GAO Tells DOD To Reassess Length of EELV Block Buy

The Government Accountability Office (GAO) released a report today recommending that the Department of Defense (DOD) reconsider the number of years its block buy of Evolved Expendable Launch Vehicles (EELVs) will last. SpaceX, in particular, has expressed concern that if DOD commits to buying 40 EELVs over the next five years, it will effectively preclude the company from competing with its Falcon Heavy design because it is not clear that the government will need that many launches.

The GAO report comes on the heels of an announcement by NASA, the Air Force and the National Reconnaissance Office (NRO) last week that could create opportunities for emerging launch service suppliers like SpaceX. On Friday, the three agenices announced a coordinated certification process for commercial launch services, including “new entrants.”

To date, DOD’s focus has been on stabilizing the launch industry industrial base. The argument is that DOD’s current approach of purchasing launch services one at a time creates uncertainty that wreaks havoc with suppliers, especially at the sub-tier level. DOD relies primarily on the Atlas V and Delta IV EELVs built and launched by the United Launch Alliance (ULA), a joint venture between Lockheed Martin and Boeing. DOD therefore is working on revising its acquisition strategy to a block buy approach, guaranteeing the purchase of eight EELV cores per year for the next five years at an expected cost of $15 billion.

Whether the government demand for launches requires that many vehicles is uncertain, however. If the 40 vehicles satisfy demand, there would no opportunity for other companies, like SpaceX, to compete.

GAO agrees that DOD should leave the door for competition from new entrants. The report notes that SpaceX and Orbital Sciences Corporation are potential providers “that may be capable in the near future” to compete for the type of services DOD requires. Both companies told GAO that they needed a “clear set of criteria” from DOD; the deparrment was supposed to issue them by July 31. Those apparently are the NASA-USAF-NRO criteria announced on Friday.

GAO’s recommendations about DOD’s acquisition strategy are much broader, however. The agency concludes that DOD should resolve a number of questions before finalizing the block buy. DOD is planning to release it by the end of the year, but GAO found “some critical knowledge gaps” and was particularly critical of DOD for relying on “contractor data and analyses” about the industrial base rather than independent reviews.

Considering that the purpose of the block buy is to stabilize the launch vehicle industrial base, it is somewhat surprising that GAO found DOD’s knowledge of the state of the industrial base lacking. Flaws and “metholodological weaknesses” were found in surveys conducted by ULA that were used in several DOD studies, and the data generated by the surveys were not “reviewed or independently assessed by DOD officials,” GAO said.

Among its recommendations, GAO called on DOD to do an independent study of the launch vehicle industrial base, reassess the block buy contract length, work closely with NASA to facilitate its ability to negotiate EELV launch contract prices, refrain from waiving federal regulatory requirements that prevent the department from knowing more about EELV costs, and ensure mission assurance activites are “sufficient and not excessive.”

DOD concurred with six of the seven recommendations and partially concurred with one — the recommendation to reassess the block buy contract length. On that one, DOD said that it would make its decision “balanced among price, operational requirements, budget realities and the potential for new entrant competition.”

GAO conducted the study at the request of the House Appropriations Subcommittee on Defense. It apparently was completed some time ago since it refers to the need for DOD to obtain knowledge about NASA’s design for the Space Launch System. The design was released on September 14.