On May 2, 2005, Boeing and Lockheed Martin announced their intention to form a joint venture called the United Launch Alliance (ULA), combining the production, engineering, test and launch operations associated with U.S. government launches of the Delta and Atlas rockets, respectively. This joint venture would assure access to space for the USAF and provide launch services to civil and commercial customers.

Since that time ULA has had a virtual monopoly for large Air Force satellites and for other large government spacecraft.

Late last month the U.S. Department of Defense announced plans to open up the competition for such launch services from other companies.

To be more specific, the Air Force has been authorized to buy as many as 14 booster cores over the next five years from ULA or other suppliers such as Space Exploration Technologies (SpaceX) and Orbital Sciences. In addition, the Air Force may buy as many as 36 cores from ULA over the five-year period.

Contracts for the new suppliers may be awarded as early as FY15 for missions that may fly beginning in FY17.

One of the main drivers of this change in policy is cost escalation over the past several years. Of course, the Pentagon is under great pressure to reduce launch costs. Average launch costs for ULA services have more than doubled to $464 million since 2005.

Two of the main causes for cost increases are the unstable demand for launch services and unsteadiness in the associated supply base. An additional factor was the retirement of the space shuttle fleet. This reduced the demand for rocket engines and forced suppliers to spread reduced demand over large fixed costs.