We've suspected this was how things would play out for some time -- but now it's official: Blue Origin has won the Vulcan Centaur rocket engine competition.

On the off-chance you're not aware, Blue Origin is the space tourism / space transportation start-up founded and financed by Amazon.com (NASDAQ:AMZN) CEO Jeff Bezos. It was the first such company to successfully launch and land a (suborbital) rocket after reaching the edge of space. It hopes to be the first company to begin taking tourists on regular trips back to said edge of space as paying customers. Blue Origin even -- eventually -- hopes to build a rocket big enough and powerful enough to reach orbital speeds, compete with the big boys of space launch for contracts to put satellites in orbit, and maybe even go to the Moon.

Moon over a landscape

Selling rockets to other space companies is just the start. Blue Origin has its sights set considerably higher. Image source: Getty Images.

Baby steps to space

With such big ambitions of its own, though, why is Blue Origin competing for the right to build mere rocket parts for other companies?

Several years ago, Blue Origin offered to contribute its rocket-engine-building know-how to United Launch Alliance (ULA). The Boeing and Lockheed Martin joint venture is designing a new two-stage rocket, Vulcan-Centaur, to replace its existing Atlas and Delta families of rocketships. As part of this project, ULA wanted to incorporate an all-American-built engine to replace the Russian-built RD-180 engines that currently power its workhorse Atlas V rockets.

One logical choice to build this replacement engine was engine-maker Aerojet Rocketdyne (NYSE:AJRD), which builds the engines for ULA's larger Delta IV rockets. But in an effort to cut costs, ULA also invited Blue Origin to bid on the project, introducing some price competition and innovative thinking into the engine competition.

Picking a winner

And now -- surprise, surprise -- it turns out that Blue Origin has won the competition. Although a relative newcomer to space, having been founded fewer than 20 years ago, Blue Origin beat out century-old Aerojet Rocketdyne for the right to build Vulcan Centaur's main engine. In a statement released Friday, ULA announced that "ULA has selected Blue Origin's BE-4 engine for Vulcan Centaur's booster stage." (Aerojet Rocketdyne won't be entirely left out in the cold. ULA noted that its RL10 engine will still power the rocket's second stage, dubbed "Centaur.")

Two liquefied natural gas-fueled BE-4 engines will power the "Vulcan" first stage, providing 1.1 million pounds of combined thrust. With added solid rocket boosters from Northrop Grumman, Vulcan Centaur should be able to manage "maximum liftoff thrust" of as much as 3.8 million pounds, enabling the rocket to lift more than 25 metric tons of payload to Low Earth Orbit, and giving Vulcan Centaur, as ULA put it, "greater capability than any currently available single-core launch vehicle."

Blue Origin's next mission

That all sounds like great news for ULA, which desperately needs to make Vulcan Centaur a success as it works to reduce its launch costs to better compete with SpaceX.

SpaceX was clearly in the back of ULA's mind when it described its rocket as the most powerful "single-core launch vehicle." You see, SpaceX's Falcon Heavy comprises three rocket "cores" working in tandem, giving it a lift capacity 2.5 times as great as Vulcan Centaur's -- 63.8 metric tons.

Still, if you ask me, last week's news was even more important for Blue Origin than it was for ULA. By winning the right to supply BE-4 engines to ULA, Blue Origin secured for itself a revenue stream to supplement the $1 billion a year in Amazon stock that Jeff Bezos is liquidating to transform into cash that can be injected into Blue Origin. Producing engines for ULA, Blue Origin will also get a head start on testing the engines that will also power the core of its own orbital-class rocket, New Glenn. This will help to ensure New Glenn meets its objective of being ready to fly by 2021.

Remind me: How do we feel when our friends become successful?

And here's the thing: Once Blue Origin does get New Glenn flight-ready, that rocket will actually be more powerful than the Vulcan Centaur that Blue Origin is helping ULA to build!

We know this because Blue Origin plans to build its new super-rocket on a base of not two, but seven BE-4 engines in its first stage. That will give New Glenn 3.85 million pounds of thrust at sea level, edging out Vulcan Centaur's oomph-factor by a good 50,000 pounds. In payload terms, New Glenn should also outperform. Blue Origin is targeting a lift capacity to LEO of 45 metric tons -- 61% more than Vulcan Centaur can manage -- which will relegate Vulcan Centaur to third place in the lift capability race, behind both Falcon Heavy and New Glenn.

On top of all that, Blue Origin will be building New Glenn as a "reusable" launch vehicle, capable of both launch and landing under its own power, and thus not needing to be rebuilt from scratch after every launch. This means that, in all likelihood, Blue Origin's New Glenn will end up being not just more powerful than the expendable Vulcan Centaur, but cheaper as well.

So, what's the upshot for investors?

Right now, everybody's arm in arm and cheering over Blue Origin's role in powering ULA's rocket. But in subsidizing Blue Origin's efforts to develop New Glenn, United Launch Alliance may have just ensured its own early exit from the space race.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.