Bloomberg News

Musk’s SpaceX to Sue Over Lockheed-Boeing Launch Monopoly (1)

April 25, 2014

Elon Musk

Space Exploration Technologies Corp. founder Elon Musk. Photographer: Simon Dawson/Bloomberg

Elon Musk’s space company will sue the U.S. Air Force to protest a Lockheed Martin Corp.-Boeing Co. (BA:US) team’s monopoly on Pentagon satellite launches, the billionaire said today.

“These launches should be competed,” he told reporters at the National Press Club in Washington. “If we compete and lose, that is fine. But why would they not even compete it?”

Musk’s Space Exploration Technologies Corp., known as SpaceX, is trying to break the joint venture’s lock on U.S. military satellite launches, which have an estimated value of $70 billion through 2030. He has said competition in that market may save taxpayers more than $1 billion a year.

Also today, Senator John McCain, an Arizona Republican, asked the Pentagon’s inspector general in a letter to investigate developments in the Air Force’s launch program. He questioned the lack of competition in the program.

SpaceX, based in Hawthorne, California, plans to file its suit Monday in the U.S. Court of Federal Claims. It seeks to reopen competition for a military contract to joint venture United Launch Alliance LLC for 36 rocket cores, said Ian Christopher McCaleb, senior vice president at Levick, a public relations firm representing SpaceX.

Taxpayer Cost

The Air Force agreed to the bulk purchase of the main rocket components last year in an attempt to hold down costs.

“This contract is costing U.S. taxpayers billions of dollars for no reason,” said Musk, who earlier today made a presentation at the U.S. Export-Import Bank’s annual conference.

Mark Bitterman, a spokesman for United Launch Alliance, said the military’s “robust acquisition and oversight process,” as well as the company’s improved performance, led to $4 billion in savings compared with prior acquisition approaches.

The joint venture recognizes the Pentagon’s “plan to enable competition and is ready and willing to support missions with same assurance that we provide today,” Bitterman said in an e-mail.

Matthew Stines, an Air Force spokesman, said in an e-mail that the service has “no formal statement” on Musk’s announcement of the SpaceX lawsuit.

Russian Engines

SpaceX will require three successful launches as part of the process to win U.S. certification, the service has said. Technical reviews and audits of the proposed rockets, ground systems and manufacturing process also are needed, according to the Air Force.

Musk, also chairman and chief executive officer of Tesla Motors Inc. (TSLA:US), told U.S. lawmakers last month that the Lockheed-Boeing venture’s Atlas V rockets uses engines from Russia, posing supply risks following the country’s invasion of Crimea in Ukraine.

The U.S. and Europe have been considering a possible expansion of sanctions against Russia.

Pentagon officials have asked the Air Force to review whether the use of Russian engines for the military launches poses a national security risk.

To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net; Kathleen Miller in Washington at kmiller01@bloomberg.net

To contact the editors responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net Steve Geimann


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