Lockheed Wins GPS Satellite Contract

By Dana Hedgpeth and Zachary A. Goldfarb
Washington Post Staff Writers
Friday, May 16, 2008

The Air Force awarded Lockheed Martin a $1.5 billion contract to build the military's next generation of navigation satellites, crucial for the growing demand by the military, companies and consumers for technology that pinpoints and tracks location.

The Bethesda company beat out rival Boeing for a contract to develop and build two satellites, with an option for 10 more, the first batch of a constellation called the Global Positioning System III. The Pentagon has said that it would probably order 20 satellites on top of that, giving Lockheed a steady stream of revenue in the satellite business for the next two decades.

"We are honored that our government customer has entrusted our team to build this vital system, which will provide improved GPS accuracy and assured availability for military and civilian users worldwide," said Stephen O. Tatum, a Lockheed spokesman.

The deal edges the U.S. military into the next era of satellite technology. In the early 1990s, the military started using GPS technology to guide missiles and bombs to their targets. The current GPS constellation includes 31 satellites 12,000 miles above the Earth.

But use of the satellites has mushroomed to include hundreds of commercial applications, such as private aviation and driving directions, even while supporting a growing number of military operations. In addition, the military satellites have been wearing down and facing an increasing amount of traffic from private satellites.

The military's new satellites will be harder to jam, more powerful and more accurate, making it easier for bombs to hit their targets in Afghanistan under heavy cloud cover and for tourists to get directions in Times Square.

"The Global Positioning System provides precise timing and positioning information for military and civil users. It is the main reason our smart bombs can operate through cloud cover and it is probably the most important navigational tool devised in the postwar period," said Loren Thompson, a defense consultant at the Lexington Institute in Arlington. Lockheed claims that GPS contributes $30 billion to the U.S. economy annually.

Marco Caceres, a senior space analyst at the Teal Group in Fairfax, said the Pentagon has been lucky that the current GPS systems have lasted so long, but they now need to be replaced. "You're fighting two wars," he said. "You have military troops all over that have to communicate, and they're dependent on satellites."

The newest GPS program will be closely watched, as the Pentagon's space programs have long suffered cost overruns, problematic technologies and delays. John Young, the Pentagon's undersecretary for acquisition, technology and logistics, said he has directed the Air Force to tie the contractor's payments to "specific program accomplishments," not to adjust the scope of the program or change its technical specifications and to "consider solutions which lower cost or risk to deliver within or below budget."

The oversight efforts, Young said, are part of "continuing a DoD push to award fees more carefully and on a more objective basis."

Of the Pentagon's eight biggest satellite programs, all are over budget, from at least 20 percent over to more than double the original price, Caceres said. That includes a missile detection and warning satellite system made by Lockheed.

"DoD is always looking for the latest technology for its satellites," Caceres said. "The problem is that technology develops quickly but the development of the satellite itself takes a while. By the time it gets to its maturity, you realize there's more advanced technology out there, so you add that at the last minute, and it leads to higher costs."

Analysts said Lockheed had been expected to win the latest GPS deal after Boeing ran into delays and cost overruns in building 12 earlier GPS satellites. The GPS deal was the latest blow for Boeing in going after major Air Force contracts. In February, the Chicago aerospace giant lost a $40 billion deal to provide a fleet of aerial refueling tankers to rivals Northrop Grumman and EADS, its European partner.

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