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Case closed: California judge ends SpaceX’s lawsuit against the U.S. Air Force

WASHINGTON — A California judge Oct. 2 officially ended SpaceX’s 18-month-long lawsuit against the U.S. Air Force. Following a Sept. 24 ruling denying SpaceX’s claim, the judge on Friday ordered the case to be closed. 

U.S. District Court Judge Judge Otis Wright II of the Central District of California on Sept. 24 ruled against SpaceX in its legal complaint over contracts the U.S. Air Force awarded in October 2018 to United Launch Alliance, Northrop Grumman and Blue Origin. 

The judge’s Sept. 24 order, first reported by Reuters, was sealed by the court because it contained sensitive information.

In the Oct. 2 motion to close the case, the judge noted that his Sept. 24 order denied SpaceX’s claim, “concluding that the Air Force’s actions were not arbitrary, capricious, or in violation of the law, and that SpaceX was not entitled to any relief in this action.”

SpaceX first filed the complaint May 17, 2019, with the Court of Federal Claims. The company argued that the Air Force gave an unfair advantage to the other companies by awarding them Launch Service Agreements and excluding SpaceX. 

After the Court of Federal Claims ruled that it lacked jurisdiction, the case was transferred in August 2019 to the U.S. District Court of the Central District of California.

The Air Force awarded Launch Service Agreements contracts to Blue Origin ($500 million), United Launch Alliance ($967 million) and Northrop Grumman ($762 million) to help the companies defray the costs of developing new rockets and infrastructure as they competed for a launch service procurement contract. 

SpaceX’s proposal for a Launch Service Agreement contract was to leverage its Starship space exploration vehicle to launch the military’s heaviest payloads. The Air Force denied SpaceX an LSA award. On Aug. 7, the Air Force selected ULA and SpaceX as the winners of the launch service procurement competition.

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SpaceX pressing on with protest against U.S. Air Force despite launch contract win

WASHINGTON — SpaceX in a court document filed Aug. 19 says it is pressing on with a legal complaint against the U.S. Air Force over contracts awarded in October 2018 to United Launch Alliance, Northrop Grumman and Blue Origin.

In a “joint notice” document that also includes the Air Force’s response, SpaceX reiterates its claim made in a May 2019 protest that the Air Force gave an unfair advantage to the other companies by awarding them Launch Service Agreements and excluding SpaceX.

The Air Force on Aug. 7 announced that SpaceX and ULA were selected as the winners of the National Security Space Launch Phase 2 launch service procurement, with ULA getting 60% of national security launches over five years and SpaceX 40%.

Although Blue Origin and Northrop Grumman did not win Phase 2 contracts and SpaceX did, the company insists that the Air Force’s October 2018 decision caused SpaceX “irreparable harm” and gave ULA a key advantage in winning the larger share of Phase 2 launches.

The purpose of the LSA agreements was to help Phase 2 competitors pay for launch vehicle development and infrastructure. SpaceX competed for an award but did not get one.

In the Aug. 19 document — filed with the U.S. District Court for the Central District of California — SpaceX says the Aug. 7 award does not change the underlying reason for the original protest.

SpaceX is challenging Air Force actions that occurred prior to the start of the Phase 2 competition, the Aug. 19 filing says. “The August 7, 2020 Phase 2 competition awards do not impact the substantive challenges asserted by SpaceX to the competition and award decision under the Launch Service Agreement.”

Although the Phase 2 award “mitigated the harm to SpaceX resulting from the unlawful and flawed LSA award decisions, substantial harm to SpaceX remains,” says the document. “Unlike its competitors, SpaceX competed in the Phase 2 competition without the benefit of government investment and technical information exchanges under the LSAs.”

SpaceX is asking the court to rule the LSA awards improper which would compel the Air Force to end the $967 million six-year agreement with ULA. The agreements with Blue Origin and Northrop Grumman would end anyway because they did not win a Phase 2 contract.

“Given the impending terminations, enjoining the further use of such LSAs harms no one,” says the filing. ULA having that agreement “may well have contributed to ULA winning 60% of the Phase 2 launches.”

The Air Force and ULA in a joint statement point out that SpaceX argument is unreasonable because its LSA bid sought funding for the development of the Big Falcon Rocket, not the Falcon 9 or the Falcon Heavy that it offered for the Phase 2 procurement.

“For Phase 2, SpaceX did not propose the Big Falcon Rocket (“BFR”) that they proposed for the LSA, but rather proposed a modified Falcon Heavy to meet the Category C requirement,” said the statement.

The Air Force and ULA also challenged SpaceX’s assertion that since Phase 2 has been awarded, there would be no disruption to national security if ULA’s LSA agreement were terminated. “If the Court vacated ULA’s LSA, the unplanned deficit in federal development funding under the LSA could delay the readiness for ULA’s Vulcan to perform Phase 2 launches.”

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Air Force to end agreements with Blue Origin and Northrop Grumman, prepares for launch contract protests

WASHINGTON — The Air Force made the call to stick with SpaceX and United Launch Alliance as its launch providers for the next five years. Now it has to decide if and how to continue working with the companies that lost the National Security Space Launch Phase 2 competition — Blue Origin and Northrop Grumman.

An issue at hand is the termination of the Launch Service Agreement contracts that the Air Force awarded in October 2018 to Blue Origin and Northrop Grumman, as well as to ULA.

