DOD initiated the EELV program in 1995 to develop a new generation of launch vehicles. The EELV program— designed to provide assured, affordable access to space for government satellites—consists of two families of commercially owned and operated launch vehicles, the Atlas V and Delta IV launch vehicles. It also includes manufacturing and launch site facilities, and ground support systems. Each family of launch vehicles consists of medium-, intermediate-, and heavy-lift vehicles. To simplify the design and manufacture of the vehicles, common components (such as booster engines) are being extensively used. See figures 1 and 2 for depictions of the Atlas V and Delta IV launch vehicle families and major components of the launch vehicles. In 1995, the Air Force awarded $30 million firm fixed-price contracts to four companies to define EELV system concepts and complete preliminary system designs. In December 1996, two of those companies, McDonnell Douglas (which became part of Boeing in 1997) and Lockheed Martin, were each awarded an 18-month, $60 million cost-plus fixed-fee contract to continue EELV design activities. At the end of their contracts, DOD planned to down-select to one contractor with the most reliable and cost- effective launch vehicle design. However, in November 1997 the Office of the Secretary of Defense (OSD) approved maintaining competition between the two contractors. This decision was based on forecasts that growth in the commercial space launch services market would support more than one launch provider and translate into lower costs for the government. More specifically, the strategy was designed to promote competition for launch services over the life of the program; encourage contractor investment and innovation for launch vehicle procure launch services that include the vehicle, the lift-off, and flight to orbit under one contract at a fixed price instead of procuring launch vehicles and launch operations under two or more separate contracts; and leverage the benefits of a robust commercial marketplace. In October 1998, the Air Force competitively awarded two $500 million “other transaction agreements” to McDonnell Douglas before it merged with Boeing and Lockheed Martin for the development of EELV families of launch vehicles and launch infrastructure. Other transaction agreements are transactions that are other than contracts, grants, or cooperative agreements that are subject to federal laws and regulations applicable to contracts, grants, or cooperative agreements. The Air Force used other transaction agreements to provide flexibility in accommodating the unique needs of the EELV program and the government. Simultaneous with the Air Force’s execution of the other transaction agreements, the Air Force also competitively awarded firm fixed-price contracts, one each to McDonnell Douglas (now Boeing) and Lockheed Martin, to procure 28 launches. At the time of award, the launch services contracts had a combined value of $2.03 billion. The robust commercial launch market upon which OSD based the EELV acquisition strategy did not materialize. As a consequence, estimated prices for future contracts for launch services increased, along with the total cost of the program. DOD’s December 2003 cost estimate for the program showed an average procurement unit cost for EELV launch services that was 77 percent higher than its 2002 cost estimate. This resulted in a Nunn-McCurdy unit cost breach, which occurs when a major defense acquisition program experiences a unit cost increase of at least 15 or 25 percent. In April 2004, in response to the unit cost breach, the Secretary of Defense sent Congress a certification that the program was essential to national security and established a new cost estimate. The new cost estimate increased the launch service’s average procurement unit costs by an additional 29 percent, due primarily to a reduction in the number of planned EELV launches. In March 2005, DOD revised the EELV acquisition strategy to reflect changes in the commercial market assumptions since 1998 and the role of the government as the primary EELV customer. The revised approach involved a new contracting strategy consisting of two negotiated contracts—EELV Launch Capability and EELV Launch Services—for each of the two launch service providers. The EELV Launch Capability cost-plus award fee contract is primarily for launch infrastructure, while the EELV Launch Services fixed-price incentive fee contract is for launch services. Under this contract approach, the government purchases launch services through competitive negotiated acquisitions that provide more government insight into contractor costs than contracts awarded under commercial item acquisition procedures. This enables the Air Force to collect previously unavailable certified cost or pricing data. As with the original acquisition strategy, there are no government ownership costs— the EELV program continues to provide launch services and ownership of hardware and facilities is retained by the contractors. In May 2005, Boeing and Lockheed Martin announced plans to create a joint venture that would combine the production, engineering, test, and launch operations associated with U.S. government launches of Boeing’s Delta and Lockheed Martin’s Atlas rockets. According to both contractors, the joint venture, named the United Launch Alliance, would reduce the cost of meeting critical national