[Satellite News 10-18-11] The U.S. Government Accountability Office (GAO) is questioning a joint U.S. Department of Defense and National Reconnaissance Office (NRO) plan to spend $15 billion on United Launch Alliance (ULA) rocket booster cores. In a report issued Oct. 18, the GAO claimed that the plan did not provide government auditors with enough information to determine whether the military was getting a “fair and reasonable” price.

   The U.S. Air Force and NRO plan would see the Pentagon purchase a total of 40 booster core rocket components in increments of eight cores each year from 2013 to 2017. The military said the order would stabilize the production of the rockets it uses for satellite launches. The GAO, however, said the expected block purchase could commit the government to buy more booster cores than it needs, and could result in a surplus of hardware requiring storage and potentially rework if stored for extended periods.

   The GAO acknowledged that its report was published as the Air Force was finalizing the details of a procurement strategy and new entrant criteria for national-security payload and reconnaissance satellite launch missions and expects the completed strategy to be finished by the end of 2011.

   The Air Force, NRO and NASA also released a strategy Oct. 14 that aims to allow U.S. commercial companies to compete for their space-launch business and establish standard set of requirements and payload risk classifications.

   “This EELV strategy is intended to further enable competition and provide a consistent path for new entrants to compete,” the agencies wrote in the strategy. “The Pentagon would issue a contract for each rocket as needed and a separate contract to cover ULA’s overhead and facilities cost. The bulk buy approach is designed to curb rising costs by stabilizing demand and production.”

   The GAO supported the EELV strategy in its report, and urged expanded coordination between the Air Force, NRO and NASA to minimize spending on fuel and other items that ULA buys for the EELV program office, but its report also highlighted that about 38 percent of the EELV missions planned during a five-year period from 2005 through 2009 were actually launched, with 21 missions completed out of 56 missions planned.

   “ULA charges up to an 18 percent profit on top of engine prices and to act as a broker for the program office on commodities like propellants bought from other government agencies, like NASA and the Defense Logistics Agency – costs the program could avoid if it were to coordinate purchases directly from other agencies,” according to the GAO report. “Without certified cost or pricing data on the booster cores defense auditors believe that program contracting officials have an inadequate basis on which to negotiate launch contracts.”

   In a U.S. Department of Defense response included in the GAO report, U.S. Deputy Assistant Secretary of Defense Ronald Jost said the Pentagon “partially concurs” with GAO’s recommendation to reassess the length of the block-buy contract, but that its suggestion to acquire certified cost and pricing data could prove to be impractical.

   “It is not likely the prime contractor or the [Pentagon] will be able to obtain certified cost or pricing data for the Atlas V RD-180 engines, which are purchased from a Russian company,” said Jost. “The decision on specific contractual quantity and period of commitment will be balanced among price, operational requirements, budget realities and the potential for new entrant competition.”

   ULA’s private sector competitor SpaceX jumped on the report’s findings in a company statement issued Oct. 18. “Since ULA’s formation, every DCAA audit of EELV pricing found unsupported or questioned costs ranging from 20 to 60 percent and audits consistently find ULA proposals and estimating techniques inadequate for evaluation. DCAA officials believe that program contracting officials have an inadequate basis on which to negotiate launch contracts,” the California-based launch company said in the statement.

   The report also received some support from U.S. Congress. Reps. C.W. Bill Young (R-Fla.) and Norm Dicks (D-Wash.) agreed with GAO assessments that additional subcontractor data was needed to negotiate fair and reasonable prices. Young also serves as the chairman of the U.S. House Appropriations Defense subcommittee.