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Elon Musk Is Right. ULA Receives $1B From the Government, but Is It a Subsidy?
The Billion Dollar Myth?
On July 13, Elon Musk posted a graph on Twitter that showed SpaceX was completely cornering the commercial rocket market. Musk specifically highlighted the fact that his venture is entirely privately funded while other major companies listed get billions of dollars in grants each year despite a profound lack of launches.
About 11 years ago, two of these companies — Boeing and Lockheed Martin — merged to become the United Launch Alliance (ULA). Tory Bruno, President and CEO of the ULA, disagreed with Musk on Twitter, calling the billion dollar subsidy a “myth.” The tweet has since been deleted.
Today, Futurism received documentation that shows ULA does indeed receive this amount of money. According to the Department of Defense Fiscal Year (FY) 2018 Budget Estimates:
- The Air Force budgeted $737.273M for ULA’s ELC in FY17 and $918.609M in FY18 (p. 105).
- These Air Force contributions represent only 75 percent of the total ELC funding to ULA. The National Reconnaissance Office (NRO) funds the remaining 25 percent.
- Thus, the full combined AF/NRO ELC financial contribution to ULA is $983.031M in FY17 and $1.224B in FY18.
It would seem that the biggest argument here isn’t about cost, though. It’s more about the definition of a subsidy. Is the $1.224B indeed a subsidy as Musk originally asserted?
An Opposing Argument
One of the primary reasons this funding is needed, as discussed in the 2016 ELC contract itself, is the high cost of maintaining a large workforce and the constant depreciation of launch vehicles. An article from Teslarati points out the specifics:
Due to contracting, ULA is required to maintain both the workforce and facilities necessary to produce and launch Delta vehicles, in spite of having nearly no “business” thanks to Atlas V. Maintaining a workforce and set of facilities that is in part or whole redundant is not efficient or cost-effective, but it is contractually required. So, while the ELC contract Musk deemed a nearly pointless subsidy does have some major flaws, inefficiencies, and illogical aspects, it is not technically correct to label it a subsidy.
Futurism reached out to ULA for a comment on the tweet and above data. A ULA representative referred us to a 2016 op-ed for SpaceNews on the topic in which Bruno addressed the criticism:
Critics have asserted that ULA receives $800 million per year in a contract “for doing nothing,” stating that it was a “retainer” or “subsidy” for ULA to “stay in business” for the Air Force. This is untrue and reveals a fundamental lack of understanding of this innovative contracting mechanism.
Whether or not ULA would still receive this payment despite a lack of actual launches is not clear.
Regardless of how the money is labeled, however, SpaceX is still leading the launch race. In addition to launching rockets with an ever-increasing frequency over the next few years, Musk also plans to launch 4,000 satellites to provide the world with unilateral internet coverage and continue work on his mission to terraform Mars.
The post Elon Musk Is Right. ULA Receives $1B From the Government, but Is It a Subsidy? appeared first on Futurism.