By Andrea Shalal
WASHINGTON (Reuters) - The U.S. Air Force said on Tuesday it will use Lockheed Martin Corp's updated A2100 spacecraft for the fifth and sixth U.S. missile early warning satellites, with no additional cost to its 2014 bulk purchase contract with Lockheed.
The Air Force said by swapping out the spacecraft for the next two Space Based Infrared System satellites, it will be easier to implement new capabilities, including sensors that would allow troops to see dimmer targets more quickly.
The move followed a proposal made by Lockheed last December aimed at lowering costs by increasing commonality with other space systems, making the spacecraft more resilient, and reducing the number of obsolescent parts.
In a statement, the Air Force's Space and Missile Systems Center said the change also offered the potential for major cost savings on future satellite purchases, and would make it easier to modernize on-board sensors in the future.
Mike Guetlein, who heads the Air Force's Remote Sensing System Directorate, said it restructured its contract to "appropriately share cost risk" with the company, and rebalance the incentives between cost, schedule and system performance.
Mark Valerio, who oversees Lockheed's military space business, told Reuters the switch would allow Lockheed to cut the cost of the seven and eighth SBIRS satellites by 20 to 30 percent, if the Air Force decided to proceed with those orders.
Air Force officials have said they expect to finish a review of alternatives for the next missile warning satellites this summer, which would pave the way for a decision about potential follow-on contracts for a seventh and eighth SBIRS satellite.
Lockheed began work on the modernized A2100 satellite "bus" in late 2011, partly due to the high rate of obsolescent parts on the earlier SBIRS vehicle. Valerio said the obsolescence rate was now below 5 percent from around 15 percent in 2011.
Switching to the new spacecraft will result in some higher integration costs initially, but should lower costs in coming years as the company benefits from larger economic order quantities and a streamlined manufacturing process, he said.
Lockheed said it would also save money and time by moving the final assembly and testing of SBIRS satellites from Sunnyvale, Calif., to Denver, where the company assembles the GPS III satellites. Other work will continue at the site.
Lockheed used its own funds to enhance the power, propulsion and electronics of the A2100 spacecraft, while adopting advanced manufacturing techniques to cut costs and production time.
(Reporting by Andrea Shalal; Editing by Jeffrey Benkoe, Bernard Orr)