itself has never fielded a new rocket, but its parent companies have. Delta IV and Atlas III or V didn't experience any failures even in their early days. And the level of component heritage they shared with their predecessors was about on par with or worse than what Vulcan will inherit from Atlas V and Delta IV. If they managed to make those rockets without any failures, I'm sure Vulcan can be done too

[Jim]

ULA itself has never fielded a new rocket, but its parent companies have. Delta IV and Atlas III or V didn't experience any failures even in their early days. And the level of component heritage they shared with their predecessors was about on par with or worse than what Vulcan will inherit from Atlas V and Delta IV. If they managed to make those rockets without any failures, I'm sure Vulcan can be done too

The people of ULA are the ones from Boeing and LM that did field Delta IV and Atlas V.  So, yes ULA has fielded a new rocket.

[Negan]

1) ULA is kind of right. Shouldn't be PURELY lowest bidder.
2) ULA should be careful. SpaceX is doing this with fairly new rockets. They introduced full thrust (stretched tanks) and deeply subcooled propellants less than a year ago. How many failures did Atlas and Delta have in the early days? Vulcan will reset ULA's launch reliability clock. ULA has never fielded a new rocket. Vulcan will enter the field just as Falcon 9 has racked up enough of a launch history to be quite formidable.

ULA itself has never fielded a new rocket, but its parent companies have. Delta IV and Atlas III or V didn't experience any failures even in their early days. And the level of component heritage they shared with their predecessors was about on par with or worse than what Vulcan will inherit from Atlas V and Delta IV. If they managed to make those rockets without any failures, I'm sure Vulcan can be done too

Isn't this what NASA and the DOD are banking on? What else could replace an Atlas V?

[Blackjax]

1) ULA is kind of right. Shouldn't be PURELY lowest bidder.
2) ULA should be careful. SpaceX is doing this with fairly new rockets. They introduced full thrust (stretched tanks) and deeply subcooled propellants less than a year ago. How many failures did Atlas and Delta have in the early days? Vulcan will reset ULA's launch reliability clock. ULA has never fielded a new rocket. Vulcan will enter the field just as Falcon 9 has racked up enough of a launch history to be quite formidable.

I think it is going to be really hard to accurately predict what will happen in the launch market in the 2019 to 2022 timeframe.  Ariane will also be fielding the Ariane 6 and Blue Origin will be fielding the New Glenn.  In addition to that presumably Russia, India, and possibly China will be continuing to attempt to (re)capture market share.  What delays occur in their timeline, the early success/failure ratio as they are building flight history, and what price they can offer their services at will make for a lot of variables in the equation. 

I do wonder if several vendors offering fire sale prices on their first few flights on a new rocket around the same time will play havoc with the market.  There may be a period of a year or two where super cheap prices on larger rockets are plentiful whether or not SpaceX manages to achieve their price goals.  I wonder if they will saturate the market for launches that are price sensitive and not especially risk averse.  Conventional wisdom has it that these are few and far between vs. those that are not price sensitive and are risk averse.  Could this cause problems for one or more of the new rockets building some flight history if there are not enough payloads willing to take the risk to fly on the relative glut of new launchers?

[Proponent]

Delta IV and Atlas III or V didn't experience any failures even in their early days. And the level of component heritage they shared with their predecessors was about on par with or worse than what Vulcan will inherit from Atlas V and Delta IV. If they managed to make those rockets without any failures, I'm sure Vulcan can be done too

Delta III did, though, and it wasn't even a totally new rocket.

[SIM city]

The "recent events" here are as much the release of a second RFP for launch services using lowest price technically acceptable criteria as much as for the explosion.  The political power of SpaceX to get the criteria meant for commodities and "non-complex" services such as lawn mowing into a space launch acquisition should not be underestimated.