Lockheed, Boeing Programs Boosted in $31.7 Billion Space Plan

Lockheed Martin Corp., Boeing Co. and Northrop Grumman Corp. satellite and launch services are among 13 major programs boosted in the U.S. Air Force’s space budget of $31.7 billion through 2016.

The plan includes $20.3 billion for procurement of satellites and launch services aboard Atlas V and Delta IV boosters and $11.4 billion in research, including redesign of a Northrop Grumman weather satellite, according to Air Force budget data compiled by Bloomberg.

Lockheed Martin, based in Bethesda, Maryland, is the prime contractor or team partner on the four highest-funded Air Force space programs. Among those programs is the company’s Denver, Colorado-based United Launch Alliance joint venture with Boeing for boosting military, spy and NASA satellites in orbit.

The Obama administration’s new National Security Space Strategy highlights the importance of developing space capabilities and a U.S. industrial base “that is robust, competitive and flexible, healthy and delivers reliable space capabilities on time and on budget.”

Previewing the 2012 budget on Jan. 6, Defense Secretary Robert Gates said the Air Force would increase funding for the launch alliance joint venture’s Evolved Expendable Launch Vehicle, known as the EELV, “to assure access” while “sustaining our industrial base.”

Expendable Launch Vehicle

The long-range EELV plan includes $1.8 billion for fiscal 2012, increasing to $2.2 billion in 2016. The five-year total is $9.9 billion, the largest of any space program.

The EELV launch costs have increased in recent years because the commercial space market that was expected to defray the expense of military launches never materialized.

The Air Force and the National Reconnaissance Office that manages spy satellites plan to buy from the launch alliance an average of eight launches a year through 2016, Air Force Undersecretary Erin Conaton told reporters Feb. 15.

These launch rates will lower the cost per booster and contribute to “a more stable market for our industrial base,” she said.

Maryland Representative C.E “Dutch” Ruppersberger, the ranking Democrat on the House Intelligence Committee, said in an e-mail that the Air Force may not be doing enough to cut costs.

Booster Costs

“At this point, I have only received the budget highlights but I am concerned by the large escalations for EELV” in the 2012 budget, he said.

“Right now, America spends more money per launch and faces more delays than any other country in the world,” he said. “These are, in part, because of the way we assemble and launch rockets.”

“The U.S. is also committed to a two-company alliance to handle all launches, despite the fact that other U.S. companies are showing promise in the field,” Ruppersberger said. “We need competition to bring costs down.”

Michael Rein, a spokesman for the launch alliance, had no immediate comment about the lawmaker’s remarks.

Lockheed Martin’s Advanced Extremely High Frequency communications satellite program could see $4.6 billion through 2016 in research and procurement funding, with $975 million requested in fiscal 2012 for the down-payment on a fifth and a sixth satellite. The request drops to $902 million by 2016.

Lockheed and Los Angeles-based subcontractor Northrop Grumman have four of the Advanced EHF satellites on contract. The Air Force includes in fiscal 2012 the initial $975 million needed for the fifth and sixth satellites.

The service wants to buy the satellites under a new “block” buying approach rather than purchasing one each in consecutive years to save as much as 10 percent.

Incentive Fee Contracts

The Air Force also wants to buy the new satellites under fixed-price incentive fee contracts. The first four have been bought under so-called cost-plus contracts that require the Air Force to pay for cost overruns. The fixed-price contracts would require Lockheed to pay some portion of cost growth.

The Air Force also is requesting $4.6 billion through 2016 for the Lockheed Martin-Northrop Grumman early warning Space Based Infrared System, including $996 million for continued assembly of four satellites and down-payment on parts for a fifth and sixth.

The Air Force request increases to $1.1 billion in 2013, according to the budget.

The first Space Based Infrared System is scheduled to launch about May 4, Major General John Hyten, head of Air Force space acquisition, told reporters on Feb. 15.

Nine Years Late

A May 4 date would be almost nine years after the original September 2002 date, or the fifth time since the program’s start in 1996 that the delivery and launch date was pushed back because of technical and quality problems, according to the U.S. Government Accountability Office.

The Space Based Infrared System satellites are designed to orbit 23,300 miles in space, staring at the earth to spot missile launches. The program has increased in cost to $15.1 billion, since it started at about $4.7 billion, according to Pentagon figures.

Lockheed Martin’s upgraded GPS IIIA satellite program, planned for initial launch in 2014, would receive $4.2 billion through 2016 in procurement and research.

Weather Satellite

The Air Force budget also includes $2.3 billion to begin redesign of an earlier Northrop Grumman weather satellite to a smaller, lighter model called the Defense Weather Satellite System. The first program, formed in 1994 by the Pentagon, NASA and National Weather Service, was divided last year into two programs.

The original program suffered from performance problems and schedule slips that increased overall program costs to $14.9 billion from $6.1 billion, according to a June 2010 congressional hearing.

The first of two satellites is planned for launch in 2018. The fiscal 2012 request calls for $445 million and increases to $527 million in fiscal 2013.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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