The Obama administration wants to maintain or boost funding next year for some of the military’s most expensive space projects, despite mounting pressure for Pentagon spending cuts.
When the Defense Department unveils its proposed 2012 budget next week, expected to total about $553 billion, some major rocket and satellite programs will be among the biggest winners, according to government and industry officials.
Proposed spending increases on space technology are part of a plan to shift toward higher-volume purchases over several years that Defense Secretary Robert Gates and White House budget officials believe will eventually save taxpayer dollars.
Historically, the military has procured spacecraft and boosters one at a time, an approach that can mean a higher cost for each piece of equipment.
Proponents of the new approach said it would allow the Pentagon to smooth out payments for subcontractors, maintain inventories of critical parts and avoid disrupting production lines. They estimate it can cut 20% or more off the price of individual satellites, which currently can cost $1.5 billion or more each.
Buying multiple satellites up front can also end the “boom-and-bust cycle for the facility making them, which is economically inefficient,” said Ashton Carter, the Pentagon’s acquisition chief, in an interview this week.
In the short run, however, the strategy would significantly increase spending on certain programs, even as the Pentagon’s overall acquisition budget shrinks. Congress may balk at some of the increases. Lawmakers in the past have blasted the Air Force for lax oversight and technical problems managing cutting-edge space projects.
Recipients of the proposed increases would include the Air Force’s most powerful rockets: Delta IVs and Atlas 5s, supplied by a joint venture of Boeing Co. and Lockheed Martin Corp., according to government and industry officials.
Those rockets are expected to get nearly $1.8 billion under President Barack Obama’s fiscal 2012 spending blueprint, more than 25% higher than previous budget projections. Over five years, that budget line would climb to a total of about $10 billion, a roughly 50% jump from earlier projections.
In return, the Pentagon hopes to save billions of dollars over several years by having contractors directly shoulder more of the overhead costs of some engineering and support services, including maintaining the thousands of workers needed to launch the boosters, according to government officials.
Under the budget proposal, Lockheed also stands to get Air Force commitments to buy several additional communications and surveillance satellites, though full production funding for some wouldn’t be available until later years.
“It’s the smart way to buy,” said Joanne Maguire, Lockheed’s top space official.
An Air Force spokeswoman said so-called block buys of satellites were an essential “means of ensuring stable production and a healthier industrial base.”
Yet elsewhere in the Air Force, including among portions of its space-acquisition work force, skeptics abounded. Some veteran officers and civilian officials questioned the extent of likely savings, while others worried about draining immediate resources from programs such as fighter jets.
Backers of the new approach said it could also help the Pentagon become more efficient in using commercial satellites to help satisfy its skyrocketing need for communications bandwidth, driven in part by videos from unmanned surveillance aircraft over Iraq and Afghanistan.
“The U.S. government is lagging” behind other countries in obtaining long-term leases for commercial-satellite capacity, said Dave McGlade, chief executive of Intelsat SA, the largest global satellite operator. He envisions deals “similar to the way commercial telecommunication services are bought and sold.”
Interlsat and other companies have also joined with some Pentagon offices to champion putting more “piggyback” military payloads aboard privately funded and operated satellites.
Such arrangements offer expanded surveillance and communication capabilities significantly faster than, and at a fraction of the cost of, building and launching military satellites. Intelsat has three such agreements in place with the U.S. government and is discussing several others, industry officials said.
As part of the broad space-acquisition review, Mr. Carter and other Pentagon officials have consolidated oversight for space programs inside the Pentagon, as well as within the Air Force. An overriding goal, according to Mr. Carter, is to stagger satellite orders for the different programs to increase factory efficiencies. “That’s not something we have done in the past,” he said.
Still another element of the internal Pentagon shift envisions greater reliance on fixed-price contracts. But unless Congress and military leaders live up to later funding commitments—an area in which they have sometimes lacked discipline—the latest moves aren’t likely to yield the anticipated benefits.
The changes don’t just apply to big-ticket items. The Air Force and other parts of the Pentagon are ramping up efforts to develop families of smaller, less-expensive satellites intended to be manufactured and launched on much faster timetables than today’s models. The most sophisticated current satellites can take at least a decade to go from early design to in-orbit operation, leaving them vulnerable to repeated funding fluctuations.
Mr.. Carter’s reform efforts received a boost from the recently released White House space strategy, which emphasizes using available technologies and commercial-style contracts to reduce costs and enhance innovation. The strategy also stresses the need for closer coordination among Pentagon, intelligence and civilian agencies when it comes to designing and buying space systems. In the past, Secretary Gates has talked about using longer-term purchases of Air Force rockets to “assure access to space for both military and other government agencies.”
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