Air Force to Save Hundreds of Millions With Fixed-Price Satellite Contracts

Rather than waiting to see how sequestration will play out on the political sphere, the Department of Defense is taking steps to reduce overall costs by hundreds of millions of dollars by converting three of its costliest Air Force satellite programs into fixed-price contracts.

The Global Positioning System III, the Space Based Infrared and the Advanced Extremely High Frequency satellites programs will be moved from “cost-plus” agreements — where the government reimburses all contractor expenses – to this new fixed-price contracting format.   In addition, for major procurements, Congress has recently passed legislation that prohibits cost-plus production contracts.

Frank Kendall, the DoD’s top acquisitions official, is behind this shift, one of several directives for containing the rising costs of weaponry systems.  In addition, many believe that the tipping point for cutting back out-of-control military spending happened three years ago when former Defense Secretary Robert Gates terminated a multibillion-dollar Transformational Satellite (TSAT) program.  The TSAT program was viewed as symbolic of chronically late and over-budget military programs that are becoming a thing of the past.

We applaud the DoD and Congress’ efforts to contain costs, while also not sacrificing the value of these vital satellite programs.