Photograph by Orlando Sentinel/TNS via Getty Images

Rival United Launch Alliance cedes competition to launch GPS satellite.

By Clay Dillow
November 17, 2015
November 17, 2015

Last year, space cargo company SpaceX sued the U.S. government in federal court for the right to bid on military satellite launches. Now the company is poised to win its first contract for a military satellite launch after its main competitor —a joint-venture between Boeing “BA” and Lockheed-Martin “LMT” —declined to submit a bid.

That rival, United Launch Alliance, or ULA, has enjoyed a monopoly on U.S. national security-related space launches since 2006, when Boeing and Lockheed teamed up on space launches. But its reliance on now-banned Russian RD-180 rocket engines has made it impossible for the company to present a compliant bid to the U.S. Air Force, which conducts the Pentagon’s space launch business.

That leaves SpaceX, founded by Tesla CEO Elon Musk, as the only certified competitor for a contract to launch a GPS satellite sometime next year. Getting a lucrative military contract world would mark a significant coup for SpaceX. Although the company has developed a strong commercial satellite launch business, it has yet to make much headway with the U.S. government—one of the world’s largest space launch customers. Government agencies are expected to spend $1.5 billion on launches this year alone.

Bids for the Pentagon’s next GPS satellite launch, worth an undisclosed amount of money, were due Monday. ULA failed to submit one citing its lack of access to RD-180 engines. That leaves SpaceX as the lone contender for the contract, though a final decision on who wins the bid isn’t expected until the end of March. In the meantime, the Air Force or Congress could alter the outcome. After all, one of the main reasons for bringing SpaceX on board as a certified military launch provider was to inject competition into what has been a monopoly. Without ULA in the competition, it’s not really a competition at all.

ULA’s withdrawal from the competition stems from a Congressional mandate directing the Pentagon to curtail its reliance on Russian launch technologies in the wake of Russia’s annexation of Crimea last year. Congress previously gave ULA approval to use five engines the company had ordered but had yet to pay for. Those engines have already been assigned to other missions, however, and while a measure approving the use of an additional four RD-180s is buried within the fiscal 2016 defense budget, that bill has not yet become law.

As such, ULA lacked the proper approvals to use the multimillion-dollar engines when Monday’s deadline passed. It needs the engines to power its workhorse Atlas V rocket.

“I very much want to participate in future competitions,” ULA CEO Tory Bruno told the Washington Post on Monday, “and having access to the Atlas V launch vehicle is key.”

There were other complications with the competition as well. The terms of the competition valued price over reliability, historical performance, and experience, Bruno said. That took ULA’s biggest strengths out of the equation while offering lower-cost SpaceX an advantage.

A trip to orbit aboard a SpaceX Falcon 9 costs $80 million to $90 million, while an Atlas V launch reportedly costs roughly twice that. ULA, on the other hand, owns an enviable track record. Last month it successfully delivered its 100th satellite to orbit. Meanwhile SpaceX is still recovering from a launch failure in June in which one of its Falcon 9 rockets broke apart mid-flight.

ULA is working with Jeff Bezos’ Blue Origin space startup to develop a wholly new, American-made rocket engine to power a rocket designed to help the company compete with SpaceX on price. But neither rocket nor engine will be ready for flight until 2019 at the soonest.

In the meantime, ULA’s withdrawal from next year’s GPS satellite launch could be a means of exerting pressure on Congress to allow it to buy the Russian rocket engines it needs to continue launching satellites for the Pentagon. The Air Force has stressed the need to have more than one reliable launch partner certified for national security launches to increase its own flexibility and drive down costs. In a letter to the Defense Department last month, SpaceX’s Musk called the possibility that ULA might withdraw “nothing less than deceptive brinkmanship.”

For the time being, however, SpaceX looks set to shake up yet another vertical in the larger space launch market. Pending action by Congress or the Air Force, the company is the only commercial launch provider certified to handle Air Force business, not only for next year’s GPS satellite launch but for several launches beyond.

For more on SpaceX, watch this Fortune video.

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