![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/AtlasV-Diagram.jpg\")
<\/a>As tensions remain high between the two countries, the following risks are key to ULA\u2019s continued existence:<\/p>\n
- \n
- ULA\u2019s supply chain relies on one rocket engine with no domestically produced alternatives, currently.<\/li>\n
- Domestically produced alternatives will not be available until 2019 at the earliest.<\/li>\n
- Future isolationism and political events could prevent ULA\u2019s from sourcing engines if it loses its sanction exemption status.<\/li>\n
- Domestically- and vertically-integrated competitors will increase both political and cost pressure on ULA.<\/li>\n<\/ol>\n
In response to these threats, ULA must consider the following actions<\/strong>:<\/p>\n
- \n
- Build closer relationships with both Blue Origin and Aerojet Rocketdyne as equally alternative suppliers.<\/li>\n<\/ol>\n
OR<\/p>\n
- \n
- Purchase\/Merge to achieve in-house rocket engine production capabilities.<\/li>\n<\/ol>\n
AND<\/p>\n
- \n
- Immediately identify and add in-house capability for any other internationally produced components.<\/li>\n<\/ol>\n
ULA\u2019s Current Environment<\/h1>\n
Russian Sourcing & Sanctions<\/h2>\n
Beginning in 2014 and until this essay\u2019s publishing, Russia has been under multinational sanctions[3]. In response, Russian officials in 2014 threatened to ban the sale of RD-180 engines to the US [4]. While these threats were not realized[5], every US National Defense Authorization act passed by the House of Representatives since 2014 has contained an exception provision for the purchase of RD-180 rockets from Russia[6]. This has caused considerable controversy from both lawmakers such as Senator John McCain[7] and industry competitors such as SpaceX[8].<\/p>\n
Competitive Supply Chains<\/h2>\n
The current Space Vehicle industry is increasingly competitive due to private sector companies such as SpaceX, Blue Origin, and Virgin Galactic entering the industry to drastically reduce the price of launches via reusable launch vehicles (RLVs) in contrast to ULA\u2019s currently expendable launch vehicles (ELVs). When these competitors entered, they created their own supply chains emphasizing vertical integration and domestic production. Because of this, both main competitors SpaceX and Blue Origin already develop their rockets domestically[9],[10] and are therefore under no such supply chain pressure.<\/p>\n
SpaceX has already completed several launches to the International Space Station (ISS) delivering supplies using its Falcon 9 RLV. While the Falcon 9 RLV does not have quite the same capabilities or capacities as ULA\u2019s Atlas V, SpaceX is targeting to launch its new Falcon Heavy RLV in December 2017[11] which would easily exceed Atlas V\u2019s capabilities[12],[13]. Additionally, Blue Origin is developing its own RLV \u201cNew Glenn\u201d which it believes it can launch by 2020 and will also exceed Atlas V capabilities[14]. ULA\u2019s market power for launches will be greatly diminished when these competitors begin launching.<\/p>\n
<\/p>\n
ULA\u2019s Current Mitigation Steps<\/h1>\n
Short-Term: Political Lobbying<\/h2>\n
Primarily, ULA has used its large market share and relative monopoly in the Space Launch Industry to lobby successfully for exceptions on rocket engines in sanctions on Russia. ULA has previously cited national security concerns if there is a gap in US military launch capabilities since as early as 2010.[15] Additionally, within the same presentation, ULA recognized both the cultural, ethical, and export issues which would result from the US\/Russian partnership. [16] Nonetheless, ULA has been successful at fending off competitive pressures on the government to remove the sanction exception for the RD-180.[17] Time will only tell if this tactic will continue to be successful as SpaceX and Blue Origin show they have the ability to compete for government contracts. [18]<\/p>\n
