In 2014, the US Government Accountability Office issued a report on cost estimates for the US Air Force’s program to launch national security payloads, which at the time consisted of a fleet of rockets maintained and flown entirely by United Launch Alliance (ULA). The report was critical of the non-transparent nature of ULA’s launch prices and noted that the government “lacked sufficient knowledge to negotiate fair and reasonable launch prices” with the monopoly.
At around the same time, the new space rocket company SpaceX began to aggressively pursue the opportunity to launch national security payloads for the government. SpaceX claimed to offer a substantially lower price for delivering satellites into various orbits around Earth. But because of the lack of transparency, comparing prices was difficult.
The price uncertainty was largely due to the fact that the government pays both a firm, fixed-price cost for the rocket used for each ULA launch—be it an Atlas V, Delta IV, or Delta IV Heavy—as well as a cost-plus incentive fee known as an ELC contract. This ELC contact was essentially a payment to ULA to maintain “launch readiness” for critical national security payloads. And the large-rocket company, co-owned by Boeing and Lockheed Martin, put the money to good use with a perfect launch record for the federal government. To critics, however, this large, nebulous payment amounted to an anti-competitive subsidy once SpaceX began offering the Falcon 9 rocket as a viable alternative.