Pentagon postpones big satellite contract till FY10
WASHINGTON (Reuters) - The U.S. Defense Department has decided to postpone a decision in a multibillion dollar satellite communications competition between Lockheed Martin Corp (LMT.N) and Boeing Co (BA.N) until fiscal year 2010, an industry source informed about the decision said on Sunday.
The Pentagon's Defense Advisory Working Group (DAWG) decided on Saturday to terminate the current competition for the Transformation Satellite (TSAT) program, and put off awarding a contract until the fourth quarter of fiscal 2010, said the source, who asked not to be identified.
The Air Force had hoped to award a contract for the new advanced military communications satellite program in December, after completing a thorough internal review, and "an independent scrub" by chief Pentagon arms buyer John Young.
Gary Payton, Air Force deputy undersecretary for space programs, told reporters last month that officials mounted the reviews to help avoid another major contract protest, but said they also needed to carefully evaluate the results of a new study of military satellite communications needs.
The TSAT program already suffered a 40 percent funding cut when the Bush administration announced its long term budget plans in February. Pentagon officials decided this weekend to scale down the program even further and postpone a scaled-down contract award for more than a year, said defense analyst Loren Thompson of the Virginia-based Lexington Institute.
"This program is sinking fast," Thompson told Reuters on Sunday. He said the decision would have grave consequences for the military's goal of offering soldiers on the battlefield access to satellite communications anytime soon.
The delayed award means the first TSAT satellite would not be launched until around 2019, raising serious questions about the ability of the U.S. Army to move ahead with its Future Combat Systems modernization program, which is meant to rely heavily on advanced satellite communications, Thompson said.
The industry source agreed the Pentagon decision "will clearly have implications for Future Combat Systems."
Boeing and Lockheed, which is teamed with Northrop Grumman Corp (NOC.N), have each won development contracts for initial work on TSAT, but the companies are eager to lock in a contract that could be worth well over $10 billion in the longer-term.
The TSAT program is linked to another big program, the Advanced Extremely High Frequency satellite program run by Lockheed, which has exceeded congressional caps on cost growth after Congress added a fourth satellite to the program.
Young's office is currently reviewing the fate of the AEHF program, which faces termination unless it is certified as essential for national security reasons.
TSAT is intended to follow AEHF and shares some of the same protected communications job. Congress added the fourth satellite due to concerns about a gap in providing satellite communications capability to troops if TSAT got delayed.
The Pentagon now seems to be prefer to continue evolving the AEHF satellites, rather than trying to leapfrog to a new generation of technology with TSAT, Thompson said. (Reporting by Andrea Shalal-Esa; Editing by Bill Tarrant)
