An Outer Space Imponderable: How Much Should Satellites Cost?

5/12/2011
By Sandra I. Erwin
At U.S. Air Force headquarters, civilian budget specialists and blue-suited officers are about to complete an in-depth green eyeshade examination of space programs. In Pentagon parlance, they are conducting a “should cost” review.
All we know for certain is thatspace systems cost too much. Weapon acquisitions chief Ashton Carter said recently that the Pentagon is overpaying for satellites and launch vehicles, and that every program office has been directed to rein in costs.
When Defense Secretary Robert Gates terminated the “transformational satellite,” or TSAT, program two years ago, the decision was viewed as a tipping point for out-of-control space programs that were chronically behind schedule and always seem to require additional billions of dollars to finish development.
With no TSAT, or any sign of a replacement on the horizon, the Air Force is trying to salvage two key constellations — the Advanced Extremely High Frequency (AEHF) classified communication satellites, and the Space Based Infrared (SBIRS) surveillance satellites.
A rigorous “should cost” review is now under way, Erin Conaton, undersecretary of the Air Force, said May 11. The review primarily targets AEHF, SBIRS and the Evolved Expendable Launch Vehicle (EELV).
Conaton said she could not provide specific cost targets, but she echoed Carter’s view that “space takes too long and costs too much.”
The Air Force increasingly is losing “buying power” as the price of each satellite grows while budgets stay flat, she said.
The latest buzzword in space procurement programs is EASE, for evolutionary acquisition for space efficiency. Conaton said it’s a relatively simple formula. EASE calls for buying satellites in “block” or bulk orders, avoiding fluctuations in research-and-development budgets, procuring hardware under fixed-price contracts, and spreading costs — as they are incurred — over multiple years.
“We are working with Congress” on how to execute the funding strategy, Conaton said. For now, she said, the focus is on answering the “should cost” question. “We have to get at the cost basis of these programs,” she said. “Our industry partners will be asked for better pricing.”
“Should cost” examinations of Pentagon programs are now de rigueur, as detailed in Carter’sApril 22 memo to procurement managers. But experts have questioned whether these general guidelines can help contain costs in complex programs such as military communications satellites. Conaton has told lawmakers that the EASE initiatives will seek to reduce costs by 10 percent.
“We think it will be substantial savings, but I don’t have a number yet,” Conaton told reporters at a breakfast meeting hosted by the Air Force Association, in Arlington, Va.
In programs such as AEHF, whose costs have doubled over the past eight years, the Air Force will be digging out of a deep hole. According to the Government Accountability Office, the estimated program costs — including the expansion of the AEHF constellation from five to six spacecraft — soared from $6.3 billion in 2001 to $13 billion in 2009. The acquisition cycle time jumped from 111 to 170 months.
Executives in the space sector speculate that the U.S. government, in the face of rising costs and flat budgets, will increasingly seekcommercial products and services. Analysts project that satellite procurement is headed for a downturn once the current backlog orders are met. They predict that the Air Force and other agencies will, over time, choose to not develop expensive satellites and instead buy “hosted payloads” that will be launched from commercial spacecraft.
The Air Force forecasts increased use of hosted payloads, Gregory L. Schulte, deputy assistant secretary of defense for space policy, told lawmakers.
Conaton insisted that the Air Force will continue to hammer at costs. But she acknowledged that these reforms take time. In aspeech last month at the Center for Strategic and International Studies, she said that sweeping acquisition reforms can take three to four years to achieve results.
Since the cancellation of TSAT in April 2009, the Air Force has been reevaluating its military satellite communications requirements beyond the sixth AEHF satellite. According to GAO, the Air Force plans to conduct an analysis of alternatives to assess options for meeting future requirements, including the possible use of commercial satellite communications.

Topics: Space

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