USAF to Phase Out Subsidy to ULA

A transporter for oversize loads delivers the port, or left, booster for the United Launch Alliance Delta IV Heavy for Exploration Flight Test-1 into the Horizontal Integration Facility, or HIF, on May 7. The port booster joins the other two boosters of the Delta IV Heavy already in the HIF. (Credit: NASA/Kim Shiflett)
A transporter for oversize loads delivers the port, or left, booster for the United Launch Alliance Delta IV Heavy for Exploration Flight Test-1 into the Horizontal Integration Facility, or HIF, on May 7. The port booster joins the other two boosters of the Delta IV Heavy already in the HIF. (Credit: NASA/Kim Shiflett)

The U.S. Air Force said on Wednesday it would phase out a major subsidy it pays United Launch Alliance (ULA)

Air Force Space Command Commander General John Hyten said acquisition officials were working on a plan to to phase out the infrastructure support contract, which he said was initially put in place to protect “a very fragile industrial base.”

He said it was not possible to have a fair competition with the contracts in place, backing an argument often made by privately-held Space Exploration Technologies, which is vying for some of the launch contracts now carried out by ULA.

In prepared testimony between the House Armed Services Committee last week, SpaceX President Gwynne Shotwell called for an end to the contract.

Eliminate payments—more properly called subsidies—under the EELV Launch Capability (ELC) contract line items that exclusively support the incumbent provider and properly account for such payments for any competitive solicitations in the interim to ensure a fair and level playing field, especially since these funds do not contribute to the true nature of assured access to space. The Department and this Committee have called fo r real, meaningful competition. That means eliminating the unfairness. All we seek is the right to compete in a fair competition. Just like reliance on the RD-180 engine, it is time for these subsidy payments to the incumbent to come to an end.

Through the EELV Launch Capability, initially referred to as “assured access to space” payments, the U.S. Air Force and the National Reconnaissance Office (NRO) pay ULA approximately $1 billion per year through distinct cost-plus-incentive-fee contract line items. These payments cover most of ULA’s fixed costs — for example, launch infrastructure, systems engineering and program management, launch operations, mission integration, base and range support costs, transportation costs, capital depreciation, and non-recurring engineering to name a few — for “up to eight launches” per year. These payments are in addition to the firm-fixed-price that ULA charges for EELV Launch Services (ELS) for each launch ordered through the block buy contract.