The Evolved Expended Launch Vehicle (EELV) program was initiated with high hopes for cutting the cost of heavy launches for the U.S. military. Instead, it has sunk into a quagmire of murky doings, token punishments for unethical behavior, and shockingly high cost escalations. 

The initial contract was based on the assumption that the United States needed to support two contractors in order to ensure its military had guaranteed access to space.  When the EELV program was first being discussed in the mid-1990s, the commercial launch industry was soaring.  So the two competitors for the EELV program, Lockheed Martin and Boeing, figured that they could offer cheap launches to the military and make up their costs in the commercial sector.  In October 1998, Boeing was awarded 19 launches for the cost of $1.3 billion, and Lockheed Martin was given seven launches for $629 million.  Both companies were given $500 million by the Air Force as seed money for the initial engineering, manufacturing, and design costs, but the theory was that the contractors would be able to handle their costs once they got the contracts going.

That did not come to pass, as the commercial satellite launch market took a steep dive, due to more reliable satellites that outlasted their expected lifecycles and a global economic recession.  In 1998, 90 civilian satellites were launched.  But by 2003, the commercial satellite industry was reeling by the drop-off in business, as it saw only 12 commercial launches. Officials at Boeing and Lockheed Martin began to worry about whether they could continue to honor the cost estimates they had given at a much more optimistic time for their industry.

2003 was a critical year for other reasons.  In July 2003, the Air Force announced that it had discovered that Boeing had gotten hold of some 25,000 pages of Lockheed Martin’s proprietary information and misused it while bidding for the contract five years earlier.  As a result, the Air Force opted to suspend Boeing from bidding on future launches for the EELV program and give seven of its launches to Lockheed Martin.  This punishment was estimated to cost Boeing over $1 billion in lost launches.  It also was pricey for the Pentagon, as it had to spend $200 million to spruce up Lockheed Martin’s West Coast capabilities so it could handle the extra launches. Overall, the Air Force has estimated that this ethics lapse by Boeing brought on around $230 million in extra costs.

The Air Force found itself in a difficult predicament.  It had been tasked to fund two contractors, even though one of them now legally could not participate, and despite the fact that the EELV program as a whole had suffered such cost growth that it triggered a Nunn-McCurdy oversight analysis of whether it should continue. 

The question of whether the United States should persist with laying out the funds for dual-access to space was answered for once and for all in January 2005. The White House released its space transportation policy in which it codified a two-track access to space.  Once this decision had been made, it was only a matter of time before the Air Force lifted Boeing’s suspension from the EELV program.

Sure enough, in March 2005, 20 months after it was placed on the contractor, the Air Force declared that Boeing had learned its lesson and therefore was lifting the suspension.  Then-Acting Secretary of the Air Force Pete Teets stated that because Boeing had “worked very hard to correct the problems and prevent such violations from occurring in the future,” the Air Force “made them a full partner again on our national security space team.”  Teets did state that the next round of contracts to be awarded for the EELV program – known as Buy III – would not occur until 2006 at the earliest. 

Something happened to speed up this timeline over the next several weeks, because by April 2005, the Air Force had released its request for proposals for Buy III, saying that it would be awarding 22 launches for it by Oct. 1, 2005, at the latest.

What changed?  It wasn’t until the following month when the U.S. heavy launch satellite industry took another unexpected turn.  In May 2005, Boeing and Lockheed Martin rather unexpectedly announced that they would be forming a joint venture called the United Launch Alliance (ULA).  This new entity would not compete for launches, but instead have them “allocated,” depending on which facility would be best suited for the mission at hand.  The ULA would exist only for U.S. military launches; the two contractors would continue to compete individually for commercial and non-U.S. launches.  Boeing and Lockheed Martin officials said that this new joint venture would share some overhead costs and could save the Air Force $100-150 million annually; they also predicted that sales starting in FY 06 would yield $1.5-$2 billion a year that they could divide equally.

These optimistic claims of cost savings should be taken with a grain of salt.  When the EELV contract was announced in October 1998, then-Acting Secretary of the Air Force F. Whitten Peters rather grandly proclaimed, “The EELV program will lower costs by at least 25 percent and we are committed to realizing a goal of 50 percent savings.”  Instead, the Government Accountability Office estimated in a March 2005 report that the EELV program has seen its costs go up by 86 percent.  The Air Force has already included $370 million for infrastructure costs related to the EELV program in its FY 06 budget estimates – an increase from the $177 million it allotted for it in FY 05.  Besides,

the U.S. commercial satellite industry is already hard pressed to contend with Russian or European firms, which are much more competitive. Aviation Week & Space Technology cites a Pentagon official on the two U.S. companies’ difficulties in holding their own against foreign launch services:  “Even if we shot one of them in the head and gave the remaining business to the other, there is still no way we can be competitive…There is nothing to encourage anybody to choose a U.S. vehicle.”

Also suspect is that once the ULA has been approved by government regulatory agencies, assuming that it does not snag on any rules against monopolies, the lawsuit against Boeing will quietly be dropped.  Boeing will only be responsible for paying $1.9 million to the Air Force as compensation for the costs the service incurred while reviewing the ethics charges against the contractor.  At that point, the two companies apparently expect to bury the hatchet and work nicely together.

Strangely enough is that the Buy III contract will still be bid on by Boeing and Lockheed Martin individually, since government regulators are not expected to approve of the new joint venture until the end of this year.  Air Force officials say that once the ULA becomes official, they will rethink the decisions made for the Buy III contract. 

One wonders what the Air Force’s hurry is on this.  Why go to the trouble of making these important contract awards if they are going to have to be re-done a few months later?  Alternatively, why are Boeing and Lockheed Martin starting this new joint venture if they still must bid separately for the next big round of contracts?  When are their savings going to kick in? 

The real question is how anyone can still think that the EELV program with its dual-track access to space is going to benefit the United States.  The program’s existence to date has yielded unsavory business practices and questionable strategies for launch allocation, but precious little in the way of cost savings. If the United States is going to prop up the domestic military launch industry anyways, why spread its funding over two companies when one would do? 

None of the original reasons for the EELV program still exist.  Despite all the rhetoric about needing two companies so that the United States has a guaranteed access to space, the responsibility for providing this has been granted to one entity, while the promised savings have yet to emerge and are unlikely to any time soon. 

As it stands, the EELV program seems like nothing more than a boondoggle designed to bolster a crumbling domestic industry that is rotting out from the inside.