Market Forces

When the first generation of launch systems were developed, the government was the primary customer of launch services. When the commercial demand for launch services became a significant factor in the 1990s, developers thought that costs could be reduced by using the same systems for both commercial and government needs. This relationship between the perceived commercial and government launch requirements tremendously influenced acquisition decisions that shaped the EELV program during its first 15 years.

In 1994, the initial strategy of selecting one contractor was based on the assumption that the commercial space market could not support two launch vehicle contractors. This quickly began to change, and from 1996 to 1997, the commercial space transportation advisory committee projected the worldwide demand for commercial launches into geosynchronous transfer orbit (GTO) to reach an average of 30–40 per year. The balance of u.s. government to commercial launches would shift significantly in favor of commercial launches by a ratio of nearly three to one. This factor, combined with robust predictions of low earth orbit (LEO) communication-satellite requirements, meant enough demand to easily support two major domestic launch systems. Accordingly, in late 1997, the Air Force revised the acquisition strategy to allow up to two contractors to proceed into the preengineering, manufacturing, and development phase. In 1998, Boeing and Lockheed Martin were awarded engineering and manufacturing development and initial launch services contracts for the Delta IV and Atlas V vehicles.

Shortly after these decisions were made, the projected boom in commercial launch demand began to erode. the virtual disap- pearance of demand for leo launches—along with increased competition from heavily subsidized Ariane, Proton, and Sea Launch systems—made it difficult for the Atlas V and Delta IV systems to be commercially competitive. Subsequently, in 2005 Lockheed Martin and Boeing formed the United Launch Alliance, a joint venture to provide Atlas V and Delta IV launches services to the U.S. government.

While the commercial market has never materialized, and the expected dramatic reduction in costs was never achieved, the program is still meeting the original cost reduction threshold of 25 percent compared with heritage systems. In addition, the technical performance and reliability of the Atlas V and Delta IV systems has been excellent. While Delta IV and Atlas V are technically still commercial systems, they are essentially dedicated to providing launch services to the EELV program. As a result, the EELV program today is operating much like a government launch program.

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