By Andrea Shalal
WASHINGTON (Reuters) - The U.S. Air Force must modify its annual "launch capability" contract with United Launch Alliance, to level the playing field for new competitors of the joint venture of Lockheed Martin Corp (NYSE:LMT) and Boeing Co, senior U.S. Air Force and Pentagon officials told lawmakers on Wednesday.
Air Force Space Command Commander General John Hyten said acquisition officials were working on a plan to phase out the infrastructure support contract in coming years. He cited changing market conditions, including the rise of a rival launch company and prospects for an increase in government satellite launches.
He said the contract was initially put in place to protect "a very fragile industrial base" in the 2000s, when there were few U.S. government satellites being launched due to program delays, and commercial demand failed to materialize as expected.
He said the contract made it impossible to have a fair competition, backing an argument often made by privately held Space Exploration Technologies. The company, also called SpaceX, hopes to be certified by June to compete for some satellite launches now carried out solely by ULA.
"I don't think you can have a fair competition with that contract in place. There'll have to be a change," Hyten told the House Armed Services Committee's strategic forces subcommittee, noting that emergence of a new competitor changed the situation.
Dyke Weatherington, acting deputy assistant defense secretary for space, strategic and intelligence systems, said some funding for launch infrastructure would likely be folded into the per-launch pricing for future contracts for launch services, instead of being awarded separately.
Gwynne Shotwell, president of SpaceX, told the same subcommittee on March 17 that continuing the annual $1 billion contract to ULA would skew any future competition, and the Air Force would have to adjust its cost estimates to reflect the infrastructure support given to ULA.
The Government Accountability Office, the investigative arm of Congress, last year said the separate launch capability contract made it difficult for the Pentagon to determine an accurate price for an individual launch by ULA.
ULA President Tory Bruno last week said the company was developing a more transparent pricing model for future launches.
The U.S. Air Force said on Monday it was on track to certify SpaceX to launch U.S. military and spy satellites by June, with the final efforts focused on qualifying the second stage engine and structure of its Falcon 9 rocket.