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Additional $340 Million Is Proposed For Rockets

Pentagon Aims to Keep 2 Firms Launch-Worthy

By Renae Merle
Washington Post Staff Writer
Tuesday, February 8, 2005; Page E01

While targeting some expensive weapons systems for heavy cuts, the Pentagon has proposed a $340 million increase in the 2006 budget to keep both Boeing Co. and Lockheed Martin Corp. in the government rocket launch business.

The funds would continue the Air Force's policy of "assured access" to space by sustaining two companies capable of launching government satellites. The policy has come under criticism from some in Congress who contend it is an expensive luxury.

Booster rockets fall to Earth after separating from Boeing's Delta 2 rocket launched in June 2003 to deliver a robot to Mars. (Nasa Image Via Reuters)

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The $340 million will boost funding for the rocket launch program to $864 million and help ensure that government launches are profitable for Lockheed and Boeing. Analysts said the satellites that the two companies' rockets send into space are critical to the military's transformation into a modern force connected by high-tech networks.

"The space guys did okay" despite the cuts the Pentagon proposed to some programs, said James Lewis, director of technology and public policy at the District-based Center for Strategic and International Studies. "That shows you where the priorities are. You can't have network-centric warfare unless you have mobile connectivity, and the best way to get mobile connectivity is through space."

Bethesda-based Lockheed, the Pentagon's largest contractor, and Chicago-based Boeing have complained that without the extra funding they would lose money on the launches because prices were set in the late 1990s, when many expected a robust commercial satellite market to offset the cost of the Pentagon program. But the commercial business failed to materialize, adding substantially to the costs for launching government satellites.

The funding would be applied to fixed costs, including expenses the companies incurred developing technology and establishing launchpads. "Maybe the commercial market will come back," a senior defense official said. "If the commercial market does come back and more of the costs are now covered on the commercial side, then of course the [Pentagon] portion will adjust accordingly."

The additional funding will likely continue for several years if the commercial market remains stagnant, industry analysts said. Last year there were 55 rocket launches worldwide, the fewest since the early 1960s, said Marco Caceras, a senior analyst and director of space studies at the Teal Group, a Fairfax-based military research firm. "I never thought it would ever go under 60," he said.

The Air Force raised the possibility of Lockheed and Boeing forming a joint venture to manage the rocket launches so that neither would be pushed out of the market, but Boeing rejected that suggestion. A senior Boeing executive acknowledged that the Pentagon will probably have to eliminate one of the companies from the market to keep costs down, possibly by the end of the decade, but said Boeing would not agree to a joint venture.

The Air Force suspended Boeing from space business more than a year ago after an investigation found the company had proprietary Lockheed documents during a rocket launch competition. The Air Force also transferred 10 Boeing rocket launches to Lockheed. The company has said reduced demand would force it to lay off 82 employees this year at the Decatur, Ala., facility where it assembles the rockets.

It is unclear when the suspension will be lifted, said Boeing spokesman Daniel Beck, but "we have continued to work with the Air Force, rebuilding their confidence in Boeing as an ethical contractor."

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