Mid-\/Long-Term: Domestic Suppliers<\/h2>\n
Blue Origin\u2019s BE-4<\/h4>\n
![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/BE-4-Engine-1024x679.jpg\")
<\/a>BE-4 engine, a collaboration between Blue Origin and ULA. Source: Blue Origin[19]<\/figcaption><\/figure>In addition to short-term lobbying efforts, ULA has partnered with competitor Blue Origin to develop a domestically sourced engine. The new engine will go into ULA\u2019s new Vulcan rocket, hopefully by 2019 according to ULA president and CEO Tony Bruno. [20] Additionally, ULA is developing a process to recover these new engines, which will reportedly represent 60-70% of the Vulcan\u2019s cost, by 2024.[21] However, the BE-4 engine will also be used in Blue Origin\u2019s New Glenn rocket[22], putting additional cost pressure on ULA.<\/p>\n Aerojet Rocketdyne\u2019s AR1<\/h4>\n
In addition to the BE-4, Aerojet is developing its own engine, the AR1, which it believes it can produce a flight ready engine by 2019.[23] However, the engine is currently considered a backup to Blue Origin\u2019s BE-4. This is a risky plan for ULA, but they are effectively betting on working with the more capitalized company, at the risk of longer-term profitability.[24]<\/p>\n
Remaining Questions<\/h1>\n
- \n
- Which engine will ULA ultimately decide on and what competitive impact will there be from their selection?<\/li>\n
- How will Aerojet view a merger attempt, given ULA rejected a previous buyout offer from Aerojet in 2015?<\/li>\n<\/ol>\n
<\/p>\n
Sources:<\/h1>\n
[1]: National Defense Authorization Act for Fiscal Year 2015, HR4435, 113th<\/sup> Cong., Congressional Record <\/em>160. https:\/\/www.congress.gov\/bill\/113th-congress\/house-bill\/4435<\/a>, accessed November 2017.<\/p>\n
[2]: ULA, \u201cAtlas V.\u201d http:\/\/www.ulalaunch.com\/Products_AtlasV.aspx<\/a>, accessed November 2017.<\/p>\n
[3]: Council Decision 2014\/145\/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, 2014. OJ L78\/16. http:\/\/eur-lex.europa.eu\/LexUriServ\/LexUriServ.do?uri=OJ:L:2014:078:0016:0021:EN:PDF<\/a>, accessed November 2017.<\/p>\n
[4]: \u201cRussia responds to US sanctions over Ukraine,\u201d ITV, May 13, 2014, http:\/\/www.itv.com\/news\/update\/2014-05-13\/russia-responds-to-us-sanctions-over-ukraine\/<\/a>, accessed November 2017.<\/p>\n
[5]:\u00a0Doug Cameron, \u201cRussia Sanctions Aren\u2019t Rocket Science, Except When They Are,\u201d Wall Street Journal<\/em>, July 21, 2014. https:\/\/blogs.wsj.com\/corporate-intelligence\/2014\/07\/21\/russia-sanctions-arent-rocket-science-except-when-they-are\/<\/a>, accessed November 2017.<\/p>\n
[6]: National Defense Authorization Act for Fiscal Year 2015, HR4435, 113th<\/sup> Cong., Congressional Record <\/em>160. https:\/\/www.congress.gov\/bill\/113th-congress\/house-bill\/4435<\/a>, accessed November 2017.<\/p>\n
[7]: Andy Pasztor, \u201cMcCain Compromises on Russian Engines for Pentagon\u2019s Space Launches,\u201d June 14, 2016, https:\/\/www.wsj.com\/articles\/mccain-compromises-on-russian-engines-for-pentagons-space-launches-1465944194<\/a>, accessed November 2017.<\/p>\n
