The most bitterly contested issue in Senate floor debate of the National Defense Authorization Act this year was whether the Department of Defense would be allowed to continue using Russian rocket engines to lift national-security satellites into orbit. The engines, called RD-180s, provide first-stage thrust for Atlas launch vehicles built by United Launch Alliance, a joint venture of Boeing and Lockheed Martin.
United Launch Alliance, or ULA, had a monopoly on Pentagon launches until last year, when the Air Force certified Elon Musk’s SpaceX as a competing provider of launch services to the military. By that time, though, the whole issue of how national-security payloads reach orbit had gotten caught up in the reaction to Moscow’s annexation of Crimea. The annexation and continuous military provocations that followed convinced many legislators that Russian engines needed to be jettisoned from the military space program as soon as possible.
That set the stage for an aggressive lobbying campaign by SpaceX to assure itself of a sizable market share in military launches by securing passage of a ban on using the Russian engines after 2019. That’s when the Pentagon’s current multiyear contract for launch services will be completed. If Russian engines were banned, then ULA would be unable to use Atlas for military launches. Its other launch vehicle, Delta, costs about 35% more than Atlas and has no hope of beating SpaceX’s Falcon 9 launch vehicle in a price-based competition.
(Disclosure: Boeing and Lockheed Martin both contribute to my think tank, and Lockheed is also a consulting client – which is why I know some of the details that follow.)
If SpaceX’s lobbying campaign had succeeded, Musk’s company would have ended up with a monopoly on pretty much any military payload it was capable of lifting into orbit. However, the campaign failed — on June 13 the Senate approved an amendment to the authorization bill that would allow use of up to 18 more RD-180 engines through the end of 2022. Since the House had already voted a bill that would allow further use of the Russian engines, it appears the great engine debate is over, and ULA won.
The question is why it won. Reporting by Politico points to the heavy lobbying muscle that ULA owners Boeing and Lockheed Martin deployed in support of their joint venture — which certainly is a big part of the explanation. But that doesn’t give credit to Senators for the deliberative process by which they weighed the arguments of both sides in a very emotional debate. The real reason ULA won was that its backers told a more convincing story than the SpaceX side did, and legislators responded to the merits of their case.
Because the space launch industry is concentrated in a handful of states, most of the Senators were not voting on the basis of constituent interests. It being an election year, though, they were all mindful of how voters might view sending money to Russia for rocket engines. Vladimir Putin’s government is despised on both sides of the aisle, and SpaceX backers hammered away at the theme that every engine purchase was lining the pockets of Putin’s corrupt inner circle.
It was a potent theme. In fact, the whole idea of relying on Russian engines to get missile warning and intelligence gathering satellites into orbit sounded a little crazy, given the threatening moves Moscow was making. But SpaceX wasn’t capable of lifting these heavy satellites into high orbits, and Atlas was the cheapest option available that could get the job done. In fact, if Delta was grounded for any reason, it was the only option.
The main goal of the Boeing-Lockheed-ULA lobbying campaign was to get this message out to Senators, many of whom had not followed the engine debate closely. That approach was a bit like the strategy that Boeing followed in making the case for reauthorization of the Export-Import Bank. Although there was strong opposition to the bank, it was almost entirely based on emotion rather than analysis. Boeing and other Ex-Im backers spent years educating legislators to the facts, and in the end won a resounding bipartisan victory.
The biggest challenge in implementing such a fact-based strategy is fielding enough talent to reach legislators and their staffs. In previous years, ULA had sustained a relatively sparse presence on Capitol Hill, failing to grasp the threat that SpaceX posed to its business. With co-owners Boeing and Lockheed Martin leaving ULA to fend for itself most of the time, SpaceX was able to win many converts to its side. ULA managed to dodge the bullet of an outright ban on the engines last year through a last-minute change to must-pass spending legislation, but it was too close for comfort.
With Senate Armed Services Committee chairman John McCain leading the charge for SpaceX and furious at last year’s 11th hour reversal of a ban, ULA’s prospects for prevailing in the 2017 budget cycle looked uncertain. So CEO Tory Bruno assembled a much bigger lobbying team, and that was heavily supplemented by Boeing and Lockheed. Reports that SpaceX and ULA spent similar amounts on lobbying in the first quarter don’t count all the additional muscle that Boeing and Lockheed deployed.
Protecting their space-launch franchise wasn’t the only reason Boeing and Lockheed got engaged in a big way. The rhetoric employed by SpaceX backers was so strident and emotional that the companies could not let it go unanswered. Senator McCain’s remarks in floor debate described a greedy “military-industrial-congressional complex” that was subverting the nation’s interests to keep using Russian engines, in the process rewarding Putin’s “corrupt cronies” and helping fund Russian aggression in Syria.
This overheated language gave the companies additional incentive to get their story out on Capitol Hill. They were aided in that effort by Senator Bill Nelson of Florida, a senior member of the Armed Services Committee who brokered a compromise that McCain was willing to sign on to because it included a specific date after which RD-180s could no longer be used for military launches. That date gave ULA sufficient time to field a successor to Atlas powered by American engines, meaning SpaceX would not be able to fashion a launch monopoly.
Nelson pointed out in floor debate on the amendment that he and Senator Cory Gardner of Colorado sponsored that Russian engines represented less than one-third of one percent of the value of U.S. imports from Russia, hardly enough to enrich anybody in Moscow. He also noted ULA’s record of over a hundred successful launches with no failures since its inception, and explained why it would take until 2022 for a new launch vehicle to be available so that military access to space and competition for launch services could be guaranteed.
Senator Nelson’s arguments were so sensible that in the end his amendment passed on a voice vote. In other words, it wasn’t close. There’s no denying that lobbying by Boeing, Lockheed Martin and ULA contributed to the defeat of the engine ban that SpaceX so fervently sought. But the arguments lobbyists laid out to anyone who would listen were so compelling that even some members of the Tea Party signed on. SpaceX lost because its position potentially endangered U.S. access to space and undermined competition.
Continue reading “SpaceX Attempted Monopoly”