Citing “unfair” competition from a rival bidder, Boeing this week walked away from a potentially $25 billion Air Force contract to build the Ground-Based Strategic Deterrent (GBSD): the next generation of nuclear-tipped intercontinental ballistic missiles.
In a July 23 letter to an Air Force acquisition official, Boeing President and CEO Leanne Caret said the company “does not intend to submit a prime offer” in response to the Air Force’s July 16 request for proposals for a GBSD engineering and development manufacturing contract.
It is a gamble Boeing kept up its sleeve for more than a year, when the Chicago-based company privately lodged its first formal complaint with the Air Force about the GBSD competition: a fight in which Boeing believed it faces an insurmountable financial disadvantage against its sole rival for the work, Northrop Grumman.
Northrop Grumman in 2016 acquired a solid-rocket motor manufacturing capacity through its buyout of Orbital ATK, giving the company what Caret called “cost, resource and integration advantages” in the missile business.
“Boeing has repeatedly informed the Air Force, beginning with our response in April 2018 to the Air Force’s first Request for Information (RFI), that the GBSD EMD competition must address the unfair advantage that Northrop holds as a result of its control of Solid Rocket Motors (SRMs), the essential component of the GBSD missile system,” Caret wrote in her letter to Will Roper, assistant Air Force secretary for acquisition, technology and logistics.
Caret also alleged that U.S. antitrust authorities at the Federal Trade Commission are not ensuring Northrop Grumman is charging fair prices for its solid rocket motors — equipment Boeing says it would need to build GBSD missiles. Nuclear Security & Deterrence Monitor and other outlets obtained Caret’s letter, which was first reported Wednesday by Inside Defense.
Pentagon policy is to maintain two suppliers of solid rocket motors, which are used in many types of missiles, to keep prices for future missile procurements lower through competition.
With Boeing’s die cast, the Air Force — which did not reply to a request for comment — has choices to make.
Caret, in her letter, wrote that “there are other procurement structures that could provide this capability more rapidly at less cost.”
But scrapping the GBSD solicitation already on the street could delay the system’s planned deployment beyond 2030: past the date the Pentagon wants to start replacing aging, Boeing-made Minuteman III silo-based missiles.
Alternatively, the Air Force could sole-source the GBSD manufacturing contract to Northrop Grumman. That would force a tightrope act, where the service would somehow have to maintain the cost-advantage Northrop Grumman brings to the table without doing long-term financial damage to Aerojet Rocketdyne: the only other supplier of big, solid rocket motors in the U.S.
Aerojet Rocketdyne has so far been on both the Boeing and Northrop teams during a three-year, Pentagon-funded GBSD design competition, which ends next year. Boeing’s design contract was worth about $350 million, Northrop’s about $330 million. Aerojet Rocketdyne was integrated with both primes during the design phase.
After the turn of the millenium, Aerojet Rocketdyne was also the prime contractor on the Minuteman III refurbishments that will keep the missile on duty through the 2020s.
It was not clear Friday whether Aerojet-Rocketdyne would get any work on a Northrop Grumman-only GBSD build, or if it did, whether the work would be enough to keep the company’s solid-rocket business afloat through the planned 50-year GBSD duty cycle. Neither Aerojet Rocketdyne nor Northrop Grumman replied to requests for comment.
One wild card in the deck is Congress. Lawmakers ordinarily do not force federal agencies to pick certain suppliers for major procurements, though there is some precedent for such drastic action from the civilian space realm: As part of the NASA Authorization Act of 2010, a group of senators effectively forced NASA to use solid rocket motors manufactured by ATK Technologies for a future crewed space-launch vehicle.
No lawmaker had signaled a willingness to go that far in the GBSD program as of Friday, though the senior senator from Arkansas, home to Aerojet Rocketdyne’s solid rocket manufacturing plant in Camden, Ark., went to bat for his constituents.
Sen. John Boozman (R-Ark.) “has been engaging with the Air Force to ensure that as it continues its procurement strategy for the Ground-Based Strategic Deterrent, it considers the large solid rocket motor manufacturers,” a spokesperson wrote in an email. “Because these represent critical components of the program, it’s important to maintain competition, which is best achieved by maintaining two suppliers.”
Rep. Bruce Westerman (R-Ark.), whose district covers the Camden solid rocket facility, did not reply to a request for comment.
One powerful lawmaker prized a speedy procurement above other considerations.
Through an an aide, Senate Armed Services Committee Chairman James Inhofe (R-Okla.) said he “looks forward to seeing the [GBSD] program proceed without delay.”
Aides for House Armed Services Committee Chairman Adam Smith (D-Wash.), meanwhile, said they were “working to get more information from Boeing and DoD to help Mr. Smith decide the next steps.” Smith has spent the whole year railing against the estimated $100 billion life cycle of the GBSD program.
The influential Sen. Richard Shelby (R-Ala.), the Senate Appropriations Committee chair whose home state includes Boeing facilities and personnel central to the company’s GBSD work, did not reply to a request for comment.
Meanwhile, an analyst with the Washington-based consultancy shop Capital Alpha Partners speculated that Boeing’s defense business might be financially constrained because of its troubled commercial aircraft business.
“The no-bid by Boeing may also signal that Boeing’s issues on the 737-MAX and future commercial airplane investment needs are crimping its ability to make strategic bids on programs,” Capital Alpha’s Byron Callan wrote in a widely distributed email.
Fatal crashes of the 737-MAX in October 2018 and March 2019 have brought regulatory scrutiny and no end of bad press to Boeing, but the first of those accidents happened months after the company initially complained to the Air Force about Northrop Grumman’s unfair advantage in the GBSD competition.
The Air Force planned to award the GBSD manufacturing contract by September 2020. The service has said it will acquire more than 600 missiles and deploy about 400, beginning around 2030.
The ICBM fleet would remain in service into the 2080s, carrying the W87-1 nuclear warhead provided by the Department of Energy’s National Nuclear Security Administration. The agency estimates the W87-1 will cost between $10 billion and $15 billion, excluding the expense associated with building a pair of factories to produce the warhead’s plutonium core.
