ULA to Reduce Staff, Costs; Musk Wants to Launch Air Force Payloads

ULA's Atlas V

ULA Says Workforce Reductions Will Help Cut Costs
Space News

United Launch Alliance (ULA) will reduce its work force by 19 percent over the next few years as it weeds out unneeded overlaps in Atlas and Delta rockets and finds other efficiencies, ULA Chief Operating Officer Dan Collins said.

The head-count reduction, which follows a 16 percent staff cut over the past four years, should enable Denver-based ULA to reduce operating costs and offer reduced launch-service prices to its U.S. government customer, he said.

Collins said ULA, established in December 2006, has already surpassed its goal of cutting launch costs by 25 percent over the previous generation of rockets, and that more cost reductions are on the way….

SpaceX Chief Executive Elon Musk was sitting with Collins on the panel, and he used the occasion to urge the government to scrap its cost-plus contracting scheme in favor of fixed-price contracts. The cost-plus formula, he said, makes “good people do bad things. … You’re creating an incentive to maximize costs up to the limit of the program being canceled.”

“The Air Force has erected enormous barriers to entry at least in the launch market, and made it really very difficult to get in,” Musk said. “It’s sort of strange that we have over 30 missions on contract for Falcon 9 — which is a vehicle that has more capability than the Delta 4 Medium — but not one of those is with the Air Force. Why is that?”

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Editor’s Note: ULA’s cost reductions are significant and help to counter the common belief that Big Rocket is always excessively expensive and can’t be more nimble and competitive. The article indicates that the Delta and Atlas workforces has been reduced from 4,400 to 3,700 employees with plans for further cuts to 3,000 workers assuming steady business. That would be a total headcount reduction of 32 percent.

The fact that the reductions are being done gradually is a good sign. Large cutbacks need to be done very carefully because they can create problems with overwork, low morale and a loss of essential capabilities, resulting in degraded performance and lower quality. That’s the last thing you want with a company that has gone 45-for-45 in launches since it was created. ULA’s main business is government satellite launches, particularly for the U.S. military. These payloads are both expensive and essential to national security. One bad day — or a couple of bad days — could be quite damaging to our national interest and wipe out a great deal of savings.

Although Musk has a good point about fixed-cost vs. cost-plus contracts, the reliability issue helps to answer his question about why his company has no Air Force contracts for the Falcon 9.  SpaceX is 2-for-2 in its Falcon 9 launches, but the company will need to repeat that success many times before the Air Force will entrust its crucial payloads to the company. Or NASA will put astronauts aboard the rocket for trips to ISS. The cost of failure is extremely high.

If ULA eventually does lose some defense-related business to SpaceX, it could be offset by an increase in orders from NASA and private industry. ULA’s Atlas booster is the baseline for human spacecraft under development by Boeing, Orbital Sciences Corporation and Sierra Nevada Corporation. These vehicles would transport crews and cargo to the International Space Station and private stations being developed by Bigelow Aerospace and other companies. The fates of these projects are dependent upon funding under NASA’s CCDev program. The space agency is set to announce another round of CCDev awards in March.

NASA and Bigelow want to launch cargo and crews on multiple rocket types with different transport vehicles from various locations. It is likely that ULA and SpaceX will be awarded contracts to provide boosters for these missions. In deciding on the mix of rockets and spacecraft, a number of factors will come into play: cost, reliability, safety and availability. For human missions, booster costs may be less important than these other factors.

ULA will face some challenges if it ramps up production. The Air Force does not want any changes being made in these boosters that would interfere with reliability and quality. Officials prefer a white-tail version of any rocket ULA produces, i.e., a single variant to which the Air Force, NASA and private companies could add whatever was required for their individual missions.  If ULA increases production, it needs to do so in a way that does not adversely impact upon the quality of individual rockets it produces.

If ULA picks up additional business, then it might need to hire back some of the employees it will be laying off. However, revenues could grow and the costs of producing the rockets and maintaining the facilities would be spread out over more rockets. That would enable ULA to better compete on price with the SpaceX’s of the world.