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

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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