Musk’s SpaceX has been excluded from suppliers by the U.S. military and sued the U.S. Air Force for it. Now, SpaceX is fighting the Pentagon, poaching four-star air generals to improve relations with the military. The military business, which was once a sideline to SpaceX, is growing in size and threatening traditional military giants Boeing and Loma.
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SpaceX, owned by billionaire entrepreneur Elon Musk, has been unseeded by top Defense Department officials for years. But now Musk and SpaceX have been more successful than ever in competing for pentagon business.
Had a frustrated complaint against the U.S. Air Force
In May 2019, SpaceX took the U.S. Air Force to court, accusing it of violating contracting rules in 2018 by awarding $2.3 billion worth of “sales and service agreements” to three rocket makers, but ignoring SpaceX’s bid. Among them, Amazon CEO Jeff Bezos’ Blue Origin won a $500 million contract, Boeing and Lockheed Martin’s joint venture United Launch Alliance (ULA) won $967 million and Srop Grumman received $762 million.
SpaceX said in the lawsuit that the Air Force awarded the contract to three “unbuilt, untexed” rocket systems that could not launch rockets on the government’s schedule and would not be able to achieve the goals set out in the Air Force’s plan. SpaceX asked the court to force the Air Force to re-bid on the Launch Services Agreement and reconsider the company’s proposal.
On September 26th a US federal judge rejected SpaceX’s lawsuit, arguing that the US Department of Defense had properly assessed the development of SpaceX’s Starship rocket system as “too risky and expensive”.
Today’s big single company
In recent months, SpaceX has won a number of U.S. military contracts, from launching national security satellites critical to the U.S. to improve the military’s weather forecast to a $149 million contract to produce missile tracking satellites for the Defense Department.
SpaceX is also working with the U.S. Air Force and Army to demonstrate communication links. A few weeks ago, SpaceX signed an agreement with the U.S. Department of Defense to study the feasibility of using SpaceX’s planned deep space starship to eventually transport cargo around the world. The Starship is a huge capsule with a built-in rocket engine. According to SpaceX engineers, the Starship could carry 80 tons of cargo across continents in minutes.
From the start, Musk said his ultimate goal was to colonize Mars and help people escape safely from Earth if necessary. But in the process, SpaceX has accumulated civilian launch contracts worth about $5 billion. SpaceX also won a contract to launch rockets and prototype satellites for the U.S. military, with an estimated final value of $6 billion. In addition, SpaceX has received contracts worth about $9 billion in the past and in the future for NASA missions, mainly to transport cargo and astronauts to the International Space Station.
However, SpaceX’s total orders are far from the total compared to America’s leading arms suppliers. Boeing earned $26 billion from defense and space last year, while Lockheed Martin, the largest U.S. defense contractor, earned about $21 billion from its space and missile programs. Boeing and Lockheed Martin are also major contractors for NASA’s major projects. Over the years, these projects have generated tens of billions of dollars in additional revenue for them.
Billions of dollars “money scene”
Many SpaceX contracts rely on emerging technologies that will generate limited initial revenue depending on future U.S. Department of Defense decisions. But industry sources say SpaceX is expected to receive billions of dollars in revenue boosts over the next decade or so as Congress and the Defense Department devote more of their budgets to a number of space programs, especially the fastest-growing classified programs.
If Democrats win this year’s presidential election and push for new priorities, overall defense spending could fall. But the emphasis on strengthening space capabilities is likely to remain in the new administration’s plans, as it is part of a long-term military funding program and strategy that has won congressional support.
In fact, SpaceX’s shift to national security is a side business, making money while launching rockets and satellites for U.S. civilian and commercial customers, and NASA remains its number one customer. But analysts and industry insiders point out that SpaceX’s evolving strategy is to adapt some of its current systems to the requirements of new missions, such as tracking space junk, helping to fend off ultra-high-speed missiles and providing a secure communications link for U.S. service members around the world.
Roger Rusch, a veterans industry consultant, said SpaceX’s management’s perseverance in doing their job and doing everything in their power to win the military’s trust “paid off.” Rousey does not work for SpaceX or its competitors. SpaceX has yet to comment.
Closer relations with the military
But there’s a big difference between pitching SpaceX’s rockets to generals and negotiating commercial contracts. SpaceX tends to have a big advantage in commercial contract negotiations because it charges far less for launches than its rivals. Keith Volkert, a consultant who contracts with SpaceX on behalf of major satellite operators, says Musk’s team likes to tell their corporate customers that they’re just hitchhikers.
“We’re not actually selling you rockets,” Falkett recalls SpaceX representatives often saying. “
In less than 24 years, SpaceX has grown from a company with only a handful of employees working in a converted garage to a business with about 8,000 employees across Texas, Florida and Washington state. In Washington, D.C., SpaceX has earned a reputation as one of the best and most successful lobbying firms.
SpaceX has become the number one commercial and civil launch service provider in the United States by offering lower prices than traditional industry pioneers. But Falkett points out that this strategy does not apply to demanding military customers, who prioritize reliability and rigorous oversight over cost.
Musk has attracted private investors through the Starlink broadband Internet program, which aims to deploy thousands of small satellites. Industry and military sources say the commercial broadband project could eventually become a pillar of several global military applications, including surveillance. According to Musk’s public expectations, new technologies to send humans to Mars for development and testing are likely to cost at least $30 billion, and industry insiders believe SpaceX will increasingly rely on military revenue to help meet this rising cash demand.
Threats to Boeing, Loma
The Pentagon has accepted SpaceX’s Falcon 9 as the main launch vehicle for launching a range of Air Force navigation and intelligence satellites, including the previously controversial recovery feature: landing a first-stage rocket and then reusing it in subsequent launch missions.
In August, SpaceX beat Blue Origin to win 40 percent of the U.S. Department of Defense’s launch orders for the next few years, with United Launch Alliance taking the remaining orders. But United Launch Alliance executives are concerned about SpaceX’s rise. Just a few years ago, united launch alliances had little monopoly on the high-value launch missions of the U.S. military.
“Now they’re not just an emerging threat anymore.” Lockheed Martin CFO Ken Possenriede said in October.
To improve relations with the U.S. military, SpaceX recently recruited retired four-star Air Force Gen. Terrence O’Shaughnessy, a former commander of the U.S. Northern Command, which protects the U.S. from ballistic missiles, industry sources said. It’s unclear whether O’Shaynethy is a SpaceX consultant or employee. SpaceX has yet to announce the appointment, and the company is recruiting other former military officials. Mr O’Shaynethy has yet to comment.
Air Force Adm. O’Shayne west
SpaceX’s rise reflects the Pentagon’s growing emphasis on small, relatively inexpensive satellites, rather than a handful of expensive ones, which are derided as “space fortress Galactica” (American sci-fi drama) and are much more difficult to maneuver or defend.
Driven by SpaceX’s record 100 successful launches and the prospect of an increase in its defense budget, some Wall Street analysts have raised SpaceX’s valuation to near Lockheed Martin’s $103 billion market value. However, some advisers and analysts worry that the expansion of the military could distract SpaceX and affect the company’s civilian and commercial launch operations.
For SpaceX, becoming a top military supplier would be a dramatic shift for the company. Don’t forget, it also sued the U.S. Air Force for not taking the contract.
For his part, Musk has left behind visionaries who aspire to protect the environment and find alternative homes for humanity in the solar system. “If it had been paid for by the military, many outsiders would not have looked at him in such a good way.” Tim Farrar, a consultant, said. Farrar works for another broadband provider.