Questioning Defense Merger Mania

When the Department of Defense endorsed the United Launch Alliance (ULA)—a joint venture between Boeing and Lockheed Martin for the Evolved Expendable Launch Vehicle (EELV) Atlas V—they justified the decision by citing cost pressures, low vehicle production rates, and low launch volumes that resulted in a collapsed commercial market. In 2004, GAO reported that the federal government will continue to subsidize a significant share of costs until a commercial market emerges and the cost burden shifts to others requiring launch services, with costs that were $13.3 billion over the $18.8 billion baseline estimate at the time.

It appears, however, that there is a commercial market for the EELV afterall. A few days ago, Lockheed Martin agreed to form a partnership with Bigelow Aerospace to study the potential for launching passengers on human-qualified Atlas V rockets.

In March of this year, POGO wrote a letter to the Under Secretary of Defense, Kenneth J. Krieg, opposing the proposed joint venture between Boeing and Lockheed Martin, writing that DoD's allowment of so many mergers "is a clear example of the Pentagon's acquiescence to the defense industry's interests—a practice that is counter to the interests of the American public." As the U.S. Air Force and Boeing prepare to sign a two-year contract for rocket launch support, the Air Force's working assumption appears to be that there is not enough launch business to support two suppliers. Given the recent commercial deal Lockheed has made with Bigelow, it appears that the justification for ULA—and taxpayers underwriting EELVs—is questionable at best, and quite possibly false. DoD and the Federal Trade Commission, who will ultimately decide if the ULA merger should be approved, should add the Bigelow deal to the list of concerns POGO has raised when determining if the Lockheed-Boeing merger is in the best interest of the taxpayer.