Dec. 30 (Bloomberg) -- The Air Force formally renewed a competition between Boeing Co. and Lockheed Martin Corp. for a military satellite system valued at as much as $11 billion after the service changed the program’s specifications to reduce costs.

The Air Force issued a revised request for proposals on a modified Transformational Communications Satellite, or TSAT, program, on Dec. 23, the service said today in a statement. TSAT will consist of five satellites and ground stations providing message and data routing for Army units, including vehicles in the new Future Combat Systems. The first satellite would be launched in 2019, the Air Force said.

The contest was delayed this year after a Joint Chiefs of Staff council decided to reduce the satellite program’s requirements. The council opted instead for a less costly alternative that Boeing and Lockheed, the two biggest defense companies, were working on as a backup design, Pentagon director for space and intelligence capabilities Josh Hartman said in a November interview.

The original program was a centerpiece of the Bush administration’s effort to make the military more mobile and lethal. The five satellites would have used laser beams to more rapidly disseminate images, voice communications and video.

The restructuring includes delaying use of the complex laser-beam technology to transmit massive amounts of imagery collected from the now-terminated Space Radar program, Hartman said.

Canceling the Space Radar, which was managed jointly by the Air Force and National Reconnaissance Office, saved the Pentagon $8.3 billion through 2015, including $800 million in 2010, according to an October 31 budget memo from Deputy Defense Secretary Gordon England.

Budget Boost

Boeing’s El Segundo, California-based Satellite Systems Inc. and Lockheed’s Sunnyvale, California, Space Systems are competing on the TSAT program.

The Air Force said it will host an “industry day” Jan. 16 in El Segundo to discuss the draft request for proposals and an acquisition strategy. The service plans to issue a final RFP by June, it said today.

The Pentagon added $2.4 billion to its proposed $580.8 billion fiscal 2010 budget for military communications satellites to start the retooled TSAT competition and support two other similar programs, according a budget chart prepared this month by Acting Pentagon Comptroller Douglas Brook.

That’s the third largest category for new programs in the proposed budget behind $5 billion for tactical aviation and $3.3 billion for shipbuilding, according to Brook’s charts.

White House

“We did add a significant amount of money” in the military communications satellite program, Hartman said.

The added funding will purchase a fourth Lockheed Advanced- EHF satellite and improve its capability to support White House telephone conferences with commanders worldwide, according to England’s memo.

The dollars proposed in fiscal 2010 will also initiate purchases of as many as five additional Boeing Wideband Global Satellites, above the six on order.

The three satellites programs, including TSAT, are intended to move differing quantities of data, including still images, full-motion video and voice communications, for different users at different speeds and security levels.

Boeing, based in Chicago, rose $1.26 to $41.25 at 4:15 p.m. in New York Stock Exchange composite trading. Bethesda, Maryland- based Lockheed climbed $3.75 to $84.29.

To contact the reporter on this story: Tony Capaccio at at acapaccio@bloomnberg.net

Last Updated: December 30, 2008 16:51 EST