If that argument actually carried any weight, then ULA wouldn't exist, but Martin, McDonnel Douglas Aerospace, and GD Convair would. That is, the DoD and the defense companies trot out any arguments they feel like, and hope that Congress accepts them.
I concur on your analysis of companies that are fat and happy bidding and working on DoD contracts. It's really, really hard to turn those companies around.
Times have changed. I think Congress may have seen the error of its ways on this one.
Individual congresspeople might see why a past decision did or did not work out well in the long run. That's very different from seeing whether the same decision is politically expedient in the present moment. Nor does it necessarily imply that Congress as a whole is even capable of forming stable memories that can reliably retain that sort of knowledge.
Either that or Congress realized they can't sweep under the rug how much taxpayer money they could be saving.
ULA is safe for a while due to the DoD's requirement that they keep two domestic methods for space access alive.
Previously this was met with the combination of ULA's Atlas V and Delta IV. Now it'll be the F9 and Atlas V, with the expensive Delta IV being phased out (it's still occasionally needed as it's the largest booster still in operation worldwide).
However ULA's in trouble if another SpaceX shows up. I assume that's why they're working so closely with Blue Origin, better to capture that player now and get a cheap engine provider out of it.
Another input: cost isn't everything; the Atlas V has never lost a payload, while the F9 has. An extra $40m doesn't look like much if your payload is a half billion dollars, for example.
You can't really "capture" a billionaire's business.
The other issue is capacity. Even if ULA dramatically cut their costs to drive SpaceX out of business, that will stimulate a huge surge in demand for launches. To drive anyone out of business, ULA would have to meet all of that demand on their own. I don't believe that's possible for them, they just don't have the capability to ramp up capacity fast enough, so SpaceX and other operators would pick up the excess business anyway.
If only that were true. It does happen in many markets, but not currently in the space market. Space is still in the early-stage / chicken-and-egg mode. A bit of simple value chain analysis shows why.
TL;DR: we may be closer than I think to the space business moving into traditional economics, but even then it's probably decades out.
There are three disjoint space markets: - military: largely price insensitive; volume unknown to me but not enormous; has specialized needs so a lot of it couldn't be satisfied by COTS launch systems - science: some of which (earth sensing) can use COTS, the rest is low volume, has non-commercial requirements (e.g. non-LEO) and often has weird timing constraints depending on what the orrery says. - commercial, which is what we all want to explode in volume! Today this is 100% LEO.
Science is largely the space side of NASA and I personally am convinced congress only funds in order to provide enough economic volume that the contractors are available to support the military. I.e. a fig leaf for the military just like the DoE (whose hands are all over space science as well).
So commercial: the chicken and egg problem the compound of two (used to be three, see below) issues: launches are rare and expensive, so satellites are few and far between, which makes them expensive, which doesn't encourage volume, which doesn't encourage launch capacity development, which keeps them expensive... This is one of the reasons why previous private efforts (e.g. Rotary Rocket) have foundered. Despite what my libertarian friends say, it's almost impossible to break out of this trap without government incentive; the activation energy is too high.
Now almost is not the same as 100% and this is where I'd like to believe and agree with you. And I do agree, except the time base I believe in is too slow to support the phrase "huge surge in demand"
One thing that has been great is the folie à deux on the part of billionaires Bezos and Musk (I believe that SpaceX and Zip2 are the only companies Musk actually founded, right?) has allowed ego to try to break that cycle for LEO applications. Unless Google or Apple or Amazon can start pumping out satellites for internal use in high volume the overall market will grow slowly (who else is likely to buy a lot of satellites? I'm not sure). And even so that effort will take time to ramp up. If not...hard to see who will take up the slack.
I also look forward to non-LEO applications, like mining. It has its own bootstrap problem.
However my main point is still true: today commercial and non-commercial applications have quite different needs and thus different economic drivers.
I do. In the '90s I was working for a company that was used to bidding cost plus contracts when DoD contracts pretty much dried up as a result of the collapse of the Soviet Union. Management tried very hard to realign the company to compete in the commercial sector and failed miserably.
Changing the focus of a large organization like that from performance to cost is extremely difficult. Your people aren't organized properly, your finances aren't organized properly, and you have a cost+ culture that's hard to kick.
A much cheaper and safer strategy is to get Congress to wire defense contracts for you. ULA has manufacturing all over the place. What that means is job losses at ULA will be politically unpalatable. Beyond that, a logical argument can be made against putting all the national space eggs in one basket.