Air Force Slashes Spending on Satellite Programs (UPDATED)

A Lockheed Martin Corp. space based infrared missile warning satellite.
The U.S. Air Force is requesting $10.1 billion for space programs in fiscal year 2014. That includes $6.4 billion for research, development and procurement of new satellites, ground equipment and launch services. The remainder covers associated personnel, operations and maintenance of space systems. The 2014 request is slightly higher than the 2013 request of $9.6 billion, although none of these figures reflects mandatory sequester cuts that Congress mandated for the budget year that ends Sept 30.
The Air Force buys and maintains space systems that are used by all branches of the military and U.S. intelligence agencies for missile warning, weather forecasting, global communications and navigation.
The largest programs in the 2014 budget are the evolved expendable launch vehicle, or EELV ($1.8 billion), the space based infrared missile warning satellite, or SBIRS ($964 million), the global positioning system GPS III satellite ($699 million), the advanced extremely high Frequency, or AEHF, military communications satellite ($652 million) and the space situational awareness surveillance satellite ($400 million).
The largest cancellations proposed in the 2014 budget are the space based surveillance follow-on satellite, which would save $500 million, and a precision tracking space system that would yield savings of $1.7 billion. Richard W. McKinney, deputy undersecretary of the Air Force for space programs, told reporters April 15 that these programs are not being terminated, but are being reorganized and delayed by several years. The Air Force also projects it will reduce the cost of two of its most expensive satellite programs, AEHF and SBIRS, by $1.5 billion over the next five years.
Cutbacks in space programs are taking place as the Pentagonscrambles to bring down spending by $41 billion by Sept. 30, which is required by law. The Air Force’s$110 billion budget for 2013 would be trimmed down to $102.8 billion. These mandatory cuts, called sequester, could happen again in 2014 unless the White House and Congress can agree on a budget plan to offset government-wide spending reductions with other deficit-reduction measures.
Sequester could not have come at a worse time for Air Force space programs, said Jamie M. Morin, undersecretary of the Air Force.The service has been struggling for years with soaring satellite and launch-vehicle price tags and it is now beginning to rein in costs. Sequester cuts could undermine the progress achieved so far because it would jeopardize efforts to inject efficiency into satellite manufacturing, Morin said April 15 during a news conference.
AEHF and SBIRS are transitioning from development to production. Air Force officials have spent the past two years negotiating with manufacturer Lockheed Martin Corp. to shift these programs to fixed-price contracts that could save the government up to $1.5 billion over the next five years, Morin said. The Air Force, he added, intends to protect AEHF and SBIRS from the 2013 sequester in order to secure these cost savings.
Even though sequester requires across-the-board cuts, Congress has given the Pentagon some leeway to reallocate funding as long as it meets the top line requirement. In the case of these two satellite programs, recent contract negotiations have yielded prices that are lower than what was projected in last year’s budget. “That frees up money to pay the cost of sequester,” Morin said. If these automatic cuts continue in 2014, there will be no more flexibility to do this, he said. “That’s a one-time good deal.” In 2013, he said, “We are going to do everything we can to keep the programs where we got great fixed prices on track.”
A key bargaining chip for the Air Force has been a commitment to buy two satellites at a time, instead of the usual practice of purchasing one per contract. Building a single satellite tends to become a “hobby shop project,” Morin said. Buying two makes the program more stable and efficient, he said. To save money, the Air Force also is courting allied nations to invest in U.S. satellite programs in exchange for future services.
The EELV satellite-launch program — with a budget of $10 billion over the next five years — is being revamped to allow new industry competitors. The current arrangement is a sole-source deal with the United Launch Alliance, a joint venture of Lockheed Martin and The Boeing Co. “We anticipate some new entrants may be able to be certified and compete by 2015,” said McKinney. Among the expected competitors is SpaceX.
Morin said he hopes for a grand budget bargain that will cancel sequester as soon as possible so the Air Force can keep current programs alive and invest in future systems. There will be growing needs for more advanced satellites that can operate in “contested” environments where a potential enemy could disable them, he said. “U.S. military dependence on space is a vulnerability that enemies can exploit. We are doing some serious thinking about how to respond to that,” Morin said. For now, the bigger worry is the budget. “Sequester, if it continues, is clearly going to do serious damage.”
Correction: An earlier version of this post reported incorrect data when comparing FY13 and FY14 budget requests. The FY14 request for investments in space programs is $6.4 billion, compared to $6.3 billion requested in FY13. 
Photo Credit: Lockheed Martin Corp.

Topics: Procurement, Acquisition Reform, Defense Department, Space