October 19, 2011
GAO Report Raises Serious Concerns Over ULA Block Buy
A Congressional watchdog report issued Monday Oct. 17 raises troubling questions for taxpayers about a proposed five-year block buy of 40 rocket booster cores being advocated by the rockets´ manufacturer, United Launch Alliance (ULA). ULA is a joint venture between aerospace giants Lockheed Martin and Boeing.
The report by the Government Accountability Office (GAO), the nonpartisan, investigative arm of the U.S. Congress, found serious flaws with a proposal that would guarantee ULA´s monopoly over Department of Defense (DoD) launches.
The report states that while ULA is pushing the 40-rocket purchase, the methodology and data used by ULA to justify the purchase were severely flawed, there is no justification for the five-year timeline, and a block purchase could kill opportunities for competition by forcing the government to commit to more boosters than are actually needed.
Key GAO findings include:
No Justification for Five-Year Duration. When asked why a block buy period of 5 years was optimal, “ULA [was] at a loss to explain the rationale.” (p. 18)
Studies Rely on Faulty Inputs from ULA.
- A survey on the U.S. industrial base conducted by ULA and provided to DoD was not “administered in a manner consistent with sound survey methodology practices.” (p. 11)
- The survey cover letter included “ULA's Chief Executive Officer´s views on the 'inefficient' method used by DoD to acquire launch vehicles” and stated “that the goal of the survey is to “justify” a new acquisition strategy “that will enhance our collective business.”” (p. 11)
- One ULA official admitted: “We wanted certain answers.” (p. 11)
Excess Purchases Would Kill Competition. “The expected block buy may commit the government to buy more booster cores than it needs.”
- On Friday the Air Force, NASA and NRO issued a memorandum of understanding (MOU) setting the strategy to allow new companies to compete for launch contracts.
- For every year between FY 05 and FY 09, fewer than 50% of planned ULA missions actually launched. (p. 17)
- If ULA produces more cores than the USAF needs, there will be no competition for additional missions.
Competition Offers “Unprecedented” Opportunity to Lower Costs. “ [A]s new launch providers emerge who may be able to compete for EELV launches, providing the government with an unprecedented opportunity to incentivize efficiencies at ULA.” (p. 15)
ULA Costs Are Not Well-Understood; DoD Cannot Effectively Negotiate with Current Information.
- “According to Defense Contract Audit Agency (DCAA) reports, ULA proposals contain inadequate cost or pricing data that make it difficult for DoD to assess the adequacy and fairness of launch prices and the cost-effectiveness of launch operations.” (p. 13)
- Since ULA´s formation, every DCAA audit of EELV pricing found “unsupported or questioned costs ranging from 20-60 percent” and DCAA audits “consistently find ULA proposals and estimating techniques inadequate for evaluation.” (p. 14)
- “DCAA officials believe that program contracting officials have an inadequate basis on which to negotiate launch contracts.” (p. 14)Key GAO findings include:
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