The Motley Fool by Rich Smith 3/26/2017
Last week, SpaceX beat out United Launch Alliance to win a $96.5 million satellite launch contract.
This March contract covered the third in a series of 10 planned missions to put GPS III global positioning satellites in orbit for the U.S. Air Force, set to begin launching in 2018. Before that, the Air Force had awarded one such GPS III contract to ULA, with SpaceX lacking "certification" and not allowed to bid, and a second contract to SpaceX, with ULA not able to bid because of a lack of engines.
But this was the first contract in which SpaceX bid head-to-head against the Boeing (NYSE:BA)-Lockheed Martin (NYSE:LMT) joint venture -- and won. It won't be the last.
A busy schedule
Our friends at SpaceFlightNow.com laid out the facts that led us to this conclusion, in an article just a few days back. As SFN explains, the Air Force plans to run "as many as 15 competitions ... over the next year [minus the two that have already taken place] for rights to lift defense and intelligence-gathering payloads into orbit." These will include:
At least four more GPS III launches
A SBIRS GEO 5 missile warning satellite
An "AFSPC 9 mission"
A multi-payload launch called STP-3
Six "classified missions for the National Reconnaissance Office"
Air Force Space and Missile Systems Director of the Launch Enterprise Directorate Claire Leon told SFN that "technical" ability, the ability to launch satellites on "schedule," and with acceptable "risk criteria," will all play a role in awarding these contracts. What's more, Boeing and Lockheed are still under contract to launch three satellite missions under a 2014 "sole-source block buy" awarded ULA by the Air Force -- so chances are good that ULA can land at least three of the 13 missions described.
And for the rest? Well, just as in the most recent contract awarded, price could turn out to be "the determining factor," SFN says, in deciding who wins and who loses most of these contracts.
When price is the object
ULA won its first contract as part of the aforementioned $11 billion block buy of satellite launch services. Covering 36 launches, that put ULA's average launch cost at $305.6 million. That was nearly four times the $82.7 million SpaceX charged for its first GPS III contract. Even if you assume, though, that SpaceX lowballed that bid to get its foot in the door on the Air Force business, $305.6 million was still more than three times as expensive as SpaceX's more recent $96.5 million bid.
To beat SpaceX's prices on the 10 missions of the above 13 that we assume will pit SpaceX and ULA head-to-head, ULA may need to cut its prices by more than $200 million per launch -- a potential $2 billion revenue sacrifice.
More:
https://www.fool.com/investing/2017/03/26/boeing-and-lockheed-could-lose-billions-of-dollars.aspx?yptr=yahoo
