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California-Based Space Transport Company Sues U.S. Government Over Anticompetitive Contract Bidding Process

SpX_CRS-2_launch_-_further_-_cropped.jpgSpace Exploration Technologies Corp., commonly known as SpaceX, filed a bid protest in the Court of Federal Claims accusing the U.S. government of anticompetitive practices in its procedures for awarding launch contracts. Space Exploration Technologies Corp. v. United States, et al, No. 1:14-cv-00354, am. complaint (C.F.C., May 19, 2014). SpaceX alleges that the United States Air Force (USAF) has granted a monopoly on national security satellite launches to United Launch Alliance (ULA), a joint venture of Boeing and Lockheed Martin. It claims that this practice is unlawful and anticompetitive, and that it costs taxpayers billions of dollars more than if the USAF considered other bids. The company states that it is only asking for the opportunity to bid on contracts rather than any competitive advantage.

SpaceX, headquartered in the Los Angeles, California area, was founded in 2002 by Elon Musk, who is also known for his involvement in PayPal and Tesla Motors. The company has developed several launch vehicles and spacecraft, and it is the first private company both to launch a spacecraft into orbit and to dock a spacecraft with the International Space Station (ISS). It has contracts with NASA to provide design and transport services for the ISS, as well as private contracts for commercial satellites. It is now seeking the opportunity to bid on contracts to launch national security satellites for the USAF.

SpaceX is requesting a declaratory judgment and permanent injunctions requiring the USAF to use a bidding process that complies with the Competition in Contracting Act (CICA) and Part 6 of the Federal Acquisition Regulations (FAR). In most cases, government agencies must permit “full and open competition” for contracts. 10 U.S.C. § 2304(a), 48 C.F.R. § 6.101. The Department of Defense, which includes the USAF, is permitted to use “procedures other than competitive procedures,” but only in certain circumstances and only by obtaining bids from “as many potential sources as is practicable.” 10 U.S.C. § 2304(c), 48 C.F.R. § 6.301.

The USAF implemented the Evolved Expendable Launch Vehicle (EELV) program in 1995, through which it contracts with private companies for space launches. The USAF gradually began awarding all launch contracts to ULA, allegedly based on “three critical commitments”: cost savings, the ability of new launch providers “to compete as soon as they were ready,” and the maintenance of “two distinct launch systems.” SpaceX, am. complaint at 10-11.

SpaceX claims that the USAF has not kept any of its three commitments. It first alleges that ULA’s monopoly has led to significant cost increases, with the cost per launch increasing by 50 percent between fiscal years 2007 and 2015. Id. at 11. A lack of open competition, it claims, will cost taxpayers nearly $6.6 billion overall. Id. at 29. SpaceX also seeks to demonstrate that it has met the requirements for readiness under the USAF’s second commitment. The EELV program determined that SpaceX was not ready when it first approached the USAF in 2006. Since then, SpaceX’s Falcon 9 launch vehicle has performed nine missions successfully, and it has 37 missions scheduled through 2017. Id. at 14-15. Finally, SpaceX claims that ULA’s monopoly over national security launches has impeded the USAF’s realization of its third commitment.

Business and commercial lawyer James G. Schwartz has 38 years of experience representing businesses in the Bay Area in contract disputes and other business matters. To schedule a free and confidential consultation to see how we can help you or your business, please contact us today online or at (925) 463-1073.

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Photo credit: By Tony Gray and Robert Murray [Public domain], via Wikimedia Commons.