Why the Pentagon Got Just One Bid to Build Next-Generation GPS Satellites
April 26 2018 - 12:43PM
Dow Jones News
By Andy Pasztor
Lockheed Martin Corp. will remain the sole producer of Global
Positioning System satellites after two main rivals decided against
bidding, 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 week
to forgo competing for the multibillion-dollar business reflect
efforts by Air Force brass to reduce long-term costs and accelerate
production of GPS satellites. The outcome underscores 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 already has committed to buy up to 10
GPS III satellites from Lockheed Martin, 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 GPS supports a range of widely used devices from navigation
aids to signals that keep cash-dispensing machines used by bank
customers operating. The Air Force has run the GPS program for
decades, providing services to both government and commercial
users.
The changes are being implemented 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 development steps largely paid for and 22 additional
next-generation GPS III satellites slated for procurement, the goal
is to shift toward faster, more commodity-style 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," this 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 Martin-built GPS III
satellite, with a longer lifespan than its predecessors, is
scheduled to launch this fall at the earliest.
In the past, the Air Force's sprawling acquisition bureaucracy
balked at favoring speed over competitive bidding to get the best
price. But now, the focus is on moving quickly and in other
programs, building prototypes to swiftly demonstrate cutting-edge
technologies before committing to long-term production.
The restructuring 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, except to point to a statement earlier this
month explaining it didn't bid because the Air Force's request, in
part, emphasized the importance of uninterrupted production over
creating new GPS features and capabilities.
Northrop spokesmen couldn't be reached for comment, but 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 an unmanned tanker aircraft program for the Navy and an
Air Force training aircraft.
A Lockheed Martin 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."
For Lockheed, which faces the end of production on its premier
Pentagon communications and missile-warning satellite
constellations, retaining GPS business is particularly important.
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 could give it a distinct price
advantage over Boeing and Northrop Grumman.
Lockheed went over budget on its initial GPS production, but
company officials have said the program is back on track. The
Pentagon now says the unit costs for each satellite will be less
than 6% higher than initially projected, though cost overruns for
development were significantly larger.
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 the service ended up
receiving only one bid. They also spelled out the scope and
reasoning behind the new direction in space contracting.
Future satellite fleets will have to be "more defensible and
resilient systems," said Lt. Gen John Thompson, head of the Air
Force's Space and Missile Systems Center in suburban Los Angeles.
He 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.
Write to Andy Pasztor at andy.pasztor@wsj.com
(END) Dow Jones Newswires
April 26, 2018 12:28 ET (16:28 GMT)
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