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U.S. Air Force Awards $2B AEHF Production Contract

AEHF satellite. Credit: Lockheed Martin photo

WASHINGTON — Lockheed Martin Space Systems of Sunnyvale, Calif., will build the fifth and sixth satellites in a program for highly secure military communications under a U.S. Air Force contract valued at $1.93 billion, the U.S. Department of Defense announced Dec. 28.

The Advanced Extremely High Frequency (AEHF) production contract follows a series of contracts for long-lead components for the two satellites with a combined value of nearly $490 million, according to previous Pentagon announcements. That would bring the total contract value for AEHF satellites 5 and 6 to about $2.42 billion.

The AEHF satellites are the Pentagon’s highly secure series of communications satellites, used for critical applications including nuclear command and control. Lockheed Martin is prime contractor; Northrop Grumman Aerospace of Redondo Beach, Calif., is a major subcontractor, with responsibility for the payload.

The two-satellite order reflects the Air Force’s block buy strategy, which is expected to save money by enabling prime contractors to buy components in bulk. Congress signed off on the block buy strategy for AEHF in the National Defense Authorization Act for Fiscal Year 2012, approving Air Force plans to buy two satellites under a fixed-price contract not to exceed $3.1 billion in value.

In a prepared statement, Mark Calassa, vice president of Lockheed Martin’s protected communications business area, said the AEHF program, with two satellites already on orbit, is making the transition from development to production.

“We have shifted from cost-plus to fixed-price incentive firm target contracting, which allows our government customer to limit its risk, while still targeting cost reduction,” Calassa said. “Additionally, with the Air Force acquiring two satellites in bulk, we can significantly reduce costs by achieving economies of scale.”

The latest production award brings the total value of Lockheed Martin’s AEHF contract to at least $9 billion, including six satellites and associated ground systems.

This could be one of the last production contracts under the current program architecture. The Air Force is considering revamping its secure communications program by separating the strategic and tactical payloads currently aboard each AEHF craft and flying them aboard separate satellites, a concept referred to as disaggregation.

The Air Force expects to decide by 2015 whether to go forward with the disaggregation approach, which also could be applied to other programs.

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