security and National Aeronautics and Space Administration (NASA) expendable launch vehicle needs. By joining together, the companies stated they could provide the government with assured access to space at the lowest possible cost. The ULA was structured as a 50-50 joint venture between Boeing and Lockheed Martin—combining services provided separately by Boeing Integrated Defense Systems’ Expendable Launch Systems division and by Lockheed Martin’s Space Systems Company—for launches of each company’s respective rockets. Based upon initial contractor estimates, annual savings to the government resulting from the joint venture were expected to be approximately $100 million to $150 million. The ULA joint venture—which was subject to government and regulatory approval in the United States and internationally—drew initial criticism from various organizations. The Federal Trade Commission (FTC) was initially opposed to the ULA joint venture because of the potential to limit competition in the launch industry—an industry with already high barriers to entry. Other companies in the launch industry also submitted formal concerns citing unfair competition. In response, DOD stated that having two launch vehicle families would present unique national security benefits that would outweigh the loss of competition. FTC agreed to allow the joint venture to move forward under the conditions of a consent order, which requires ULA to be nondiscriminatory to other companies seeking launch services. FTC provided preliminary approval of the consent order in October 2006, and the joint venture officially began operations in December 2006. To ensure that ULA follows the provisions of the consent order, the order requires the Secretary of Defense to appoint a compliance officer, currently the Director of the National Security Space Office (NSSO), to have broad investigative and remedial powers to ensure compliance. In addition, the consent order requires ULA to establish—no later than 24 months after the formation of ULA, or December 2008— separate communication networks and management information systems from its parent companies, Boeing and Lockheed Martin. The first Atlas V and Delta IV launches occurred in 2002. According to the Air Force, all 21 Atlas V and Delta IV launches through June 2008 have been successful. DOD estimates its investment in the EELV program through fiscal year 2008 to be about $8.2 billion, and future investment to be about $27.5 billion. DOD faces numerous uncertainties in the EELV program and ULA transition related to the reliability of the launch vehicles, the amount of work remaining in the ULA transition, and program budget decisions based on premature data. First, DOD does not yet have enough launch experience with EELVs to demonstrate their reliability, which may be accomplished by carrying out a set number of successful launches. While all Atlas V and Delta IV operational launches conducted thus far have been successful, launch vehicle design and production reliability have yet be demonstrated due to the limited number of launches. Additionally, DOD may be even less certain of EELV reliability as the program progresses as plans to relocate production activities under the ULA transition may undo some of the progress made toward demonstrating EELV reliability. Second, DOD faces uncertainties relating to the cost, schedule, and performance risks of the ULA transition, mainly because the transition is still in its initial stages, and numerous unknowns exist in areas such as business and production processes, personnel management, and cost savings. Third, DOD does not know whether its EELV program budget is sufficient to manage the program over the next 5 years because the Air Force accounted for anticipated savings from the ULA transition in the program budget, even though savings estimates were based on preliminary data. DOD does not yet have enough launch experience with EELVs to demonstrate their reliability. According to the Air Force, since the first launches in 2002, all 21 Atlas V and Delta IV operational launches have been successful. However, these launches represent experience with only 9 of 15 possible EELV configurations across both families of launch vehicles. As depicted in table 1, only 1 EELV configuration has been launched more than 3 times. This is significant because the number of times a configuration has been successfully launched can be an indicator of a configuration’s design and production process reliability, according to an Aerospace Corporation study of EELV launch risk. Through a study of the causes of worldwide launch vehicle success and failures over a 13-year period, the Aerospace Corporation developed a widely accepted measurement for demonstrating launch vehicle design and production process reliability called the “3/7 Reliability Rule.” According to this rule, if a failure occurs during a configuration’s first three launches, the problem is most likely a design issue, and if a failure occurs after the third successful launch but before the seventh, the problem is most likely a production process issue. Once a launch vehicle configuration is launched successfully three times, its design can be considered to have demonstrated maturity; similarly, if a vehicle is successfully launched seven times, both the design and production process maturity of that launch vehicle configuration can be considered as having been demonstrated.