	Background

		Encouraging Competition and Launch Vehicle Development to Assure Access to Space

The U.S. government has sought to help develop a competitive launch  industry from which it can acquire launch services in order to lower the  price of space launch and assure its access to space. The Commercial Space Act of 1998 prohibited the  commercial use of surplus ICBM motors and directed government  agencies to purchase and use commercial services with only limited  exceptions. In response to a House Armed Services Committee report to  a bill for the NDAA for Fiscal Year 2017 and an associated House  member request for detailed information on the costs and benefits, the Air  Force is also studying the potential effects of changing law and policy to  allow surplus ICBM motors to be used on commercial launches and  expects to complete its study later this year. The price at which surplus ICBM motors are sold is  an important factor for determining the extent of potential benefits and  challenges of allowing the motors to be used for commercial launch. However, the breakeven price  is just one of several methods that DOD could use to set the sales prices  of surplus ICBM motors. Below this price, DOD would not  recuperate its costs, and, above this price, DOD would potentially achieve  savings. We estimated that DOD could sell three Peacekeeper motors or  two Minuteman II motors—the numbers required for one launch—at a  breakeven price of about $8.36 million or $3.96 million, respectively. In  response to the Air Force’s August 2016 request for information, industry  stakeholders proposed that the Air Force use various options for valuing  the motors, which resulted in prices ranging from $1.3 million for a set of  Peacekeeper motors to $11.2 million for a Peacekeeper first stage  motor. However, the commercial use of surplus ICBM motors could create  challenges, such as discouraging private investment and disrupting  competition among emerging commercial space launch companies. Uncertainties Pose Challenges for Effective Decision Making

Officials conducting the Air Force study told us that they would need to  gather additional details and conduct additional analysis beyond the price  of the motors if law and policy are changed to allow surplus ICBM motors  to be made available for commercial launches, as illustrated in the  examples below:
Study officials said that further analysis would be required for allowing  commercial providers to take control of the surplus ICBM motors prior  to delivering the motor to the launch site for integration into the launch  vehicle. Because its study is not completed, it is not clear the extent to which  it addresses these uncertainties. As such, we are not making recommendations in this  report. Appendix I: Objectives, Scope, and Methodology

The National Defense Authorization Act (NDAA) for Fiscal Year 2017  contains a provision for us to analyze the potential effects of allowing the  use of surplus Intercontinental Ballistic Missile (ICBM) motors for  commercial launch purposes, including an evaluation of the effects, if any,  of allowing such use on national security, the Department of Defense  (DOD), the solid rocket motor industrial base, the commercial space  launch market, and any other areas the Comptroller General considers  appropriate. We assessed: (1) the options for determining the selling  prices for these motors; and (2) the potential benefits and challenges,  including savings and costs, of allowing surplus ICBM motors to be used  for commercial space launch. Additionally, we reviewed Federal Accounting Standards Advisory Board  (FASAB) criteria to understand other methods for determining the value  and price of surplus ICBM motors.
Why GAO Did This Study

The U.S. government spends over a billion dollars each year on launch activities as it strives to help develop a competitive market for space launches and assure its access to space. Among others, one launch option is to use vehicles derived from surplus ICBM motors such as those used on the Peacekeeper and Minuteman missiles. The Commercial Space Act of 1998 prohibits the use of these motors for commercial launches and limits their use in government launches in part to encourage the development of the commercial space launch industry in the United States. Legislative and policy changes would be needed to allow DOD to sell these motors for use on commercial launches.
The National Defense Authorization Act for Fiscal Year 2017 contains a provision for GAO to analyze the potential effects of allowing the use of surplus ICBM motors for commercial space launch. This report addresses (1) the options for pricing surplus ICBM motors; and (2) the potential benefits and challenges of allowing surplus ICBM motors to be used for commercial space launch.
GAO used Office of Management and Budget criteria to develop a range of breakeven prices, collected detailed motor storage and disposal costs from the Air Force, reviewed industry stakeholder responses to an Air Force request for information about other pricing methods, and interviewed DOD and industry officials.

What GAO Found

The Department of Defense (DOD) could use several methods to set the sale prices of surplus intercontinental ballistic missile (ICBM) motors that could be converted and used in vehicles for commercial launch if current rules prohibiting such sales were changed. One method would be to determine a breakeven price. Below this price, DOD would not recuperate its costs, and, above this price, DOD would potentially save. GAO estimated that DOD could sell three Peacekeeper motors—the number required for one launch, or, a “motor set”—at a breakeven price of about $8.36 million and two Minuteman II motors for about $3.96 million, as shown below. Other methods for determining motor prices, such as fair market value as described in the Federal Accounting Standards Advisory Board Handbook, resulted in stakeholder estimates ranging from $1.3 million per motor set to $11.2 million for a first stage Peacekeeper motor.
The prices at which surplus ICBM motors are sold is an important factor for determining the extent of potential benefits and challenges of allowing the motors to be used for commercial launch. Potential benefits include
increasing the global competitiveness of U.S. launch services, and
Potential challenges include
affecting private investment negatively, hindering innovation, and disrupting competition among emerging commercial space launch companies; and
expanding the workload of the Air Force program office responsible for maintaining and refurbishing the motors.
Further, uncertainties in underlying assumptions and cost estimates—such as Peacekeeper motor storage and disposal costs—could hinder effective decision making. DOD is also conducting a study on the potential effects of allowing surplus ICBM motors to be used for commercial launch. Because DOD's study is not completed, it is not clear the extent to which its study addresses such uncertainties.

What GAO Recommends

GAO is not making recommendations in this report.