PayPal’s Elon Musk Is About to Trash the Pentagon’s Space Monopoly

Musk’s SpaceX is one launch away from changing how the Pentagon gets into orbit

PayPal’s Elon Musk Is About to Trash the Pentagon’s Space Monopoly PayPal’s Elon Musk Is About to Trash the Pentagon’s Space Monopoly

Uncategorized December 18, 2013 0

An upstart rocket company is one satellite launch away from busting open the Pentagon’s creaky old space program. California-based SpaceX could soon win the... PayPal’s Elon Musk Is About to Trash the Pentagon’s Space Monopoly

An upstart rocket company is one satellite launch away from busting open the Pentagon’s creaky old space program. California-based SpaceX could soon win the first battle of a bitter industrial rivalry that Pentagon insiders have taken to calling “the launch wars.”

The implications are huge for American space power.

Led by tech billionaire Elon Musk, most famous for heading PayPal, SpaceX has slowly and steadily been making progress toward meeting the Pentagon’s stipulations for any new company that wants to handle military rocket launches. SpaceX has achieved two successful launches since September using its upgraded Falcon 9 rocket.

Now Musk’s firm is prepping for a third launch of the Falcon 9 V1.1 rocket. That launch is projected to take place in late December from Cape Canaveral Air Force Station in Florida. If the launch is successful, the Pentagon will allow SpaceX to compete for billions of dollars in future space launch contracts.

The Defense Department sees SpaceX as a trailblazer, paving the way to cheaper launches, according to one Pentagon official who asked not to be named. Military bureaucrats have been carefully watching the 11-year-old company's incremental progress in a field that has long been monopolized by space giant United Launch Alliance.

ULA—a joint partnership between Lockheed Martin and Boeing—was established in 2006 and, since that time, has scheduled about several rocket launches per year. The company spends about $50 million per launch on its Delta II rocket and the Atlas V has a satellite launch cost of about $100 million.

The launch wars began earlier this year when SpaceX signed a deal with the Air Force, essentially challenging ULA for the right to launch the Pentagon's satellites into space.

Musk invested millions of his own money in the company and secured an additional $20 million in funding from a venture capital investment firm to pursue his mission of reducing the cost of space launches. SpaceX has been able to reduce the launch price by focusing on small rockets and building the components itself instead of purchasing them overseas.

The company launched its first Falcon 9 in September. The second launch, which successfully lofted a communications satellite, took place in early December. With just one more successful launch, SpaceX could break ULA’s space monopoly, according to the official. That third orbital boost should take place in the next month or so.

“When they have completed a third [launch] then they can compete for future launches and be, like, less than half the price,” the official says. “The intrigue is big because behind the scenes they've done a lot of things to try to combat Musk.”

The official did not specify what behind-the-scenes actions ULA has taken to push back against Musk, and ULA did not immediately respond to a media request regarding those allegations. The official says that in the near future ULA will make public its case for maintaining the Pentagon's space launch business.

“You will very soon see a press release touting the cost savings coming from ULA as part of a negotiated block buy of launches—that would not have happened without the imminent threat of being completely undercut by SpaceX.”

Despite some of the difficulties SpaceX has experienced both during satellite launches and behind the scenes, Musk has proved hard to beat. He has played a significant role in creating progressive companies like Tesla Motors and PayPal. A few Defense Department officials see Musk as a potential trust-buster with the ability to revitalize the Pentagon’s space launch program.

“Launch is broken badly,” the official says. The process of launching a satellite into space is extremely expensive and relies on Russian-made parts, according to the official. ULA’s monopoly certainly isn't helping.

SpaceX’s Dragon capsule resupplies the International Space Station. SpaceX photo

Still, despite all the issues that plague the space industry, not everyone in the Pentagon thinks that SpaceX can really drive down the cost of launches.

“There are people on both sides of the issue,” the official says. “There are the believers in competition and the ones who think it ends up costing the taxpayer more money.”

Some senior officials believe that there are simply not enough launches to warrant the cost of certifying a new launch company. Some of those officials have leaned heavily on that concern when discussing SpaceX with lawmakers and congressional staffers.

“Most of their argument centers around risk—that Elon is too risky,” the official explains.

Congress is aware of the importance of SpaceX completing the launch series and is planning for a space launch hearing in the near future, the source says. Pentagon officials have been in talks with Illinois senator Richard Durbin’s office about scheduling a day and time for that hearing, according to the source. Durbin, a Democrat, is the chairman of the Senate Appropriations defense subcommittee.

Durbin's office did not return a media request seeking confirmation or denial that scheduling negotiations are underway.

The source said that Frank Kendall, the Pentagon’s top acquisition official, and Bill LaPlante, the Air Force’s principal deputy assistant secretary for acquisition and management, will likely attend the hearing and discuss the progress that SpaceX has been making.

The hearing would provide a bigger stage for discussing the cost differences associated with expanding space launch competition, according to the official.

“It’s a huge deal on the Hill and it’s a huge deal in the [Pentagon]—just because there’s so much money at stake,” the official says. “And also, if SpaceX actually completes all the entrance criteria successfully, [the company] will come in at less than half the price of ULA. So it will be like when the Japanese kind of came in and started cutting in on Detroit. All of a sudden, it was like, ‘Holy crap, what are we going to do?’”

Once SpaceX is able to compete for future space launches, ULA will have to find a way to greatly reduce the cost of its launches, according to the official.

In the past, DOD has a had difficulties revamping its space launch program, according to the source. Kendall, who has sought to improve the efficiency of defense acquisition, wanted to expand its pool of space launch contract contenders in order to reduce the cost of the program, but his efforts were not eagerly embraced by the Air Force, the source said.

And now the Air Force’s recalcitrance—and the high cost of the current launch monopoly—could give Musk and SpaceX the chance to pave a new, and possibly better, way into space for the U.S. military.

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