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Get Four
|  | DECEMBER 7, 2005
By Stan Crock The Air Force Fails Rocket Science[Page 2 of 2]WORST OF BOTH WORLDS. So the Air Force solution is to have one company make two rockets. Beyond the benefits of a monopoly, there are other reasons the companies might want a deal. If the merger is approved, Lockheed Martin would drop its lawsuit against Boeing over the theft of data, which could have cost Boeing a tidy sum, estimated by some at hundreds of millions of dollars. And Lockheed Martin and its Russian partner won't have to worry about being beaten out by all-American Boeing. Those issues aside, some outside experts think the deal makes sense. "The country shouldn't have to pay the price of maintaining two totally separate production lines and engineering forces," says John Logsdon, director of George Washington University's Space Policy Institute. Loren Thompson, COO of the Arlington (Va.)-based Lexington Institute, adds that if demand for launches continues to be slack, "there isn't much alternative" to the merger. But I have to side with the skeptics. John Pike, director of Globalsecurity.org, an Alexandria (Va.) national security Web site, argues that the current proposal stands on its head the argument for the previous two approaches. With the merger, "We get the 'benefits' of high costs from two production lines and the 'benefits' of high costs from having a monopoly supplier," he says. "If you want to imagine the least efficient way possible of doing it, this is it." Adds David Williams, vice-president for policy of the watchdog group Citizens Against Government Waste: With one supplier, "there's really no hope for the taxpayer." UNFAIR ADVANTAGE? Industry players are concerned as well. Northrop Grumman (NOC ) is worried that it could get the shaft because both Lockheed Martin and Boeing make satellites that compete with Northrop Grumman while they will control launches in concert. "If there's no mechanism to insure that competition is allowed to flourish on what's launched, then the merger to monopoly doesn't serve the industry well," a Northrop Grumman spokesman says. Others, such as space startup Space Exploration Technologies (SpaceX), fear that the merged company will have an additional edge: the subsidies for launch infrastructure (see BW, 12/12/05, "The Final Frontier at Costco Prices"). "They've turned assured access into assured profits," gripes Lawrence Williams, the SpaceX vice-president for international and governmental affairs (see BW Online, 8/15/05, "Billionaires Blasting Off"). Capitol Hill isn't enamored of the Air Force approach either. In a 2005 report, the House Appropriations Committee noted soaring costs of the EELV program and questioned the need to rely on two families of launchers. Though the panel was concerned with two separate companies, its logic would apply to the venture with two rocket lines. "The Committee believes it is wiser to invest in launch reliability than launch back-up," the report said. Lawmakers feared that keeping two rocket lines going would prompt contractors to cut corners in a way that would undermine launch reliability. SINGLE CHOICE. What's more, the backup notion ignores the fact that payloads are designed for specific boosters. The Appropriations Committee notes that it can take several years to get a backup booster ready. And it takes time to reconfigure the satellite for the new launcher. Is that much different from the time it would take to fix a rocket with a defect? Does the backup idea make all that much practical sense? So what should the Air Force do? What it wanted to do at the start: Pick one company and fully fund it. Otherwise, the EELV program will eat up so much of the space budget that other programs will suffer irreparably. It may not be easy to choose between a Boeing that cheated and its all-American Delta IV, which has few launches under its belt, or a Lockheed Martin Atlas V that relies on Russian technology but has five successes to date. But, hey, that's why they pay the brass the big bucks. The Air Force also should leave open the possibility that new, lower-cost entrants, such as SpaceX, could compete for launches in the future. The best way to safeguard both reliability and taxpayers is to rely on competition and make a choice.
 Crock is a correspondent in BusinessWeek's Washington bureau Edited by Phil Mintz Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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