"3 ... 2 ... 1 ... Rip-Off!" Taxpayer Group Blasts Boeing/Lockheed Launch Vehicle Plan


(Alexandria, VA) - The pending Boeing/Lockheed "United Launch Alliance" (ULA) to provide the Air Force with expendable rockets would unfairly strand taxpayers with a half-billion-dollar-a-year subsidy: that's the message the 350,000-member National Taxpayers Union (NTU) delivered to Congress today, in an open letter urging lawmakers to end subsidies for the companies' current and proposed space-booster schemes. Federal policymakers are expected to consider the merger deal as early as this week.

"Launch platforms for satellites can be expendable, but tax dollars never are," said NTU Director of Government Affairs Paul Gessing. "Over the past decade, the Air Force's Evolved Expendable Launch Vehicle (EELV) initiative has moved from the best of intentions to the worst of results, and now the EELV is poised to go where no rocket program has gone before - toward a near-permanent government bailout of Boeing's and Lockheed's launch businesses."

Recently the sole providers of the troubled EELV project - Boeing and Lockheed Martin - proposed to merge their government space-booster operations into a United Launch Alliance, which the companies say will save the federal government as much as $150 million. But Gessing's letter to Members of Congress calls this claim "dubious on its face," because it fails to account for increases in taxpayer subsidies to Boeing, Lockheed, and, if approved, the ULA.

The source of the problem, Gessing contends, was that from the EELV's very inception in 1995, the two firms appeared "to have significantly underbid" to secure the initial contracts. Subsidies such as "assured access payments" soon followed, yet it became clear that Lockheed and Boeing would experience perpetual losses on EELV. The latest arrangement would give the two companies a sole-source "sustainment capability" contract - an indication, in NTU's view, that "competition is giving way to permanent taxpayer subsidies."

Since its founding NTU has opposed numerous wasteful or low-priority defense/aerospace programs, including the F/A-22 Raptor, the Crusader artillery system, and the X-33 orbiter. As Gessing noted, the ULA shows "many telltale signs" of previous government contracts gone awry.

"The Air Force's newly-revised EELV acquisition strategy makes a bad situation worse for taxpayers," the letter to Members of Congress concluded. "... NTU urges you to support the elimination of the EELV subsidy contracts and instead return to price-competitive acquisitions."

NTU is a non-profit, non-partisan citizen group founded in 1969 to work for lower taxes and smaller government at all levels. Note: Gessing's letter to Congress is available at www.ntu.org.

For Further Information, Contact: Pete Sepp or Paul Gessing, (703) 683-5700

LETTER FOLLOWS:

December 19, 2005

An Open Letter to the United States Congress: Don't Bail Out Boeing's and Lockheed's EELV Programs

Dear Member of Congress:

On behalf of the 350,000 members of the National Taxpayers Union (NTU), I urge you to cease taxpayer expenditures for subsidies meant to prop up Boeing's and Lockheed Martin's Evolved Expendable Launch Vehicle (EELV) ventures. As an advocate for American taxpayers, NTU views these expenditures as wasteful and unfair. Specifically, we believe that the Air Force's newly revised EELV acquisition strategy is tantamount to a government bailout of these money-losing EELV programs.

As you may be aware, the sole providers of EELVs - Boeing and Lockheed - recently announced their intent to merge their government launch businesses into a joint venture called the "United Launch Alliance" (ULA). This merger is currently under review by the Federal Trade Commission and the Department of Defense. Boeing and Lockheed claim that the merger will result in a "lower cost to the Government," with projected savings in the $100-150 million range at some point in the future. This claim is dubious on its face. Whatever savings might result from the merger will be more than offset by increases in taxpayer-funded subsidies to Boeing and Lockheed (and if approved, the ULA), ultimately costing taxpayers upwards of $500 million per year due to the Air Force's EELV acquisition strategy.

The history of the EELV program (and the Air Force's acquisition strategy) has moved from the best of intentions to the worst of results. When it began the program in 1995, the Air Force had planned to take advantage of the benefits of a commercial-like procurement - that is, the Air Force had intended for competitive market forces to drive costs down and quality up. However, in order to secure the initial EELV contracts, Boeing and Lockheed appear to have significantly underbid. As the companies' costs grew and they began to lose money, Boeing and Lockheed petitioned Congress for additional funding. From 2003 through 2005, Congress provided extraordinary assistance to the two companies in the form of "assured access" payments. Now, the Air Force has proposed shifting to sole-source "sustainment-capability" contracts, which cover both infrastructure and certain mission-related launch costs. In essence, this ensures that the Boeing and Lockheed EELV businesses simply cannot lose money. In addition, the Air Force is providing Boeing and Lockheed with exclusive, long-term EELV launch allocations. Finally, the Air Force is supporting the ULA merger. It is clear that competition is giving way to permanent taxpayer subsidies.

The Air Force's newly revised EELV acquisition strategy makes a bad situation worse for taxpayers. The gains, if any, are far outstripped by taxpayer losses. For these reasons, NTU urges you to support the elimination of the EELV subsidy contracts and instead return to price-competitive acquisitions.

Sincerely,

Paul J. Gessing
Director of Government Affairs

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