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Musk’s SpaceX to Sue U.S. Air Force Over Launch Monopoly

By Kathleen Miller and Jonathan D. Salant
April 26, 2014 12:01 AM EDT 87 Comments
SpaceX's Falcon 9 rocket lifts off from Cape Canaveral, Florida on April 18, 2014 carrying its Dragon CRS3 spacecraft on a resupply mission to the International Space Station.
Photographer: Bruce Weaver/AFP via Getty Images
SpaceX's Falcon 9 rocket lifts off from Cape Canaveral, Florida on April 18, 2014 carrying its Dragon CRS3 spacecraft on a resupply mission to the International Space Station.

Elon Musk’s Space Exploration Technologies Corp. plans to sue the U.S. Air Force, saying it should be allowed to compete in a satellite-launch market monopolized by the two biggest defense contractors.

“If we compete and lose, that is fine,” he told reporters at the National Press Club in Washington. “But why would they not even compete it?”

Musk’s company, known as SpaceX, is trying to break the Lockheed (LMT) Martin Corp.-Boeing Co. joint venture’s lock on military satellite launches, which have an estimated value of $70 billion through 2030. Lockheed and Boeing are the military’s biggest suppliers.

SpaceX, based in Hawthorne, California, plans to file its suit Monday in the U.S. Court of Federal Claims. It’s seeking to reopen competition for a contract to the venture, United Launch Alliance LLC, for 36 rocket cores, said Ian Christopher McCaleb, senior vice president at Levick, a public relations firm representing SpaceX.

The Air Force agreed to the bulk purchase of the main rocket components last year. “This contract is costing U.S. taxpayers billions of dollars for no reason,” Musk said.

Also yesterday, Senator John McCain, an Arizona Republican, asked the Pentagon’s inspector general in a letter to investigate developments in the Air Force’s launch program. He questioned the lack of competition in the program.

‘Robust Acquisition’

Mark Bitterman, a spokesman for United Launch Alliance, said in an e-mail that the military’s “robust acquisition and oversight process,” and the company’s improved performance, led to more than $4 billion in savings compared with prior acquisition approaches.

Captain Matthew Stines, an Air Force spokesman, said the Air Force had no comment on SpaceX’s planned lawsuit.

SpaceX will require three successful launches as part of the process to win U.S. certification, the service has said. Technical reviews and audits of the proposed rockets, ground systems and manufacturing process also are needed, according to the Air Force.

For Musk, also chairman and chief executive officer of Tesla Motors Inc. (TSLA), it was a busy day in Washington. In addition to announcing the Pentagon lawsuit, he carved out time to thank friends and trash-talk his space competition.

Earlier yesterday, he made a presentation at the U.S. Export-Import Bank’s annual conference, where he praised the lender for providing financial support that Musk said helped his company compete overseas.

NASA Contract

He also had kudos for the National Aeronautics and Space Administration. The agency gave SpaceX a $1.6 billion contract to supply the International Space Station and has helped fund its development of a rocket and capsule capable of returning astronauts to space.

NASA’s been fantastic to work with and really has helped us a lot,” Musk said at the conference. “In fact, I’m not sure we’d even be where we are today without the help of NASA. We’re very grateful.”

During his talk, he took a jab at rival Orbital Sciences Corp. (ORB), which Musk said is paid twice as much to ferry cargo to the space station compared with SpaceX. “I think maybe they should get fewer missions in the future,” Musk said to laughter.

Barron Beneski, a spokesman for Dulles, Virginia-based Orbital Sciences, didn’t respond to phone and e-mail messages seeking comment on Musk’s statements.

Last month, Musk told U.S. lawmakers that the Lockheed-Boeing (BA) venture’s Atlas V rockets uses engines from Russia, posing supply risks following the country’s invasion of Crimea in Ukraine.

The U.S. and Europe have been considering a possible expansion of sanctions against Russia.

Pentagon officials have asked the Air Force to review whether the use of Russian engines for the military launches poses a national security risk.

To contact the reporters on this story: Kathleen Miller in Washington at kmiller01@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net

To contact the editors responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net Steven Komarow

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