Defense contractor retains business of supplying U.S. with GPS
satellites
By Andy Pasztor
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 27, 2018).
Lockheed Martin Corp. will remain the sole producer of
satellites for the government's Global Positioning System after two
main rivals decided against bidding on the newest version,
reflecting new Air Force acquisition strategies that favor
incumbent contractors on some big-ticket space programs.
The decisions by Boeing Co. and Northrop Grumman Corp. this
month to forgo competing for the multibillion-dollar business are
in keeping with efforts by Air Force brass to reduce long-term
costs and accelerate production of GPS satellites. They underscore
the Pentagon's broader drive to transform acquisition of space
technology -- satellites, rockets, missile warning systems -- into
a less expensive and more nimble process.
The U.S. military, which is already committed to buying up to 10
next-generation GPS III satellites from Lockheed, has been advised
by procurement experts inside and outside the Air Force that the
best way to streamline the program is to stick with the existing
supplier, say people familiar with the details.
The government-owned satellite system supports a range of widely
used devices, from navigation aids to the cash-dispensing machines
at banks. The Air Force has run the GPS program for decades,
providing services to both government and commercial users.
The developments come against a backdrop of heightened threats
to U.S. space technology from Russia and China. Military and
intelligence experts warn that U.S. national-security satellites,
for example, could be blinded or damaged by hostile forces using
lasers, antisatellite weapons and other types of weapons.
Air Force leaders also are under congressional pressure to show
progress in overhauling the acquisition of space hardware. Some
House GOP leaders advocate a separate branch of the armed services
dubbed a space corps.
With product development largely paid for and 22 additional GPS
III satellites slated for procurement, the focus is now on
smoothing out assembly, according to one person involved in
discussions. "The Air Force realizes it needs to dramatically
squeeze costs while ratcheting up the pace of production," the
person said.
There are currently 31 GPS satellites in orbit, including
spares. The latest models feature greater power, accuracy and
jam-resistant capabilities. The first Lockheed-built GPS III
satellite, with a longer lifespan than its predecessors, will
launch this fall at the earliest.
In the past, the Air Force's sprawling acquisition bureaucracy
regarded competitive bidding as key to getting the best price. But
now the emphasis is on moving quickly and, in some other programs,
building prototypes to swiftly demonstrate cutting-edge
technologies before committing to long-term production.
The process change aims "to put large amounts of hardware on
orbit now, at the lowest possible cost," according to industry
consultant Jim McAleese. Such moves "are critical for the Air Force
at all levels," he said in an interview Wednesday.
Boeing, which built a previous version of GPS satellites,
declined to comment. Instead, it referred to its statement earlier
this month that it didn't bid because the Air Force's request, in
part, prioritized uninterrupted production over creating new GPS
features and capabilities.
Northrop spokesmen couldn't be reached for comment. The company
has indicated it didn't submit a bid because it didn't make
financial sense. Last year, Northrop surprised aerospace industry
analysts by not bidding on some larger Pentagon contracts,
including one to supply unmanned tanker aircraft for the Navy and a
training aircraft for the Air Force.
A Lockheed spokesman also declined to comment. When it submitted
its bid, the company said modular design envisioned "insertion of
modern technologies and new Air Force requirements in a low-risk
manner."
Retaining GPS business is particularly important for Lockheed as
it faces the end of production on its premier Pentagon
communications and missile-warning satellite constellations, The
company also has invested heavily in recent years to shake up its
commercial satellite-making operations, and industry officials said
some of those efficiencies give it a distinct price advantage over
Boeing and Northrop.
Lockheed went over budget on its initial GPS production that
dates back seven years, but company officials have said the program
is back on track. The Pentagon now says the unit costs for each
satellite will be at most 6% higher than initially projected,
though cost overruns for development were significantly larger.
Based on current prices, the anticipated fixed-price contract,
excluding potential incentive payments, could total more than $12
billion.
At a space conference in Colorado last week, Air Force officials
declined to discuss specifics of GPS bidding procedures, but said
rigorous cost estimating would be used if there were to be only one
bid. They also spelled out the scope and reasoning behind the new
direction in space contracting.
Lt. Gen John Thompson, head of the Air Force's Space and Missile
Systems Center in suburban Los Angeles, said future requests for
bids would "take advantage of similarities between programs,"
noting that "we have so much redesign work to do" regarding SMC's
structure and acquisition policies.
He also said future satellite fleets will have to be "more
defensible and resilient systems."
Write to Andy Pasztor at andy.pasztor@wsj.com
(END) Dow Jones Newswires
April 27, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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