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The Antares medium-class space launch vehicle features two-stages
(with optional third stage) that provides low-Earth orbit launch capability for payloads weighing more than 5,000 kg.
Image credit: Oribital Sciences
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[Satellite TODAY 06-25-13] Orbital Sciences filed a lawsuit last week seeking more than $1.5 billion – including trembled damages – against its competitor, United Launch Alliance (ULA) and its engine supplier RD AMROSS, alleging violations of the Sherman Act, which deals with fair market competition.
Lockheed Martin declined to comment and deferred questions to ULA. ULA officials said while they are aware of pending litigation, “it would be inappropriate for us to comment on specifics, due to the impending litigation.”
The litigation was announced in the wake of ULA’s joint venture, which was owned and controlled by Lockheed Martin and Boeing. The venture purportedly blocked Orbital’s access to the Russian-built RD-180 engine. Orbital also claims that the deal was intentionally framed "to freeze Orbital out of the medium-lift market, thereby conferring monopoly control of this market to ULA," said Chris Quilty, senior vice president with Raymond James in a recently issued report.
According to court documents obtained by SatelliteTODAY.com, the complaint alleges that precluding Orbital from acquiring a rocket engine for its Antares launch vehicle actually hindered Orbital’s ability to compete for federal contracts, including with the U.S. Department of Defense (DoD), National Reconnaissance Office (NRO) and NASA. The complaint also said that Orbital had purportedly been in active discussions with RD AMROSS regarding engine procurement but the negotiations ended when RD AMROSS signed an exclusive agreement with United Launch, which ultimately prevented any deals with Orbital through 2018 and was contrary to DoD objectives.
“I direct the Air Force to aggressively introduce a competitive procurement environment in the [Evolved Expendable Launch Vehicle] EELV program by competing up to 14 cores with initial contract awards as early as FY 2015,” a DoD under secretary wrote in an email republished in the complaint.
To date, Orbital has invested $390 million to enter the medium-class space launch systems market and a number of “man-hours,” according to the complaint, but that doesn’t phase Marco Caceres, a satellite analyst at the Teal Group. Caceres noted the agreement was basically a renewal of a previous exclusivity agreement, which he said is a fairly common practice.
"The argument that there is a monopoly here seems kind of funny to me because the approval of the sale by the U.S. government was basically saying, yeah it creates a monopoly, but so what? There is not enough business there for two separate companies to survive. In time one [company] was going to go out of business anyway, and why not approve the sale and create one stronger company?" Caceres said.
The previous exclusivity agreement terminated in 2006, and it was not renewed or extended until 2010, which extended the term until 2016.
“The pattern is clear. Every time Orbital threatens to compete with ULA … ULA extends the period of the exclusivity agreement to force Orbital’s access to the RD-180, the only viable long term liquid propulsion engine available for sale in the United States,” the complaint said. “If there was a legitimate business interest to extend exclusivity past this initial 10-year period, Lockheed Martin and ULA surely would not have allowed the agreement to lapse and remain expired for two and one-half years.” The complaint also contends that ULA held 80 percent of the market share in specific space-launch classes and that the programs experienced “massive cost overruns, triggering a review under the Nunn-McCurdy oversight program,” which was designed to reduce cost increase associated with the U.S. government’s weapon procurement efforts.
Lockheed Martin declined to comment and deferred questions to ULA. ULA officials said while they are aware of pending litigation, “it would be inappropriate for us to comment on specifics, due to the impending litigation.”
Based on data released by the U.S. Government Accountability Office (GAO), the ULA EELV program exceed its original projected per unit cost by 286 percent, the complaint said, noting that a July 2012 GAO report indicated DoD and NRO expect to spend $19 billion on EELV launches between 2013 and 2017.
Manufactured by NPO Energomash of Moscow, the RD-180 was co-developed with Lockheed Martin during the 1990s to support the U.S. government’s EELV launch program and was eventually selected to power the first stage of ULA’s Atlas V rocket, Quilty said.
"ULA currently has exclusive rights to the RD-180 through RD AMROSS," he said. "During the late 2000s, Orbital attempted to procure the RD-180 for its Antares medium-class rocket program, but was eventually forced to select the Aerojet AJ-26 after being rebuffed by RD AMROSS."
And there are not substitutes. “Other than the AJ26 engine, the RD-180 engine is the only existing liquid propulsion engine available in the United States that is suitable for use by medium-class space launch vehicle providers,” the complaint states.
According to Quilty, the AJ-26 has been out of production for more than 40 years because its initial purpose served the Russian moon program, which was aborted. And while Aerojet currently has enough engines to support Orbital’s NASA cargo delivery contract of two demonstration flights and eight cargo missions, it is unclear whether there are enough engines remaining to support a NASA contract extension, much less commercial medium-lift contracts.
But Quilty noted that Aerojet’s president, Warren Boley, argued that production of the AJ-26 could have restarted, had Orbital agreed to sign a contract for more engines. The problem with this claim, however, is that “it would likely take several years and $500 plus million to re-establish AJ-26 production, with no guarantee of an export license," Quilty said.
But from a long-term perspective, Caceres agrees with Boley. "The solution would be for the Russians to agree to restart production line. That would solve Orbital Science problems," Caceres said.
Regardless of the outcome of the newly filed litigation, "the lawsuit is likely to create a degree of chaos within the industry as domestic and Russian vendors hedge their bets on the lawsuit’s outcome," Quilty said.
Quilty predicts that GenCorp will likely be forced to play both sides of the dispute while supplying AJ-26 engines to Orbital through its Aerojet subsidiary and defending RD-180 exclusivity through its recently-acquired Pratt & Whitney Rocketdyne subsidiary – RD AMROSS, is a joint venture between American Pratt & Whitney Rocketdyne and Russian NPO Energomash. "ULA can be expected to offer a vigorous support of its position, but may eventually choose to partner, surrender, or undertake an all-new engine development program," he added.
Meanwhile Caceres defended ULA and said, "I’m not sure you can blame them for playing hardball, it is a business after all. They didn’t create the monopoly, it was already developing on its own because of a lack of business in that particular segment of the industry, plus the U.S. government allowing it."
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