US Air Force rocket buy sparks lawsuit by aspiring contender SpaceX

By Irene Klotz

CAPE CANAVERAL Fla. (Reuters) - Space Exploration Technologies, the privately held company known as , said on Friday it filed a lawsuit to protest the U.S. Air Force’s award of a multibillion-dollar, non-compete contract for 36 rocket launches to a partnership of the two biggest U.S. weapons makers.

The contract, announced earlier this year, "essentially blocks companies like SpaceX from competing for national security launches," SpaceX Chief Executive Elon Musk told reporters at a briefing in Washington, D.C., that was also broadcast on a conference call.

SpaceX, which manufactures and launches rockets and spacecraft, is in the process of getting its Falcon 9 rockets certified to fly payloads for the U.S. military.

The company wants the Air Force to reverse the sole-source award of 36 boosters to United Launch Alliance, a joint venture of Lockheed Martin (LMT.N) and Boeing (BA.N), and open the procurement to commercial competition. At the time, the Air Force said 14 additional contracts would be open to competition, although it has since delayed half those contracts beyond 2019.

"SpaceX is not saying that these launches should be awarded to us," Musk said. "We’re just ... saying that these launches should be competed. If we compete and lose, that's fine, but why were they not even competed? That just doesn't make sense."

SpaceX Falcon 9 rockets already fly cargo ships to the International Space Station, a $100 billion research laboratory that flies about 260 miles (418 km) above Earth, and launches commercial communications satellites into high-altitude orbits.

So far, the Air Force has certified one of three Falcon flights needed before SpaceX can compete for military missions.

Musk said he expects SpaceX to be able to fly military payloads for around $100 million apiece, or about one-quarter the price the United States pays for rides on United Launch Alliance’s Atlas and Delta rockets.

“The ULA rockets are basically about four times more expensive than ours, so this contract is costing the U.S. taxpayers billions of dollars for no reason,” Musk said.

The lawsuit comes amid growing controversy about the use of the Russian rocket engines and the Air Force’s slow progress toward a more competitive market for rocket launches.

Senator John McCain on Friday asked the Pentagon's inspector general to investigate the Air Force's handling of the process and what he described as its "demonstrably false explanations" for why it had delayed some of the competitive launches.

He said it was "profoundly troubling" that the Air Force was not following the Pentagon's goal to promote competition.

Air Force Secretary Deborah James told lawmakers this month that she was committed to moving toward competition, but it was important to ensure that SpaceX and other new entrants to the market could safely launch critical national security satellites, which often cost $1 billion or more to build.

McCain also wrote to James asking for more information about her testimony, and raising concerns about "the apparently incomplete and incorrect nature of some that testimony."

Musk raised questions about the U.S. government's contract with United Launch Alliance in light of U.S. sanctions imposed to protest Russia’s invasion of Ukraine’s Crimea peninsula. He said the United Launch Alliance's Atlas rocket uses Russian-made RD-180 engines while Dmitry Rogozin, Russia's deputy prime minister who is also the head of the country's space program, is among the individuals who are subject to the sanctions.

“How is it that we’re sending hundreds of millions of U.S. taxpayer money at a time when Russia is in the process of invading Ukraine?" Musk said. "It would be hard to imagine some way that Dmitry Rogozin is not benefiting personally from the dollars that are being sent there.”

The Air Force said it was on track to conclude a review of the RD-180 engine issues by May 1. It had no immediate comment on SpaceX’s lawsuit, which was filed in the U.S. Court of Federal Claims, or McCain's letters.

United Launch Alliance spokesman Mark Bitterman, said the company was reviewing the transcript of Musk's press conference.

Bitterman said the Pentagon's "robust acquisition and oversight process" and ULA's "improved performance" had lowered launch costs by $4 billion compared to earlier contracts.

SpaceX also announced that its Falcon 9 rocket used to put a Dragon cargo ship into orbit for NASA last week touched down on the Atlantic Ocean, before high seas destroyed the booster.

The company is working on technology to land and refly its rockets in an attempt to cut launch costs further.

SpaceX plans to make another water landing when it flies a network of communication satellites for Orbcomm next month.

(Additional reporting by Andrea Shalal in Washington; Editing by Leslie Adler and David Gregorio)