Kendall Describes Novel Way of Contracting for Space-Launch Services

By Jim Garamone DoD News, Defense Media Activity

WASHINGTON, January 27, 2016 — The undersecretary of defense for acquisition, technology and logistics described a novel concept to acquire access to space during his testimony to the Senate Armed Services Committee today.

Frank Kendall told the committee that the proposed acquisition strategy will prepare the Defense Department for the future in space as well as driving down costs. And, he said, it will be an American solution -- one not reliant on Russian-made RD-180 rockets as is today’s Atlas 5 system.

Kendall’s solution would not replace one Russian-made rocket with an American counterpart, he explained. He is looking to meet DoD’s priorities of short access to space with at least two affordable and reliable sources of launch services. This will ensure competition, which should drive down costs and end any use of the RD-180 Russian engine for DoD launches, the undersecretary said.

“The first thing I would like to emphasize is that the department does not buy rockets or engines. We do not buy launch systems or propulsion systems,” he told the senators. “What we do buy is the transportation of our satellites to space by launch service providers.”

Given Russia’s actions in Ukraine, the United States would like to stop using the Russian RD-180 engine. “The obvious and direct thing for the department to do would seem to be to pay for a new engine to replace the RD-180,” he said. “There are three problems with this.”

Challenges

The first is that engines are designed for a specific rocket and are not interchangeable, Kendall said. If the U.S. government decided to build a copy of the RD-180, it would only fit on the Atlas rocket and would benefit only one company -- United Launch Alliance, the undersecretary said.

“Second, this would be expensive,” he said. “Current estimates are that this would take about $3 billion.”

Finally, Kendall explained, DoD doesn’t need an engine; it needs reliable, affordable and efficient access to space through commercial companies.

“The commercial space launch business and space as an operational domain are both in transition,” he said. “A number of commercial enterprises are planning large-scale constellations involving hundreds or even thousands of satellites.”

Capitalize on Commercial Investments

Given this, DoD should be able to take advantage of the economies of scale, Kendall said. “This potential market is motivating launch service companies, like SpaceX, ULA and others to invest in more modern and efficient space launch systems,” he said.

“The department does not need to and should not carry all the cost of developing more efficient space launch systems. We need to capitalize on these commercial investments,” the undersecretary said.

But, he noted, DoD has additional concerns and requirements than purely commercial companies. “The department is concerned about the ongoing foreign military acquisition of anti-satellite systems by countries like Russia and China,” Kendall said. “This development is causing a major rethinking of our space system designs, with a resiliency to possible attack now a much more important operational and technical consideration.”

One approach is to replace the small number of existing highly capable satellites with a larger number of satellites with more distributed capabilities. “This development also suggests the need for more efficient launch service providers to fill those constellations,” the undersecretary said.

All this combines to give DoD the opportunity to enter business arrangements with prospective launch service providers using a commercial model, Kendall said.

“The basic business deal we have in mind is that the department will, through competition, provide at least two launch service providers with some of the capital they need to develop, test and certify the launch systems they will use to provide us with launch services in the future, including any unique DoD requirements,” he said.

In return, Kendall said, DoD will acquire the right to purchase launch services in the future at competitive prices and some degree of assurance that those systems will actually be available.

The exact form of these business arrangements will be dependent on the unique needs of each competing prospective launch service provider, he said. “The department has received industry responses to formal requests for information … which tell us that this concept has a real chance of success,” the undersecretary said.

Requests for Proposals

Kendall told the committee that the department will release a draft request for proposals shortly, in hopes that the final requests will be released by the end of the year. DoD hopes to award contracts in fiscal 2017, he said.

“In most acquisition strategies, the department specifies the product or service that it desires and industry bids to provide the specified deliverables,” the undersecretary said. “In this case, industry will have an important role in defining the terms of the arrangement or contract. Each selected launch service provider is expected to offer unique terms that will have to be negotiated.”

Kendall said that some factors to be weighed in awarding any contract will include “the technical risk of completing the launch system and achieving certification, the schedule to provide launch services without Russian engines, the soundness of the business case to provide commercial launch services officially, the cost of any not to exceed future launch service options for DoD and of course the amount and timing of DoD funding needed to complete development and certification of the proposed launch system.”

The undersecretary asked the committee to support this approach. “We are anxious to move forward so that we can end the use of the RD-180 and take advantage of the emerging commercial space launch service market,” he said.