By Mike Stone
WASHINGTON (Reuters) -Desperate to address surging demand for solid fuel rocket engines, the Pentagon is close to giving a contract for new motors to the untested, privately held startup Ursa Major, according to two sources familiar with the situation.
While rocket motors themselves are relatively inexpensive, they play a vital role in propelling billions of dollars of missiles and rockets on order to supply the war efforts in Ukraine and Israel, and to re-stock dwindling U.S. inventories.
The contract - expected to be small and to fall under the Pentagon's development programs - would be a big vote of confidence in the upstart defense contractor as officials seek more suppliers beyond the two dominant rocket engine makers - Northrop Grumman (NYSE:NOC) and L3 Harris Technologies. There are other recent entrants including X-Bow Systems.
It also shows the Defense Department's growing appetite for risk to resolve what officials called a "major crisis."
"As soon as I get the FY (fiscal year) '24 budget I am going to drop it on a small company that is going to do additive manufacturing of a solid rocket motor," Heidi Shyu, under secretary of defense for research and engineering, told Congress last week.
She did not name of the company or give a size of the contract during her testimony, but did say the company had been working closely with the Navy, adding, "we can't wait to get them on contract."
A congressional aide and an industry executive who spoke on condition of anonymity said Shyu was referring to Ursa Major, a privately held company that uses 3-D printing to make rocket motors.
A representative of Ursa Major declined to comment. The Pentagon declined further comment on the possible award.
Ursa Major is headquartered in Berthoud, Colorado, and backed by investors including RTX Ventures, BlackRock (NYSE:BLK) and Eclipse.
Ursa Major's website features the launch of a Javelin anti-tank missile, a weapon heavily used in Ukraine's efforts to combat the Russian invasion for the last two years. Ursa Major says it can make rocket motors between 2 and 22 inches in diameter.
The industry executive from a large defense prime contractor said Ursa Major's motors can be used in any small diameter weapon like the new Boeing (NYSE:BA) and SAAB product the Ground Launched Small Diameter Bomb (GLSDB), RTX's SM-6 rockets and Lockheed Martin (NYSE:LMT)'s Guided Multiple Launch Rocket System (GMLRS) which are used heavily in Ukraine.
Lockheed Martin was making about 4,600 GMLRS per year but has ramped production since 2022. More than 5,000 have been sent to Ukraine so far, according to a Reuters analysis. GMLRS production is scheduled to ramp from 10,000 deliveries in 2024 to 14,000 deliveries in 2025 as demand surges.
President Joe Biden's 2024 budget request was the first to procure missiles and other munitions with multi-year contracts, something that is routine for planes and ships, as the Pentagon signals enduring demand to top munitions makers.
That 2024 budget, which is still not through Congress, earmarked $11 billion to "deliver a mix of highly lethal precision weapons" which included hypersonic prototyping and the multiyear procurements of Joint Air-to-Surface Standoff Missile (JASM), and Long-Range Anti-Ship Missile (LRASM), and Standard Missile 6 (SM-6).
Ursa Major has raised $274 million from investors and has a valuation of $750 million according to PitchBook data.