The purpose of the agreements was to help Phase 2 competitors pay for launch vehicle development and infrastructure. Blue Origin received $500 million; Northrop Grumman $792 million and ULA $967 million. The funds were to be spread out through 2024, and the Air Force from the beginning said the LSAs would be terminated with those companies that did not win a Phase 2 procurement contract.

Despite political pressure to not end the LSAs, the agreements will be terminated, Assistant Secretary of the Air Force for Acquisition Will Roper said Aug. 7 during a video conference with reporters.

“We will work with those two companies to determine the right point to tie off their work under the LSA agreements,” Roper said. The intent of the LSAs “was to create a more competitive environment leading into Phase 2,” he said. “The point is not to carry them indefinitely.”

LSA funds supported the development of Blue Origin’s New Glenn rocket and Northrop Grumman’s OmegA launch vehicle. ULA will continue to receive funds for its Vulcan Centaur vehicle. SpaceX was not awarded an LSA contract.

Before the LSAs are terminated, said Roper, “We have to determine what work has been done and what rights to the data the government has. We want to make sure we retain those.”

Roper said a key reason why the LSAs could not continue for all three companies is that the Air Force doesn’t have enough money in the budget.

A RAND report commissioned by the Air Force warned that ending the LSAs could leave the Air Force with fewer industry competitors able to challenge ULA and SpaceX in 2024 when Phase 3 of the National Security Space Launch program is scheduled to begin.

RAND said cutting off financial support could drive companies to abandon certification efforts to qualify commercial launch vehicle for national security launch. The report said this has national security implications because if a U.S. launch company dropped out of the market, a foreign competitor is likely to emerge to try to fill the gap.

Roper said the Air Force plans to continue to support U.S. industry but the specifics have yet to be worked out, Roper said. “We will discuss this with Capitol Hill for Phase 3.”

Roper said he agreed with RAND’s take that it would be “in the government’s best interest to have three or more viable systems to compete for Phase 3.”

Both the House and Senate versions of the 2021 National Defense Authorization Act include provisions for the Air Force to create new partnerships with the launch industry similar to the LSAs.

Possibility of legal protests

Before the Air Force can move forward and start planning Phase 2 missions with SpaceX and ULA, it is preparing for the possibility of a legal protest over the Aug. 7 awards.

Blue Origin and Northrop Grumman issued statements on Friday expressing disappointment in the Air Force’s selection. Any decision to file a protest would be made after the companies are briefed by the Air Force on why their bids didn’t make the cut.

“We submitted an incredibly compelling offer for the national security community and the U.S. taxpayer,” Blue Origin CEO Bob Smith said. The New Glenn bid was a “very competitive single basic launch service price for any mission across the entire ordering period.”

The company intends to stay in the launch market regardless, Smith said. “We are proceeding with New Glenn development to fulfill our current commercial contracts, pursue a large and growing commercial market, and enter into new civil space launch contracts.”

Northrop Grumman said the company is “confident we submitted a strong proposal that reflected our extensive space launch experience and provided value to our customer, and we are looking forward to our debriefing from the customer.”

Surprising price tag for SpaceX mission

The selection of SpaceX and ULA was not surprising given their experience. “This ended exactly how everyone expected,” said one industry source.

What nobody expected was the price tag for SpaceX’s first Phase 2 mission awarded on Aug. 7.

SpaceX was awarded a $316 million contract to launch USSF-67, a mission scheduled for the fourth quarter of fiscal year 2022. ULA was awarded a $337 million contract to launch two missions — USSF-51 and USSF-106 — scheduled for the second and fourth quarters of fiscal year 2022, respectively.

Roper during the call with reporters was asked to explain why SpaceX is being paid nearly the same amount for one mission that ULA is getting for two missions. Roper declined to comment on that issue, and said these launches are classified missions.

The U.S. Space Force’s Space and Missile Systems Center, which oversees launch procurements, said in a statement to SpaceNews that both contracts include funding for support costs in addition to the price that the companies bid for the launch services.

“The awarded task order includes the first year of Launch Service Support, and the prices for the individual missions ordered from each respective company,” SMC said. “These prices were proposed by companies as part of the Phase 2 acquisition, and they reflect significant savings when compared to historical pricing from previous NSSL launch acquisitions.”

The additional payment to launch providers — which one industry source estimated at about $100 million per company — was unexpected. It is reminiscent of the “ELC” funding that the Air Force used to pay ULA and was criticized by SpaceX as government subsidies that commercial companies don’t get.

ELC is short for Evolved Expendable Launch Vehicle Launch Capabilities, which the Air Force awarded yearly to ULA for infrastructure and engineering support. ELC was discontinued in 2019 and the Air Force said it would transition to commercially based pricing.

Based on the value of the Aug. 7 contract, the SpaceX contract is likely for a Falcon Heavy launch. An industry analyst who asked to not be quoted by name said the $316 million launch contract, even if $100 million is for support costs, is very large considering the pricing that SpaceX has offered for Falcon Heavy. The company in February won a Falcon Heavy contract for a NASA asteroid mission in 2022 valued at $117 million, which includes the launch itself and other mission-related costs.

SpaceX has not commented on social media or issued any statements following the Air Force’s announcement that it was selected as a Phase 2 provider.

The Air Force awarded ULA 60% of the Phase 2 missions to be flown over five years, and 40% will go to SpaceX. According to several sources, SpaceX believes it should have won the 60% share because it has operational and certified vehicles, whereas ULA’s Vulcan Centaur is still in development and is expected to fly for the first time in 2021.

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