The contract, Musk charged, "essentially blocks companies like SpaceX from competing for national security launches."
"This really doesn't seem right to us, " added Musk, whose electric car maker Tesla is challenging established auto companies.
The Air Force did not respond to a request for comment.
United Launch Alliance spokeswoman Christa Bell said the contracting process began in 2011. She said the ULA contract was able to deliver billion worth of savings compared to past contracts.
SpaceX has filed notice that it plans to sue the Air Force, the first step before a federal contract can be challenged. The suit will be filed late Friday or Monday, a spokesman said.
Musk alleged the United Launch Alliance contract is costing taxpayers "billions of dollars, for no reason" because SpaceX could provide launch rockets more inexpensively.
SpaceX has a $1.6 billion contract to launch a dozen unmanned cargo ships to the International Space Station, delivering equipment and supplies.
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