* AEHF satellites enable advanced military communications
* Company focused on cutting costs
* Agreement safeguards funds against budget cuts due in
WASHINGTON, Dec 28 Lockheed Martin Corp
has won a contract valued at $1.9 billion to build two
additional advanced military communications satellites for the
U.S. Air Force, the Pentagon said on Friday.
The contract, which runs through January 2022, covers
production of the fifth and sixth satellites in the Advanced
Extremely High Frequency satellite program.
Lockheed welcomed the contract, saying it underscored the
government's confidence in the company's work on the program.
"As protected and resilient satellite communications become
increasingly vital to global security, the AEHF program has
developed into an indispensable element of the nation's military
space architecture," said Mark Calassa, vice president of
Lockheed Martin's Protected Communications mission area.
He said the first two satellites were operating
exceptionally in orbit, and the company was implementing several
affordability initiatives together with the Air Force that were
already reducing program costs.
The terms of the contract had been switched from cost-plus
to fixed-price, with an incentive fee, which allowed the
government to limit its risk, Calassa said in a statement.
The Air Force's decision to buy two satellites at one time
also allowed Lockheed to significantly reduce costs through
economies of scale, he said.
A top Air Force acquisition official last week told Reuters
the service was unlikely to reach an agreement with Lockheed on
the new satellites before the end of the year.
It was not immediately clear how the two sides managed to
work through the remaining issues so quickly.
Agreement on the contract terms does safeguard funding for
the satellites from automatic across-the-board cuts if U.S.
lawmakers do not find a way to avert significant Pentagon
reductions due to take effect in January.
Air Force officials had initially hoped to sign the contract
with Lockheed this summer, with an eye to reaping savings of
well over 10 percent over earlier contracts.
The cost of the contract had been projected at $2.6 billion,
well above the level announced on Friday.
The two AEHF satellites already in orbit are designed to
ensure that military communications continue among top military
commanders and the White House in the event of a nuclear war.
The satellites also provide transmission of more routine
communications such as targeting data and video data feeds, and
serve international partners including Canada, the Netherlands
and the United Kingdom.