[8]: Loren Thompson, \u201cWhy SpaceX Lost Its Bid To Ban Russian Rocket Engines,\u201d July 7, 2016, https:\/\/www.forbes.com\/sites\/lorenthompson\/2016\/07\/07\/why-spacex-lost-its-bid-to-ban-russian-rocket-engine-debate\/<\/a>, accessed November 2017.<\/p>\n
[9]: SpaceX, \u201cAbout SpaceX.\u201d http:\/\/www.spacex.com\/about<\/a>, accessed November 2017.<\/p>\n
[10]: Blue Origin, \u201cBLUE ORIGIN DEBUTS THE AMERICAN-MADE BE-3 LIQUID HYDROGEN ROCKET ENGINE.\u201d https:\/\/www.blueorigin.com\/news\/news\/blue-origin-debuts-the-american-made-be-3-liquid-hydrogen-rocket-engine<\/a>, accessed November 2017.<\/p>\n
[11]: Kennedy Space Center, \u201cRocket Launches,\u201d https:\/\/www.kennedyspacecenter.com\/launches-and-events\/events-calendar\/2017\/december\/rocket-launch-spacex-falcon-heavy<\/a>, accessed November 2017.<\/p>\n
[12]: SpaceX, \u201cCapabilities & Services,\u201d http:\/\/www.spacex.com\/about\/capabilities<\/a>, accessed November 2017.<\/p>\n
[13]: ULA, \u201cAtlas V.\u201d http:\/\/www.ulalaunch.com\/Products_AtlasV.aspx<\/a>, accessed November 2017.<\/p>\n
[14]:\u00a0Nicholas St. Fleur, \u201cJeff Bezos Says He Is Selling $1 Billion a Year in Amazon Stock to Finance Race to Space,\u201d New York Times, <\/em>April 5, 2017. https:\/\/www.nytimes.com\/2017\/04\/05\/science\/blue-origin-rocket-jeff-bezos-amazon-stock.html<\/a>.<\/p>\n
[15]: Gregory J. Pech, \u201cRussian RD-180 Rocket Engine for Atlas V Launch Vehicle,\u201d February 10, 2010, https:\/\/www.nasa.gov\/pdf\/427652main_PMC_2010_Pech_Russian.pdf<\/a>, accessed November 2017.<\/p>\n
[16]: Gregory J. Pech, \u201cRussian RD-180 Rocket Engine for Atlas V Launch Vehicle,\u201d February 10, 2010, https:\/\/www.nasa.gov\/pdf\/427652main_PMC_2010_Pech_Russian.pdf<\/a>, accessed November 2017.<\/p>\n
[17]: Loren Thompson, \u201cWhy SpaceX Lost Its Bid To Ban Russian Rocket Engines,\u201d July 7, 2016, https:\/\/www.forbes.com\/sites\/lorenthompson\/2016\/07\/07\/why-spacex-lost-its-bid-to-ban-russian-rocket-engine-debate\/<\/a>, accessed November 2017.<\/p>\n
[18]: Eric Berger, \u201cAir Force budget reveals how much SpaceX undercuts launch prices,\u201d June 15, 2017, https:\/\/arstechnica.com\/science\/2017\/06\/air-force-budget-reveals-how-much-spacex-undercuts-launch-prices\/<\/a>, accessed November 2017.<\/p>\n
[19]: Blue Origin, \u201cBE-4,\u201d https:\/\/www.blueorigin.com\/be4<\/a>, accessed November 2017.<\/p>\n
[20]: Stephen Clark, \u201cULA chief says Blue Origin in driver\u2019s seat for Vulcan engine deal,\u201d April 18, 2017, https:\/\/spaceflightnow.com\/2017\/04\/18\/ula-chief-says-blue-origin-in-drivers-seat-for-vulcan-engine-deal\/<\/a>, accessed November 2017.<\/p>\n
[21]:\u00a0Mohamed M. Ragab et al. \u201cLaunch Vehicle Recovery and Reuse,\u201d ULA, http:\/\/www.ulalaunch.com\/uploads\/docs\/Published_Papers\/Supporting_Technologies\/LV_Recovery_and_Reuse_AIAASpace_2015.pdf<\/a>, accessed November 2017.<\/p>\n
[22]:\u00a0Eric Berger, \u201cBlue Origin releases details of its monster orbital rocket,\u201d March 7, 2017, https:\/\/arstechnica.com\/science\/2017\/03\/blue-origin-releases-details-of-its-monster-orbital-rocket\/<\/a>, accessed November 2017.<\/p>\n
[23]:\u00a0Aerojet Rocketdyne, \u201cAR1,\u201d http:\/\/www.launchar1.com\/<\/a>, accessed November 2017.<\/p>\n
- Immediately identify and add in-house capability for any other internationally produced components.<\/li>\n<\/ol>\n
- Purchase\/Merge to achieve in-house rocket engine production capabilities.<\/li>\n<\/ol>\n
- Build closer relationships with both Blue Origin and Aerojet Rocketdyne as equally alternative suppliers.<\/li>\n<\/ol>\n