The first completed BE-4 engine. Photo: Blue Origin.

The U.S. Air Force and U.S. Space Force plan to end Launch Services Agreement (LSA) funding for Northrop Grumman and Blue Origin by the end of this year, the Air Force said on Nov. 30.

“The government sent letters in October to notify Northrop Grumman Space Systems and Blue Origin of the intent to end the LSAs,” the Air Force acquisition office wrote in an email.  “The government is currently negotiating with each company, and plans to completely end both LSA Other Transaction Agreements (OTAs) by the end of 2020.”

Both companies lost out in the Phase 2 launch service procurement (LSP) National Security Space Launch (NSSL) awards on Aug. 7. On that date, the Space Force’s Space and Missile Systems Center (SMC), in partnership with the National Reconnaissance Office (NRO), awarded United Launch Alliance (ULA) a $337 million contract for two classified mission launches, and Space X a $316 million contract for one classified mission launch under Phase 2 of LSP.

Air Force acquisition chief Will Roper has said that the Air Force does not want to “carry” the companies “indefinitely” under the LSAs and that the LSA goal “was to create a more competitive environment leading into Phase 2.”

Part of the delay in ending the LSAs with Northrop Grumman and Blue Origin has apparently been the work Air Force acquisition officials have wanted to perform in documenting vendors’ activities, determining what data is government proprietary and retaining rights to that data, and engaging with Congress on a possible acceleration of Phase 3, which will be an open competition like Phase 2.

 “The government and contractors are in negotiations for the final milestones and payments to receive data deliveries for work in progress,” the Air Force acquisition office wrote in the Nov. 30 email. “The final amounts paid to each company is not yet known. The government will not pay termination fees. The government originally committed a total of $500 million through 2024 in OTA funds for Blue Origin and $792 million for Northrop Grumman.”

Despite its loss, Blue Origin retains a stake in Phase 2, as Blue Origin’s BE-4 engine will power ULA’s Vulcan Centaur launch vehicle.

Under the Phase 1 LSA awards in October 2018, Northrop Grumman, Blue Origin and ULA received up-front contracts of $109 million. Northrop Grumman was eligible for $792 million under LSA, while Blue Origin was eligible for $500 million.

The first three Phase 2 missions are to launch between Fiscal Year 2022 and Fiscal Year 2024, and SMC is to order launch services annually from ULA and SpaceX for up to 34 launches over five years. ULA is to receive 60% of the launch orders, and SpaceX will receive the remaining 40%.

Congressional appropriators are concerned with the cost of NSSL, as the Evolved Expendable Launch Vehicle (EELV) program, the predecessor to NSSL, had as its paramount goal a dramatic reduction in launch costs through lower cost commercial launch providers. SpaceX’s Falcon 9 and Falcon Heavy launches start around $60 million but will cost no more than $150 million, SpaceX founder Elon Musk has said.

The NSSL effort is to allow the Air Force to end reliance on the Russian-made RD-180 engine by leveraging U.S. commercial launch capabilities. The service has 12 RD-180 engines it can use, if a catastrophic failure arises in the NSSL program, but the service is prohibited by law from buying new RD-180s after 2022.

This article was first published by Via Satellite’s sister publication Defense Daily.